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Ordinance No. 9,785 FINANCIAL ADVISORY AGREEMENT STATE OF TEXAS § COUNTY OF HARRIS § This Financial Advisory Agreement (the "Agreement") is made and entered into by and .between the City of Baytown, Texas ("Issuer") and First Southwest Company ("FSC") effective as of the date executed by the Issuer as set forth on the signature page hereof. WITNESSETH: WHEREAS, the Issuer will have under consideration from time to time the authorization and issuance of indebtedness in amounts and forms which cannot presently be determined and, in connection with the authorization, sale, issuance and delivery of such indebtedness, Issuer desires to retain an independent financial advisor; and WHEREAS, the Issuer desires to obtain the professional services of FSC to advise the Issuer regarding the issuance and sale of certain evidences of indebtedness or debt obligations that may be authorized and issued or otherwise created or assumed by the Issuer (hereinafter referred to collectively as the "Debt Instruments") from time to time during the period in which this Agreement shall be,effective; and WHEREAS, FSC is willing to provide its professional services and its facilities as financial advisor in conection with all programs of financing as may be considered and authorized by Issuer during the period in which this Agreement shall be effective. NOW, THEREFORE, the Issuer and FSC, in consideration of the mutual covenants and agreements herein contained and other good and valuable consideration, do hereby agree as follows: SECTION I DESCRIPTION OF SERVICES Upon the request of an authorized representative of the Issuer, FSC agrees to perform the financial advisory services stated in the following provisions of.this Section I; and for having rendered such services, the Issuer agrees to pay to FSC the compensation as provided in Section V hereof. A. Financial Planning. At the direction of Issuer, FSC shall: 1. Survey and Analysis. Conduct a survey of the financial resources of the Issuer to determine the extent of its capacity to authorize, issue and service any Debt Instruments contemplated. This survey will include an analysis of any existing debt structure as compared with the existing and projected 1 r sources of revenues which may be pledged to secure payment of debt service and, where appropriate, will 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 Debt Instruments then under consideration, the survey will take into account any outstanding indebtedness payable from the revenues thereof, additional revenues to be available from any proposed rate increases and additional revenues, as projected by consulting engineers employed by the Issuer, resulting from improvements to be financed by the Debt Instruments under consideration. FSC will provide advice on bond covenants, pledge of revenues, flow of funds, legal and coverage requirements. 2. Future Financings. Consider and analyze future financing needs as projected by the Issuer's staff and consulting engineers or other experts, if any, employed by the Issuer. FSC will keep the City abreast of market developments and financing techniques which might be applicable to the City's bond financing program. 3. Recommendations for Debt Instruments. On the basis of the information developed by the survey described above, and other information and experience available, submit to the Issuer recommendations regarding the Debt Instruments under consideration, including such elements as the date of issue, interest payment dates, schedule of principal maturities, options of prior payment, security provisions, and such other provisions as may be appropriate in order to make the issue attractive to investors while achieving the objectives of the Issuer. All recommendations will be consistent with the goal of designing the Debt Instruments to be sold on terms which are advantageous to the Issuer, including the lowest interest cost consistent with all other considerations. FSC will evaluate and provide recommendations on unsolicited proposals from investment banking firms and financial consultants. 