07-0703_ECO RESOURCES , INC_Settlement Agreement0 0
SETTLEMENT AGREEMENT
THIS SETTLEMENT AGREEMENT ("Settlement Agreement") is made and dated as of
July 3, 2007 (the `Effective Date") between the City of San Juan Capistrano, California (the
"City"), and ECO Resources, Inc., a corporation organized and existing under the laws of the
State of Texas (the "Company").
RECITALS
WHEREAS, the Capistrano Valley Water District (the "District") and ECO Resources,
Inc. ("ECO") executed a Service Contract for the Design, Construction, Financing and Operation
of the San Juan Basin Desalter Project on September 3, 2002 (the "Service Contract; capitalized
terms used but not otherwise defined herein shall have the meanings set forth in the Service
Contract);
WHEREAS, following execution of the Service Contract, the District merged with the
City pursuant to subsection 16.9(C) of the Service Contract, and the City has assumed all of the
rights and obligations of the District under the Service Contract;
WHEREAS, the Company achieved satisfaction of the Acceptance Date Conditions set
forth in Section 7.7 of the Service Contract as of December 3, 2004, which is the Acceptance
Date under the Service Contract, and, accordingly, the Company has no obligation to pay delay
liquidated damages to the City in accordance with Section 7.9 of the Service Contract;
WHEREAS, the City has withheld retainage funds in the sum of $2,274,447.07 which are
due to the Company upon Final Completion of the Design/Build Work;
WHEREAS, the City and the Company have certain claims they have asserted against
each other relating to the Design/Build Work and other acts or events which occurred during the
Construction Period, including a claim by the City that the Design/Buitd Work relating to the
Finished Water Transmission Line crossing the I-5 Freeway (the "I-5 Line") is defective because
the I-5 Line is not encased in accordance with the requirements of Applicable Law;
WHEREAS, the City intends to develop and construct two additional Wells in the
vicinity of the Tirador Well at Well sites to be specified by the City because two of the eight
Well sites specified under the Service Contract proved to be insufficient for purposes of the
Project and only six Wells were constructed by the Company; and
WHEREAS, the parties wish to enter into this Settlement Agreement in order to provide
for the construction of a new encased I-5 Line, the development and construction of two new
Wells, and the resolution and waiver of all claims and disputes arising out of or otherwise
relating to the Construction Period.
NOW THEREFORE, for consideration agreed to have been made and accepted mutually,
the parties hereto agree as follows:
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1. Recitals. The recitals set forth above are hereby incorporated into this Settlement
Agreement.
2. Release of Retainage. The City shall authorize and direct the Trustee to pay to the
Company the retainage held by the Trustee pursuant to Section 5.5 of the Service Contract in the
amount of $2,274,447.07 within ten (10) days following execution of this Settlement Agreement.
The parties acknowledge and agree that such retainage has been held by the Trustee in an interest
bearing account. As of June 1, 2007, the interest which has accrued on the retainage amounts to
$187,778.94. The City shall provide for the payment by the Trustee to the Company,
concurrently with the payment of the retainage, of the full amount of any interest which has
accrued on the retainage up until the date paid, less $33,007.53, which shall be held by the City
in an interest bearing account, subject to the provisions of Subparagraphs 6.1, 6.3 and Paragraph
7 below.
3. Resolution of Certain Disputes between the Parties. The Company and the City
agree that the Fixed Design/Build Price includes compensation to the Company for the
performance of the Design/Build Work associated with the development, drilling, construction
and installation of eight Wells. The City and the Company acknowledge and agree that since
two of the eight Well sites specified under the Service Contract proved to be insufficient for
purposes of the Project, there is a credit due to the City. The City also has certain claims which
it has previously asserted against the Company during the Construction Period. However, the
City and the Company agree that the Company has performed additional work required and/or
requested by the City that was not included in the Fixed Design/Build Price, for which the
Company has not been paid. In consideration of the foregoing and without limiting the
obligations of the parties under Paragraphs 2, 6, 7 and 8 of this Settlement Agreement, the City
and the Company agree that all claims previously asserted by and between the parties which
concern or relate to the Design/Build Work, the payment of the Design/Build Price, or any other
acts or events relating to the Construction Period, including the credit which otherwise would be
due to the City for the work not performed by the Company at two of the eight Well sites as
described above, shall be resolved without any additional monetary payment by or between the
parties.
