HomeMy WebLinkAbout05.B- Execution of Settlement Agreement between City of San Bernardino and Public Agency Retirement System 5.B
RESOLUTION (ID # 4425) DOC ID: 4425
CITY OF SAN BERNARDIINO — REQUEST FOR COUNCIL ACTION
Agreement
law
From: Jolena E. Grider M/CC Meeting Date: 05/02/2016
Prepared by: Jolena E. Grider, (909) 384-
5355
Dept: City Attorney Ward(s): All
Subject:
Resolution of the Mayor and Common Council of the City of San Bernardino Authorizing
the Execution of a Settlement Agreement Between the City of San Bernardino and the
Public Agency Retirement System ("PARS") Participants. (#4425)
Current Business Registration Certificate: Not Applicable
Financial Impact:
Total cost for the Agreement is consistent with the City's Fiscal Plan adopted by the
Mayor and Common Council on May 18, 2015 and filed with the Bankruptcy Court on
May 29, 2015.
Motion: Adopt the Resolution.
Synopsis of Previous Council Action:
On July 18, 2012, the Mayor and Common Council directed the filing of a Petition under
Chapter 9 of the United States Bankruptcy Code following the adoption of a Declaration
of a Fiscal Emergency in the City of San Bernardino. Such Petition was filed on August
1, 2012.
On November 26, 2012, the Mayor and Common Council adopted the Pendency Plan,
Resolution 2012-27, which included the Fiscal Year 2012/13 and Fiscal Year 2013/14
General Fund Budgets and incorporated the Pre-Pendency Plan adopted on September
5, 2012.
On May 18, 2015, the Mayor and Common Council adopted Resolution No. 2015-103,
approving a Recovery and Fiscal Plan.
Background:
In January 2004, the City of San Bernardino contracted with the Public Agency
Retirement System (PARS) to provide a Police Safety Retirement Enhancement Plan
(REP). Only police safety employees or police safety management employees who
retired on or before December 31, 2008 with at least 20 years of service with the City, or
23 employees, were eligible to receive this PARS benefit. This PARS plan was a
supplemental enhancement retirement plan to the City's CalPERS defined benefit
retirement plan. At the time the PARS plan was created, the CalPERS benefit formula
for the 23 police safety employees was 3% at 55 formula. Effective January 1, 2009, the
City improved its CalPERS Safety formula to a 3% at 50 benefit, thereby effectively
Updated: 4/25/2016 by Georgeann "Gigi" Hanna Packet Pg. 9
5.B
4425
closing the plan.
This PARS Plan was created to provide a supplement that is the functional equivalent of
a 3% at 50 plan for long service employees that retired before 3% at 50 was effective at
the City; then available in many California cities but not San Bernardino.
Also, during this same time period, the City created an excess benefit plan through
PARS that became effective on January 1, 2008. Participants under this plan are
reduced by the benefit limitations imposed by Section 415 of the Internal Revenue
Code.
Since the adoption of the Resolution No. 2015-103, the City's negotiating team has met
with representatives from the San Bernardino Bankruptcy Retiree Committee and with
the 23 PARS participants regarding the distribution of the PARS Trust funds that the
City previously paid into the PARS Retirement Enhancement Plan Trust Plan and the
PARS Excess Defined Benefit Plan. Each of the PARS Plan participants has approved
the terms and conditions of the Settlement Agreement between the City of San
Bernardino ("City') and the PARS F'articipants, hereto attached as Exhibit A.
The Agreement provides for the distribution of funds that have already been paid into
the PARS Trust Plan accounts. The! value of the funds currently paid into the PARS
Retirement Enhancement Plan Trust is approximately $1.7 million which will be
distributed to 22 PARS participants. The value of the funds currently paid into the
Excess Benefit Plan is approximately $ 53,746.98 and will be distributed to two
individuals. To fully fund the PARS Plans, the City would have to contribute
approximately $2.974 million. In settlement of this claims, the City and the PARS
participants have agreed that on July 5, 2017, the City will disburse $290,000 to the
PARS participants and on July 5, 2018, the City will disbursed an additional $290,000 to
the 23 PARS participants.
