SETTLEMENT AGREEMENT
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This Settlement Agreement made this 30th day of January, 1998 by and between
Eagle Development Company, a Colorado corporation ("Eagle") and Xxxxxxxx X.
X'Xxxxxx, an individual residing in Boulder, Colorado ("X'Xxxxxx").
RECITALS
A. Eagle is the Plaintiff and X'Xxxxxx is the Defendant in that certain
civil action pending in Boulder County District Court known as Civil Action
No. 97 CV 458, Division 2 (the "Litigation").
B. Eagle and X'Xxxxxx are members of a Colorado limited liability company
known as Eagles Landing, LLC (the "LLC"). X'Xxxxxx is the manager of the LLC.
C. The LLC owns certain improved real property in Jefferson County,
Colorado, which contains an apartment house (the "Property").
D. In the Litigation, Eagle alleges that X'Xxxxxx has wrongfully failed to
sell the Property as required by the Operating Agreement of the LLC, as
amended, and that Eagle is owed certain moneys by X'Xxxxxx and by the LLC that
X'Xxxxxx has wrongfully refused to pay or cause to be paid.
X. X'Xxxxxx has agreed, in his role as Manager of the LLC, to sell the
Property and has executed on behalf of the LLC a Commercial Contract to Buy
and Sell Real Estate dated January ___, 1998 under which The Ezralow Company
and/or assigns would purchase the Property for the sum of $15.4 million (the
"Ezralow Contract"). Eagle has approved the form of the Ezralow Contract at
the request of X'Xxxxxx. X'Xxxxxx has advised Eagle that while the Ezralow
Company has agreed on the general business terms contained in the Ezralow
Contract, it has not signed it but is instead providing comments to X'Xxxxxx
on it.
F. Eagle and X'Xxxxxx have agreed on the terms of a compromise and
settlement of Eagle's claims against X'Xxxxxx and the LLC and that X'Xxxxxx
will purchase Eagle's interest in the LLC pursuant to the terms and conditions
described below.
AGREEMENT
1. Eagle agrees to sell and X'Xxxxxx agrees to purchase Eagle's membership
interest in the LLC for the consideration and on the terms set out below.
2. X'Xxxxxx will proceed to attempt to close the sale of the Property
pursuant to the Ezralow Contract. If the Ezralow Contract does not result in
the sale of the Property, X'Xxxxxx agrees to immediately seek other contracts
for the sale of the Property at a price and on terms that reflect the
then-current market value of the Property. Specifically, X'Xxxxxx agrees to
pursue all reasonable offers from interested parties, to conduct sufficient
investigation on the maker of any offer received for a reasonable person to
determine whether the offer has a reasonable chance of being acceptable and
capable of resulting in a sale of the Property, to assist any potential
purchaser of the property by providing information reasonably necessary for
such person to conduct its due diligence as quickly as possible, and to keep
Eagle informed within two business days of the status of his sales efforts and
any offers or contracts he has received.
3. If the Property is not sold pursuant to the Ezralow contract and
X'Xxxxxx is not able by March 15, 1998 to obtain an executed contract to sell
the Property to an unaffiliated third-party at a price and on terms which
reflect the then-current market value of the Property, a sales committee
composed of Eagle, X'Xxxxxx (or another person designated by him) and a person
agreed on by Eagle and X'Xxxxxx or, if they are not able to agree on the
identity of any person, a person selected by the designees of Eagle and
X'Xxxxxx (each having designated a person for the purpose of making such
selection) (the "Sales Committee") shall assume the responsibility of selling
the Property. The Sales Committee shall attempt to sell the Property to an
unaffiliated third-party as quickly as reasonably possible at a price and on
terms which reflect the then-current market value of the Property. A vote by
any two of the members of the Sales Committee shall constitute the decision of
the Sales Committee. X'Xxxxxx will follow all directions given to him by the
Sales Committee, including any directions to execute any contract or other
documents relating to the sale of the Property.
