MDD Resolution No. 471 RESOLUTION NO. 471
A RESOLUTION OF THE BOARD OF DIRECTORS OF THE BAYTOWN
MUNICIPAL DEVELOPMENT DISTRICT AUTHORIZING THE GENERAL
MANAGER TO EXECUTE A MUNICIPAL ADVISORY AGREEMENT WITH
HILLTOP SECURITIES INC.; AUTHORIZING PAYMENT TO HILLTOP
SECURITIES, INC., CONSISTENT WITH SUCH EXTENSION AGREEMENT;
MAKING OTHER PROVISIONS RELATED THERETO; AND PROVIDING FOR
THE EFFECTIVE DATE THEREOF.
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BE IT RESOLVED BY THE BOARD OF DIRECTORS OF THE BAYTOWN MUNICIPAL
DEVELOPMENT DISTRICT:
Section 1: That the Board of Directors of the Baytown Municipal Development District
hereby finds that the expenditures authorized herein are for improvements, which satisfy the purposes for
which the funds can be expended pursuant to Chapter 377 of the Texas Local Government Code and/or
Section 3888.102 of the Special District Local Laws Code. All required findings pursuant thereto are
hereby declared to have been made and adopted as findings of the Board of Directors.
Section 2: That the Board of Directors of the Baytown Municipal Development District
hereby authorizes the General Manager to execute a Municipal Advisory Agreement with Hilltop
Securities Inc. A copy of said agreement is attached hereto as Exhibit"A,"and incorporated herein for all
intents and purposes.
Section 3: That the Board of Directors of the Baytown Municipal Development District
hereby authorizes the payment to Hilltop Securities Inc., in accordance with the agreement referenced in
Section 2 hereof.
Section 4: This resolution shall take effect immediately from and after its passage by the
Board of Directors of the Baytown Municipal Development District.
INTRODUCED, READ and PASSED by the affirmative vote of the Bo of Directors of the
Baytown Municipal Development District,this the ay o arch, 202 .
O l; ILLO, resident
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SCOTT LE ,General Counsel
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HilltopSecurities
A Hilltop Holdings Company.
MUNICIPAL ADVISORY AGREEMENT
This Municipal Advisory Agreement(the"Agreement") is made and entered into by and between
Baytown Municipal Development District(the"Issuer")and Hilltop Securities Inc.("HilltopSecurities"),
and is dated,and shall be effective as of April 30,2022(the"Effective Date").
WITNESSETH:
WHEREAS, the Issuer will have under consideration from time to time the authorization and
issuance of municipal securities, including but not limited to the issuance and sale of evidences of
indebtedness or debt obligations that may currently or in the future be authorized and issued or otherwise
created or assumed by the Issuer, in amounts and forms which cannot presently be determined;and
WHEREAS, in connection with the authorization, sale, issuance and delivery of such municipal
securities, as well as in connection with any matters relating to municipal financial products of the Issuer,
the Issuer desires to retain a municipal advisor; and
WHEREAS, the Issuer desires to obtain the professional services of HilltopSecurities as a
unicipal advisor to advise the Issuer regarding the issuanct of municipal securities and any municipal
Inancial products, all as more fully described herein, during the period in which this Agreement shall be
effective; and
WHEREAS, HilltopSecurities is willing to provide its professional services and its facilities as a
municipal advisor in connection with the Issuer's issuances of municipal securities and any municipal
financial products, all as more fully described herein, during the period in which this Agreement shall be
effective.
NOW,THEREFORE, the Issuer and HilltopSecurities, in consideration of the mutual covenants
and agreements herein contained and other good and valuable consideration,do hereby agree as follows:
SECTION I
SCOPE OF SERVICES
A. Scope of Services and Discharge of Resnonsibilities.
1. Scope of Services.
(a) HilltopSecurities is engaged by the Issuer as its municipal advisor to provide the services
set forth in Appendix A hereto(the"Municipal Advisory Services"). The Municipal Advisory Services,
together with any services to be provided by HilltopSecurities as the Issuer's independent registered
municipal advisor("IRMA") pursuant to subparagraph 13.1 of this Section I, are hereinafter collectively
referred to as the"Scope of Services"hereunder. The Scope of Services to be provided by HilltopSecurities
may be changed only as provided in paragraph D of this Section I.
(b) If the Issuer engages HilltopSecurities or any of its affiliates, in a capacity other than as
municipal advisor,to provide additional services that are not municipal advisory activities("Non-Municipal
Advisor Services"),such engagement for Non-Municipal Advisor Services shall be evidenced by a separate
agreement between the Issuer and such party. The parties hereto acknowledge that such Non-Municipal
Advisor Services shall not be governed by this Agreement and are intended to consist of activities not
requiring registration as a municipal advisor under the Securities Exchange Act.
(c) The Issuer shall provide written notice to HilltopSecurities of any other municipal advisor
engaged by the Issuer, whether in regard to all or any portion of the Municipal Advisory Services or for
any other aspects of the issuance of municipal securities or municipal financial products outside the scope
of the Municipal Advisory Services,as described in clause(c)of subparagraph B.1 of this Section I.
2. Inquiries and Information in Connection with HilltopSecurities'Duties. If and to the
extent provided in the Scope of Services, HilltopSecurities is called upon to make recommendations to the
Issuer or to review recommendations made by others to the Issuer,and in connection therewith to determine
whether such recommendations are suitable for the Issuer, in order to fulfill its duties with respect to such
recommendations and any associated suitability determinations, HilltopSecurities is required under
applicable regulations to make reasonable inquiries of the Issuer as to the relevant facts. Such facts include,
at a minimum, information regarding the Issuer's financial situation and needs,objectives,tax status, risk
tolerance,liquidity needs,experience with municipal securities transactions or municipal financial products
generally or of the type and complexity being recommended, financial capacity to withstand changes in
market conditions during the term of the municipal financial product or the period that municipal securities
to be issued in the municipal securities transaction are reasonably expected to be outstanding,and any other
material information known by HilltopSecurities about the Issuer and the municipal securities transaction
or municipal financial product. In addition, HilltopSecurities is required under applicable regulations to
use reasonable diligence to know the essential facts about the Issuer and the authority of each person acting
on behalf of the Issuer so as to effectively service HilltopSecurities' municipal advisory relationship with
the Issuer, to act in accordance with any special directions from the Issuer,to understand the authority of
each person acting on behalf of the Issuer,and to comply with applicable laws,regulations and rules.
Accordingly, the Issuer hereby agrees to provide accurate and complete information reasonably
designed to permit HilltopSecurities to fulfill its responsibilities in connection with any such
recommendations and suitability determinations and to provide to HilltopSecurities reasonable access to
relevant documents and personnel in connection with its required investigation to determine that any
recommendations are not based on materially inaccurate or incomplete information. The Issuer
acknowledges that HilltopSecurities may not be able to make requested recommendations or suitability
determinations if it is not provided access to such information and that the Issuer shall be estopped from
claiming a violation of HilltopSecurities' fiduciary duty to the Issuer in connection with a recommendation
or suitability determination made by HilltopSecurities based on materially inaccurate or incomplete
information provided by the Issuer.
