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HomeMy WebLinkAboutA3915 - STONE & YOUNGBERG SETTLEMENT AD 155 BONDS MO 6108 Stone & Youngberg LLC • Stlmnt & Coop Agr. AD155 Bonds AGREEMENT #3915 M06108, 2-18-98 SETTLEMENT AND COOPERATION AGREEMENT THIS SETTLEMENT AND COOPERATION AGREEMENT ("Agreement")is entered into as of March 2, 1998 by and among THE CITY OF PALM SPRINGS ("City") and STONE& YOUNGBERG LLC ("Stone& Youngberg") (collectively the "Parties"). RECITALS - A. In or around July, 1989 the City formed Assessment District No. 155 ("AD 155") and issued assessment bonds (the "Bonds") to fund certain infrastructure improvements within the boundaries of AD 155 (the "Improvements"). B. The City issued $7,638,119.64 of the Bonds. Stone & Youngberg acted as underwriter for the issuance and sale of the Bonds. Currently, $5,590,000 of the Bonds remain outstanding. C. Principal and interest due on the Bonds is paid through assessments imposed upon certain fee properties, contributions from the City's Airport Enterprise Fund. and certain possessory interests in Indian land within AD 155 which receive the benefits of AD 155 improvements. D. AD 155 includes approximately 80 acres of land owned by members of the Agua Caliente Indian Tribe ("Indian Allottees"). Pursuant to federal law, assessment liens may not be maintained against such Indian owned lands. However, where an Indian Allottee leases Indian land to third persons, the possessory interest in the leasehold can serve as security for assessments based upon the benefit conferred by the Improvements upon the Indian land. Consequently, assessments for the benefit of improvements affecting Indian owned lands in AD 155 were secured by possessory interests in certain leaseholds (the "Indian Leases"). These Indian Leases represented almost 50% of the total security for the Bonds. E. Since the creation of AD 155, the Indian Leases have gone into default thereby adversely affecting the ability to pay principal and interest on the Bonds and, consequently, the market value of the Bonds. As a result, Allstate Insurance Company ("Allstate"), as a principal bondholder of the Bonds, has asserted certain claims relating to the creation and administration of AD 155 and the issuance of the Bonds. The City and Stone& Youngberg contend that primary liability for such claims rests with the bond counsel ("Original Bond Counsel")who advised the City about formation of AD 155 and structuring the bond issue and who issued its opinion to Stone & Youngberg to the effect that there was adequate disclosure to Bondholders in the City's Official Statement pertaining to the offering of the Bonds. F. In pursuit of the aforementioned claims, Allstate threatened to file litigation against the City and Stone & Youngberg. In fact., absent a Tolling or Settlement Agreement or agreements, Allstate would have filed such litigation. However, the City, Stone & Youngberg and Allstate have developed a plan to resolve the claims and disputes between the City and Allstate and between Stone & Youngberg and Allstate without any admission of wrongdoing or Draft: 2/26/98 12:42 PM 1 DOCS SF#268720 v7/20079-14 liability. The City and Stone & Youngberg wish to resolve any claims and disputes or potential claims and disputes between themselves and without any admission of wrongdoing or liability. G. Toward the end of resolving the actual or potential disputes between Allstate and the City, Allstate and Stone&Youngberg, and the City and Stone& Youngberg, the City is attempting to restructure AD 155 related debt as follows: The Bonds will be called by the City in their entirety pursuant to the optional redemption provisions of the Bond Indenture.- The Bonds will be reclassified "Class 1" and "Class 2". The Class 1 Bonds will have a senior lien on assessments from AD 155 and the Class 2 Bonds will have a junior lien. Outstanding Bonds will be redeemed at a price equal to their principal amount plus accrued interest and premium as provided in the Bond Indenture and statute. Pursuant to a Bond Exchange Agreement Allstate will purchase Bonds (Class 2) in the principal amount of$1,030,000. Bonds (Class 1)in the principal amount of$3,425,000 will be held by the City of Palm Springs Financing Authority (the "Authority") as local obligations securing the issuance of the Authority's 1998 Limited Obligation Revenue Bonds, Series A("Assessment District No. 155 Bond Refunding")in the aggregate principal amount of$3,725,000 (the "Series A Authority Bonds"). The Series A Authority Bonds will be sold to Stone&Youngberg pursuant to a Bond Purchase Agreement and offered to the public for sale by Stone & Youngberg pursuant to various disclosure documents prepared by the City and its financing consultant, Rod Gunn Associates, Inc. The Authority will also issue its 1998 Limited Obligation Revenue Bonds, Series B (Assessment District No. 155 Bond Refinancing) (the "Series B Authority Bonds")which will be acquired in their entirety by Allstate pursuant to a Bond Purchase Agreement. Stone&Youngberg will enter into an Agreement with Allstate ("S&Y Allstate Agreement") regarding the Class 2 Bonds held by Allstate. The Authority on behalf of the City will also hold Class 2 Bonds in an aggregate principal amount of $1,030,000 as local obligations securing in part the Series B Authority Bonds held by Allstate. The City will fund a reserve fund for the Series A Authority Bonds and advance the full costs of issuing the Series B Authority Bonds. Allstate