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HomeMy WebLinkAbout11847RESOLUTION NO. 11847 A RESOLUTION APPROVING A MEDIATED SETTLEMENT AGREEMENT BETWEEN THE CITY OF PUEBLO, A MUNICIPAL CORPORATION AND GEORGE F. ADAM, JR. SETTLING PUEBLO DISTRICT COURT ACTION NO. 08CV1794 FILED BY THE CITY TO ENFORCE THE GUARANTY OF GEORGE F. ADAM, JR. CONCERNING OBLIGATIONS OF ADAM AIRCRAFT INDUSTRIES, INC. BE IT RESOLVED BY THE CITY COUNCIL OF PUEBLO, that: SECTION 1 The Mediated Settlement Agreement dated March11, 2010 between the City of Pueblo and George F. Adam, Jr. settling the City's claims against Defendant George F. Adam, Jr. in Pueblo County District Court Case No. 08CV1794 (the "litigation "), a copy of which is attached hereto, having been approved and executed by Defendant and City's legal counsel in the litigation, is hereby approved. SECTION 2 This Resolution shall become effective upon passage and approval. INTRODUCED: April 12, 2010 BY: Vera Ortegon COUNCILPERSON APPROVED: FtE51DENT CF CITY CC) UNCIL ATTESTED BY: GIB' Y CLERK Background Paper for Proposed RESOLUTION DATE: April 12, 2010 AGENDA ITEM # M-4 DEPARTMENT: Law Department Thomas J. Florczak, City Attorney TITLE A RESOLUTION APPROVING A MEDIATED SETTLEMENT AGREEMENT BETWEEN THE CITY OF PUEBLO, A MUNICIPAL CORPORATION AND GEORGE F. ADAM, JR. SETTLING PUEBLO DISTRICT COURT ACTION NO. 08CV1794 FILED BY THE CITY TO ENFORCE THE GUARANTY OF GEORGE F. ADAM, JR. CONCERNING OBLIGATIONS OF ADAM AIRCRAFT INDUSTRIES, INC. ISSUE Should the City approve a Mediated Settlement Agreement between the City as Plaintiff and George F. Adam, Jr. as Defendant. The Mediated Settlement Agreement is in the best interest of the City and should be approved. BACKGROUND The City had advanced to or for the benefit of Adam Aircraft Industries, Inc. ( "Adam Aircraft ") the approximate sum of $2.671 million under a job creating capital improvement project agreement ( "Agreement "). This included $703,845 for purchase of a building and $308,441 for remodeling the building, $1,360,726 for purchase of equipment and $297,698 for rent paid under a lease for the building. After credit for amounts properly creditable to Adam Aircraft under the agreement, the sum of $2,144,647 was owed to the City by Adam Aircraft at the time it defaulted in its obligations under the Agreement. George F. Adam, Jr. had personally and unconditionally guaranteed to pay to City the full amount of Adam Aircraft's Repayment Obligation described in and in accordance with the terms and provisions of the Agreement. Adam Aircraft filed bankruptcy, in which the City has filed a claim. An action was also filed in Pueblo County District Court to enforce Mr. Adam's guaranty. During pendency of those proceedings, the building (with improvements made in the remodeling) has been conveyed to City. The present value of the building is not known. Under the settlement: the City will obtain a judgment against Mr. Adam for $1,860,000; City will withhold execution on the judgment for one year from the "closing date" of the settlement; the judgment will be deemed satisfied if $1.5 million is paid within 12 months of the closing date; if not paid within that time frame, the judgment will be satisfied by payment of $1.5 million plus 12% interest from the closing date; the Defendant will furnish financial information to City and execute deeds of trust securing the judgment upon the three parcels of property located in Vail, Colorado, at Centennial Airport and in Wisconsin which may be foreclosed by City at any time after 12 months from the closing date; and that any funds recovered in the bankruptcy case will be credited against the settlement amount. FINANCIAL IMPACT This settlement has a high probability of recovery of $1.5 million in 1/2 cent sales tax funds which will be returned to the 1/2 cent sales tax account. DISTRICT COURT, COUNTY OF PUEBLO, STATE OF COLORADO Address: 320 West 10 Street, Pueblo, Colorado 81003 CITY OF PUEBLO, a Municipal Corporation Plaintiff vs COURT USE ONLY Case Number 08 CV 1794 GEORGE F. ADAM, JR. Defendant Div. G Mediator: Name: David C. Mize Address: 104 South Cascade Avenue Suite 202 Colorado Springs, Colorado 80903 -5102 Phone Number: (719) 578 -2001 Fax: (719) 475 -9847 E -Mail: Atty. Reg.: #2244 MEDIATED SETTLEMENT AGREEMENT The above parties agree to the hereafter Mediated Settlement Agreement: 1. The Defendant hereby confesses judgment for the Plaintiff and against the Defendant in the amount of $1,860,000 C judgment"); and will execute a formal confession judgment in that amount