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R2002-0088 06-10-02 RESOLUTION NO. R2002-88 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PEARLAND, TEXAS, AUTHORIZING THE CITY MANAGER OR HIS DESIGNEE TO ENTER INTO A CONTRACT WITH PATTERSON & ASSOCIATES, A REGISTERED INVESTMENT AND FUNDS MANAGEMENT PARTNERSHIP, FOR INVESTMENT ADVISORY SERVICES. BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF PEARLAND, TEXAS: Section 1. That certain contract by and between the City of Pearland and Patterson & Associates, a copy of which is attached hereto as Exhibit "A" and made a part hereof for all purposes, is hereby authorized and approved. Section 2. That the City Manager or his designee is hereby authorized to execute and the City Secretary to attest a contract with Patterson & Associates,' a registered investment and funds management partnership, for investment advisory services. PASSED, APPROVED and ADOPTED this the 10 dayof JUNE , A.D., 2002. TOM REID MAYOR ATTEST: rY S~ETARY ~' APPROVED AS TO FORM: D~,RRIN M. COKER CITY ATTORNEY Exhibit "A" R2002.88 INVESTMENT ADVISORY AGREEMENT BETWEEN PATTERSON & ASSOCIATES and CITY OF PEARLAND, TEXAS This Investment Advisory Agreement dated as of the ./.2-~day of ~/~'u~O~-.~ , 2002 (the "Agreement") is made and entered into by and between Patterson Capital Management, L.P., dba Patterson & Associates ("P&A"), a registered investment advisor and funds management Texas limited partnership and the City of Pearland, Texas (the "Client"). PREAMBLE WHEREAS, the Client has determined to select and appoint P&A to act as its non-discretionary funds manager for funds and securities to manage, maintain, and invest monies and securities and to perforrn the advisory and consulting services described herein, NOW THEREFORE, for and in consideration of the mutual promises, covenants, and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree with each other as follows: ARTICLE I. Definitions "Authorized Investments" shall mean those investments authorized and defined in the Client's Investment Policy attached hereto and made part of as Exhibit A. "Authorized Representative(s) of the Client" shall mean the duly authorized officers, members of the Board of Directors or their delegated representatives, empowered to execute instructions and take other necessary actions under this Agreement on behalf of the Client as listed on Exhibit D. "Authorized Representative(s) of P&A" shall mean any employee of P&A who is designated in writing by P&A as an authorized representative for purposes of this Agreement as listed on Exhibit D. "Letter of Instructions" shall mean a written authorization and direction to an Authorized Representative of P&A signed by an Authorized Representative of the Client. ARTICLE II. Creation of Portfolio(s) Section 2.01. Creation of a Separate and Distinct Portfolio(s). P&A, on behalf of the Client hereby creates and establishes on their records as many separate and distinct portfolio(s) (the "Portfolio") to be managed as separate and distinct funds and held in the Client's name at Client's safekeeping institution. Client will determine how many portfolios are established and maintained. The Portfolio shall be segregated and held distinct from all other funds held or invested by P&A. ARTICLE III. Investment Advisory Services Section 3.01. Investment Management Services. P&A agrees to provide non-discretionary management of the Client's portfolio(s) through advice and administrative duties as defined by the Client. All investments shall be in accord with the Texas Government Code and the Client's own Investment Policy attached hereto and made a part hereof as Exhibit A. The Client and P&A agree that all funds in the Portfolio shall be invested only in Investments authorized by the Policy and state law. P&A hereby agrees to act with judgment and care, under circumstances then prevailing, which persons of prudence, discretion and intelligence exercise in the management of their own affairs, not for speculation, but for investment, considering the probable safety of their capital as well as probable income to be derived. This Prudent Person Law shall be applied to the investment of all Portfolios with the same degree of care and assuming the same duty as the Client. Section 3.02. Depository. All funds and securities of the Portfolio and securities owned by the Client will be maintained in the Client's name and in the designated depository of the Client. All security transactions will be made on a delivery-versus-payment basis. P&A will at no time have possession of Client's funds or securities. All charges for the depository account maintenance and transactions will be paid by the Client. Section 3.03. Earnings and Losses from Investments. All earnings and profits from the investment of funds in the Portfolio shall be credited to and deposited in the Portfolio(s). All losses resulting from the investment of funds in the Portfolio(s) shall be charged to the Portfolio(s). Section 3.04. Investment of Accounts. Monies held in the Portfolio and all Accounts shall be invested and reinvested in Authorized Investments selected or recommended by P&A and approved by Client. Section 3.05. Liability. P&A, or any P&A employees shall not be held liable for any act or omission to act on behalf of herself, her agents, employees or other persons except for negligence or malfeasance, or violation of applicable law. Common law and the federal securities laws impose