will provide the City and the Redevelopment Agency for the City of Palm Springs (the "Agency")with a liability release and certain other nonmonetary benefits. Allstate also will provide Stone & Youngberg with a liability release to be effective if and when certain conditions outlined in the S&Y Allstate Agreement occur. The aggregate of the transactions and agreements described above together with this Agreement constitute an integrated transaction which must be completed in its entirety to be completed at all and shall be hereinafter referred to as the "Refunding". NOW THEREFORE, THE PARTIES AGREE AS FOLLOWS: 1. The Refundine. This Agreement, including but not limited to the release and covenant not to sue contained herein, is contingent upon the successful completion, funding, and closing(collectively "Closing") of the Refunding. Though the City and Stone&Youngberg will make reasonable efforts to accomplish the Refunding to satisfy this contingency and make this Agreement effective, neither shall be contractually obligated to proceed with or close the Refunding. If the Closing of the Refunding does not occur by March 2, 1998, then this Agreement shall be null and void and of no further force and effect. Draft: 2/26/98 12:42 PM 2 DOCS SP 4268720 d7/20079-14 2. Reimbursement for Assessment Advances. By separate agreement the City has engaged Stone& Youngberg as underwriter for the issuance of bonds to finance the infrastructure needs relating to the Palm Springs Airport Facility ("Airport Financing"), The proposed financing is for approximately$20,000,000 and the proposed underwriting spread is ninety-seven and one-half(97'/2) basis points. Upon the successful sale and delivery of securities and closing of that Airport Financing by Stone& Youngberg as underwriter, and contingent thereon, Stone & Youngberg will pay the City $33,000 in consideration of advances made by the; City in connection with the Refunding which were required because the County of Riverside refunded approximately$66,000 of assessments paid in prior years on possessory interests of Indian owned land. Said $33,000 payment, if made, shall be credited toward the $129,500 reimbursement to be repaid pursuant to paragraph 3 below. In the event the City or the Authority is able to recover any of those assessments directly or from the County of Riverside , the City will pay to Stone&Youngberg an amount equal to fifty (50%) of such recovery within thirty (30) days of receipt, but in no event prior to closing of the Airport Financing. 3. Reimbursement for Reserve Funds and Costs. The City has funded a reserve fund for the Series A Authority Bonds in the amount of$283,300 and has incurred $15,000 of costs in the issuance of the Series B Authority Bonds. The City was able to use $105,000 of funds on hand towards the funding of the reserve fund. Payments of principal and interest on the; Class 2 Bonds not held by the Authority from any surplus over payments of principal and interest on the Class 1 Bonds and the Series A Authority Bonds may be paid on the Class 2 Bonds owned by the Authority until the City has received $129,500, plus interest accrued at a rate per annum which shall be equal to the true interest costs on the Series A Authority Bonds. Stone& Youngberg will not have any obligation to make such payments whether or not surplus over payment of principal and interest on the Class 1 Bonds is available. The City and the Authority expect but have no obligation to retain Stone& Youngberg to underwrite future financings. Upon such retention, the City and the Authority will require that, upon the closing(s) of any such financing(s), Stone &Youngberg make payment(s) in an amount(s) to be agreed upon by the Parties against any unpaid portion of such$129,500 amount. 4. Claims Against Original Bond Counsel. Stone &Youngberg and the City will cooperate in attempting to obtain a settlement or bringing an action against Original Bond Counsel in accordance with the provisions of Exhibit 1 attached hereto and incorporated herein by reference. Draft: 2/26/99 12:42 PM 3 DOCS SF#268720 v7/20079-14 5. City Representations and Warranties (a) Due Organization, Existence and Authority. The City is a municipal corporation and chartered city organized and existing under the Constitution and laws of the State, with full right, power and authority to execute, deliver and perform its obligations under this Agreement. (b) Due Authorization and Approval. By all necessary official action of the City, the City has duly authorized and approved the execution and delivery of, ,and the performance by the City of the obligations contained in, this Agreement; and as of the date hereof, such authorizations and approvals are in full force and effect and have not been amended, modified or rescinded. When executed and delivered, this Agreement and the Refunding Documents will constitute the legally valid and binding obligations of the City enforceable in accordance with their respective terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles relating to or affecting creditors' rights generally. The City has complied, and will at the Closing of the Refunding be in compliance in all respects, with the terms of this Agreement. (c) No Breach or Default. As of the time of acceptance hereof and as of the time of the Closing of the Refunding, the City is not and will not be in breach of or in default under any applicable constitutional provision, law or administrative rule or regulation of the