4. Market Information. Advise the Issuer of our interpretation of current bond market conditions, other related forthcoming bond issues and general information, with economic data, which might normally be expected to influence interest rates or bidding conditions so that the date of sale of the Debt Instruments may be set at a favorable time. 5. Elections. In the event it is necessary to hold an election to authorize the Debt Instruments then under consideration, FSC will assist 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 2 0 f , • 1 such data to a firm of municipal bond attorneys ("Bond Counsel")retained by the Issuer. B. Debt Management and Financial Implementation. At the direction of Issuer, FSC shall: 1. Method of Sale. Evaluate 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 Debt Instruments are to be sold by an advertised competitive sale, FSC will: (1) Supervise the sale of the Debt Instruments, reserving the right, alone or in conjunction with others, to submit a bid for any Debt Instruments issued under this Agreement which the Issuer advertises for competitive bids; however, in keeping with the provisions of Rule G-23 of the Municipal Securities Rulemaking Board, FSC will request and obtain written consent to bid prior to submitting a bid, in any instance wherein FSC elects to bid, for any installment of such Debt Instruments; (2) Disseminate information to prospective bidders, organize such informational meetings as may be necessary, and facilitate prospective bidders' efforts in making timely submission of proper bids; (3) Attend bid openings of bond sales, assist in evaluating bids and recommend acceptance or rejection of bids. Assist 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) Advise the Issuer regarding the best bid and provide advice regarding acceptance or rejection of the bids; (5) Be responsible for bond closings, with the successful bidder, printer, paying agent/registrar, bond counsel and City staff, including instructions for closing; and (6) Maintain copies of all transcripts. 3 b. If the Debt Instruments are to be sold by negotiated sale, FSC will: (1) Recommend for Issuer's final approval and acceptance one or more investment banking firms as managers of an underwriting syndicate for the purpose of negotiating the purchase of the Debt Instruments; (2) Cooperate with and assist any selected managing underwriter and their counsel in connection with their efforts to prepare any Official Statement or Offering Memorandum. FSC will cooperate with and assist the underwriters in the preparation of a bond purchase contract, an underwriter's agreement and other related documents. The costs incurred in such efforts, including the printing of the documents, will be paid in accordance with the terms of the Issuer's agreement with the underwriters, but shall not be or become an obligation of FSC, except to the extent specifically provided otherwise in this Agreement or assumed in writing by FSC; (3) Assist the staff of the Issuer in the safekeeping of any good faith checks, to the extent there are any such, and provide a cost comparison, for both expenses and interest which are suggested by the underwriters, to the then current market; and (4) Advise the Issuer as to the fairness of the price offered by the underwriters. 2. Offering Documents. Coordinate the preparation of the notice of sale and bidding instructions, preliminary and final official statements, official bid form and such other documents as may be required and submit all such documents to the Issuer for examination, approval and certification. After such examination, approval and certification, FSC shall provide the Issuer with a supply of all such documents sufficient to its needs and distribute by mail or, where appropriate, by electronic delivery, sets of the same to prospective purchasers of the Debt Instruments. Also, FSC shall provide copies of the final Official Statement to the purchaser of the Debt Instruments in accordance with the Notice of Sale and Bidding Instructions and assist with briefing the City Council on the proposed sale. 3. Credit Ratings. Make recommendations to the Issuer as to the advisability of obtaining a credit rating, or ratings, for the Debt Instruments and, when directed by the Issuer, coordinate the preparation of such information as may be appropriate for submission to the rating agency, or agencies. In 4 those cases where the advisability of personal presentation of information to the rating agency, or agencies, may be indicated, FSC will arrange for such personal presentations, utilizing such composition of representatives from the Issuer as may be finally approved or directed by the Issuer. 4. Trustee, Paying Agent, Registrar. Upon request, counsel with the Issuer in the selection of a Trustee and/or Paying Agent/Registrar for the Debt Instruments, and assist in the negotiation of agreements pertinent to these services and the fees incident thereto. 5. Financial Publications. when appropriate, advise financial publications of the forthcoming sale of the Debt Instruments and provide them with all pertinent information. 