4. Waiver and Release of Claims.
4.1 The City and the Company, including their officers, directors,
shareholders, partners, board members, employees, representatives, agents, predecessors,
successors, assigns, subsidiaries, parent corporations and affiliated entities, agree to fully release
each other from all claims, demands, actions, causes of action, obligations, costs, expenses,
attorney's fees, damages, losses and liabilities of whatsoever nature, character or kind, whether
known, suspected or unsuspected, material or contingent, which concern or relate to the
Design/Build Work, the payment of the Design/Build Price or any acts or events relating to the
Construction Period, subject to the exclusion set forth in Subparagraph 4.2 of this Settlement
Agreement and the obligations of the City and the Company pursuant to Paragraphs 2, 6, 7 and 8
of this Settlement Agreement. Nothing in this Settlement Agreement shall be deemed to relieve
the Company from any of its obligations under the Service Contract with respect to the
Operation Period, including, but not limited to, the Company's obligation to perform the
Operation Services in accordance with the Performance Guarantees.
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4.2 The release of the Company by the City set forth in Subparagraph 4.1 of
this Settlement Agreement shall not affect or release any rights which the City may have against
the Company for unknown or latent defects arising out of or relating to the Design/Build Work
performed by the Company, or for any warranties provided by the Company under the terms of
the Service Contract. The City warrants and represents that it is currently aware of no latent
defects pertaining to the Design/Build Work.
4.3 The Company acknowledges and agrees that the waiver and release of
claims provided for under Subparagraph 4.1 of this Settlement Agreement includes all claims for
relief by the Company under the Uncontrollable Circumstance provisions of the Service Contract
with respect to the Design/Build Work.
4.4 With regard to the claims released herein, the City and the Company agree
that, except as provided in Subparagraph 4.2, this release is given with the intention to expressly
waive all rights provided by Section 1542 of the Civil Code of the State of California, which
provides as follows:
"A general release does not extend to claims which the creditor does
not know or suspect to exist in his or her favor at the time of
executing the release, which if known by him or her must have
materially affected his or her settlement with the debtor."
Based upon the advice of counsel, the City and the Company expressly, knowingly and
voluntarily waive and relinquish any and all rights that they may have under Section 1542 of the
Civil Code. Each party assumes the risk of any injury, loss or damage which may arise from
such waiver.
5. Agreement Concerning the Development and Construction of Two New Wells.
5.1 The City intends to develop and construct two additional Wells in the
vicinity of the Tirador Well at Well sites to be specified by the City (the "New Wells"). Once
the precise location of the New Wells is determined and provided that the City, in the exercise of
its discretion, determines that such New Well sites are suitable for the Project, the City shall
notify the Company in writing of the City's decision to proceed forward with the construction of
the New Wells. The City and the Company will jointly review proposals to perform the design
work by not less than two companies acceptable to both the Company and the City. The
Company shall then submit to the City a written quotation on a lump sum basis for the cost of
producing plans and specifications suitable for competitive bidding for the New Wells and the
pipelines connecting the Plant to these Wells. The entire cost of this design work shall be
considered Extra Design/Build Work pursuant to Section 6.11 of the Service Contract. Once the
City and the Company agree on the cost of this Extra Design/Build Work, a Change Order shall
be issued by the City authorizing payment to the Company in this sum. Upon issuance of such
Change Order, the Company shall promptly proceed with this Extra Design/Build Work, which
will be completed within 180 days thereafter unless otherwise provided in the Change Order.
The City reserves the right to review and require modifications to the plans and specifications at
the preliminary, 50%, 90% and pre -final stage. In the event the modifications made by the City
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are substantive, the Company and the City will negotiate a further Change Order for the design
work.