State or the United States, or any applicable judgment or decree or any trust agreement, loan agreement, bond, note, resolution, ordinance, agreement or othe.r instrument to which the City is a party or is otherwise subject, and no event has occurred and is continuing which, with the passage of time or the giving of notice, or both, would constitute a default or event of default under any such instrument; and, as of such times, the authorization, execution and delivery of this Agreement and compliance with the provisions of this Agreement or such instruments do not and will not conflict with or constitute a breach of or default under any applicable constitutional provision, law or administrative rule or regulation of the State or the United States, or any applicable judgment, decree, license, permit, trust agreement, loan agreement, bond, note, resolution, ordinance, agreement or other instrument to which the City (or any of its officers in their respective capacities as such) is subject, or by which it or any of its properties is bound, nor will any such authorization, execution, delivery or compliance result in the creation or imposition of any lien, charge or other security interest or encumbrance of any nature whatsoever upon any of its assets or properties or under the terms of any such law, regulation or instrument, except as may be provided by this Agreement and the Refunding Documents. Dr:St: 2/26/98 12:42 PM 4 DOCS SF 4268720 d7/20079-14 (d) No Litigation. As of the time of the Closing of the Refunding, no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, government agency, public board or body, is or will be pending or threatened (i)in any way questioning the corporate existence of the City or the titles of the officers of the City to their respective offices; (ii) affecting, contesting or seeking to prohibit, restrain or enjoin, or in any way contesting or affecting this Agreement or the consummation of the transactions contemplated thereby or contesting the powers of the City to execute, deliver and perform this Agreement. 6. Stone& Youngberg Representation and Warranty. Stone &Youngberg has reviewed the Bond Exchange Agreement between the City and Allstate. If Stone&Youngberg acquires any Class 2 Bonds, it will do so with full knowledge of the provisions set forth in that Bond Exchange Agreement, and will acquire the Class 2 Bonds for its investment purposes without intent to resell them privately or publicly, or to trade them, and will be bound by any transfer restriction contained therein. 7. Effective Date. This Settlement and Cooperation Agreement shall be effective and binding as of the date of the Closing of the Refunding. 8. Mutual Releases. 8.1. In consideration of this Settlement and Cooperation Agreement, on the Effective Date, Stone& Youngberg and the City hereby fully and forever release and discharge each other from any and all Released Claims as defined in paragraph 6.2 below. For purposes of the release granted hereby and the covenants not to sue herein, (i) Stone& Youngberg includes its present and former members, managers, officers, affiliates, representatives, agents, attorneys, and insurers, its predecessor limited partnership and the limited and general partners thereof, and its successors and assigns; and the City includes the Palm Springs Redevelopment Agency, the Authority, and each of their elected or appointed representatives, agents, employees and attorneys, past and present. 8.2. Subject to subparagraph 6.4 below, "Released Claims" shall be defined as follows: any and all rights, claims, damages, liabilities, costs, expenses and causes of action, of whatever kind or nature, in law, equity or otherwise, including but not limited to claims for attorneys' fees or costs (any and all of the foregoing referred to herein as "Claims"), whether now known or unknown, vested or contingent, suspected or unsuspected, and whether or not concealed or hidden, that have existed or may have existed, or that do exist as of the Effective Date, or that could or do later accrue as a result(in whole or in part) of transactions, occurrences, acts or omissions that have occurred as of the Effective Date, arising out of or in any way connected with(i) all transactions, occurrences, acts, omissions or Claims arising out of or related in any way to AD 155 or the issuance of the Bonds up to the Closing of the Refunding ; (ii) any Draft: 2/26/98 12:42 PM 5 DOCS SF#268720 d7/20079-14 Claims by the City against Stone& Youngberg for indemnity or contribution or other equitable or legal relief for Claims by Allstate against the City with respect to AD155 or issuance of the Bonds prior to the Refunding or with respect to the Series B Authority Bonds, the Settlement Agreement between the City and Allstate or any other agreement or transaction in connection with the Refunding, except any claims against the City relating to the S&Y Allstate Agreement; (iii) any Claims by Stone&Youngberg against the City for indemnity or contribution or other equitable or legal relief for claims by Allstate against Stone& Youngberg in connection with AD 155 or issuance of the Bonds prior to the Refunding, the S&Y Allstate Agreement or any other agreement or transaction in connection with the Refunding, except any claims against Stone & Youngberg relating to the Series B Authority Bonds or the Settlement Agreement between Allstate and the City; (iv) claims for attorneys' fees or costs in connection with any Released Claim, including but