6. Consultants. After consulting with and receiving directions from the Issuer, arrange for such reports and opinions of recognized independent consultants as may be appropriate for the successful marketing of the Debt Instruments. 7. Auditors. In the event formal verification by an independent auditor of any calculations incident to the Debt Instruments is required, make arrangements for such services. 8. Arbitrage Rebate Compliance. Assist the City and its arbitrage rebate compliance contractor as necessary to enable the completion of arbitrage rebate calculations and required reports; provided such services shall be limited to providing information and advice and does not include the obligation to make computations or associated filings. 9. Issuer Meetings. Attend meetings of the governing body of the Issuer, its staff, representatives or committees as requested at all times when FSC may be of assistance or service and the subject of financing is to be discussed. 10. Printing. To the extent authorized by the Issuer, coordinate all work incident to printing of the offering documents and the Debt Instruments. 11. Bond Counsel. Maintain liaison with Bond Counsel in the preparation of all legal documents pertaining to the authorization, sale and issuance of the Debt Instruments. 12. Changes in Laws. Provide to the Issuer copies of proposed or enacted changes in federal and state laws, rules and regulations having, or expected to have, a significant effect on the municipal bond market of which FSC becomes aware in the ordinary course of its business, it being 5 understood that FSC does not and may not act as an attorney for, or provide legal advice or services to, the Issuer. 13. Delivery of Debt Instruments. As soon as a bid for the Debt Instruments is accepted by the Issuer, coordinate the efforts of all concerned to the end that the Debt Instruments may be delivered and paid for as expeditiously as possible and assist the Issuer in the preparation or verification of final closing figures incident to the delivery of the Debt Instruments. 14. Debt Service Schedule; Authorizing Resolution. Be responsible for bond closings, with the successful bidder, printer, paying agent/registrar, bond counsel and City staff, including instructions for closing. After the closing of the sale and delivery of the Debt Instruments, deliver to the Issuer a schedule of annual debt service requirements for the Debt Instruments and, in coordination with Bond Counsel, assure that the paying agent/registrar and/or trustee has been provided with a copy of the authorizing ordinance, order or resolution. 15. SEC Disclosure Documents - Coordinate the preparation and submission of SEC disclosure documents required under Rule 15 C2-12 to NRMSIRs and SIDS or any applicable rules; however, FSC shall not be responsible for the filings and compliance issues associated with Rile 15 C2-12. SECTION II OTHER AVAILABLE SERVICES In addition to the services set forth and described in Section I herein above, FSC agrees to make available to Issuer the following services, when so requested by the Issuer and subject to the agreement by Issuer and FSC regarding the compensation, if any, to be paid for such services, it being understood and agreed that the services set forth in this Section II shall require further agreement as to the compensation to be received by FSC for such services: A. Investment of Funds. From time to time, as an incident to the other services provided hereunder as financial advisor, FSC may purchase such investments as may be directed and authorized by Issuer to be purchased, it being understood that FSC will be compensated in the normal and customary manner for each such transaction. In any instance wherein FSC may become entitled to receive fees or other compensation in any form from a third party with respect to these investment activities on behalf of Issuer, we will disclose to Issuer the nature and, to the extent such is known, the amount of any such compensation so that Issuer may consider the information in making its investment decision. It is understood and agreed that FSC is a duly licensed broker/dealer and is affiliated with First Southwest Asset Management, Inc. ("FSAMI"), a duly registered investment 6 1 advisor. Issuer may, from time to time, utilize the broker/dealer services of FSC and/or the investment advisory services of FSAMI with respect to matters which do not involve or affect the financial advisory services referenced in this Agreement. The terms and conditions of the engagement of FSC and/or FSAMI to provide such services shall be determined by mutual