City Attorney Review:
Supporting Documents:
PARS Settlement Resolution (DOC)
agrmt 4425 (PDF)
Updated: 4/25/2016 by Georgeann "Gigi" Manna Packet Pg. 10
1 RESOLUTION NO.
2 RESOLUTION OF THE MAYOR AND COMMON COUNCIL OF THE CITY OF SAN
BERNARDINO AUTHORIZING THE EXECUTION OF A SETTLEMENT AGREEMENT
s BETWEEN THE CITY OF SAN BERNARDINO AND THE PUBLIC AGENCY
4 RETIREMENT SYSTEM ("PARS") PARTICIPANTS.
5 WHEREAS, in March 2004, the City established two supplemental retirement
plans (the "Plans") with PARS for twenty-three police safety officers ("PARS
6 Participants");
7
WHEREAS, the City funded these plans for the benefit of the PARS Participants,
8
WHEREAS, The City and the PARS Participants have met and negotiated a
9 settlement to terminate the Plans and distribute the trust funds; and,
10
WHEREAS, as part of the Settlement Agreement, the PARS Participants have
11 agreed to support the confirmation of the City's Chapter 9 Plan and release any and all
12 claims that they may have regarding their PARS Plans distributions.
13 NOW THEREFORE, BE IT RESOLVED BY THE MAYOR AND COMMON
COUNCIL OF THE CITY OF SAN BERNARDINO AS FOLLOWS:
14
15 SECTION 1. The City Manager is hereby authorized to execute a Settlement
Agreement between the City of San Bernardino and the 23 participants in the Public
16 Agency Retirement System (PARS), attached hereto as Exhibit "A" and incorporated
17 herein by this reference.
18 SECTION 2. Upon the occurrence of the Effective Date (as defined in the
Settlement Agreement), and effective as of such date, the City of San Bernardino
19 hereby (a) amends the Plans as necessary to permit the Plans to terminate, (b) amends
20 the Plans such that all amounts payable under the Settlement Agreement shall be paid
either: in a lump sum; or in the case of the PARS Retirement Enhancement Plan only,
21 via a direct rollover at the election of the PARS Participants, as set forth in the
respective Plans, and (c) terminates the Plans.
22
23 SECTION 3. The duly authorized personnel of the City of San Bernardino are
each hereby individually authorized, empowered and directed, on behalf of the City of
24 San Bernardino, to make, execute, deliver and file or cause to be made, executed,
delivered or filed, such agreements, tax returns, and other reports, filings, instruments,
25 documents and certifications with respect to the Plans, and to take such further action,
26 as may be deemed necessary, appropriate or convenient, to fully implement and
effectuate the intent of the foregoing resolutions and the termination of the Plans,
27 subject to the preservation of any statutorily required protected rights and features,
including, but not limited to, the adoption of any amendments to the Plans, and to
28 otherwise secure and maintain for the Plans their compliance with the requirements of
1 ERISA and the Code, to the extent applicable, and the taking of such further action, by
such personnel to be conclusive evidence of such necessity, appropriateness and
2 convenience; and that all actions heretofore taken by any appropriate personnel of the
3 City of San Bernardino in connection with any matter referred to in any of the foregoing
resolutions are hereby approved, ratified and confirmed in all respects.
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1 RESOLUTION OF THE MAYOR AND COMMON COUNCIL OF THE CITY OF SAN
BERNARDINO AUTHORIZING THE EXECUTION OF A SETTLEMENT AGREEMENT
2 BETWEEN THE CITY OF SAN BERNARDINO AND THE PUBLIC AGENCY
3 RETIREMENT SYSTEM ("PARS") PARTICIPANTS.
4 1 HEREBY CERTIFY that the foregoing Resolution was duly adopted by the
5 Mayor and Common Council of the City of San Bernardino at a meeting
6
thereof, held on the day of 2016, by the following vote,
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to wit:
8
9 Council Members: AYES NAYS ABSTAIN ABSENT
to MARQUEZ
11 BARRIOS
12 VALDIVIA
13
SHORETT
14
15 NICKEL
16 RICHARD
17 MULVIHILL
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20 Georgeann Hanna, City Clerk
21 The foregoing Resolution is hereby approved this day of
22 2016.