not limited to Claims for such fees or costs that were, might have been, or could have been awarded or sought in connection with any other action or proceeding that had occurred or might in the future occur arising out of or related to any Released Claim; and (v) Claims arising out of or in any way connected with the prosecution or settlement of any Released Claim, including without limitation the negotiation and documentation of the settlement memorialized by this Settlement and Cooperation Agreement; but shall not include Claims arising out of or related to the Series A Authority Bonds, the offering or sale thereof, or the preliminary or final official statements relating to the offering and sale of the Series A Authority Bonds or claims with respect to obligations to each other arising out of the Refunding, except as provided herein. 8.3. It is the intention of the Parties in executing this release that the same shall be effective as a bar to each and every Released Claim hereinabove specified, known or unknown; and the Parties hereby knowingly and voluntarily waive any and all rights and benefits otherwise conferred by the provisions of Section 1542 of the California Civil Code, which 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." The parties acknowledge in that connection that the City and Stone& Youngberg may have sustained damages, losses, costs, or expenses that are presently unknown and unsuspected, and such damages, losses, costs, or expenses they have sustained may give rise to unsuspected, and such damages, losses, costs, or expenses they have sustained may give rise to additional damage, loss, cost, or expense in the future. Nevertheless, the Parties acknowledge that this Agreement has been negotiated and agreed upon in light of this situation and expressly waive any and all rights which they may have under § 1542 of the California Civil Code, or any other state or federal statute or common law principle of similar effect with respect to the Released Claims. 8.4. The releases and covenants not to sue granted in this Settlement Agreement do not extend to, and nothing in this Settlement Agreement will be construed to limit Draft: 2/26/98 12:42 PM 6 DOCS SF#269720 v7/20079-14 either Party's rights to enforce this Agreement according to its terms. Furthermore, the covenant not to sue shall not apply to any suit or claim brought by the City or Stone&Youngberg, alone or with others, against the law firm of Brown&Diven or Brown Divert& Hemsche, or any member thereof. 8.5 The Parties represent and warrant that no Claim or right that would have been released or dismissed under this Agreement if held by either Party or the-Effective Date has been transferred, hypothecated, assigned or given away by either party prior to the Effective Date of this Agreement to any person or entity that would not be bound hereby. The Parties each shall indemnity, defend and hold harmless every other person or entity then entitled to a release hereunder from and against any and all Claims (including without limitation attorneys' fees) resulting from its own actual or alleged breach of this representation and warranty. 9. Covenant Not to Sue. 9.1 As of the Effective Date, the Parties respectively covenant and agree not to assert in any procedural form or forum, whether initially or by way of defense, offset, or cross-counter- or third party claim in any action, any Released Claim against any person or entity then entitled to a release hereunder, including but not limited to any claim for indemnity or contribution in the event Allstate brings action or asserts a claim against either party arising from or in any way relating to the Bonds, the Series B Authority Bonds, or the AD 155 Class 1 or Class 2 Bonds but not including any claim arising from or related to the Series A Authority Bonds if Allstate purchases any Series A Authority Bonds. 9.2 As of the Effective Date, the Parties further covenant and agree not to assert against any person or entity not then entitled to the benefit of a release hereunder, in any procedural form or forum, whether initially or by way of defense, offset, or cross-counter- or third-party claim, any claim arising or accruing later, but based on any transaction, occurrence, act or omission that occurred on or before the Effective Date hereof(or arising or accruing later, but based on any transaction, occurrence, act: or omission that occurred on or before the Effective Date hereof) that causes or results in the assertion by any person or entity whatsoever of any claim against any person or entity entitled to the benefit of a release hereunder. The Parties shall indemnify, defend or hold harmless every person and entity then entitled to a release hereunder from and against any and all claims (including without limitation attorneys' fees) resulting from its own breach of this covenant not to sue. This shall not prevent the Parties from pursuing litigation against Bond Counsel pursuant to paragraph 4 above. 10. Nonsignatories. The signatories to this Settlement and Cooperation Agreement are Stone & Youngberg and the City. To the extent that this Agreement provides for releases in favor of persons or entities not signatories hereto ("Nonsignatories"), this Agreement is declared to have been made for their use and benefit, and is further declared to be intended to bar the assertion by Nonsignatories of Released Claims against persons or entitles entitled to the benefit of a release hereunder. Draft: 2/26/98 12:42 PM 7 DOCS SF#268720 v7/20079-14 11. No Admissions. This Agreement is entered into in compromise of disputed claims. Neither the execution of this Agreement and the releases, dismissals and other documentation provided for herein, nor the payment of any consideration hereunder, nor any other act or agreement in furtherance of this Agreement shall be construed in any way as an admission of wrongdoing on the part of any Party hereto or an admission of facts giving rise to liability. 