Exhibit 10.12
SETTLEMENT AGREEMENT
This Settlement Agreement ("Agreement") is made and entered into on
this 16th day of October, 2002, by and among DTE Enterprises, Inc. a Michigan
corporation and the successor by merger to MCN Energy Group, Inc. ("MCN"), MCNIC
Pipeline & Processing Company, a Michigan corporation ("MCNIC"), Xxxxxx X. Xxx
III ("Dow"), and Xxxxxxx X. Xxxxxxx ("Xxxxxxx") (collectively, the "MCN
Parties"), and Crown Energy Corporation, a Utah corporation ("CEC"), Crown
Asphalt Corporation, a Utah corporation ("CAC"), Crown Asphalt Products Company,
a Utah corporation ("CAPCO"), and Crown Asphalt Distribution, L.L.C., a Utah
limited liability company ("CAD") (collectively, the "Crown Parties" and Xxx
Xxxxxx ("Xxxxxx") (the MCN Parties, the Crown Parties, and Xxxxxx shall
sometimes be referred to collectively herein as the "Parties").
RECITALS
A. The Parties have entered into this Agreement to compromise and
settle all of their remaining disputes, including but not limited to the
following pending litigation matters: (a) the Order Confirming Arbitrator's
Award and Final Judgment, dated February 7, 2002 (the "Damages Judgment"),
issued by the third Judicial District Court of Salt Lake County, State of Utah
in Case No. 010910263 Misc. (the "Confirmation Proceeding"), which constitutes a
judgment in favor of MCNIC and against CAD in the amount of $20,011,683.35; (b)
the Arbitrator's Award of Fees, Costs and Expenses, dated February 5, 2002 (the
"Fee Award"), issued by the Xxxxxxxxx Xxxx X. Xxxxxx in JAMS Arbitration
Proceeding No. 1220024039 (the "Arbitration Proceeding"), which was issued in
favor of the MCN Parties and against the Crown Parties, jointly and severally,
in the amount of $2,609,518.69; (c) the cross-motions to confirm or vacate the
Fee Award that have been filed in the Confirmation Proceeding; (d) the action
pending in the Third Judicial District Court of Salt Lake County, State of Utah,
entitled MCNIC Pjpeline & Processing Company, a Michigan corporation, Plaintiff
v. Crown Asphalt Distribution, L.L.C. a Utah limited liability company,
Defendant, Civil No. 000904867 (the "State Action"); and (e) the action pending
in the United States District Court for the District of Utah, Central Division,
entitled Crown Energy Corporation, et al., Plaintiffs N, MCN Energy Group, Inc.,
et al., Defendants, Civil No. 2:00CV-0583ST (the "Federal Action").
B. The Parties have previously attempted to reach a settlement, On
March 8, 2002, the Parties entered into a Settlement Agreement ("First
Settlement Agreement"), under which portions of the settlement were effective
upon the execution of the First Settlement Agreement and certain other portions
of the settlement were conditioned upon the timely exercise by the Crown Parties
of an option to purchase MCNIC's interest in CAD. Although the Crown Parties did
not satisfy that condition, the Parties now are entering into this Agreement to
compromise and settle their remaining dispute.
C. This Agreement does not amend or supersede in any way the First
Settlement Agreement. As stated in Paragraph 28 of the First Settlement
Agreement, Paragraphs 1 through 7 and 20 through 27 of the First Settlement
Agreement became effective and binding immediately upon the execution of the
First Settlement Agreement and are not affected by the Crown Parties' failure to
timely exercise their option to purchase MCNIC's interest in CAD or by the
Parties' execution of this Agreement.
AGREEMENT
For good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, the Parties agree as follows:
1. Purchase and Sale of MCNIC's Interests in CAD and the Damages
Judgment. CAPCO hereby purchases, and MCNIC hereby sells, assigns, and transfers
MCNIC's entire right, title, and interest (i) in or relating to CAD, and (ii) in
the Damages Judgment, as well as under any loan by MCNIC to CAD and under any
mortgages upon, liens against, and security interests in any asset of CAD,
including the assignment of all financing statements, trust deeds, notes, and
security agreements constituting, memorializing, and supporting such interests.
