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HomeMy WebLinkAbout2003-06-03; City Council; 17186; Settlement with Modetek IncCITY OF CARLSBAD -AGENDA BILL AB# 17,186 MTG. 6/3/03 TITLE: REPORTING OUT THE TERMS AND CONDITIONS OF DEPT. HD. THE SETTLEMENT AS REQUIRED BY THE BROWN ACT IN MODETEK, INC. CITYATTY. 6, RECOMMENDED ACTION: There is no action the Council needs to take. ITEM EXPLANATION: At its special meeting of April 21, 2003 under Government Code section 54956.9(c), the City Council discussed the possibility of initiating litigation against ModeTek, Inc. It approved a proposed settlement subject to approval by all parties. The parties have now settled this potential litigation which satisfies the Brown Act requirement to report the fact of a settlement of potential litigation, and makes the terms and conditions of the settlement available to the public. The Settlement Agreement and Mutual Release (attached) is provided for public review. FISCAL IMPACT: The ModeTek, Inc. bears the cost of the settlement. EXHIBITS: Settlement Agreement and Mutual Release SETTLEMENT AGREEMENT AND MUTUAL RELEASE This Compromise Settlement Agreement (“Agreement”) is entered into between the City of Carlsbad (“City” or “Lessor”) and ModeTek, Inc., a California Corporation (“ModeTek” or “Lessee”) at the City of Carlsbad, California on May -, 2003. RECITALS A. The City as Lessor and ModeTek as lessee entered into a written Lease Agreement (the “Lease”) on September 2 1,2000 with respect to certain improved real property located in Carlsbad, California at 2075 Las Palmas Drive (the “Premises”). B. ModeTek has gone out of business and is in the process of liquidating its assets. C. ModeTek owes he City unpaid rent and penalties accrued under the Lease of $ for the period July 2002 through April 2003. D. The City desires an immediate turnover of possession of the Premises. ModeTek is willing to do so. E. The City has sustained, and will continue to sustain damages by reason of ModeTek’s breach of the Lease. F. The parties wish to agree to the amount the City will be paid by ModeTek in satisfaction of the City’s claim for damages for ModeTek’s breach of the Lease. AGREEMENT 1. Initial Payment by ModeTek. Concurrent with the execution of this Agreement, ModeTek shall pay to City the sum sixty thousand dollars ($60,000.00). This payment shall be applied first to April, May and June 2003 rent, and the balance to past due rent and late charges. 2. Second Payment by ModeTek. On or before May 30,2003, ModeTek shall pay to City the additional sum of sixty thousand dollars $60,000.00. 3. Possession of the Premises. The City shall have the immediate right to possession of the Premises, and ModeTek hereby immediately relinquishes possession of the premises to City. 4. Conditional Satisfaction. If and only if the City is paid both the first and second $60,000.00 payments, at the times and in the manner provided in paragraphs 1 and 2, above, City agrees to accept the payments in full satisfaction of its claims for damages against ModeTek for damages for breach of the Lease, and the lease shall be terminated, subject to the following conditions subsequent: a. No bankruptcy petition is filed by or against ModeTek during the 90-day period after May 30, 2003; b. No general assignment for the benefit of creditors is made by ModeTek during that 90 day period; and c. ModeTek performs the requirements set out in paragraph 5, below. d. The representations and warranties of ModeTek in paragraph 11 of this Agreement are, at all relevant times, correct and true. 5. Trade Fixtures and Equipment. ModeTek may remove its trade fixtures and equipment located at the Premises no later than May 30,2003, so long as it causes no material damage to the interior or exterior of the Premises, but shall leave intact all tenant improvements, including, without limitation, all clean rooms and air conditioning and purifying equipment. ModeTek shall leave the premises in good and clean condition, free of debris. ModeTek shall have access to the Premises during this period for these purposes. 6. Events of Default by ModeTek. Upon the occurrence of any of the following events, the Lease is not terminated, and the City shall be entitled to pursue its remedies for breach of the Lease as provided in the Lease, California law, and, if ModeTek is then a debtor or an alleged debtor in a bankruptcy case, United States Bankruptcy law: a. The first $60,000.00 payment is not made at the time provided in paragraph 1, above; b. The second $60,000.00 payment is not made within the time provided in paragraph 2, above; c. A petition under the United States Bankru tcy Code (Title 11, U.S. Code) is filed by or against ModeTek at any time on or before the 90' ! day after May 30,2003; and d. A general assignment for the benefit of creditors is made by ModeTek at any time on or before the 90th day after May 30,2003. e. ModeTek shall fail to perform the requirements set out in paragraph 5, above. f. A representation or warranty of ModeTek in paragraph 11 of this Agreement is not, at all relevant times, correct and true. Notwithstanding the occurrence or non-occurrence of any of these events, ModeTek’s right to possession of the Premises is terminated effective as of the date of execution of this Agreement. 