12. Authority. Each individual executing this Agreement on behalf of an entity represents and warrants that he or she is duly authorized representative of that entity with full power and authority to bind it to each term and condition hereof. 13. Further Acts. Each of the Parties hereto agrees promptly to execute all other documents and take all other actions reasonably necessary to effectuate all of the terms and conditions of this Agreement. 14. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors, and assigns and any entity through which the Parties do business. 15. Recitals. The Parties agree that the RECITALS are accurate and are incorporated in this Agreement. 16. Descriptive Headings. The headings used herein are descriptive only and shall not determine, define, limit or otherwise affect the meaning or effect of any such provisions. 17. Counterparts. This Agreement may be executed in separate counterparts which, when taken together, shall constitute the entire agreement between the Parties. Drnti: 2/26/98 12:42 PM 8 DOCS SF#268720 v7/20079-14 THE UNDERSIGNED HAVE READ THE ABOVE AGREEMENT AND UNDERSTAND ITS TERMS. EACH OF THE UNDERSIGNED IS AUTHORIZED TO SIGN ON BEHALF OF THE PARTY INDICATED BELOW. WHEREFORE THE UNDERSIGNED HAVE EXECUTED THIS AGREEMENT AS OF THE DATE FIRST SET FORTH ABOVE. STONE& YOUNGBERG LLC THE CITY OF PALM SPRINGS y Ysd � By: bt�r i gna re Signature Name and Title Name and Title ATTEST: CITY OF PALM SPRITCS-,_CALI_FORNIA o City Clerk age -"pGY CI�,p lff C eiN C —u� il'Pd�OW�L� ��� .ah'� +V �,�11nf_.., � 6.1. � L���O �,�u I o�Ln„lJa`�Y�.tll e YYLO �V Draft: 2/26/98 12:42 PM 9 DOCS SP#269720 V7/20079-14 EXHIBIT 1 Claims Against Original Bond Counsel Stone&Youngberg and the City will incur damages associated with the Refunding. Stone& Youngberg and the City believe this damage is due to various acts and/or omissions of Original Bond Counsel. In order to recover those damages suffered by the City and Stone&Youngberg which they believe are due to the acts and/or omissions of Original Bond Counsel, Stone&Youngberg and the City agree to cooperate in the prosecution ofdamage claims against Original Bond Counsel. These efforts may take the form of negotiations, resulting in settlement, or actual litigation, which litigation may proceed to judgement and appeal, or settlement. In this regard, the Parties agree to the following: (a) Stone&Youngberg and the City each will designate separate counsel to represent them in pursuing the damage claims against Original Bond Counsel. The City will designate "lead counsel" for said proceeding which shall have the primary responsibility for the day-to-day activities in relation to the prosecution of the claim including, but not limited to the preparation of pleadings, taking of discovery, and the attendance at all necessary appearances (the "Lead Counsel"). (b) Except as expressly provided herein, the City shall make all decisions concerning the prosecution of such litigation including preparation of pleadings other than what claims to bring in the initial complaint, taking discovery, preparation for and conduct of trial and review and payment of legal bills, but shall consult with Stone& Youngberg as needed. The following decisions shall require joint agreement by the Parties: whether to file a lawsuit, what claims to bring in the initial complaint, whether to proceed past any Evaluation Point established in the Action Plan in paragraph(c) below, whether to file any appeal and whether to settle such litigation and on what terms. (c) The City shall develop a proposed action plan(the "Action Plan"), which plan shall be reviewed and approved by Stone& Youngberg and shall include all of the following: (1) identify the claims to be brought against Original Bond Counsel, (2) identify the phases of the litigation, with general budgets for each phase, (3)identify points at which the Parties should meet ` and identify the progress of the litigation and decide whether to proceed, along with budgets to reach such points (the "Evaluation Points.") (d) At each Evaluation Point, in addition to other factors, the parties shall evaluate Original Bond Counsel's ability to pay any judgement. (e) All costs and expenses actually incurred by the Lead Counsel in pursuing the action plan shall be divided equally between Stone& Youngberg and the City. Activities of the separate counsel designated by Stone&Youngberg(or the counsel designated by the City if the City designates the counsel designated by Stone &Youngberg as Lead Counsel) shall also be shared equally if, and only if, those activities are contemplated by the Action Plan, and are billed at an hourly rate no higher than that charged by the Lead Counsel. . (f) As a part of the Action Plan, the parties shall establish an estimate of monthly expenses. After development and approval of the Action Plan, the Parties shall each EXHIBIT 1 (Page 1 of 2) DOCS_SF#270677 v3/20079-14 EXHIBIT 1 deposit $25,000 with the City's Finance Director who shall place such