The consideration for this purchase and sale is the sum of $1,300,000.00 (the
"Purchase Price"). MCNIC's assignment of its right, title, and interest in CAD
is "as is, where is" and does not include any representations or warranties with
respect to CAD. This transaction shall be deemed to have closed simultaneously
with the execution of this Agreement at the offices of Xxxxxxx Xxxxx & Xxxxxxx,
located at 000 Xxxxx Xxxx Xxxxxx, Xxxxx 0000, Xxxx Xxxx Xxxx, Xxxx. At the
closing, the Parties have executed this Agreement, CAPCO has paid the Purchase
Price in full by delivering immediately available funds to MCNIC, and MCNIC has
delivered to CAPCO fully executed assignments of MCNIC's above-described
interests in tile forms attached hereto as Exhibits A and B, respectively, and
an acknowledgement of assignment of the form attached hereto as Exhibit C
2. Indemnification Concerning CAD. As additional consideration to MCNIC
for the sale described in Paragraph 1 above, CAPCO and CEC covenant and agree,
jointly and severally, to defend, indemnify, and hold harmless the MCN Parties
from any and all claims and liabilities arising out of or in any way relating to
CAD, CAPCO, or their operations, including but not limited to any claim
pertaining to the Notice of Attorneys' Liens filed by Berman, Gaufin, Xxxxxx &
Savage in the Arbitration Proceeding on or about November 12, 2001.
3. Tax Matters. CEC and/or CAPCO shall not cause CAD, and CAD shall
not, carry back any credit or loss to a period ending on or prior to the closing
of the transaction described in Paragraph 1 above without the prior written
consent of the MCN Parties. Also, CEC and/or CAPCO shall not cause CAD, and CAD
shall not, file an amended tax return for any period ending on or prior to the
closing without the prior written consent of the MCN Parties.
4. Entry of Fee Judgment. Simultaneous with the execution of tills
Agreement, the Crown Parties and the MCN Parties stipulate to tile immediate
entry of all order in the Confirmation Proceeding that confirms the Fee Award
and also to the immediate entry of a conforming fee judgment, in the amount of
$2,409,518.69 (although the Fee Award is in the amount of $2,609,518.69, the
Crown Parties paid $200,000 toward the Fee Award on March 8, 2002 as part of the
First Settlement Agreement, thereby reducing the outstanding balance of the Fee
Award to $2,409,518.69), against the Crown Parties, jointly and severally (the
"Fee Judgment"), by the execution and filing of a stipulation in the form
attached hereto as Exhibit D and a proposed order and judgment in the form
attached hereto as Exhibit E. The Crown Parties waive any right to appeal from
or otherwise contest the Fee Judgment. The Fee Judgment is subject to the stay
and satisfaction provisions set forth in Paragraph 6 below.
5. Purchase and Sale of Overriding Royalty Interest. MCNIC hereby
purchases on behalf of its wholly-owned limited liability company, Crown Asphalt
Ridge, L.L.C ("CAR"), and CAC hereby sells, assigns, and transfers, for tile sum
of $ 100,000 ("ORRI Purchase Price"), all of the overriding royalty interests
granted to CAC pursuant to Paragraph 6 of the First Settlement Agreement (the
"ORRI"). In exchange for CAC's assignment and transfer of the ORRI to CAR, the
MCN Parties have credited CAC with having made a $100,000 payment toward the
amount due on the Fee Judgment. This transaction shall be deemed to have closed
simultaneously with the execution of this Agreement at the offices of Xxxxxxx
Xxxxx & Xxxxxxx, located at 000 Xxxxx Xxxx Xxxxxx, Xxxxx 0000, Xxxx Xxxx Xxxx,
Xxxx. At the closing, CAC has delivered to MCNIC or its designee a fully
executed assignment of the ORRI in the form attached hereto as Exhibit F and
MCNIC has delivered to CAC in full satisfaction of the ORRI Purchase Price a
release and a partial satisfaction of judgment in the forms attached hereto as
Exhibits G and H, stating that CAC (but not CEC, CAPCO, or CAD) has been
released from liability on the Fee Judgment.