agreement at the time such services are requested. B. Exercising Calls and Refunding. Provide advice and assistance with regard to exercising any call and/or refunding of any outstanding Debt Instruments. C. Special Financial Services. Provide special financial advice to the City as needed. This may include assistance in the development of debt scenarios for preparing debt service budgets, financial feasibility studies and alternative financing plans for potential capital projects, working with citizen committees, evaluating State and Federal legislation for the City, and other tasks as needed. D. Long Range Planning. Provide advice and assistance in the development of other long-range financing plans of the Issuer. E. Post-Sale Services. Subsequent to the sale and delivery of Debt Instruments, review the transaction and transaction documentation with legal counsel for the Issuer, Bond Counsel, auditors and other experts and consultants retained by the Issuer and assist in developing appropriate responses to legal processes, audit procedures, inquiries, internal reviews and similar matters. SECTION III TERM OF AGREEMENT This Agreement shall become effective as of the date executed by the Issuer as set forth on the signature page hereof and, unless terminated by either party pursuant to Section IV of this Agreement, shall remain in effect thereafter for a period of five (5) years from such date. Unless FSC or Issuer shall notify the other party in writing at least thirty (30) days in advance of the applicable anniversary date that this Agreement will not be renewed, this Agreement will be automatically renewed on the fifth anniversary of the date hereof for an additional one (1) year period and thereafter will be automatically renewed on each anniversary date for successive one (1) year periods. SECTION IV TERMINATION This Agreement may be terminated with or without cause by the Issuer or FSC 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 FSC for services provided and 7 � • • 1 1 J 1 expenses incurred to the date of termination will be due and payable. No penalty will be assessed for termination of this Agreement. SECTION V COMPENSATION AND EXPENSE REIMBURSEMENT The fees due to FSC for the services set forth and described in Section I of this Agreement with respect to each issuance of Debt Instruments during the term of this Agreement shall be calculated in accordance with the schedule set forth on Appendix A attached hereto. Unless specifically provided otherwise on Appendix A or in a separate written agreement between Issuer and FSC, such fees, together with any other fees as may have been mutually agreed upon and all expenses for which FSC is entitled to reimbursement, shall become due and payable concurrently with the delivery of the Debt Instruments to the purchaser. SECTION VI MISCELLANEOUS 1. Choice of Law. This Agreement shall be construed and given effect in accordance with the laws of the State of Texas. 2. Binding Effect; Assignment. This Agreement shall be binding upon and inure to the benefit of the Issuer and FSC, their respective successors and assigns only; 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. 3. Entire Agreement. This instrument 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. 4. Venue. Any litigation concerning this Agreement shall be conducted in Harris County, Texas, and the parties hereby agree to the venue and personal jurisdiction of these courts. 5. INDEMNITY. FSC AGREES TO AND SHALL INDEMNIFY, HOLD HARMLESS, AND DEFEND THE ISSUER, ITS OFFICERS, AGENTS AND EMPLOYEES (COLLECTIVELY REFERRED TO HEREINAFTER IN THIS PARAGRAPH AS THE ("ISSUER'"), FROM AND AGAINST ANY AND ALL CLAIMS, LOSSES, DAMAGES, CAUSES OF ACTION, SUITS AND LIABILITY OF EVERY KIND, INCLUDING ALL EXPENSES OF LITIGATION, COURT COSTS, AND ATTORNEYS' FEES, FOR ANY AND ALL DAMAGES ARISING OUT OF OR IN CONNECTION WITH THE SERVICES PERFORMED BY FSC PURSUANT TO THIS AGREEMENT, THE CONDUCT OR MANAGEMENT OF FSC'S BUSINESS OR ACTIVITIES, OR FROM ANY ACT OR OMISSION BY SOUTHWEST COMPANY, ITS OFFICERS, 8 • • 1 1 AGENTS, OR EMPLOYEES (COLLECTIVELY REFERRED TO HEREINAFTER IN THIS PARAGRAPH AS "FSC"), PERFORMED IN FURTHERANCE OF THIS AGREEMENT, WHERE SUCH DAMAGES ARE CAUSED BY THE JOINT NEGLIGENCE OF THE ISSUER AND FSC OR THE SOLE OR JOINT NEGLIGENCE OF FSC. IT IS THE EXPRESSED INTENTION OF THE PARTIES HERETO, BOTH FSC AND THE ISSUER, THAT THE INDEMNITY PROVIDED FOR IN THIS PARAGRAPH IS INDEMNITY BY FSC TO INDEMNIFY AND PROTECT THE ISSUER FROM THE CONSEQUENCES OF (I) THE ISSUER'S OWN NEGLIGENCE, WHERE THAT NEGLIGENCE IS A CONCURRING CAUSE OF THE RESULTING