23
24 R. Carey Davis, Mayor
25 City of San Bernardino
Approved as to form:
26 Gary D. Saenz, City Attorney
27
28 By'.
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1
Confidential Settlement Agreement
This SETTLEMENT AGREEMENT (the "Agreement") is effective as of the
Effective Date, which is defined below, and is made and entered into by and between (i)
the City of San Bernardino ("City") and (ii) those individuals signatory hereto, each of
which is a participant in the existing and outstanding PARS Plans (as defined below) of
the City (collectively, the "PARS Participants The City and the PARS Participants, the
"Parties' and each individually a, "I arty'). "). The Public Agency Retirement System
("PARS") and U.S. Bank National Association, as trustee and/or custodian of the PARS
Trusts defined herein (the"Trustee")are each referred to in this Agreement.
RECITALS
WHEREAS, pursuant to the terms of the Amended and Restated City of San
Bernardino Public Agency Retirement System (PARS) Retirement Enhancement Plan,
effective July 1, 2007 (originally adopted by the City effective January 1, 2004) (the d
"PARS Retirement Enhancement Plan"), the City established a private pension plan to
provide additional benefits to the PARS Participants in order to supplement pension
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benefits provided to the PARS Participants by the California Public Employees'
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Retirement System("CalPERS"); a
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WHEREAS, PARS is the current plan administrator for the PARS Retirement
Enhancement Plan;
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WHEREAS, distributions under the PARS Retirement Enhancement Plan are N
made to the PARS Participants from a trust(the"PARS Retirement Enhancement Plan d
Trust") established pursuant to the Public Agency Retirement System (PARS) Trust
Agreement,amended and restated as of July 1, 1999; M
WHEREAS, the PARS Retirement Enhancement Plan Trust currently maintains
assets of a value of approximately $1,670,369.90;
i WHEREAS, the Trustee is the current trustee and/or custodian of the PARS a
Retirement Enhancement Plan Trust;
WHEREAS, pursuant to the terms of the City of San Bernardino Excess Benefit
Plan (Defined Benefit Plan), effective January 1, 2008 (the "PARS 415 Plan," and
together with the PARS Retirement Enhancement Plan the "PARS Plans"), a number of
PARS Participants whose benefits under the PARS Retirement Enhancement Plan are
reduced by the limitations on benefits imposed by Section 415 of the Internal Revenue
Code, receive supplemental benefits,as set forth in the PARS 415 Plan;
WHEREAS, PARS is the current plan administrator for the PARS 415 Plan;
WHEREAS, assets under the PARS 415 Plan are currently held in a trust
established under the City of San Bernardino Excess Benefit Trust Agreement, effective
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as of January 25, 2008 (the "PARS 415 Plan Trust", with the PARS Retirement
Enhancement Plan Trust,the"PARS Trusts");
WHEREAS, the PARS 415 Plan Trust currently maintains assets of a value of
approximately$53,746.98;
WHEREAS, the Trustee is the current trustee of the PARS 415 Plan Trust;
WHEREAS, on August 1, 2012, ("Petition Date"), the City filed a petition for
relief under chapter 9 of title I1 of the United States Code in the United States
Bankruptcy Court for the Central District of California (the `Bankruptcy Court")
commencing the case styled In re City of San Bernardino, California, Case No. 6:12-
28006-MJ(the"Chapter 9 Case");
WHEREAS, on September 17, 2013, the Bankruptcy Court entered an order for
relief and a related order determining that the City had met the chapter 9 eligibility
requirements of 11 U.S.C. §§ 109 and 921;
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WHEREAS, on October 11, 2013, the U.S. Trustee appointed the Official
Committee of Retired Employees of the City of San Bernardino (the "Retiree in
Committee") in the City's Chapter 9 Case, which Retiree Committee represents the
interests of the retired employees of the City, including the PARS Participants, and has a
acted as liaison for the PARS Participants in relation to this Agreement;
WHEREAS, in its capacity as a liaison, the Retiree Committee has agreed that it
will affirmatively support and not object to confirmation of the City's Chapter 9 Plan of N
Adjustment (the "Chapter 9 Plan") so long as it is consistent with the terms of this
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Agreement; .�
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WHEREAS, the PARS Retirement Enhancement Plan is underfunded and the r
PARS 415 Plan is underfunded and these underfunded amounts collectively are the c
"PARS Remaining Obligations"; E