monies in a separate fund to which legal expenses will be charged. Such deposit will be non refundable unless the Parties jointly terminate pursuit of the Action Plan or litigation before expenditure of the entire amount. The Finance Director shall establish a schedule of monthly contributions to be made by the Parties after depletion of the initial deposit so that there will be sufficient monies to pay bills when due. The Parties shall make their contributions in accordance with the schedule. Stone&Youngberg shall be entitled to review copies of all billings. Any monies in the fund shall draw interest which shall accrue to the fund. In the event of termination of this Agreement or mutual determination by the Parties to terminate pursuit of the Action Plan or the litigation, or on settlement or judgement, each Party shall be entitled to its pro rata share of any unencumbered balance in such fund. (g) If and only if either Party elects to cease making all payments otherwise required by this Agreement and the other Party desires to continue the litigation, the Party desiring not to continue shall withdraw, the claims unique to it shall be dismissed, and the Party continuing may proceed with its own claims and shall be entitled to 100% of any settlement or judgement if it continues the litigation at its sole expense subsequent tot cessation of payments by the other Partysept irs aci vI1T[ii�n'ra nranh !i\! l I of n.z, �� `� � (h) Any recovery obtained from Original Bond Counsel or any other person pursuant to the Action Plan, either by settlement or judgement, related to damage claims covered by this agreement, shall be divided equally between Stone& Youngberg and the City, except as provided below in paragraph(i). (i) In the event the Parties receive any written offer of settlement and disagree as to whether to pursue litigation further, the Parties may: (1) continue the litigation jointly pursuant to the terms hereof; (2) either Party may drop out of the litigation allowing the other Party to proceed on its own claims without contribution or indemnification from the other, -dAririnp to cat+lo shall_ eC. ;74 '— n im:�g�azt3�u�hethe ud ement-o�settlemen m„m .f A1y-- [aim 3' g t,�-se«a-maxa.n...,..e,r��.. —p@FeeeA-E5OV6)=of thetetal--amount-in=the.written offer.�af settlement;ror(3) either Party may settle separately allowing the other Party to proceed on its own claims but without further contribution from the other Party. In case one Party settles separately, fifty percent (50%) of such settlement shall be paid to the non-settling Party and the claims of the settling Party which are unique to that Party shall be dismissed from the litigation. Thereafter the non-settling Party shall prosecute the litigation individually at its own sole expense and shall be entitled to one hundred percent(100%) of any settlement or judgement in such litigation. EXHIBIT 1 (Page 2 of 2) DOGS 0#270677 A/20079-14 • • MUTUAL RELEASE AND COVENANT NOT TO SUE This Mutual Release and Covenant Not to Sue ("Mutual Release") is made as of March 2, 1998, by and between Stone&Youngberg LLC ("S&Y") and Allstate Insurance Company ("Allstate") according to the terms and conditions set forth below and is to become effective on the Effective Date defined below. S&Y and Allstate are sometimes individually referred to herein as a "Party" and collectively referred to herein as "the Parties." RECITALS A. On or about March 2, 1998, the Parties entered into a Dispute Resolution Agreement. The Dispute Resolution Agreement is incorporated by reference herein. Unless otherwise indicated to the contrary, the provisions and defined terms contained in the Dispute Resolution Agreement shall apply equally here. B. The Dispute Resolution Agreement provides certain contingent and voluntary methods for resolving a dispute between the Parties. Upon accomplishment of certain events, the Parties agreed that this Mutual Release will become effective. Specifically, this Mutual Release will become effective if and when Allstate is paid principal and interest for its $1,030,000 par value Class 2 Bonds pursuant to the terms of the Dispute Resolution Agreement. If Allstate is not paid principal and interest therefor pursuant to the terms of the Dispute Resolution Agreement, this Mutual Release will become null and void and of no force and effect. C. The purpose of this Mutual Release is to implement the agreements reflected in the Dispute Resolution Agreement between the Parties upon the occurrence of the certain events defined therein. NOW, THEREFORE, for good and valuable consideration described in the Dispute Resolution Agreement and the covenants and mutual promises and releases contained herein, the receipt of which is hereby acknowledged, the Parties agree as follows: I. Allstate Release. Allstate, on behalf of itself and its administrators, agents, servants, employees, representatives, directors, officers, assigns, parent entities, subsidiaries, affiliates, attorneys and successors ("Allstate Releasors") hereby fully and forever releases and discharges S&Y as well as its managers, members, administrators, agents, servants, employees, representatives, directors, officers, assigns, parent entities, subsidiaries, affiliates, stockholders, attorneys, predecessor limited partnership, former general and limited partners, successors and insurers (collectively "S&Y Releasees"), of and from any and all rights, claims, damages, liabilities, expenses and causes of action including but not