5.2 After completion of the design documents pursuant to Subparagraph 5.1 of
this Settlement Agreement, the Company shall solicit competitive bids for the construction work
for evaluation by the Company and the City. The Company shall then submit to the City a
written quotation on a lump sum basis for the cost of managing, permitting and constructing the
New Wells and the pipelines connecting the Plant to the New Wells. It is agreed that the entire
amount of this construction work shall be considered Extra Design/Build Work. The parties
shall promptly proceed to negotiate in good faith to reach an agreement on the cost of this Extra
Design/Build Work. Once an agreement is reached, the City shall issue a Change Order
authorizing payment to the Company for the agreed upon amount. Upon issuance of this Change
Order and the receipt of permits from the appropriate governmental agencies authorizing the
work to proceed, the Company shall promptly perform this Extra Design/Build Work, and shall
achieve substantial completion thereof within one year thereafter, unless otherwise provided in
the Change Order. The Company shall operate and maintain the New Wells in accordance with
the Service Contract without any adjustment to the Service Fee.
6. Conditions Under Which the Company Shall Provide a New Encased I-5 Line
6.1 The Company shall be responsible for the installation of an encased I-5
Line by constructing a new encased pipeline to replace the existing unencased Finished Water
Transmission Line previously installed by the Company under Interstate 5 (the "Existing 1-5
Line") with an equivalent encased distribution pipeline (the "New I-5 Line") upon the
occurrence of one of the following two events: (a) the issuance by the City, within two years of
the execution of this Settlement Agreement, of written notice to the Company of the City's
decision to construct the New Wells, as provided in Subparagraph 5.1 above; or (b) receipt by
the City, within two years of the execution of this Settlement Agreement, of written notice from
the California Department of Transportation directing the City to replace the Existing I-5 Line.
Upon the occurrence of either of such events, the Company shall be responsible, without
reimbursement from the City, for the payment of all design and construction costs related to the
New I-5 Line and shall perform such work in accordance with Applicable Law and Good
Engineering and Construction Practice. Within thirty (30) days after the occurrence of one of the
above-described events, the City shall pay to the Company the $33,007.53 withheld by the City
pursuant to Paragraph 2 above, plus accrued interest.
6.2 The parties intend to cooperate with each other to coordinate the
installation of the New I-5 Line with the Extra Design/Build Work contemplated under
Paragraph 5 of this Settlement Agreement. Accordingly, in the event that the City issues the
written notice to the Company, within two years of the execution of this Settlement Agreement,
of the City's decision to construct the New Wells, as provided in Subparagraph 5.1 above, the
Company shall install the New I-5 Line concurrently with the construction of the pipelines
contemplated under Paragraph 5 of this Settlement Agreement.
6.3 The Company acknowledges and agrees that the issuance of the Change
Orders authorizing the performance of the Extra Design/Build Work contemplated by Paragraph
5 of this Settlement Agreement shall be subject to the City's determination, in its discretion, that
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the two New Well sites identified by the City in the vicinity of the Tirador Well are suitable for
the Project. In the event that the City determines not to construct the New Wells, and therefore,
does not issue written notice to the Company in accordance with Subparagraph 5.1 of this
Settlement Agreement within two years following the date of this Settlement Agreement, the
City shall have the right to retain the $33,007.53 held by the City under Paragraph 2, above, and,
subject to clause (b) of Subparagraph 6.1 of this Settlement Agreement, the Company shall be
relieved of the responsibility to replace the Existing I-5 Line and to install a New I-5 Line,
including all work related thereto.
6.4 In the event the City issues a written notice to the Company, within two
years of the execution of this Settlement Agreement, of the City's decision to construct the New
Wells, as provided in Subparagraph 5.1 above, and (a) the Company fails to commence the
design of the New I-5 Line within 120 days of receipt of such notice from the City, or (b) the
Company fails to achieve substantial completion of the New 1-5 Line within one year of receipt
of the Change Order from the City, pursuant to Subparagraph 5.2 of this Settlement Agreement,
and the issuance of permits from the appropriate governmental agencies authorizing the work to
proceed, whichever is later, the City shall have the right to provide for the performance or the
completion of the performance of the New I-5 Line, either through its own forces or through a
contract with a third party, and charge the Company for the costs associated therewith through an
offset of the Service Fee.