6. Satisfaction of Fee Judgment. Each of the Crown Parties represents
that it shall not become the subject of a bankruptcy petition, voluntary or
otherwise, under Xxxxx 00, Xxxxxx Xxxxxx Code, within 91 days of CAC's
assignment of the ORRI to MCNIC, pursuant to Paragraph 5 above. Once the 91 days
have elapsed without any of the Crown Parties becoming subject to such a
petition, the MCN Parties shall file a notice in the Confirmation Proceeding
that the Fee Judgment has been fully satisfied. During this 91-day period, the
MCN Parties agree that they will not execute upon the Fee Judgment, file an
abstract of the Fee Judgment in any other county in the State of Utah, enroll or
enter the Fee Judgment in federal court or in tile courts of any other state of
the United States, assign or sell the Fee Judgment, or otherwise attempt to
collect the Fee Judgment from CEC, CAPCO, or CAD. The MCN Parties further agree
that they will withdraw all supplemental orders, writs of garnishment. and writs
of execution issued prior to the date of this Agreement. If, however, one or
more of the Crown Parties becomes tile subject of a bankruptcy petition,
voluntary or otherwise, during this 91-day period, the MCN Parties shall
immediately be entitled to recover, by proof of claim, execution, or otherwise,
the remainder of the Fee Judgment ($2,309,518.69) from CEC, CAPCO, and/or CAD,
unless such petition is an involuntary petition filed in violation of Paragraph
7 below.
7. No Involuntary Bankruptcy Petition. During the 91-day period
following CAC's assignment of the ORRI to MCNIC, the MCN Parties, their
directors, officers, and employees shall not participate in, finance, encourage,
aid, or abet, directly or indirectly, the filing of any involuntary petition
under Xxxxx 00, Xxxxxx Xxxxxx Code against any of the Crown Parties.
8. Mutual Releases. Effective immediately upon MCNIC's receipt of tile
Purchase Price and the ORRI, the Parties mutually release each other as follows:
(a) Release by the Crown Parties and Xxxxxx. Except for the
right to enforce the terms of this Agreement, the Crown Parties and Xxxxxx, on
behalf of themselves and their respective heirs, successors, and assigns,
completely release and discharge the MCN Parties, as well as their respective
heirs, successors, and assigns and all of their respective current and former
attorneys, directors, officers, shareholders, members, managers, employees, and
agents, from any and all then-existing claims and causes of action of any kind
and nature, whether or not presently known by the Parties, including but not
limited to all claims and causes of action asserted in the Arbitration
Proceeding, the State Action, and the Federal Action, all claims and causes of
action arising under the CAD Operating Agreement., the CAD Operating and
Management Agreement, and any loans made by MCNIC to CAD, and all claims and
causes of action arising from or in any way related to the ownership, operation,
and management of CAPCO, CAD, and the Xxxxxxx terminal.
(b) Release by the MCN Parties. Except for the right to
enforce the terms of this Agreement, the MCN Parties, on behalf of themselves
and their respective heirs, successors, and assigns, completely release and
discharge the Crown Parties and Xxxxxx, as well as their respective heirs,
successors, and assigns and all of their respective current and former
attorneys, directors, officers, shareholders, members, managers, employees, and
agents, from any and all then-existing claims and causes of action of any kind
and nature, whether or not presently known by the Parties, except for the
Damages Judgment (which is the subject of Paragraph 1 above) and the Fee
Judgment (which is the subject of Paragraphs 4 through 6 above).