4. Eagle and X'Xxxxxx will immediately analyze the operating results of
the Property and the other financial results of the LLC from 1/1/97 through
the present and attempt to agree on the amount of distributable profits to
which Eagle is currently entitled, taking into account amounts actually
distributed to Members since 1/1/97 and assuming that all Members are entitled
to pro-rata distributions. If they are not able to agree on such amount
within 45 days, Xxxxx & Co. will be directed to conduct a review of the LLC
financial affairs and records for the calendar year 1997. It will supplement
that review to a date as close as possible to the closing of the sale of the
Property in order to have a complete review prepared for the period 1/1/97
through closing of the sale of the Property. The amount of Eagle's share of
distributable profits (which, for the purpose of this Settlement Agreement,
shall assume that all profits are distributable with no amount retained for
any purpose except for refundable tenants' deposits and ordinary and necessary
operating and third-party management expenses incurred but unpaid as of the
date of closing, and that the amount in the capital accounts of all members of
the LLC on such date is zero ($0), and which shall include any undistributed
profits existing on 1/1/97) for such period reflected in Xxxxx'x review shall
be paid by X'Xxxxxx to Eagle at the time of and out of the proceeds of the
sale of the Property and, to the extent such proceeds are insufficient to pay
such amount, from X'Xxxxxx'x other assets. For the purpose of this
calculation, the amount of any distribution or payment to any Member of the
LLC or any affiliated entity, other than payments for services actually needed
by the project at rates not exceeding market rates and approved by Eagle or
expressly authorized by the Operating Agreement of the LLC, shall be added
back to the amount of distributable profits. The parties will be bound by
Xxxxx'x determinations contained in the review. The LLC shall pay Xxxxx'x fee
for performing the review. For the purpose of determining the amounts payable
to Eagle pursuant to this paragraph and paragraph 5, no amount owing on or
after 1/1/98 related to (i) the SID tax liability, (ii) Xxxxxxx XxXxx, Home
Place Land & Cattle Co., Inc., a Colorado corporation or any affiliate or
successor of either entity, or (iii) any development, asset, management,
broker's or other fee, commission, overhead, salary or other payment of any
type to X'Xxxxxx or any entity affiliated with him, will be deemed to be
payable by Eagle, the LLC or the purchaser of the Property. Any amount paid
by the LLC after 1/1/98 relating to any of the matters listed in this
paragraph will be added to the total amount of distributable profits of which
Eagle is entitled to receive its 40% share pursuant to paragraph 5, below.
The provisions of this paragraph reflect the compromise and settlement of
various claims by Eagle and are reflected in the amount X'Xxxxxx has agreed to
pay to Eagle.
5. At closing of the sale of the Property, X'Xxxxxx shall pay or cause to
be paid to Eagle (A) 40% of the net sale proceeds, defined as the gross
selling price less (i) brokers' fees to brokers unaffiliated with either
party, with total brokers' fees not to exceed a total of 2%, (ii) customary
and reasonable closing costs paid to persons unaffiliated with either party,
and (iii) amounts owing to Allstate under the permanent loan; (B) the sum of
$262,500 payable from X'Xxxxxx'x share of the closing proceeds and, to the
extent such proceeds are insufficient to pay such amount, from X'Xxxxxx'x
other assets; and (C) Eagle's share of distributable cash for the period
1/1/97 through closing, as described in 3, above. Any amount payable under
subsection B of this paragraph that has not been paid to Eagle on or before
May 20, 1998 shall bear interest at 8%. The payment of all amounts payable to
Eagle under this Settlement Agreement shall be and is the personal obligation
of X'Xxxxxx as consideration for his acquisition of Eagle's membership
interest in the LLC.
6. Eagle agrees to keep confidential the amount being paid to it by
X'Xxxxxx and the basis for calculation of such amount, except to the extent it
is required to disclose any such information by any law, statute or rule
applicable to it.
7. Eagle agrees to cooperate with any reasonable request by X'Xxxxxx
regarding his tax planning related to the settlement or sale of the property
provided such request is reasonably acceptable to Eagle and its counsel and
does not have any actual or potential impact on Eagle or any of the
transactions described above.