7. No Premature Lease Termination. In no event will the Lease terminate until after the 90th day after May 30,2003. 8. Releases. a. ModeTek’s Release of City. ModeTek, on behalf of itself and its employees, ’ agents, representatives, successors, and assigns, hereby releases and discharges the City and its employees, agents, representatives, attorneys, successors, and assigns from any and all actions, causes of action, claims, demands, damages, compensation, costs, loss of services, expenses and attorney fees, whether or not contingent, unliquidated or unmatured, known or unknown, arising out of, concerning, resulting from, or relating to the Lease, or any facts or incidents relating thereto, or which were or could have been alleged in connection therewith. Specifically included in this release is a waiver of all defenses, offsets, counterclaims, pleas in abatement or other defenses to liability relating to the breach of the Lease. b. City’s Release of ModeTek. Subject to the performance by ModeTek of the provisions of paragraphs 1,2 and 3 of this Agreement, and subject to the provisions of paragraphs 4, 5,6 and 7 of this Agreement, City, on behalf of itself and its employees, agents, representatives, successors, and assigns, hereby releases and discharges the ModeTek and its employees, agents, representatives, and attorneys from any and all actions, causes of action, claims, demands, damages, compensation, costs, loss of services, expenses and attorney fees, whether or not contingent, unliquidated or unmatured, known or unknown, arising out of, concerning, resulting from, or relating to the Lease, or any facts or incidents relating thereto, or which were or could have been alleged in connection therewith. 9. Waiver Of Unknown Claims. All rights under section 1542 of the Civil Code of the State of California are hereby waived with respect to the releases set forth above. Said Civil Code section reads as follows: A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor. Each party hereto understands and acknowledges the significance and consequences of this specific waiver of section 1542 and, except as provided in paragraph 13 of this Agreement, hereby assumes full responsibility for and releases any and all actions, causes of action, claims, demands, damages, compensation, costs, loss of services, expenses and attorney fees, which may hereafter occur or which later become known to such party, including any right to rescind this Agreement. 10. Exceptions to Releases. Specifically excluded from the release in paragraphs 8 and 9 of this Agreement are the rights, obligations, representations and warranties of the parties set forth in this Agreement. 11. Representations and Warranties of ModeTek. ModeTek represents and warrants a. ModeTek has ceases all business operations, is out of business and is as follows: liquidating its assets in as orderly a manner as possible. The liquidation will be substantially completed by May 30,2003. ModeTek will not engage in any business in the future, whether by merger or otherwise. b. ModeTek is the lessee under the Lease, which is the subject of this Agreement, and its interest in the Lease has not been assigned, transferred or hypothecated, whether voluntarily or involuntarily, by subrogation, operation of law or otherwise, to any other person or entity. c. ModeTek has the power to enter into and perform this Agreement; and this Agreement’s execution has been duly authorized by all necessary corporate action. d. This Agreement constitutes a valid and binding obligation on ModeTek, enforceable in accordance with its terms. e. To ModeTek’s knowledge, no suit, action, arbitration, administrative proceeding or governmental investigation is pending or threatened against ModeTek. No involuntary bankruptcy petition has been filed against ModeTek, and ModeTek has not and will not file either a voluntary bankruptcy petition or a general assignment for the benefit of its creditors. f. No consent or approval of any other person or entity is necessary for this Agreement to be effective. g. Neither the execution or delivery of this Agreement, nor the consummation of the transactions contemplated by it would constitute a default or violation of ModeTek’s articles of incorporation, bylaws, or any license, franchise, instrument or other agreement. h. These representations and warranties shall survive full execution of and performance under this Agreement. 12. Representations and Warranties of City. a. City represents and warrants it has the power to enter into and perform this Agreement; and this Agreement’s execution has been duly authorized by all necessary action by the City Council. b. This Agreement constitutes a valid and binding obligation on the City, enforceable in accordance with its terms. 