on the closing date of this Settlement Agreement. Said confession of judgment will be filed with the Court for an entry of judgment for the Plaintiff and against the Defendant. The Plaintiff agrees that the Defendant may fully satisfy the judgment as follows: A. If paid on or before 12 months from the closing date of this Settlement Agreement (as hereafter defined), the judgment will be satisfied by the payment of $1,500,000. B. If paid after that date, the judgment will be satisfied by the payment of $1,500,000 plus interest at the rate of 12% per annum from the closing date of this Settlement Agreement until paid C. Plaintiff agrees not to execute on the judgment for a period of 12 months from the closing date of this Settlement Agreement; but shall be free to execute thereafter. D. The Defendant may make partial payments, through the sale of the parcels of real property described in paragraph 2, through monies received from the bankruptcy proceeding as described in paragraph 3, or with his own funds, and any amounts so paid shall first be credited against any interest owed on the judgment and then against the principal of the judgment. E. The Defendant shall be responsible for any attorney's fees incurred by the Plaintiff in the collection of the judgment or the enforcement of this Settlement Agreement 2. Within 10 days hereof, the Defendant shall provide to the Plaintiff his financial statement certified by a certified public accountant, which statement shall identify at least the three parcels of real estate generally described as and located in Vail, Centennial Airport, the state of Wisconsin, and which statement shall demonstrate that the equity values of said three parcels exceeds the amount of the judgment. The Defendant agrees to execute deeds of trust or statuatory mortgages on the closing date of the Settlement Agreement, to be prepared by counsel for the Plaintiff for the approval of counsel for the Defendant on said three parcels of real estate to the order of the Plaintiff, and Defendant will provide, at his cost, title insurance insuring that the Plaintiff, as a result of said Deeds of Trust or mortgages, has a first security position on the Centennial Airport and Wisconsin properties and a second security position on the Vail property. Plaintiff agrees not to initiate foreclosure on said Deeds of Trust or mortgages for a period of 12 months from the closing date of this Settlement Agreement; and agrees that any bid at the foreclosure sale shall be credited against the judgment. Defendant shall also provide Plaintiff with the listing agreements on said parcels of real estate and will inform the Plaintiff of any changes or extensions of those listing agreements. 3. Plaintiff agrees that the Defendant may intervene in the claim made by the Plaintiff in the bankruptcy proceeding of Adam Aircraft, which claim is for monies owed as a result of Plaintiff's security interest in equipment of Adam Aircraft. Plaintiff further agrees that Defendant may take control of that claim in the bankruptcy proceeding; and that Plaintiff will make available any witness or records which Defendant reasonably requires to prosecute said claim. Defendant agrees that any monies paid as a result of said claim shall be paid over to the Plaintiff and shall be credited against the settlement amount; and the parties agree to stipulate in the bankruptcy proceeding that any such payments shall be made directly to the Plaintiff to the extent there remains money owing on the judgment. 4. At closing date of this Settlement Agreement, the parties agree to execute a Mutual Release of all claims except those arising out of this Settlement Agreement, to be prepared by counsel for the Plaintiff to be accepted by counsel for the Defendant. Plaintiff shall cause to be filed a satisfaction of judgment on the full and complete payment of the judgment; and shall release any and all deeds of trust or liens against the Defendant "s property. 5. This Mediated Settlement Agreement is contingent upon its approval by appropriate resolution of the Pueblo City Counsel, which must occur on or before f! PVO, 20110 1 6. The "closing date of this Settlement Agreement" shall occur within 10 days of the approval of the settlement as provided in paragraph 5 at a place, date and time agreed to by the parties. The parties shall each pay their respective attorney's fees and shall split equally the mediation fees. Dated: March 11, 2010 �OrLI.� Plaint ttorney UO Defendant's Attorney Tom Aigerr, as representative of the ;aintiff A Adams, Jr., Defendant