3. Actions Independent of or Contrary to Advice. The parties hereto acknowledge that the
Issuer shall not be required to act in accordance with any advice or recommendation provided by
HilltopSecurities to the Issuer. Upon providing such advice or recommendation to the Issuer,together with
the basis for such advice or recommendation,HilltopSecurities shall have discharged its duties with regard
to such advice or recommendation and shall not be liable for any financial or other damages resulting from
the Issuer's election not to act in accordance with such advice or recommendation. Furthermore,the Issuer
shall be estopped from claiming a violation of HilltopSecurities' fiduciary duty to the Issuer as a result of
its election not to act in accordance with any advice or recommendation by HilltopSecurities, including but
not limited to any claim that HilltopSecurities should have taken steps, in addition to providing its advice
or recommendation together with the basis therefor, to cause the Issuer to follow its advice or
recommendation.
4. Preparation of Official Statement in Connection with Issuance of Municipal Securities.
If and to the extent provided in the Scope of Services, HilltopSecurities is called upon to assist the Issuer
in the preparation of its official statement in connection with the issuance of municipal securities,the Issuer
hereby agrees to provide accurate and complete information to HilltopSecurities reasonably designed to
permit HilltopSecurities to fulfill its responsibility to have a reasonable basis for any information
HilltopSecurities provides about the Issuer, its financial condition, its operational status and its municipal
securities in connection with the preparation of the official statement. While HilltopSecurities may
participate in the due diligence process in connection with the preparation of the official statement, if such
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participation is within the Scope of Services, HilltopSecurities shall not be obligated to undertake any
inquiry or investigation in connection with such due diligence beyond any inquiries or investigations
otherwise required by this Agreement. Furthermore,HilltopSecurities shall not be responsible for certifying
the accuracy or completeness of the official statement, other than with respect to information about
HilltopSecurities provided for inclusion in the official statement, if applicable. The Issuer agrees that
HilltopSecurities may rely on any information provided to it by the Issuer for purposes of this paragraph.
5. Representations and Certifications. If and to the extent provided in the Scope of Services,
HilltopSecurities is called upon to make representations and certifications with regard to certain aspects of
matters pertaining to the Issuer, its municipal securities or municipal financial products arising as part of
the Municipal Advisory Services to be provided pursuant to this Agreement, the Issuer hereby agrees to
provide accurate and complete information to HilltopSecurities as may be reasonably necessary or
otherwise helpful to HilltopSecurities in fulfilling its responsibility to have a reasonable basis for any
representations,other than representations by HilltopSecurities regarding itself,made in a certificate signed
by HilltopSecurities that may be relied upon by the Issuer, any other parry involved in any matter arising
as part of the Municipal Advisory Services, or investors in the Issuer's municipal securities. The Issuer
agrees that HilltopSecurities may rely on any information provided to it by the Issuer for purposes of this
paragraph.
B. Services as Independent Registered Municipal Advisor.
l. Designation as IRMA and Scope of Designation.
(a) Subject to clause (b) of this subparagraph B.1, if the Issuer elects to designate
HilltopSecurities, and HilltopSecurities agrees to represent the Issuer, as the Issuer's IRMA for purposes
of Securities Exchange Commission ("SEC") Rule 15Bal-l(dX3)(vi) (the "IRMA exemption") with
respect to the Municipal Advisory Services, HilltopSecurities will treat such role as IRMA as within the
scope of Municipal Advisory Services. Any reference to HilltopSecurities, its personnel and its role as
IRMA in the written representation of the Issuer contemplated under SEC Rule 1513al-l(d)(3)(vi)(B)shall
be subject to prior approval by HilltopSecurities.
If there are any other aspects of the issuance of municipal securities or municipal financial products
outside the scope of the Municipal Advisory Services with respect to which the Issuer seeks to have
HilltopSecurities serve as its IRMA,such aspects,which are separate and distinct from Municipal Advisory
Services for purposes of this Agreement,shall be included in Appendix A hereto and may be changed only
as provided in paragraph D of this Section 1. HilltopSecurities' duties as IRMA shall be strictly limited to
the provision of advice to the Issuer with regard to third-party recommendations on any aspects of the
issuance of municipal securities or municipal financial products outside the scope of the Municipal
Advisory Services, subject to subparagraph B.3 of this Section 1, and the provision of advice by
HilltopSecurities to the Issuer with respect to such matters shall not result in a change in scope of the
Municipal Advisory Services. By way of example, if HilltopSecurities serves as municipal advisor for an
issuance of municipal securities within the scope of Municipal Advisory Services,but is asked to review a
recommendation made by a third party with respect to a different issuance of municipal securities not within
the scope of Municipal Advisory Services, any advice with respect to such review would not, by itself,
cause such other issuance to come within the scope of Municipal Advisory Services,and HilltopSecurities
would not be obligated to undertake any of the services set forth in Appendix A with regard to such issuance
unless the scope of Municipal Advisory Services hereunder is amended to include such issuance.
(b) If the Issuer elects not to designate HilltopSecurities to serve as an IRMA for purposes of
the IRMA exemption with respect to the Municipal Advisory Services, or if the Issuer elects to designate
HilltopSecurities to serve as IRMA for less than the full range of Municipal Advisory Services, such
election shall be set forth in Appendix A.
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(c) The Issuer shall provide written notice to HilltopSecurities of any other municipal advisor
engaged by the Issuer, whether such other municipal advisor has been designated as an IRMA, and such
notice shall include the scope of services of such municipal advisor. If the Issuer has engaged,or has caused
HilltopSecurities to engage through subcontract,any other party to serve as municipal advisor to the Issuer
with regard to all or any portion of the Municipal Advisory Services("Joint Municipal Advisory Services"),
whether engaged jointly with or separately from HilltopSecurities(a"Co-Municipal Advisor"), the Issuer
agrees that such Co-Municipal Advisor shall not be entitled to treat HilltopSecurities as an IRMA with
respect to the Joint Municipal Advisory Services. Notwithstanding the preceding sentence,the Issuer may
seek to have HilltopSecurities provide advice on any recommendation made by a Co-Municipal Advisor
with regard to matters within the scope of Joint Municipal Advisory Services on the same terms as set forth
in subparagraph B.3 of this Section I,provided that any such advice provided by HilltopSecurities shall not
serve to eliminate or reduce such Co-Municipal Advisor's fiduciary or other duties as municipal advisor to
the Issuer.
2. HilltopSecurities Not Responsible for Independence from Third Parties.
Notwithstanding HilltopSecurities' status as an IRMA, HilltopSecurities shall not be responsible for
ensuring that it is independ nt,within the meaning of the IRMA exemption as interprete by the SEC,from
another party wishing to re�y on the exemption from the definition of municipal advisor Worded under the
IRMA exemption or for otherwise ensuring that any such party not be treated as a municipal advisor for
purposes of Section 1513 of the Securities Exchange Act or any SEC or Municipal Securities Rulemaking
Board("MSRB") rule thereunder. The Issuer expressly acknowledges that it is the responsibility of such
other parry to make its own determination of independence and that such other party shall not be entitled to
cause HilltopSecurities to make any personnel changes to allow such party to qualify for the IRMA
exemption.
3. Recommendations Provided by Third Parties Relying on IRMA Exemption. The Issuer
agrees that, to the extent the Issuer seeks to have HilltopSecurities provide advice with regard to any
recommendation made by a third party relying on the IRMA exemption, the Issuer shall provide to
HilltopSecurities written direction to provide advice with regard to such third party recommendation as
well as any information it has received from such third party. In connection therewith, HilltopSecurities
shall be authorized to communicate with such third party as necessary or appropriate in order for
HilltopSecurities to have the information it needs to provide informed advice to the Issuer with regard to
such recommendation. HilltopSecurities shall provide to the Issuer recommendations it receives directly
from any third party but shall not be required to provide advice to the Issuer with regard to any such
recommendation unless the Issuer has provided to HilltopSecurities the written direction as described above
in this subparagraph B.3.