liabilities under certain circumstances on persons who act in good faith, and therefore nothing herein shall in any way constitute a waiver or limitation of any rights which the Client may have under common law or any federal securities laws Section 3.06. Portfolio Designation. Client has full discretion to designate the amount of funds to be placed in the Portfolio or in separate investments. Section 3.07. Presentations. An Authorized Representative of P&A will be available to present reports or attend presentations regarding the Portfolio(s) to the Client or the Clientts governing body on a quarterly basis, or as required by the Client. Section 3.08 Advisory Consulting Services. P&A agrees to provide advisory consulting services for the Client in all areas of cash management to include, at a minimum, examination and evaluation of the following treasury areas: - Investment policy review. To analyze the existing investment policy for application to the Client's needs and, if necessary, to formulate revisions for adoption. - Investment strategy review. To continuously evaluate investment strategies (written and operational) for feasibility and appropriateness. - Cash Flow Analysis. To provide cash flow analysis advice to develop a cash flow system for the Client to include ongoing forecasts and projections for investment purposes. - Internal procedures and processes. To evaluate internal treasury procedures for maximum benefit and efficiency to the Client and its Portfolio(s) including broker/dealer transactions, wire transfers, competitive bidding process, repurchase agreements documentation, and transactign audit trails. To review for adequate management oversight and prepare written procedures. Delivery and Settlement Oversight. To coordinate investment settlements, delivery and availability of funds with City staff to assure safe transfer of funds and securities. Financial counter-party evaluation. To provide ongoing credit review of Client's baking institutions and financial counter-parties. To obtain and maintain all statutorily required broker certifications. GASB 3 and 31 Compliance. To provide assistance on custodial procedures for GASB 3 compliance and reporting and accurate and timely annual GASB 31 reporting. Market Research. To provide technical and fundamental market research on an ongoing basis. Banking arrangement and structure. To determine the efficiency and effectiveness of the current banking structure and possible recommendations for improvement. To prepare and evaluate the bidding and awarding of banking services. Benchmark Analysis. To review the applicability of existing benchmarks or suggest applicable benchmarks for the Portfolio(s). - Coordination with external client agencies. To improve communications with and efficiencies between the Client and any external service agencies (including broker/dealers) for policy compliance, maximum utility of funds and investment alternatives. - Exposure review. To determine if the Client has any audit, operational or policy exposures in the Treasury area. - Investment Reporting. To review all investment reporting for adequacy of information and presentation format for maximum benefit and understanding. To provide monthly and quarterly Portfolio(s) reporting. - Public Funds Investment Act Compliance. To evaluate the Client's Treasury operation and reporting for full compliance to the Texas Government Code 2256. - Public Funds Collateral Act Compliance. To evaluate the Treasury operation and reporting for full compliance to the Texas Government Code 2257. ARTICLE IV. Reporting Section 4.01. Reports. P&A shall assist Client to define all reporting needs for information needed on a daily, monthly or quarterly basis. P&A shall submit all Portfolio(s) reports to the Client including all transactions promptly after the end of each month. Such reports shall indicate all holdings and balances in the Portfolio, earnings, performance, transactions, and accounting for all securities. All reports will be in full compliance with state law and Client's Investment Policy. Section 4.02. Records. P&A shall keep a book of records in which complete and correct entries shall be made of all transactions relating to transactions in the Portfolio(s) in accordance with generally accepted accounting principles. Such records shall be available for inspection at all reasonable hours of the business day and under reasonable conditions by the Client. Client wilt provide records of any other investments to P&A for monthly reporting purposes. Section 4.03. Confirmations. P&A will establish all necessary procedures for Client to receive independent trade confirmations from all broker/dealers for each transaction in the Portfolio. Independent confirmations will be sent directly to the Client for independent audit trail purposes. ARTICLE V. Expenses Section 5.01. Fee and Expenses. The Client agrees to pay to P&A on a quarterly basis (in arrears) an amount sufficient to reimburse P&A for costs of performing the duties contemplated under this Agreement in accordance with the Fee Schedule, attached hereto and made a part hereof as Exhibit B. P&A shall advise the Client from time to time, in writing of the amount of such costs. This invoice shall set forth the services provided for each of the Portfolio(s) and the cost incurred as applicable. Fees are calculated by P&A and the invoice provided to the Client by the fifth (5) business day of the succeeding month. Payment