INJURY, DEATH OR DAMAGE AND (II) FSC'S OWN NEGLIGENCE, WHERE THAT NEGLIGENCE IS THE SOLE OR CONCURRING CAUSE OF THE RESULTING INJURY, DEATH OR DAMAGE. FURTHERMORE, THE INDEMNITY PROVIDED FOR IN THIS PARAGRAPH SHALL HAVE NO APPLICATION TO THE ISSUER FOR ANY CLAIM, LOSS, DAMAGE, CAUSE OF ACTION, SUIT AND LIABILITY WHERE THE INJURY, DEATH OR DAMAGE RESULTS FROM THE SOLE NEGLIGENCE OF THE ISSUER, UNMIXED WITH THE FAULT OF ANY OTHER PERSON OR ENTITY. IN THE EVENT THAT ANY ACTION OR PROCEEDING IS BROUGHT AGAINST THE ISSUER BY REASON OF ANY OF THE ABOVE, FSC FURTHER AGREES AND COVENANTS TO DEFEND THE ACTION OR PROCEEDING BY LEGAL COUNSEL ACCEPTABLE TO THE ISSUER. THE INDEMNITY PROVIDED FOR IN THIS PARAGRAPH SHALL SURVIVE EXPIRATION OR EARLIER TERMINATION OF THIS AGREEMENT. 5. No consent to litigate. By this Agreement, the City does not consent to litigation or suit, and the City hereby expressly revokes any consent to litigation that it may have granted by the terms of this Agreement or any other contract or agreement, any charter, or applicable state law. Nothing contained herein shall be construed so as to limit or waive the Issuer's sovereign immunity. The Company assumes full responsibility for the services performed hereunder as well as for the acts and deeds of its officers, agents and/or employees. 6. Insurance. Throughout the term of this Agreement, the First Southwest Company at its own expense shall purchase, maintain and keep in force and effect insurance against claims for damages to property which may arise out of or result from FSC's operations and/or performance of the services under this Agreement. FSC's insurance coverage shall be primary insurance with respect to the Issuer, its officers, agents and employees. Any insurance or self-insurance maintained by the Issuer, its officials, agents and employees shall be considered in excess of FSC's insurance and shall not contribute to it. The following is a list of standard insurance policies along with their respective minimum coverage amounts required in this Agreement: 9 t 1 7 1 • t t 1. Commercial General Liability(CGL) General Aggregate: $1,000,000 Personal &Advertising Injury: $500,000 Per Occurrence: $500,000 a. Coverage shall be at least as broad as ISO CG 00 01 10 93 b. No coverage shall be excluded from standard policy without notification of individual exclusions being attached for review and acceptance. 2. Errors and Omissions Limit$25000 Claims-made form is acceptable. Coverage will be in force for two years after project is completed. Upon execution of this contract, FSC shall file with the Issuer valid certificates of insurance and endorsements acceptable to the Issuer. Such certificates shall contain a provision that coverage afforded under the policies will not be canceled, suspended, voided, or reduced until at least sixty (60) days' prior written notice has been given to the Issuer via certified mail, return receipt requested. The following are general requirements which are applicable to all policies: a. AM Best Rating of A:VII or better. b. Insurance carriers eligible to do business in the State of Texas will be accepted. C. Liability policies will be on occurrence form. d. Issuer, its officials and employees are to be added as Additional Insured to liability policies. e. Upon request of and without cost to Issuer, certified copies of all insurance policies and/or certificates of insurance shall be furnished to Issuer's representative. Certificates of insurance showing evidence of insurance coverage shall be provided to Issuer's representative prior to execution of this Agreement. f. Upon request of and without cost to Issuer, loss runs (claims listing) of any and/or all insurance coverage shall be furnished to Issuer's representative. 7. Compliance with Laws. FSC shall comply with all rules, regulations, and laws of the United States of America, the State of Texas, and all laws, regulations, and ordinances of the City of Baytown as they now exist or may hereafter be enacted or amended. 