Except as may be otherwise expressly provided in writing by HilltopSecurities,no recommendation
by a third-party (including but not limited to a Co-Municipal Advisor) shall be deemed to be a
recommendation by HilltopSecurities,and the failure by HilltopSecurities to specifically address any aspect
of a third-party recommendation shall not be viewed as HilltopSecurities having implicitly accepted or
approved such aspect of the recommendation or otherwise having adopted the recommendation or any
aspect thereof as its own recommendation.Furthermore,the Issuer agrees that,to the extent the Issuer does
not seek to have HilltopSecurities provide advice with regard to any recommendation made by a third party
relying on the IRMA exemption, HilltopSecurities shall not be required to provide any advice with regard
to such recommendation notwithstanding any information it may have received from such third party.
HilltopSecurities may rely on the absence of the Issuer's written direction to provide advice with regard to
a third party recommendation as indicative that the Issuer does not seek to have HilltopSecurities provide
such advice.
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C. Limitations on Scope of Engagement.
1. Express Limitations The Scope of Services with respect to HilltopSecurities' engagement
as municipal advisor shall be solely as provided in paragraphs A and B of this Section I and Appendix A
of this Agreement,subject to the express limitations set forth in this paragraph C. The failure of the parties
hereto to set out any particular service or responsibility, or any particular type or aspect of the issuance of
municipal securities or municipal financial products,within the express limitations in this paragraph C shall
not,by its omission,cause such service,responsibility or product to be within the scope of this engagement
if not contemplated by the mutual agreement of the parties hereto or if not reasonably viewed as
encompassed by the description of the Municipal Advisory Services set forth in this Agreement.
2. Limitation as to Matters Wititin Then-Current Scope of Engagement. It is expressly
understood that HilltopSecurities serves as municipal advisor to the Issuer only with respect to the matters,
and with respect to specific aspects of matters, within the then-current Scope of Services. The Issuer
acknowledges that HilltopSecurities is not a municipal advisor to the Issuer with respect to matters
expressly excluded from such Scope of Services as set forth in this paragraph C or matters otherwise not
within the Scope of Services as set forth in paragraphs A and B of this Section I and Appendix A hereto.
Without limiti the generality of the preceding sentence, the parties hereto agree that HilltopSecurities'
service as municipal advisor for one issuance of municipal securities would not result in HilltopSecurities
being a municipal advisor to the Issuer for any other issuances of municipal securities if such other issuances
are not within the Scope of Services. It is expressly understood that HilltopSecurities shall be municipal
advisor with respect to a particular issuance of municipal securities or a particular municipal financial
product beginning on the earlier of (a) the date on which HilltopSecurities is assigned to serve or is
otherwise put on notice by the Issuer that it will serve as municipal advisor for such particular matter or(b)
the date on which HilltopSecurities first provides advice to the Issuer with respect to such particular matter,
and it is further understood that HilltopSecurities shall not be deemed to be a municipal advisor to the Issuer
with respect to any such particular matter prior to such date merely due to the fact that the matter falls
within the general description of the Scope of Services.
3. Transactions and Services Outside Scope of Engagement. To the extent that the Issuer
engages in any transaction with HilltopSecurities,or any affiliate of HilltopSecurities, as principal relating
to municipal securities(including but not limited to as underwriter for the issuance of municipal securities)
or municipal financial products that are not within the Scope of Services and with respect to which
HilltopSecurities does not in fact provide advice other than as permitted within the exceptions and
exclusions of SEC Rule 1513al-1, the Issuer agrees that it would not view HilltopSecurities as serving as
its municipal advisor with respect to such transaction or any related issuance of municipal securities or
municipal financial product. In addition, as noted in clause(b)of subparagraph A.1 of this Section I, the
Issuer understands that Non-Municipal Advisor Services are outside the scope of this engagement.
4. Issuer Consent to Limitation in Scope. The Issuer expressly consents to the limitations in
scope of the engagement as described in this paragraph C.
D. Change in Scope of Services.The scope of services to be provided by HilltopSecurities,whether
within or outside of the scope of the Municipal Advisory Services, may be changed only by written
amendment to Appendix A, and the parties hereto agree to amend such appendix promptly to reflect any
material changes or additions to the scope of such services, as applicable. Furthermore, the parties hereto
agree to amend paragraph C of this Section I to reflect any material changes or additions to the limitations
on the overall Scope of Services.
The parties hereto agree that if, on an infrequent or inadvertent basis, HilltopSecurities takes any
actions for or on behalf of the Issuer that constitute municipal advisory activities within the meaning of
MSRB Rule G-42(f)(iv)but which are not within the Scope of Services under this Agreement,such actions
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shall not, by themselves, serve to change the Scope of Services under this Agreement without a written
amendment as provided in this paragraph. Furthermore,to the extent that any such activities not within the
Scope of Services under this Agreement consists of inadvertent advice provided with respect to the issuance
of municipal securities or municipal financial products that are not within the Scope of Services under this
Agreement, HilltopSecurities may take such action, if any, as it deems appropriate pursuant to
Supplementary Material .07 of MSRB Rule G-42 with respect to such inadvertent advice, to maintain the
Scope of Services under this Agreement consistent with the intent of the parties hereto.
Amendments to Appendix A may be effected by replacement of the prior version of the appendix
with a new version or by the addition of an addendum to such appendix,provided that any such amended
appendix shall be dated as of its effective date and shall cause Appendix A, taken together with the
provisions of this Section 1, to clearly set forth the then-current scope of HilltopSecurities' engagement
hereunder and any limitations to such scope.
E. Non-Municipal Advisory Activities Related to Scone of Services. The Scope of Services under
this Agreement is intended to encompass activities subject to the provisions of Securities Exchange Act
Section 15B and the rules of the SEC and MSRB thereunder relating to municipal advisory activities.
However,the Issuer and HilltopSecurities acknowledge that in some cases the range of activities necessary
or appropriate to provide the intended services hereunder in a fair, effective and efficient manner for the
benefit of the Issuer may involve a combination of actions that consist of municipal advisory activities and
actions that may not qualify as municipal advisory activities. Unless otherwise prohibited by Securities
Exchange Act Section 15B or any rule of the SEC or MSRB thereunder, the fact that HilltopSecurities
serves as municipal advisor to the Issuer in connection with a particular matter shall not prohibit
HilltopSecurities from undertaking such necessary or appropriate non-municipal advisory activities in
connection therewith,and the fact that HilltopSecurities undertakes such non-municipal advisory activities
within the Scope of Services under this Agreement would not, by itself, cause such activities to become
municipal advisory activities for purposes Securities Exchange Act Section 15B or any rule of the SEC or
MSRB thereunder.
SECTION II
TERM AND TERMINATION
A. Term of this Engagement. The term of this Agreement begins on the Effective Date and will be
automatically renewed thereafter on each anniversary date of the Effective Date for successive one(1)year
periods unless(i)terminated pursuant to paragraph B of this Section 11 or(ii)HilltopSecurities or the Issuer
shall notify the other parry in writing at least thirty (30) days in advance of such successive anniversary
date.
B. Termination of this Engagement. This Agreement may be terminated with or without cause by
the Issuer or HilltopSecurities upon the giving of at least thirty(30)days' prior written notice to the other
party of its intention to terminate, specifying in such notice the effective date of such termination. In the
event of such termination, it is understood and agreed that only the amounts due HilltopSecurities for
services provided and expenses incurred to the date of termination will be due and payable. No penalty
will be assessed for termination of this Agreement.