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WHEREAS, the City does not have the funds to continue to fund its current or
future obligations under the PARS Retirement Enhancement Plan or the PARS 415 Plan;
WHEREAS, distributions under the PARS Retirement Enhancement Plan have
continued to be made under the PARS Retirement Enhancement Plan Trust, and
distributions under the PARS 415 Plan ceased effective as of the Petition Date;
WHEREAS,the City filed its Second Amended Plan for the Adjustment of Debts
of the City of San Bernardino (March 30, 2016) with the Bankruptcy Court on March 30,
2016(as may be amended from time to time, the "Chapter 9 Plan");
WHEREAS, disputes have arisen between the City and the PARS Participants
regarding the disposition of the PARS Plans and the funds therein and the treatment of
the PARS Participants' claims under the Chapter 9 Plan;
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5.B.b
b WHEREAS, the City has determined, in the exercise of its sound business
judgment,that it is in the City's best interest to resolve consensually any and all claims of
the PARS Participants against the City that could arise under the PARS Plans, the PARS
Trusts or any agreements ancillary to the PARS Plans or the PARS Trusts (collectively,
the "PARS Claims");
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WHEREAS,the City,the Retiree Committee and the PARS Participants have met
on several occasions to discuss the PARS Claims and the distribution of the amounts
remaining in the PARS Trusts to the PARS Participants;
WHEREAS, the City and the PARS Participants have reached an agreement
regarding the treatment and allowance of the PARS Claims under the City's Chapter 9
Plan, including the distribution of the funds in the PARS Trusts to the PARS Participants;
and
WHEREAS, the City and the PARS Participants now wish to memorialize the w
terms of the Agreement as set forth below, with the cooperation and agreement of PARS
and the Trustee. E
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NOW, THEREFORE, in consideration of the foregoing, the Parties hereby N
stipulate and agree as follows:
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1. The Recitals as set forth above are true and correct and are hereby LO
incorporated herein. N
2. Within thirty (30) calendar days after the Effective Date (as defined N
below)of this Agreement(the"Distribution Date"),PARS and/or the Trustee(on behalf v
of, and at the direction of,the City)will make a distribution from the PARS Trusts of the E
amounts remaining in each respective trust to each PARS Participant entitled to a
distribution thereunder (the "PARS Trust Distributions"). The PARS Trust
Distributions will be made to each respective PARS Participant in a single disbursement
in the amount as set forth on Exhibit A hereto. .�
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3. On the later of July 5,2017,or within three(3) business days thereafter,or Q
the Effective Date, the City will disburse $290,000.00 to the PARS Participants (the
"First PARS Additional Disbursement"), and on the later of July 5, 2018, or within
three (3) business days thereafter, or the Effective Date, the City will disburse
$290,000.00 to the PARS Participants (the "Second PARS Additional Disbursement").
The First PARS Additional Disbursement and the Second PARS Additional
Disbursement collectively are referred to herein as the "PARS Additional
Disbursements." The First PARS Additional Disbursement will be made to each
respective PARS Participant in a single disbursement in the amount as set forth in Exhibit
B hereto, and the Second PARS Additional Disbursement will made to each respective
PARS Participant in a single disbursement in the amount as set forth in Exhibit B hereto.
4. The City will endeavor to make the PARS Trust Distributions to each
PARS Participant in a manner that will minimize adverse tax consequences for each
PARS Participant, and the City hereby agrees to work with PARS, or a replacement
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:10 administrator to PARS (if PARS is unable or unwilling to assist), to take such actions as
may reasonably be necessary to minimize and/or reduce any tax consequences in relation
to the transactions contemplated to be taken hereunder; rop vided, however, that neither
the City nor PARS hereby makes any representations or warranties as to the taxable or
non-taxable nature of the PARS Trust Distributions to the PARS Participants.
Distributions under the PARS 415 Plan and the PARS Additional Disbursements are
intended to be fully taxable. Each PARS Participant is solely responsible for any and all
taxes including, without limitation, income taxes and estimated taxes which-he or she
may incur as a result of the PARS Trust Distributions and/or the PARS Additional
Disbursements.