8. Independent Contractor. It is expressly agreed and understood by all parties hereto that FSC is an independent contractor in its relationship to the City. Nothing herein contained at any time or in any manner shall be construed to effect a contract of partnership or joint venture or render any party hereto the employer or master of any other party and/or its employees, agents or representatives. All necessary personnel for the services offered shall be deemed employees of FSC. 10 • 9. Notice. All notices required to be given hereunder shall be given in writing either by telecopier, overnight, or facsimile transmission, certified or registered mail at the respective addresses of the parties set forth herein or at such other address as may be designated in writing by either party. Notice given by mail shall be deemed given three (3) days after the date of mailing thereof to the following addresses: FSC First Southwest Company Attn. Drew Masterson 1021 Main Street, Suite 2200 Houston, Texas 77002 Fax: (713) 654-8658 CITY City of Baytown Attn: City Manager P.O. Box 424 Baytown, TX 77522 Fax: (281)420-6586 10. Non-waiver. Failure of either party hereto to insist on the strict performance of any of the agreements herein or to exercise any rights or remedies accruing thereunder upon default or failure of performance shall not be considered a waiver of the right to insist on and to enforce by an appropriate remedy, strict compliance with any other obligation . hereunder to exercise any right or remedy occurring as a result of any future default or failure of performance. 11. Severability. All parties agree that should any provision of this contract be determined to be invalid or unenforceable, such determination shall not affect any other term of this contract, which shall continue in full force and effect. 12. Construction. Both parties have participated fully in the review and revision of this Agreement. Any rule of construction to the effect that ambiguities are to be resolved against the drafting party shall not apply to the interpretation of this Agreement. 13. Headings. The article and section headings are used in this Agreement for convenience and reference purposes only and are not intended to define, limit or describe the scope or intent of any provision of this Agreement and shall have no meaning or effect upon its interpretation 14. Authority. The officers executing this Agreement on behalf of the parties hereby represent that such officers have full authority to execute this Agreement and to bind the party he/she represents. 11 IN WITNESS WHEREOF, the parties hereto have executed this Agreement in multiple copies, each of which shall be deemed to be an original, but all of which shall constitute but one and the same agreement, thisol 7'f'1 day of&r// 52004. FIRST SOUTHWEST COMPANY By: ill A. Feinberg, Chairman an Chief Executive Officer By: Drew K. Masterson Senior Vice President CITY OF B Y WN, T XAS By: Gary Jackson City Manager AT ST: G W mth City Clerk APPROVED AS TO FORM: 4acgio Ramirez, Sr. City Attorney F:\Karen\Files\Contracts\Financial Advisory Contract\contract.doc 12 • t b i Qr a APPENDIX A The fees due FSC will not exceed those contained in our customary fee schedule as listed below. $0 -- $4995000 $7,500 minimum flat fee $500004159995000 1.5% *$500,000 plus $4.00 per thousand over$500,000 $250005000 -$459995000 0.675% * $2,000,000 plus $2.00 per thousand over$2,000,000 Over$5,000,000 0.39% * $5,000,000 plus $1.75 per thousand over$5,000,000 The above charges shall be multiplied by 1.25 times for the completion of an application to a federal or state government agency or for the issuance of revenue bonds or refunding bonds, reflecting the additional services required. The charges for ancillary services, including computer structuring and official statement printing, shall, if approved in advance by Issuer in writing, be levied only for those services which are reasonably necessary in completing the transaction and which are reasonable in amount, unless such charges were incurred at the specific direction of the Issuer. The payment of charges for financial advisory services described in Section I of the foregoing Agreement shall be contingent upon the delivery of bonds and shall be due at the time that bonds are delivered. The payment of charges for services described in Section II of the foregoing Agreement shall be due and payable in accordance with the mutual agreement therefor between FSC and Issuer. The Issuer shall be responsible for the following expenses, if and when applicable, whether they are charged to the Issuer directly as expenses or charged to the Issuer by FSC as reimbursable expenses: Bond counsel Bond printing Bond ratings Computer structuring Credit enhancement CPA fees for refunding Official statement preparation and printing Paying agent/registrar/trustee Travel expenses Underwriter and underwriter's counsel Miscellaneous, including copy, delivery, and phone charges The payment of reimbursable expenses that FSC has assumed on behalf of the Issuer shall NOT be contingent upon the delivery of bonds and shall be due at the time that services are rendered and payable upon receipt of an invoice therefor submitted by FSC. 13