limited to claims for attorney's fees or costs (collectively "Claims"), in law or equity, under state or federal law, whether currently known or unknown, suspected or unsuspected, foreseen or unforeseen, concealed or hidden, which arise from or in any way relate to Assessment District No. 155, the issuance, offer, purchase or sale of Limited Obligation Improvement Bonds Assessment District No. 155, issued by the City of Palm Springs, California([he "AD 155 Bonds"), the formation of Assessment District No. 155, the Plan or the subject matter of the Dispute Resolution Agreement, including 1 20079-1-Draft:February 24, 1998 6:41 PM SF #266481 v6 • District No. 155, the Plan or the subject matter of the Dispute Resolution Agreement, including but not limited to any securities purchased or sold by Allstate, S&Y, or any other person or entity pursuant to the Plan (the "AD 155 Claims"), which the Allstate Releasors have ever had, now have or may hereafter have against any of the S&Y Releasees. 2. S&Y Release. S&Y on behalf of itself and its managers, members, administrators, agents, servants, employees, representatives, directors, officers, assigns, parent entities, subsidiaries, affiliates, stockholders, predecessor limited partnership, former general and limited partners, attorneys and successors (the "S&Y Releasors"), hereby fully and forever releases and discharges Allstate as well as its administrators, agents, servants, employees, representatives, directors, officers, assigns, parent entities, subsidiaries, affiliates, attorneys, successors and insurers (the "Allstate Releasees"), of and from any of the AD 155 Claims which the S&Y Releasors have ever had, now have or may hereafter have against any of the Allstate Releasees. 3. Release of Unknown and Unsuspected Claims. The Claims released in this Mutual Release shall hereinafter collectively be referred to as the "Released Claims." This Mutual Release shall act as a release of all Released Claims described above, and the Parties hereby waive the benefit of Section 1542 of the California Civil Code which 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 The Parties acknowledge in that connection that the Allstate Releasors and the S&Y Releasors may have sustained damages, losses, costs, or expenses that are presently unknown and unsuspected, and such damages, losses, costs, or expenses they have sustained may give rise to additional damage, loss, cost, or expense in the future. Nevertheless, the Parties acknowledge that this Mutual Release has been negotiated and agreed upon in light of this situation and expressly waive any and all rights which they may have under § 1542 of the California Civil Code, or any other state or federal statute or common law principle of similar effect. 4. Non-Assignment. The Parties hereto represent and warrant to each other that each is the owner of all respective Released Claims, and no other person or entity has any interest therein, nor has either Party sold, assigned, transferred, conveyed, or otherwise disposed of any interest in a Released Claim released pursuant to this Mutual Release, or that would have been released under this Mutual Release if held by the Releaser on the Effective Date hereof, except as referenced herein. 5. Governing Law. This Mutual Release shall be governed by the laws of the State of California without regard to its provisions relating to conflicts of laws. 6. Entire Agreement. This Mutual Release constitutes the entire agreement between the Parties and supersedes all previous understandings, agreements and communications, whether express or implied, oral or written, relating to the subject matter of this Mutual Release. 2 20079-1-Draft:February 24, 1998 5:56 PM SF #266481 v6 This Mutual Release shall not be amended, altered, modified, supplemented or otherwise changed, except by a writing signed by the Parties. 7. Negotiated Terms. The Parties represent and agree that the terms of this Mutual Release have been the result of negotiations between the Parties and have been drafted by the Parties and their legal counsel. Accordingly, the Parties agree and understand that neither this Mutual Release nor any of its provisions shall be construed against any either Party under any statutory or common law rule to the effect that any agreement is to be construed against the drafter. 8. Confidentiality. The Parties agree to keep all terms of this Mutual Release and all discussions concerning settlement strictly confidential, except as may be required by law, or rule of an applicable regulatory authority or self regulatory organization. The Parties further agree not to discuss the settlement with any media. Any breach of the confidentiality required under this paragraph shall be deemed a material breach of this Mutual Release. 9. Representation By Counsel. The Parties acknowledge that they have been represented by independent legal counsel who have advised them in connection with this Mutual Release and who have explained the meaning of the legal effect of each term of this Mutual Release. The Parties acknowledge that they have read and understand the meaning and consequence of each term of this Mutual Release, and that they are signing these documents voluntarily. 