5. Effective as of the Effective Date (as defined below), the documents
comprising the PARS Plans(the "PARS Plan Documents") will be amended to provide
for the termination of all rights and obligations of any party under the PARS Plans, the
related PARS Trusts or any agreements ancillary thereto.
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6. Effective as of the date the Bankruptcy Court has entered an order
confirming the City's Chapter 9 Plan (the "Confirmation Date"), the PARS Trusts, the as
PARS Plans and any PARS related agreements to which the City is a party will be a
deemed rejected under Section 365 of the Bankruptcy Code.
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7. Effective as of the Confirmation Date, the City will waive any and all nQ.
claims to the funds then remaining within the PARS Trusts. Ln
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8. The PARS Claims shall be separately classified under the City's Chapter 9 7'
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Plan. Upon the Confirmation Date, the City will be discharged from all PARS Claims,
including but not limited to the PARS Remaining Obligations.
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9. The City shall undertake all reasonable,best efforts to obtain confirmation
of a Chapter 9 Plan that incorporates this Agreement.
10. Each of the PARS Participants hereby agrees that, so long as the City is in
compliance with its obligations under this Agreement, he or she each shall: (a) support w
Bankruptcy Court approval of a Disclosure Statement filed by the City that incorporates a
as an Exhibit this Agreement (the "Disclosure Statement"); and (b) after Bankruptcy
Court approval of the Disclosure Statement (i) timely vote or cause to be voted each of
his or her claims in the Chapter 9 Case including, without limitation, his or her PARS
Claims, Retiree Health Benefit Claims (which are the claims of retirees based upon the
reduction in retiree health benefits as defined in the City's Chapter 9 Plan) and any other
General Unsecured Claim (as defined in the City's Chapter 9 Plan) (the "Claims"), in
support of the Chapter 9 Plan, (ii) support a Chapter 9 Plan that contains the settlement
terms contained herein and/or incorporates this Agreement as a supplement to the
Chapter 9 Plan, (iii) take all reasonable actions necessary or reasonably requested by the
City to facilitate, confirm and consummate the Chapter 9 Plan, and (iv) not take any
action, including initiating any legal proceedings, to enforce any of the PARS Claims or
the Claims against the City other than to seek to enforce this Agreement in the
Bankruptcy Court.
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It. This Agreement is not a solicitation of votes in favor of the Chapter 9 PIan
until the Disclosure Statement is approved by the Bankruptcy Court.
12. Unless otherwise agreed to by the Parties hereto, this Agreement shall
remain confidential until the City is required to disclose this Agreement in order to obtain
the authorization of the Common Council.
13. Upon the Confirmation Date, each of the City, PARS, the Trustee and the
PARS Participants hereby fully, finally, unconditionally, irrevocably and completely
releases and forever discharges each other, and each of their predecessors, successors,
assigns, affiliates, subsidiaries, parents, partners, constituents, officers, directors,
employees, attorneys and agents (past, present or future) and each of their respective
heirs,successors, and assigns, of and from any and all claims, causes of action, litigation
claims, and any other debts, obligations, rights, suits, damages, actions, remedies,
judgments and liabilities arising from the PARS Plans, the PARS Trusts and any rights or
obligations, or ancillary documents and agreements, related thereto (including, but not
limited to, any existing deficiencies in the PARS Plans and any obligations to further
fund any of the PARS Plans), whether known or unknown, foreseen or unforeseen, d
liquidated or unliquidated, fixed or contingent, matured or unmatured, existing as of the N
Effective Date (as defined below) or thereafter arising, in law, at equity, whether for tort, N
contract or otherwise, based in whole or in part upon any act or omission, transaction,
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event or other occurrence or circumstance existing or taking place prior to the Effective a
Date (the"Released Claims");provided,that nothing in this Agreement shall be deemed N
to release any Party from any claims, demands, or causes of action with respect to its
obligations under this Agreement or the Chapter 9 Plan. Section 1542 of the California Ul)
Civil Code states:
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A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH E
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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 E
AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.
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All rights under Section 1542 of the California Civil Code, or any analogous state or a
federal law, are hereby expressly WAIVED by the Parties with respect to the Released
Claims.