7. Conditions under Which the City Shall Provide a New Encased I-5 Line. In the
event that the Company is relieved of its obligation to replace the Existing I-5 Line with a new I-
5 Line in accordance with Subparagraph 6.3 of this Settlement Agreement, the City shall provide
for the replacement of the Existing I-5 Line with a New I-5 Line at its sole cost and expense
without reimbursement from the Company. In such event, the City shall retain the $33,007.53
withheld by the City pursuant to Paragraph 2 above, plus accrued interest.
8. Responsibility and Liability for the I-5 Line
8.1 The Company is and shall remain fully responsible and liable for the Existing I-5
Line in accordance with the terms of the Service Contract, including the indemnification
provision set forth in Section 14.3 thereof.
8.2 Following a replacement of the Existing I-5 Line with a New I-5 Line by the
Company pursuant to Paragraph 6 of the Settlement Agreement, the New I-5 Line shall be
considered part of the Project Improvements, and the Company shall have all responsibilities and
obligations under the Service Contract with respect thereto, including the obligation to maintain
the New I-5 Line in accordance with the Contract Standards, without any adjustment to the
Service Fee.
8.3 Following a replacement of the Existing I-5 Line with a New I-5 Line by the City
pursuant to Paragraph 7 of this Settlement Agreement, the New I-5 Line shall be considered part
of the Project Improvements, and the Company shall have all responsibilities and obligations
under the Service Contract with respect thereto, including the obligation to maintain the New I-5
Line in accordance with the Contract Standards, without any adjustment to the Service Fee;
provided, however, that the City shall be responsible for any defects or deficiencies in the design
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or construction of the New I-5 Line, and the Company shall be relieved of any responsibilities in
connection therewith.
9. Effectiveness of the Service Contract. The parties acknowledge and agree that,
except as otherwise specifically provided for herein, all terms and conditions of the Service
Contract remain in full force and effect.
10. Bindin Eg ffect. This Settlement Agreement shall be binding upon and shall inure
to the benefit of the parties hereto, their respective heirs, executors, administrators, trustees,
directors, officers, shareholders, members, successors, and assigns.
11. Governing Law. This Settlement Agreement shall be governed by and interpreted
in accordance with the laws of the State of California.
12. Further Assurances. The parties agree that, upon a request of the other party, they
will execute and deliver such further documents and undertake such further actions as may
reasonably be required to effect any of the agreements and covenants contained in this
Agreement.
13. Counterparts. This Settlement Agreement may be executed and delivered in
multiple counterparts, and all counterparts so delivered and executed shall constitute one and the
same instrument and be enforceable as such.
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IN WITNESS WHEREOF, the parties hereto have set their hands and seals as of
the date first set forth above.
CITY OF SAN JUAN CAPISTRANO, CALIFORNIA
Name
Title
AILLOJAI-tz
ECO RESOURCES, INC.
Name:
Title: Western Region Vice President
4etATTE. Monahan, City Clerk
APPROVED A TO FORM:
John Sha , ity Attorney
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u
32400 PASEO ADELAN70
SAN JUAN CAPISTRANO, CA 92675
(949) 493-1171
(949) 493-1053 FAx
www.sanjuancapstrano. org
TRANSMITTAL
TO:
Thomas O'Neill
ECO Resources, Inc.
2230 East Bidwell St. # 200
Folsom, CA 95630
DATE: July 18, 2007
Jwor,
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EST LIS em � 1961
1776
FROM: Maria Morris, Deputy City Clerk (949) 443-6309
RE: Settlement Agreement
MEMBERS OF THE CITY COUNCIL
Enclosed is an original settlement agreement. If you have questions concerning the
agreement, please contact Cindy Russell, Assistant City Manager (949) 443-6301.
Cc: Cindy Russell, Assistant City Manager
Enclosure
San Juan Capistrano: Preserving the Past to Enhance the Future
0 Printed on too/ recycles paper
SAMALLEVATO
THOMAS W. HRIBAR
MARK NIELSEN
JOE SOTO
DR. LONORES USO