8. X'Xxxxxx agrees to hold Eagle harmless and indemnify it against any and
all claims, loss, liabilities or expenses, including reasonable attorney's
fees, arising out of or related to the LLC, the Property or the apartment
project or its operation, including, but not limited to, any claim by any
party related to the settlement of the Litigation or any amounts received by
Eagle pursuant to this Settlement Agreement, excepting only claims by third
parties based on the express acts of Eagle or its officers, shareholders or
representatives (other than the acts of negotiating and executing this
Settlement Agreement, which shall be covered by the indemnification), which
claims shall not be covered by the indemnification contained in this
paragraph. Any attorney's fees claimed by Eagle under this paragraph shall be
payable by X'Xxxxxx unless a court of competent jurisdiction determines that
the amount of such fees exceeds a reasonable amount under the circumstances,
in which case X'Xxxxxx shall be required to pay only such fees as are
determined to be reasonable by such court. Eagle agrees not to voluntarily
cooperate with any person in asserting or supporting any claim against
X'Xxxxxx or the LLC except (i) with respect to Eagle's claims which arise out
of either the Litigation, if the Litigation goes to trial pursuant to
paragraph 10, or this Settlement Agreement, or (ii) to the extent that Eagle's
cooperation is legally required by the Colorado Rules of Civil Procedure,
court order or other legal requirement applicable to Eagle.
9. X'Xxxxxx agrees that if he breaches any of the provisions of this
Settlement Agreement and the sale of Eagle's interest in the LLC is not
transferred to X'Xxxxxx as a result of such breach, X'Xxxxxx will resign as
Manager of the LLC, a person elected by a majority of members of the Sales
Committee will become the Manager of the LLC, and Eagle will be entitled to
have a court of competent jurisdiction order such change upon a finding of a
breach hereunder by X'Xxxxxx. In the event that Eagle determines that
X'Xxxxxx has committed any breach of any of the provisions hereof, Eagle will
give to X'Xxxxxx written notice of such breach. If such breach is curable by
X'Xxxxxx, he shall have five (5) business days to cure such breach. In the
event of a cure of the breach within such five (5) day period, such that no
breach is then occurring, X'Xxxxxx will be deemed not to be in breach of this
Settlement Agreement.
10. Eagle and X'Xxxxxx agree to immediately file a joint motion for stay
of the Litigation. Subject to the provisions of paragraph 7, after the
performance of all acts required of X'Xxxxxx hereunder, Eagle will deliver to
X'Xxxxxx a written assignment of its membership interest in the LLC. At such
time, Eagle and X'Xxxxxx agree to and shall be deemed to waive and release all
claims contained in the Litigation and they shall file a joint motion to
dismiss the Litigation with prejudice. If, prior to such time, either party
hereto determines, in its sole discretion, that the other party is not
proceeding in good faith to perform the duties imposed on it by this
Settlement Agreement, the party making such determination shall have the right
to file a motion with the Court in which the Litigation is pending requesting
that the stay of the Litigation be lifted, and upon the filing of such a
motion, the parties agree that it shall be their intent and desire that the
Court lift the stay and order that the Litigation proceed to trial.
11. If any litigation is filed to enforce the terms of this Settlement
Agreement, the prevailing party will be entitled to recover all costs and
expenses incurred in connection with such litigation, including reasonable
attorneys' fees.
12. X'Xxxxxx personally guarantees to Eagle the prompt payment of all
amounts payable to Eagle pursuant to this Settlement Agreement. This
guarantee is a guarantee of payment and not of collection, is absolute and
shall not be conditioned or limited in any way based on the occurrence or
non-occurrence of any event or the receipt of any money or other specific
asset by X'Xxxxxx, provided, however, that X'Xxxxxx shall enjoy and be
entitled to exercise any rights provided to him under Colorado law in the
event of a breach of this Settlement Agreement by Eagle.
13. In the event of any dispute or conflict between any of the terms of
this Settlement Agreement and any other document to which either Eagle or
X'Xxxxxx is a party, the provisions of this Settlement Agreement shall control
and be binding on Eagle and X'Xxxxxx.
EAGLE DEVELOPMENT COMPANY, a Colorado corporation
By:___________________________________
Xxxx X. Xxxxxxx, President
_______________________________________
XXXXXXXX X. X'XXXXXX