14. Each of the Parties shall bear the fees, costs and expenses of their
respective professionals (including, without limitation, their attorneys and financial
advisors). The Parties waive any rights under the PARS Plan Documents, for
reimbursement of the fees, costs and expenses to which they may otherwise be entitled.
1 This waiver will not impact any professional fees, costs or expenses incurred as a result
of a future breach of this Agreement or any obligations of the Parties arising under the
Chapter 9 Plan confirmed by the Bankruptcy Court.
15. The Effective Date of this Agreement ("Effective Date") shall occur on
the first date that all of the following conditions have been met:
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a. this Agreement is executed by all Parties;
b. this Agreement has been approved by the Common Council by the
3 passing of an appropriate resolution;
c. an amended Chapter 9 Plan or a supplement to the Chapter 9 Plan (the
"Plan Supplement") has been filed with the Bankruptcy Court which
attaches or incorporates into the Chapter 9 Plan,this Agreement;
d. the amendments to the PARS Plan Documents, referenced in
paragraph 5 above, have been executed by the City and, to the extent
applicable,PARS and/or the Trustee; and
e. The effective date of the Chapter 9 Plan has occurred.
16. The Bankruptcy Court shall retain jurisdiction over the Parties for all
purposes relating to the enforcement of this Agreement.
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17. Each signatory to this Agreement represents that he or she is authorized to
sign this Agreement and bind the entities and persons on whose behalf he or she signs. in
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18. This Agreement may be executed in one or more counterparts, including of
by way of pdf or facsimile, each of which shall be deemed an original, but all of which a
together shall constitute one and the same instrument. N
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19. Captions and paragraph headings used herein are for convenience only and
are not a part of this Agreement and shall not be used in construing it.
20. Except as otherwise set forth in this Agreement, nothing in this Agreement E
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is intended to confer any rights or remedies under or by reason of this Agreement on any
persons other than the Parties and their respective permitted successors and assigns.
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21. Any action to enforce the terms of this Agreement shall be filed solely in
? the Bankruptcy Court.
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22. This Agreement is a compromise believed by the Parties to be in the best
interests of all concerned parties. Nothing in this Agreement shall be construed or
deemed to be an admission by any of the Parties of any liability or any material fact in
connection with any other litigation or proceeding.
i 23. Each Party hereto, by signing this Agreement, acknowledges that
it/he/she: (i) has read this Agreement in its entirety; (ii) fully understands the terms and
i conditions of this Agreement; (iii) has had a full and ample opportunity to investigate the
PARS Claims that this Agreement is settling and the terms of this Agreement; (iv)
regards the terms of this Agreement as reasonable and a good faith compromise of the
PARS Claims; (v) executes this Agreement freely, voluntarily without coercion,with full
knowledge of its significance and the legal consequences thereof; (vi) agrees that if an
ambiguity exists with respect to any provision of this Agreement, such provision shall not
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be construed against any Party because such Party or its representatives drafted such
provision; (vii) has been represented by counsel or afforded the opportunity to obtain
a counsel and knowingly waived same; and (viii) has analyzed and agrees that the
covenants contained herein are reasonable and enforceable.
24. Each Party is relying upon its own advisors for legal and tax advice. No
specific representations are made by any Party to the other as an inducement to enter into
'F this Agreement or otherwise.
AGREED TO AS OF THIS April 2016 BY:
The City of San Bernardino, California
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Name:Mark Scott E
Title: City Manager w
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By:
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be construed against any Party because such Party or its representatives drafted such
provision; (vii) has been represented by counsel or afforded the opportunity to obtain
counsel and knowingly waived same: and (viii) has analyzed and agrees that the
covenants contained herein are reasonable and enforceable.
24. Each Party is relying upon its own advisors for legal and tax advice. No
specific representations are made by any Party to the other as an inducement to enter into
this A-reemcnt or otherwise.
AGREED TO AS OF THIS April 296N16 BY:
The City of San Bernardino,California
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Name: Mark Scott 0
Title:City Manager (n
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Name:Georgeann Hanna IRT
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Name: David Anderson
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be construed against any Party because such Party or its representatives drafted such
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