SECTION III
COMPENSATION,EXPENSES,LIABILITY
AND OTHER FINANCIAL MATTERS
A. Com ensation. The fees due to HilltopSecurities for the Municipal Advisory Services and any
other services set forth in Appendix A hereto shall be as provided in Appendix B hereto. The Issuer has
agreed to the compensation arrangements set forth in Appendix B and believes that they are reasonable and
6
not excessive. If at any time the Issuer becomes concerned that, notwithstanding its initial belief that the
compensation arrangements set forth in this Agreement are reasonable,the actual amount of compensation
to be paid in accordance with such arrangements for any particular matter during the course of this
engagement may potentially become excessive, the Issuer shall immediately notify HilltopSecurities in
writing of its concern in that regard.
B. Exaenses. HilltopSecurities shall be entitled to reimbursement of expenses incurred in connection
with any services provided hereunder as set forth in Appendix B subject to a maximum of$15,000 without
written approval.
C. Third-Party Payments. The Issuer agrees that any request it makes to HilltopSecurities to make
payments to any third party on its behalf(other than with any underwriter), whether pursuant to a fee-
splitting arrangement or otherwise, shall be in writing and shall set forth the name of the recipient, the
amount of payment, and a brief statement of the purpose of such payment. The Issuer agrees that the
counter signature by HilltopSecurities of any such written request shall be satisfactory disclosure of such
third-party payment or fee-splitting arrangement for purposes of MSRB Rule G-42(e)(i)(D) and shall, in
the case of any such arrangements made after the Effective Date,serve as satisfactory written disclosure of
any conflict of interest arising from such third-party payment or fee-splitting arrangement for purposes of
MSRB Rule G-42(b)(i)(D)and(cxii).
D. No Custody of Issuer Funds. This engagement does not contemplate that HilltopSecurities
receive deposit of or maintain custody of the Issuer's funds unless otherwise provided in Appendix A
hereto.
E. Limitation on Liability. In the absence of willful misconduct, bad faith, gross negligence or
reckless disregard of obligations or duties hereunder on the part of HilltopSecurities or any of its associated
persons, HilltopSecurities and its associated persons shall have no liability to the Issuer for any act or
omission in the course of, or connected with, rendering services hereunder or for any error of judgment,
mistake of law, or any loss arising out of any issuance of municipal securities, any municipal financial
product or any other investment.
SECTION IV
REQUIRED DISCLOSURES
A. Disclosure of Conflicts of Interest and Information Regarding al or Disciplinary Events.
The Issuer hereby acknowledges receipt of, and has read and understands the content of, the Municipal
Advisor Disclosure Statement, attached hereto as AApoendix C, current as of the date of this Agreement,
setting forth disclosures by HilltopSecurities of material conflicts of interest(the"Conflict Disclosures"),
if any,and of any legal or disciplinary events required to be disclosed pursuant to MSRB Rule G-42(b)and
(c)(ii). The Conflict Disclosures also describe how HilltopSecurities addresses or intends to manage or
mitigate any disclosed conflicts of interest, as well as the specific type of information regarding, and the
date of the last material change,if any,to the legal and disciplinary events required to be disclosed on Forms
MA and MA-1 filed by HilltopSecurities with the SEC.
B. Waiver of Disclosed Conflicts of Interest. By executing this Agreement,the Issuer hereby waives
any conflicts of interest disclosed by HilltopSecurities in the Conflict Disclosures as of the date of this
Agreement.
C. Consent to Electronic Delivery of Disclosures. By executing this Agreement,the Issuer consents,
for the full term of this Agreement,to the electronic delivery of the Conflict Disclosures at no cost to the
Issuer, in lieu of delivery of hard copy. The Conflict Disclosures may be delivered by email to the Issuer
at [ 1, or at such other email address as the Issuer may hereafter provide in writing to
HilltopSecurities.
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SECTION V
MISCELLANEOUS
A. Choice of Law. This Agreement shall be construed and given effect in accordance with the laws
of the State of Texas.
B. Binding Effect, Assignment. This Agreement shall be binding upon and inure to the benefit of
the Issuer and HilltopSecurities, their respective successors and assigns; provided however, neither party
hereto may assign or transfer any of its rights or obligations hereunder without the prior written consent of
the other party.
C. Entire Agreement. This instrument,including all appendices hereto,contains the entire agreement
between the parties relating to the rights herein granted and obligations herein assumed.Any oral or written
representations or modifications concerning this Agreement shall be of no force or effect except for a
subsequent modification in writing signed by all parties hereto, subject to the provisions of paragraph D of
Section I hereof.
Signature page follows
HILLTOP SECURITIES INC. BAYTOWN MUNICIPAL
DEVELOPMENT DISTRICT
By: By:.
e orrow
Title: Managing Director Name
Title:
Date:
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APPENDIX A
MUNICIPAL ADVISORY SERVICES
This Appendix A sets out the scope of the Municipal Advisory Services to be performed by
HilltopSecurities pursuant to the Agreement, subject to the limitations in scope set out in paragraph C of
Section I of the Agreement,and with the understanding that:
(a) Individual actions taken within this scope shall be consistent with any request or
direction provided by an authorized representative of the Issuer or as HilltopSecurities determines
to be necessary or appropriate in furtherance of any matter for which it serves as municipal advisor.
However, not all listed activities will be appropriate, necessary or applicable to any particular
matter subject to this Agreement.
(b) For purposes of this Agreement, an issuance of municipal securities (an
"issuance") shall encompass any and all stages in the life of an issuance, from the pre-issuance
planning stage to the repayment stage.
I. New Issuances of Municival Securities. At the direction of or upon the request of the Issuer,
HilltopSecurities shall provi a advice to the Issuer on any new issuances, including reofferings of
outstanding issuances that are treated for purposes of the federal securities laws and/or federal tax laws as
new issuances,throughout the term of this Agreement. The activities to be performed by HilltopSecurities
may include, depending on the specific circumstances of an issuance and any request or direction of the
Issuer,one or more of the following:
Planning for New Issuance
1. Survey and Analysis. Surveying the financial resources of the Issuer in connection with
its capacity to authorize, issue and service the contemplated issuance. This survey would be
expected to include an analysis of any existing debt structure as compared with the existing and
projected sources of revenues which may be pledged to secure payment of debt service and, where
appropriate,would include a study of the trend of the assessed valuation,taxing power and present
and future taxing requirements of the Issuer. In the event revenues of existing or projected facilities
operated by the Issuer are to be pledged to repayment of the contemplated issuance, the survey
would be expected to take into account any outstanding indebtedness payable from such revenues,
additional revenues to be available from any proposed rate increases, and additional revenues
resulting from improvements to be financed by the contemplated issuance, as projected by
consulting engineers engaged by the Issuer.
2. Future Financings. In connection with the contemplated issuance, considering and
analyzing future financing needs as projected by the Issuer's staff and consulting engineers or other
experts, if any,engaged by the Issuer.
3. Recommendations.Making recommendations to the Issuer on the contemplated issuance,
including such elements as the date of issue, interest payment dates, schedule of principal
maturities, options for prepayment, security provisions, and such other provisions as may be
appropriate.
4. Market Information. Advising the Issuer of HilltopSecurities' view of current bond
market conditions, other related forthcoming bond issues and general information (including
applicable economic data)which might normally be expected to influence interest rates or bidding
conditions relevant to setting an appropriate date and time for the sale of the issuance.