9. Dismissal of Pending Litigation. Simultaneous with the execution of
this Agreement, the Crown Parties and the MCN Parties stipulate to the immediate
dismissal with prejudice of the State Action and the Federal Action, by the
execution and filing of the stipulations and proposed orders in the forms
attached hereto as Exhibits I through L.
10. Execution of Further Documents. The Parties agree to execute and
deliver to the other any and all documents, whether attached to this Agreement
and otherwise, that may be necessary to effectuate the terms of this Agreement.
By way of example, and not by limitation, MCNIC is transferring all of its
interests and rights in any security agreement, financing statement, lien, deed
of trust, or mortgage in or upon the CAD assets to CAPCO. The Parties may
discover, and expect to discover, fixture filings, trust deeds, financing
statements and other recorded documents not known as of the date of execution of
this Agreement that constitute such interests and rights and acknowledge and
agree to execute any and all documents in the future necessary to effectuate the
terms of this Agreement. Specifically, MCNIC agrees to execute such specific
assignments promptly upon tender of documents in recordable form prepared by CAD
or CAPCO for such purpose.
11. Remedies. The provisions of this Settlement Agreement are
specifically enforceable.
12. Binding Agreement. This Agreement is binding upon and inures to the
benefit of the Parties and their respective heirs, successors, and assigns.
13. Applicable Law. This Agreement shall be governed by and construed
in accordance with the internal laws of Utah.
14. Effective Date. This Agreement is effective and binding upon the
Parties on the date hereof upon the execution and delivery of this Agreement by
all of tile Parties.
15. Counterparts, Facsimile. This Agreement is and may be executed in a
number of counterparts and by facsimile, each of which has been executed by
fewer than all of the Parties. Each counterpart is enforceable against the
Parties actually executing such counterparts, and all of which together shall
constitute one instrument.
16. Integration Clause. The Parties stipulate that this Agreement is
the final, complete, exclusive, and fully integrated expression of their
settlement. This Agreement supersedes all prior oral or written agreements among
the Parties with respect to the subject matters contained herein. There are no
representations, arrangements or understandings, either oral or written, among
the Parties which are not fully expressed herein. No alterations or other
modifications of this Agreement shall be effective unless made in writing and
signed by all Parties.
17. Representations and Warranties. Each of the Parties hereby
represents and warrants that this Agreement has been duly authorized and validly
executed and delivered by said Party, by or through an individual with authority
to act oil behalf of and legally bind said Party. Each of the Parties also
hereby represents and warrants that said Party has not transferred, assigned, or
pledged, in whole or in part, any of the claims that are within the scope of the
releases set forth in Paragraph 6 above. The Parties further represent and
warrant that they have not relied upon any statement, communication,
representation, or opinion of any other Party or any representative of any other
Party in connection with this Agreement or the settlement of this matter.
IN WITNESS WHEREOF, the Parties have executed this Agreement on the
dates indicated below.
DTE ENTERPRISES. INC
Dated: October 16, 2002 By: /s/ N.A. Rhouri
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Its: Vice President and Treasurer
MCNIC PIPELINE & PROCESSING
COMPANY
Dated: October 16, 2002 By: /s/ N.A. Rhouri
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Its: Vice President and Treasurer
Dated: October 16, 2002 /s/ Xxxxxx X. Xxx III
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XXXXXX X. XXX III
Dated: October 16, 2002 /s/ W.E. Xxxxxxx
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XXXXXXX X. XXXXXXX
CROWN ENERGY CORPORATION
Dated: October 16, 2002 By /s/ Xxx Xxxxxx
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Its: President
CROWN ASPHALT CORPORATION
Dated: October 16, 2002 By /s/ Xxx Xxxxxx
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Its: President
CROWN ASPHALT PRODUCTS COMPANY
Dated: October 16, 2002 By /s/ Xxx Xxxxxx
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Its: President
CROWN ASPHALT DISTRIBUTION, L.L.C
Dated: October 16, 2002 By /s/ Xxx Xxxxxx
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Its: President
Dated: October 16, 2002 /s/ Xxx Xxxxxx
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XXX XXXXXX