on the charges shall be made within ten (10) business days after receipt of invoice. ARTICLE VI. Miscellaneous Section 6.01. Notices. Any notices, Letters of Instruction, requests or demands required or permitted to be given hereunder shall be given in writing and shall be deemed duly given when mailed by registered or certified mail, postage pre-paid, addressed or telefaxed ag follows: To the Client: James Caussey, Director of Finance City of Pearland - Finance Department 3519 Liberty Road Pearland, Texas 77581 Telephone: Telefax: E-mail: jcausse¥~ci.peaxland.tx.us To P&A: Debbie A. Cervantes Patterson & Associates 301 Congress Avenue Suite 570 Austin, Texas 78701 Telephone: (512) 320-5042 Telefax: (512) 320-5041 E-mail: debbie~patterson.net Section 6.02. Severabilit.y. If any provision of this Agreement shall be held or deemed to be or in fact shall be illegal, inoperative, or unenforceable, the same shall not affect any other provision or provisions herein contained or render the same invalid, inoperative, or unenforceable to any extent whatsoever. Section 6.03. Limitation of Rights. With the exception of the rights herein expressly conferred, nothing in or to be implied from this Agreement is intended or shall be construed to give any person other than the parties hereto any legal or equitable right, remedy or claim under or in respect to this Agreement or any of the covenants, conditions and provisions herein contained; this Agreement and all of the covenants, conditions and provisions hereof being intended to be and being for the sole and exclusive benefit of the parties hereto and herein provided. The Client further agrees that P&A's responsibilities hereunder are limited to the management of the Portfolio and Accounts as herein described and the providing of reports and information herein required; P&A shall not be liable for any losses from investments made and transfers made in accordance with the procedures set forth in this Agreement. Section 6.04. Execution of Counterparts. This Agreement may be simultaneously executed in several separate counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. Section 6.05. Applicable Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas and is performable in Harris County, Texas. Section 6.06. Captions. The captions or headings in this Agreement are for convenience only and in no way define, limit, or describe the scope or intent of any provisions, articles, or sections of this Agreement. Section 6.07. Amendment. The Client and P&A may supplement or amend this Agreement only if evidenced in a writing signed by both parties. Section 6.08. Termination. This Agreement may be terminated by either party hereto, with or without cause, by tendering thirty (30) days prior written notice in the manner set forth in Section 6.01 hereof. In addition, the Client may terminate this Agreement within five (5) business days of the date hereof, with or without cause and without penalty, by notifying P&A in the manner set forth in Section 6.01 hereof of its decision to terminate the Agreement. Section 6.09. Term. Unless terminated in accordance with Section 6.08 hereof, this Agreement shall be automatically renewed on each anniversary date hereof. Section 6.10. Assignment. This Agreement shall not be assignable by either party hereto, by operation of law or otherwise, without the prior written consent of the other party hereto. Any assignment in violation of this Section 6.10 shall result in the automatic termination of this Agreement. Section 6.11. Ownership Change. P&A shall notify the Client in writing of any change in its partnership ownership within a reasonable time after such change. IN WITNESS WI-IEREOF the parties hereto have cause this Agreement to be executed in multiple counterparts as of the date first set forth above. CITY OF PEARLAND~ TEXAS Patterson Capital Management, L.P. dba PATTERSON & ASSOCIATES By:Patterson & Associates, Inc. General Partner By: Name:' Bi l Att e st'.~/~~~/ Date: By:_~ ent Attest: Date: EXHIBIT A CLIENT'S INVESTMENT POLICY The Client's investment policy is made part of this Investment Advisory Agreement in order to assure that all investment decisions conform to the policy and parameters established by the Client. EXHIBIT B FEE SCHEDULE The investment advisory services described under the terms of this Agreement are being provided in accordance with the following fee schedule. Services are provided for a fee off $ 37,500 per year Fees are calculated by P&A on services rendered in the preceding month and the invoice provided to the Client by the fifth (5) business day of the succeeding month. Fees are due and payable within ten (10) business days after receipt of invoice. EXHIBIT C Securities and Exchange Commission ADV FORM, PART H This form is being provided the Client in accordance with SEC Regulations 204-3 for Registered Investment Advisors. This disclosure document must be provided the Client not less than 48 hours prior to entering any investment advisory contract. Failure to do so can result in a voidable contract. EXltlBIT D AUTHORIZED REPRESENTATIVES Authorized Representatives of the Client Name/Title Phone Fax e-mail Authorized Representatives of P&A Name/Title Deborah A. Cervantes VP and CFO Linda T. Patterson President Rikki Ramirez Portfolio Analyst Phone 512-320-5042 512-320-5042 512-320-5042 Fax 512-320-5041 512-320-5041 512-320-5041 e-mail debbie~patterson.net linda~patterson.net rikki~patterson.net