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S. Elections. in the event it is necessary to hold an election to authorize the contemplated
issuance,assisting in coordinating the assembly of such data as may be required for the preparation
of necessary petitions, orders, resolutions, ordinances, notices and certificates in connection with
the election, including assistance in the transmission of such data to the Issuer's bond counsel.
Debt Management and Financial Implementation for New Issuance
6. Method of Sale. Evaluating the particular financing being contemplated, giving
consideration to the complexity, market acceptance, rating, size and structure in order to make a
recommendation as to an appropriate method of sale,and:
a. If the issuance is to be sold by a competitive sale:
(1) Supervising the sale of the municipal securities;
(2) Disseminating information to prospective bidders, organizing such informational
meetings as may be necessary, and facilitating prospective bidders' efforts in making
timely submission of proper bids;
(3) Assisting the staff of the Issuer in coordinating the receipt of bids,the safekeeping of
good faith checks and the tabulation and comparison of submitted bids;
(4) Advising the Issuer regarding the best bid and provide advice regarding acceptance or
rejection of the bids;and
(5) Obtaining CUS1P numbers on behalf of the Issuer.
b. If the issuance is to be sold by negotiated sale:
(1) Recommending for the Issuer's final approval and acceptance one or more investment
banking firms, as sole underwriter or as managers of an underwriting syndicate, for the
purpose of negotiating the purchase of the municipal securities;
(2) Cooperating with and assisting any selected sole or managing underwriter and its
counsel, as well as any disclosure counsel retained by the Issuer, in connection with the
preparation of any preliminary or final official statement or offering memorandum.
HilltopSecurities will cooperate with and assist the underwriters in the preparation of a
bond purchase contract,an underwriters' agreement and other related documents;
(3) Assisting the staff of the Issuer in the safekeeping of any good faith checks and
providing a cost comparison to the then-current market of expenses, interest rates and
prices which are proposed by the underwriters;
(4) Advising the Issuer on the fairness of the price offered by the underwriters;
(5) Advising the Issuer in connection with any terms and conditions it may wish to
establish with respect to order priorities and other similar matters relating to the
underwriting of the new issuance;
(6) If the new issuance will have a retail order period, advising the Issuer on retail
eligibility criteria and other features of the retail order period and reviewing information
provided by the underwriters to the Issuer in connection with retail orders received; and
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(7) At the request of the Issuer, reviewing required disclosures by underwriters to the
Issuer relating to their role as underwriter, conflicts of interests, material terms and risks
of the issuance,and any other matters, and providing any appropriate advice to the Issuer
in connection with such disclosures.
7. Offering Documents for Competitive Offerings. Coordinating the preparation of the
notice of sale and bidding instructions, preliminary official statement(including cooperating with
and assisting any disclosure counsel retained by the Issuer), official bid form and such other
documents as may be required and submitting all such documents to the Issuer for examination,
approval and certification. After such examination, approval and certification, HilltopSecurities
shall provide the Issuer with a supply of all such documents sufficient to its needs and distribute
sets of the same to prospective bidders for the municipal securities. HilltopSecurities also shall
provide copies of the final official statement to the winning bidder purchasing the municipal
securities in the MSRB-designated electronic format and in accordance with the notice of sale and
bidding instructions promptly after the Issuer approves the final official statement for distribution.
8. Credit Ratings. Making recommendations to the Issuer on the advisability of obtaining
one or more credit ratings for the issuance and, when directed by the Issuer, coordinating the
preparation of such information as may be appropriate for submission to any rating agency. In those
cases where the advisability of personal presentation of information to a rating agency may be
indicated,HilltopSecurities will arrange for such personal presentations,utilizing such composition
of representatives from the Issuer as may be approved or directed by the Issuer.
9. Trustee, Paying Agent, Registrar, Professionals and Other Transaction Participants.
Upon request, providing advice to the Issuer in the selection of a trustee and/or paying
agent/registrar, legal, accounting or other professionals,and other transaction participants relating
to any issuance, and assisting in the negotiation of agreements pertinent to these services and the
fees incident thereto.
10. Financial Publications. When appropriate, advising financial publications of the
forthcoming sale of the municipal securities and providing them with all pertinent information.
IL Consultants.After consulting with and receiving directions from the Issuer,arranging for
such reports and opinions of recognized independent consultants as may be appropriate for the
successful marketing of the issuance.
12. Auditors. In the event formal verification by an independent auditor of any calculations
incident to the issuance is required,making arrangements for such services.
13. Issuer Meetings. Attending meetings of the governing body of the Issuer, its staff,
representatives or committees as requested when HilltopSecurities may be of assistance or service
and matters within the scope of this engagement are to be discussed.
14. Printing.To the extent authorized by the Issuer,coordinating all work incident to printing
or final production,physical or electronic,of the offering documents.
15. Bond Counsel. Maintaining liaison with bond counsel in the preparation of all legal
documents pertaining to the authorization,sale and issuance of the municipal securities.
16. Delivery of the Municipal Securities.As soon as a bid for the purchase of a competitive
issuance is accepted by the Issuer or the bond purchase contract for a negotiated issuance is signed
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by the Issuer,coordinating the efforts of all concerned to the end that the municipal securities may
be delivered and paid for as expeditiously as possible and assisting the Issuer in the preparation or
verification of final closing figures incident to the delivery of the municipal securities.
17. Debt Service Schedule,Authorizing Resolution.After the closing of the sale and delivery
of the issuance, delivering to the Issuer a schedule of annual debt service requirements for the
issuance and, in coordination with bond counsel, assuring that the paying agent/registrar and/or
trustee has been provided with a copy of the authorizing ordinance,order or resolution.
18. Continuing Disclosure. Providing advice to the Issuer with regard to its continuing
disclosure undertakings for its new issuances and its selection of a dissemination agent under its
continuing disclosure undertakings; provided that, upon the mutual agreement of the Issuer and
HilltopSecurities, HilltopSecurities may serve as dissemination agent under one or more of the
Issuer's continuing disclosure undertakings upon such terms as the parties shall agree, with such
service as dissemination agent being expressly excluded from the scope of this Agreement.
II. Baseline Advice on Outstandine Issuances of Municipal Securities. HilltopSecurities shall
provide baseline on-going advice to the Issuer on any outstanding issuances throughout the term of this
Agreement,which may include,depending on the s cific circumstances of such issuance and any request
or direction of the Issuer:
1. Exercising Calls. Providing advice and assistance to the Issuer with regard to exercising any
calls of outstanding municipal securities unrelated to a refunding of such securities.
2. Rffundings and Tender Offers. Providing advice to the Issuer with regard to opportunities for
refundings of outstanding issuances or to make tender offers for outstanding issuances,whether by
means of a new issuance, bank loans, or other funds of the Issuer, but not including serving as
advisor in connection with the specific transaction through which such refunding or tender offer is
effected. Transaction-based advice in connection with a specific new issuance of bonds to
effectuate any such refunding or tender offer would be provided within the scope of Municipal
Advisory Services for new issuances described in Section I above. Transaction-based advice in
connection with a specific bank loan or other transaction to effectuate any such refunding or tender
offer, other than by means of a new issuance of bonds would be provided pursuant to a separate
agreement as described in Section IV below.
3. Continuing Disclosure. Providing advice to the Issuer with regard to continuing disclosure
undertakings for outstanding issuances; processes, policies and procedures to comply with
continuing disclosure undertakings; and coordination of continuing disclosure obligations arising
from different continuing disclosure undertakings for its various issuances. However, the
preparation of continuing disclosure documents, other than in the capacity of dissemination agent
under a continuing disclosure undertaking, would be provided within the scope of other services
described in Section V. below.