13. Attorneys’ Fees. a. Each party shall bear its own attorneys’ fees and costs incurred in the negotiation and preparation of this agreement. b. . In the event any party hereto commences litigation for the interpretation, specific performance, or damages for the breach, of this Agreement, the prevailing party shall be entitled to recover reasonable attorney fees and expenses incurred, together with all other appropriate legal or equitable relief. In the event ModeTek shall become a debtor or an alleged debtor in a bankruptcy case, or shall make a general assignment for the benefit of creditors, City shall be entitled to recover as damages under the Lease and this Agreement its attorneys’ fees and costs incurred therein. 14. Construction. Each party and its counsel have participated fully in the review and revision of this Agreement. Any rule of construction to the effect that ambiguities are to be resolved against the drafting party shall not apply in interpreting this Agreement. 15. Entire Agreement. This Agreement constitutes the final, complete and exclusive statement of the terms of the agreement between the parties pertaining to the subject matter of this Agreement and supersedes all prior and contemporaneous understandings or agreements of the parties. No party has been induced to enter into this Agreement by, nor is any party relying on, any representation or warranty outside those expressly set forth in this Agreement. 16. Choice of Law and Forum. This Agreement and any dispute arising under it shall be governed by California law, excluding any laws that direct the application of laws of another jurisdiction’s laws. Any dispute that arises under or relates to this Agreement (whether in contract, tort or both) shall be resolved in the Superior Court, Northern San Diego County, State of California. 17. Headings. The headings in this Agreement are included for convenience only and shall neither affect the construction or interpretation of any provision in this Agreement nor affect any of the rights or obligations of the parties to this Agreement. 18. Waiver. No waiver of a breach, failure of any condition, or any right or remedy contained in or granted by the provisions of this Agreement shall be effective unless it is in writing and signed by the party waiving the breach, failure, right or remedy. No waiver of any breach, failure, right or remedy shall be deemed a waiver of any other breach, failure, right or remedy, whether or not similar, nor shall any waiver constitute a continuing waiver unless the writing so specifies. 19. Necessary Acts; Further Assurances. The parties shall at their own cost and expense execute and deliver such further documents and instruments and shall take such other actions as may be reasonably required or appropriate to evidence or carry out the intent and purposes of this Agreement. 20. Time of the Essence. Time is of the essence in respect to all provisions of this Agreement. 21. Notice. All notices, requests, demands or other communications under this Agreement shall be in writing. Notice shall be sufficiently given for a; purposes as follows: a. Personal delivery. When delivered personally to the recipient. Notice is effective on delivery. b. First class mail. When mailed, first class postage prepaid, to the last address of the recipient known to the party giving the notice. Notice is effective three (3) mail delivery days after deposit in a United States Postal Service office of mailbox. c. Overnight delivery. When delivered by overnight delivery (e.g., Express Mail, Federal Express),charges prepaid or charged to the sender’s account. Notice is effective on delivery if delivery is confirmed by the delivery service. d. Telex or facsimile transmission. When sent by telex or fax to the last telex or fax number of the recipient known to the party giving notice. Notice is effective on receipt, provided (i) a duplicate copy of the notice is promptly given by first-class mail or overnight delivery, or (ii) the receiving party delivers a written confirmation of receipt. Any notice given by telex or fax shall be deemed received on the next business day if it is received after 5:OO p.m. (recipient’s time) or on a nonbusiness day. Addresses for purpose of giving notice are as follows: City of Carlsbad: ModeTek, Inc. Cynthia Haas Economic Development Manager City of Carlsbad 1635 Faraday Ave. Carlsbad CA 92008 Fax: (760) 602-8560 J with copies to Ronald R. Ball, Esq. City of Carlsbad 1200 Carlsbad Village Dr. Carlsbad CA 92008 Fax: (760) 434-8367 Scott Stanton, Esq. Gray Cary Ware & Freidenrich LLP 4365 Executive Drive, Suite 1100 San Diego CA 92121 Fax: (858) 677-1477 Colin W. Wied, Esq. C.W. Wied Professional Corporation 501 W. Broadway, Suite 1780 San Diego, CA 92101 This Agreement is executed at San Diego, California, as of the date set forth at the beginning hereof. ModeTek, Inc., a California Corporation . By: 5,‘ 9 its City Manager its president its secretary