10. Covenant Not To Sue. As of the Effective Date defined below, the Parties respectively covenant and agree not to assert in any procedural form or forum, whether initially or by way of defense, offset, or cross-, counter- or third-party claim, any Released Claim against any person or entity then entitled to a release hereunder (namely the S&Y Releasees and the Allstate Releasees). As of the Effective Date, the Parties further covenant and agree not to assert against any person or entity not then entitled to the benefit of a release hereunder, in any procedural form or forum, whether initially or by way of defense, offset, or cross-, counter- or third-party claim, any Claim arising or accruing on or before the Effective Date hereof(or arising or accruing later, but based on any transaction, occurrence, act or omission that occurred on or before the Effective Date hereof) that causes or results in the assertion by any person or entity whatsoever of any Claim against any person or entity entitled to the benefit of a release hereunder relating to the Released Claims. Allstate shall indemnify, defend and hold harmless the S&Y Releasees from and against any and all Claims (including without limitation attorneys' fees) resulting from its own breach of this covenant not to sue. S&Y shall indemnify, defend and hold harmless the Allstate Releasees from and against any and all Claims (including without limitation attorney's fees) resulting from its own breach of this covenant not to sue. Notwithstanding the foregoing, Allstate agrees that S&Y, either alone or together with the City or any of the City's agencies or authorities, may sue or bring action against bond counsel for the original AD 155 Bond offering, namely the firm known as Brown, Diven& Hentsche, or Brown&Diven, and any of its members or representatives. 3 20079-1-Draft:February 24, 1998 5:56 PM SF #266481 v6 11. Enforcement of Mutual Release. Notwithstanding anything to the contrary in this Mutual Release, the releases and covenants not to sue granted in this Mutual Release do not extend to, and nothing in this Mutual Release will be construed to limit either Party's rights to enforce, this Mutual Release according to its terms. Furthermore, the covenant not to sue shall not apply to any suit or claim brought by S&Y, alone or with others against the law firm of Brown& Diven or Brown Diven&Hentsche, or any member thereof, and/or their insurers. 12. Nonsignatories. The signatories to this Mutual Release are S&Y and Allstate. To the extent that this Mutual Release provides for releases in favor of the S&Y Releasees and Allstate Releasees, in addition to S&Y and Allstate, this Mutual Release is declared to have been made for their use and benefit, and is further declared to be intended to bar the assertion by the Allstate Releasors and S&Y Releasors, in addition to Allstate and S&Y, of Released Claims against the S&Y Releasees and the Allstate Releasees respectively. 13. No Admissions. This Mutual Release is entered into in compromise of disputed claims. Neither the execution of this Mutual Release and the releases, dismissals and other documentation provided for herein, nor the payment of any consideration hereunder, nor any other act or agreement in furtherance of this Mutual Release or the Dispute Resolution Agreement shall be construed in any way as an admission of wrongdoing on the part of any Party hereto or an admission of facts giving rise to liability. 14. Authority. Each individual executing this Mutual Release on behalf of an entity represents and warrants that he or she is duly authorized representative of that entity with full power and authority to bind it to each term and condition hereof. 15. Further Acts. Each of the Parties hereto agrees promptly to execute all other documents and take all other actions reasonably necessary to effectuate all of the terms and conditions of this Mutual Release. 16. Effective Date and Condition. This Mutual Release shall become effective, if at all, on the date ("Effective Date") Allstate has been paid the principal and interest for all of its Class 2 Bonds pursuant to the terms of the Dispute Resolution Agreement. If Allstate has not been so paid, the mutual releases and the covenants not to sue provided for herein and this Mutual Release shall be null and void and have no force or effect. 17. Successors and Assigns. This Mutual Release shall be binding upon and inure to the benefit of the Parties and their respective successors, assigns and any entity through which the Parties do business. 18. Recitals. The Parties agree that the RECITALS are accurate and are incorporated in this Mutual Release. 19. Descriptive Headings. The headings used herein are descriptive only and shall not determine, define, limit or otherwise affect the meaning or effect of any such provisions. 4 20079-1-Draft:February 24, 1998 5:56 PM SF #266481 v6 20. Counterparts. This Mutual Release may be executed in separate counterparts which, when taken together, shall constitute the entire agreement between the Parties. 21. Attorney, 'sue. ]If any legal action is necessary to enforce the terms of this Mutual Release, the prevailing Party shall be entitled to reasonable attorney's fees and costs of suit in addition to any other relief to which that Party may be entitled. THE UNDERSIGNED HAVE READ THE ABOVE MUTUAL RELEASE AND UNDERSTAND ITS TERMS. EACH OF THE UNDERSIGNED IS AUTHORIZED TO SIGN ON BEHALF OF THE PARTY INDICATED BELOW. STONE&YOUNGBERG LLC ALLSTATE INSURANCE COMPANY By: 'Alv By: Slgnature Signature '_4e�e-dollex, CHARLES D. MIRES INV Name and Title Typed or Printed Name By: Signature PATRICIA W. WILSON Typed or Printed Name Its Authorized Signatories 5 20079-1-Draft:February 24, 1998 5:56 PM SF #266481 v6