III. Particularized Services on Outstandine Issuances of Municipal Securities. HilltopSecurities
may provide to the Issuer certain additional advisory or related services in connection with particular
outstanding issuances or matters affecting multiple outstanding issuances throughout the term of this
Agreement,which may include,depending on the specific circumstances of such issuance and any request
or direction of the Issuer:
1. Other Post-Sale Services. Reviewing the transaction features and documentation of
outstanding issuances with legal counsel for the Issuer, bond counsel, auditors and other experts
and consultants retained by the Issuer and assisting in developing appropriate responses to legal
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processes,audit procedures,inquiries,internal reviews and similar matters,or other services related
to one or more outstanding issuances as may be agreed to by the Issuer and HilltopSecurities.
2. Brokerage of Municipal Escrow Investments. At the request of the Issuer, brokering the
purchase of municipal escrow investments in connection with a refunding of an outstanding
issuance, together with any recommendations by HilltopSecurities (but not by Hilltop Securities
Asset Management,LLC as an investment adviser)with respect to such brokerage.
IV. Services as Independent Reeistered Municipal Advisor ('FIRMA" At the written request of
the Issuer, HilltopSecurities shall, as the Issuer's IRMA, review and provide advice to the Issuer in
connection with any recommendations, proposals, ideas or matters suggested or otherwise communicated
by a third party to the Issuer with respect to the same aspects of the issuance of municipal securities or
municipal financial products that are within the scope of Municipal Advisory Services. There are no aspects
of the issuance of municipal securities or municipal financial products that are outside the scope of
Municipal Advisory Services set forth in this Appendix.
V. _Other Services Relating to Municipal Securities. HilltopSecurities agrees to make available to
the Issuer other services relating to municipal securities,when so requested by the Issuer and subject to the
agreement by Issuer and HilltopSecurities regarding the specific requirements with respect to such services,
which requirements shall be made part of the scope of Municipal Advisory Services and included in this
Appendix as an amendment or addendum,which services may include,without limitation:
1. Capital Improvement Programs. Providing advice and assistance in the development of any
capital improvement programs of the Issuer.
2. Long-Range Planning. Providing advice and assistance in the development of other long-
range financing plans of the Issuer.
3. Refundings and Tender Offers. Providing advice and assistance in executing a refunding or
tender offer of an outstanding issuance other than by means of refunding bonds,such as by means
of a bank loan or other funds of the Issuer.
4. Continuing Disclosure Documents. Preparing and providing advice with regard to the content
of continuing disclosure documents in compliance with the Issuer's continuing disclosure
undertakings for its outstanding issuances, other than in the capacity of dissemination agent under
a continuing disclosure undertaking.
As provided in paragraph D of Section I of the Agreement, amendments to this Appendix A may
be effected by replacement of this Appendix A with a new version hereof or by the addition of an
addendum to this Appendix A, and this Appendix A,as it may have been amended, shall be dated
and effective as of the most recent of the date set forth in any such amendment or the date set forth
in any addendum to this Appendix A.
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APPENDIX B
FORM AND BASIS OF COMPENSATION
This Appendix B sets out the form and basis of compensation to HilltopSecurities for the Municipal
Advisory Services provided under this Agreement as set forth in Appendix A; provided that the
compensation arrangements set forth in this Appendix B shall also apply to any additional services hereafter
added to the scope of the Municipal Advisory Services,unless otherwise provided in the amendment to the
Agreement relating to such change in scope of Municipal Advisory Services as provided in paragraph D of
Section I of the Agreement.
I. New Issuances of Municipal Securities. The fees due HilltopSecurities in connection with the
Municipal Advisory Services set forth in Section I of Appendix A hereto for each new issuance of municipal
securities will not exceed those contained in our fee schedule as listed below:
$0- $499,000 $7,500 minimum flat fee
$500,00041,999,000 $7,500 plus$4.00 per thousand over$500,000
$2,000,000-$4,999,000 $13,500 plus$2.00 per thousand over$2,000,000
Over$5,000,000 $19,500 plus$1.75 per thousand over$5,000,000
The above charges shall be multiplied by 1.25 for an issuance of municipal securities for which
HilltopSecurities participates in the completion of an application to a federal or state government agency
or for the issuance of revenue bonds, refunding bonds or variable rate bonds, reflecting the additional
services required.
The payment of charges as set forth in this Section I for new issuances shall be contingent upon the delivery
of the new issuance and shall be due at the time that the municipal securities are delivered.
II. Baseline Advice on Outstanding Issuances of Municlipai Securities. There shall be no additional
fees due HilltopSecurities in connection with the Municipal Advisory Services set forth in Section II of
Appendix A hereto,with the understanding that such services are integral to HilltopSecurities'engagement
as municipal advisor to the Issuer and HilltopSecurities shall be compensated for such services through and
as part of the fees paid for the other services provided by HilltopSecurities hereunder.
III. Particularized Services on Outstanding Issuances of Municipal Securities. In connection with
Other Post-Sale Services described in Section III of Appendix A hereto,HilltopSecurities shall charge a fee
based on an hourly rate for services rendered in accordance with the following schedule:
Billing
Title Rate
Directors and Above $400.00
Vice Presidents 300.00
Assistant Vice Presidents 250.00
Associates/Analysts 210.00
Clerical/Administrative Staff 160.00
In connection with the brokerage of municipal escrow investments described in Section III of Appendix A
hereto, HilltopSecurities shall charge a commission that is normal and customary for investments of that
type under then-current market conditions and shall disclose such commission to the Issuer so that the Issuer
may consider the information in making its investment decision.
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IV. Third-Party Recommendations Proposals, Ideas or Other Matters as IiRMA. In connection
with its review of and advice on third-party recommendations to Issuers as an IRMA as described in Section
IV of Appendix A hereto,HilltopSecurities shall charge a fee based on an hourly rate for services rendered
in accordance with the schedule included above in Section III of this Appendix.
V. Other Services Relating to Municipal Securities. In connection with any services described in
Section V of Appendix A hereto requested by the Issuer and agreed to by HilltopSecurities, the fees due
with respect to any such services shall be as agreed to by the parties hereto,which terms shall be made part
of the compensation provided under this Agreement and shall be included in this Appendix as an
amendment or addendum hereto.
VI. Expenses. The Issuer shall be responsible for the following expenses in connection with the
Municipal Advisory Services (including any additional services hereafter added to the scope of the
Municipal Advisory Services), if and when applicable, whether they are charged to the Issuer directly as
expenses or charged to the Issuer by HilltopSecurities as reimbursable expenses: bond counsel fees and
expenses, bond printing costs, bond ratings fees and expenses, computer structuring costs, credit
enhancement fees and expenses,accountant fees for verifications and related activities in connection with
refundii1gs, official statement preparation and printing, paying agent/registrar/trustee fees and expenses,
travel expenses, underwriter and underwriter's counsel fees and expenses, and other miscellaneous
expenses incurred by HilltopSecurities in the furtherance of any matter for which it serves as municipal
advisor, including copy, delivery, phone and other charges normally incurred in connection with
engagements of this type.
The Issuer agrees that any expense that it requests that HilltopSecurities pay to any third party on the
Issuer's behalf shall be made in writing and shall be in accordance with paragraph C of Section III of the
Agreement.
The payment of reimbursable expenses that HilltopSecurities has assumed on behalf of the Issuer shall NOT
be contingent upon the delivery of a new issuance of municipal securities or the completion of any other
transactions for which such expenses have been assumed and shall be due at the time that services are
rendered and payable upon receipt of an invoice therefor submitted by HilltopSecurities, unless otherwise
provided for in any amendment or addendum hereto in connection with the compensation arrangements for
any services provided under the Agreement for which such amendment or addendum is required.
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APPENDIX C
MUNICIPAL ADVISOR DISCLOSURE STATEMENT
This disclosure statement("Conflict Disclosures") is provided by Hilltop Securities Inc. ("the Firm") to
you(the"Client")in connection with our current municipal advisory agreement,("the Agreement"). These
Conflict Disclosures provide information regarding conflicts of interest and legal or disciplinary events of
the Firm that are required to be disclosed to the Client pursuant to MSRB Rule G-42(b)and(c)(ii).
PART A—Disclosures of Conflicts of Interest
MSRB Rule G-42 requires that municipal advisors provide to their clients disclosures relating to any actual
or potential material conflicts of interest, including certain categories of potential conflicts of interest
identified in Rule G-42, if applicable.
Material Conflicts of Interest--The Firm makes the disclosures set forth below with respect to material
conflicts of interest in connection with the Scope of Services under the Agreement with the Finn,together
with explanations of how the Firm addresses or intends to manage or mitigate each conflict.
Genera/Mitigations— As general mitigations of the Firm's conflicts, with respect to all of the conflicts
disclosed below, the Finn mitigates such conflicts through its adherence to its fiduciary duty to Client,
which includes a duty of loyalty to Client in performing all municipal advisory activities for Client. This
duty of loyalty obligates the Firm to deal honestly and with the utmost good faith with Client and to act in
Client's best interests without regard to the Firm's financial or other interests. In addition,because the Firm
is a broker-dealer with significant capital due to the nature of its overall business, the success and
profitability of the Firm is not dependent on maximizing short-term revenue generated from individualized
recommendations to its clients but instead is dependent on long-term profitability built on a foundation of
integrity, quality of service and strict adherence to its fiduciary duty. Furthermore, the Firn's municipal
advisory supervisory structure, leveraging our long-standing and comprehensive broker-dealer supervisory
processes and practices, provides strong safeguards against individual representatives of the Firm
potentially departing from their regulatory duties due to personal interests.The disclosures below describe,
as applicable,any additional mitigations that may be relevant with respect to any specific conflict disclosed
below.
I. Affiliate Conflict. The Firm, directly and through affiliated companies, provides or may provide
services/advice/products to or on behalf of clients that are related to the Firm's advisory activities within
the Scope of Services outlined in the Agreement. Hilltop Securities Asset Management(HSAM),a SEC-
registered affiliate of the Firm, provides post issuance services including arbitrage rebate and treasury
management. The Firm's arbitrage team verifies rebate and yield restrictions on the investments of bond
proceeds on behalf of clients in order to meet IRS restrictions. The treasury management division performs
portfolio management/advisor services on behalf of public sector clients. The Firm, through affiliate
Hilltop Securities Asset Management (HSAM), provides a multi-employer trust tailor-made for public
entities which allows them to prefund Other Post-Employment Benefit liabilities. The Firm has a structured
products desk that provides advice to help clients mitigate risk though investment management, debt
management and commodity price risk management products. These products consist of but are not limited
to swaps (interest rate, currency, commodity), options, repos, escrow structuring and other securities.
Continuing Disclosure services provided by the Firm work with issuers to assist them in meeting disclosure
requirements set forth in SEC rule 15c2-12. Services include but are not limited to ongoing maintenance
of issuer compliance,automatic tracking of issuer's annual filings and public notification of material events.
The Firm administers government investment pools. These programs offer governmental entities
investment options for their cash management programs based on the entities specific needs. The Firm and
the aforementioned affiliate's business with a client could create an incentive for the Firm to recommend
to a client a course of action designed to increase the level of a client's business activities with the affiliates
16
or to recommend against a course of action that would reduce or eliminate a client's business activities with
the affiliates. This potential conflict is mitigated by the fact that the Firm and affiliates are subject to their
own comprehensive regulatory regimes.
II. PlainsCanital Bank Affiliate Conflict. The Firm, directly and through affiliated companies,
provides or may provide services/advice/products to or on behalf of clients that are related to the Firm's
advisory activities within the Scope of Services outlined in the Agreement. Affiliate, PlainsCapital Bank,
provides banking services to municipalities including loans and custody.The Firm and the aforementioned
affiliate's business with a client could create an incentive for the Firm to recommend to a client a course of
action designed to increase the level of a client's business activities with the affiliates or to recommend
against a course of action that would reduce or eliminate a client's business activities with the affiliates.
This potential conflict is mitigated by the fact that the Firm and affiliates are subject to their own
comprehensive regulatory regimes.
III. Other Municipal Advisor or Underwriting Relationships. The Firm serves a wide variety of other
clients that may from time to time have interests that could have a direct or indirect impact on the interests
of Client. For example, the Firm serves as municipal advisor to other municipal advisory clients and, in
such cases, owes a regulatory duty to such other clients just as it does to Client. These other clients may,
from time to time and depending on the specific circumstances,have competing interests,such as accessing
the new issue market with the most advantageous timing and with limited competition at the time of the
offering. In acting in the interests of its various clients,the Firm could potentially face a conflict of interest
arising from these competing client interests.In other cases,as a broker-dealer that engages in underwritings
of new issuances of municipal securities by other municipal entities, the interests of the Finn to achieve a
successful and profitable underwriting for its municipal entity underwriting clients could potentially
constitute a conflict of interest if, as in the example above, the municipal entities that the Firm serves as
underwriter or municipal advisor have competing interests in seeking to access the new issue market with
the most advantageous timing and with limited competition at the time of the offering. None of these other
engagements or relationships would impair the Firm's ability to fulfill its regulatory duties to Client.
IV. Secondary Market Transactions in Client's Securities. The Firm, in connection with its sales and
trading activities, may take a principal position in securities, including securities of Client, and therefore
the Firm could have interests in conflict with those of Client with respect to the value of Client's securities
while held in inventory and the levels of mark-up or mark-down that may be available in connection with
purchases and sales thereof. In particular, the Firm or its affiliates may submit orders for and acquire
Client's securities issued in an Issue under the Agreement from members of the underwriting syndicate,
either for its own account or for the accounts of its customers. This activity may result in a conflict of
interest with Client in that it could create the incentive for the Firm to make recommendations to Client that
could result in more advantageous pricing of Client's bond in the marketplace. Any such conflict is
mitigated by means of such activities being engaged in on customary terms through units of the Firm that
operate independently from the Finn's municipal advisory business, thereby reducing the likelihood that
such investment activities would have an impact on the services provided by the Firm to Client under this
Agreement.
V. Broker-Dealer and Investment Advisory Business. The Firm is dually registered as a broker-
dealer and an investment advisor that engages in a broad range of securities-related activities to service its
clients,in addition to serving as a municipal advisor or underwriter.Such securities-related activities,which
may include but are not limited to the buying and selling of new issue and outstanding securities and
investment advice in connection with such securities, including securities of Client,may be undertaken on
behalf of, or as counterparty to, Client, personnel of Client, and current or potential investors in the
securities of Client.These other clients may,from time to time and depending on the specific circumstances,
have interests in conflict with those of Client, such as when their buying or selling of Client's securities
may have an adverse effect on the market for Client's securities,and the interests of such other clients could
17
create the incentive for the Firm to make recommendations to Client that could result in more advantageous
pricing for the other clients. Furthermore,any potential conflict arising from the firm effecting or otherwise
assisting such other clients in connection with such transactions is mitigated by means of such activities
being engaged in on customary terms through units of the Firm that operate independently from the Firm's
municipal advisory business, thereby reducing the likelihood that the interests of such other clients would
have an impact on the services provided by the Firm to Client.
VI. Compensation-Based Conflicts. Fees that are based on the size of the issue are contingent upon
the delivery of the Issue. While this form of compensation is customary in the municipal securities market,
this may present a conflict because it could create an incentive for the Firm to recommend unnecessary
financings or financings that are disadvantageous to Client, or to advise Client to increase the size of the
issue. This conflict of interest is mitigated by the general mitigations described above.
Fees based on a fixed amount are usually based upon an analysis by Client and the Firm of, among other
things,the expected duration and complexity of the transaction and the Scope of Services to be performed
by the Firm. This form of compensation presents a potential conflict of interest because, if the transaction
requires more work than originally contemplated, the Firm may suffer a loss. Thus, the Firm may
recommend less time-consuming Iternatives,or fail to do a thorough analysis of alternatives. This conflict
of interest is mitigated by the gen;ral mitigations described above.
Hourly fees are calculated with, the aggregate amount equaling the number of hours worked by Firm
personnel times an agreed-upon hourly billing rate. This form of compensation presents a potential conflict
of interest if Client and the Firm do not agree on a reasonable maximum amount at the outset of the
engagement, because the Firm does not have a financial incentive to recommend alternatives that would
result in fewer hours worked. This conflict of interest is mitigated by the general mitigations described
above.
PART B—Disclosures of Information Regarding Legal Events and Disciplinary History_
MSRB Rule G-42 requires that municipal advisors provide to their clients certain disclosures of legal or
disciplinary events material to its client's evaluation of the municipal advisor or the integrity of the
municipal advisor's management or advisory personnel.
Accordingly,the Firm sets out below required disclosures and related information in connection with such
disclosures.
I. Material-Legal or Disciplinary Event. The Firm discloses the following legal or disciplinary events
that may be material to Client's evaluation of the Firm or the integrity of the Firm's management or advisory
personnel:
• For related disciplinary actions please refer to the Firm's BrokerCheck webpage.
• The Firm self-reported violations of SEC Rule 15c2-12: Continuing Disclosure. The Firm
settled with the SEC on February 2, 2016. The firm agreed to retain independent consultant
and adopt the consultant's finding. Firm paid a fine of$360,000.
• The Firm settled with the SEC in matters related to violations of MSRB Rules G-23(c), G-17
and SEC rule 1513(c)(1). The Finn disgorged fees of$120,000 received as financial advisor
on the deal, paid prejudgment interest of$22,400.00 and a penalty of$50,000.00.
• The Finn entered into a Settlement Agreement with Rhode Island Commerce Corporation.
Under the Settlement Agreement, the firm agreed to pay $16.0 million to settle any and all
18
claims in connection with The Rhode Island Economic Development Corporation Job
Creation Guaranty Program Taxable Revenue Bond(38 Studios, LLC Project) Series 2010,
including the litigation thereto. The case, filed in 2012, arose out of a failed loan by Rhode
Island Economic Development Corporation.The firm's predecessor company,First Southwest
Company, LLC, was one of 14 defendants. HilltopSecurities' engagement was limited to
advising on the structure, terms, and rating of the underlying bonds. Hilltop settled with no
admission of liability or wrongdoing.
• On April 30, 2019, the Firm entered into a Settlement Agreement with Berkeley County
School District of Berkeley County, South Carolina.The case, filed in March of 2019, arose
in connection with certain bond transactions occurring from 2012 to 2014, for which former
employees of Southwest Securities,Inc.,a predecessor company, provided financial advisory
services. The Firm agreed to disgorge all financial advisory fees related to such bond
transactions,which amounted to$822,966.47, to settle any and all claims, including litigation
thereto. Under the Settlement Agreement, the Firm was dismissed from the lawsuit with
prejudice, no additional penalty, and with no admission of liability or wrongdoing.
• From July 2011 to October 2015, Hilltop failed to submit required MSRB Rulo G-32
information to EMMA in connection with 122 primary offerings of municipal securities for
which the Firm served as placement agent. During the period January 2012 to September
2015,the Firm failed to provide MSRB Rule G-17 letters to issuers in connection with 119 of
the 122 offerings referenced above. From October 2014 to September 2015, the Firm failed
to report on Form MSRB G-37 that it had engaged in municipal securities business as
placement agent for 45 of these 122 offerings. This failure was a result of a misunderstanding
by one branch office of Southwest Securities. Hilltop discovered these failures during the
merger of FirstSouthwest and Southwest Securities and voluntarily reported them to FINRA.
The Firm paid a fine of$100,000 for these self-reported violations.
• In connection with a settlement on July 9, 2021 , the U.S. Securities and Exchange
Commission found that, between January 2016 and April 2018, the Firm bought municipal
bonds for its own account from another broker-dealer and that, on occasion during that time
period,the other broker-dealer mischaracterized the Firm's orders when placing them with the
lead underwriter. The SEC found that, among other things, the Firm lacked policies and
procedures with respect to how stock orders were submitted for new issues bonds to third
parties, including the broker-dealer that mischaracterized the Firm's orders. The SEC found
violations of MSRB Rules G-27, G•17, and SEC rule 1513(c)(1) and a failure to reasonably
supervise within the meaning of Section 15(b)(4XE) of the Securities Exchange Act of
1934. The Firm was censured and ordered to pay disgorgement of$206,606, prejudgment
interest of$48,587 and a penalty of$85,000.
1I. How to Access Form MA and Form MA-1 Filings. The Finn's most recent Form MA and each
most recent Form MA-I filed with the SEC are available on the SEC's EDGAR system at Forms MA and
MA-I. The SEC permits certain items of information required on Form MA or MA-I to be provided by
reference to such required information already filed by the Firms in its capacity as a broker-dealer on Form
BD or Form U4 or as an investment adviser on Fonm ADV,as applicable.Information provided by the Firm
on Form BD or Form U4 is publicly accessible through reports generated by BrokerCheck at
http://brokercheck.finra.org/,and the Firm's most recent Form ADV is publicly accessible at the Investment
Adviser Public Disclosure website at http/Ywww_.44 ri1}fo.sec govl. For purposes of accessing such
BrokerCheck reports or Form ADV,click previous hyperlinks.
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PART C—MSRB Rule G-10 Disclosure
MSRB Rule 0-10 covers Investor and Municipal Advisory Client education and protection. This rule
requires that municipal advisors make certain disclosures to all municipal advisory clients. This
communication is a disclosure only and does not require any action on your part.The disclosures are noted
below.
1. Hilltop Securities Inc. is registered with the U.S. Securities and Exchange Commission and the
Municipal Securities Rulemaking Board as a Municipal Advisor.
2. You can access the website for the Municipal Securities Rulemaking Board at www.msrb.org
3. The Municipal Securities Rulemaking Board has posted a municipal advisory client brochure. A
copy of the brochure is attached to the memo. This link will take to you to the electronic version
A Client B ac1yre
PART D—Future Supplemental Disclosures
As required by MSRB Rule G-42, this Municipal Advisor Disclosure Statement may be supplemented or
amended,from time to time as needed,to reflect changed circumstances resulting in new conflicts of interest
or changes in the conflicts of interest described above,or to provide updated information with regard to any
legal or disciplinary events of the Firm. The Firm will provide Client with any such supplement or
amendment as it becomes available throughout the term of the Agreement.
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