Item 5Pq,Zty or aoutniaKe, 1 eras
MEMORANDUM
November 29, 2005
TO
FROM:
X 1040
Shana Yelverton, City Manager
Kevin Hugman, Director of Human Resources
Resolution No. 05 -057, Authorizing the City Manager to enter into an agreement
with Kenneth P. Horne and Associates to establish a Section 529 College Savings
Plan.
Action Requested: City Council consider Resolution NO. 05-057, authorizing the City Manager to
execute an agreement with Kenneth P. Horne and Associates to provide
financial consulting services and to market a qualifying Section 529 college
savings plan to employees.
Background
Information: Staff has met with Southlake resident Kenneth Horne in regards to offering a
Section 529 college savings plan to city employees. After several meetings
and a review of different proposals by Mr. Horne, staff feels the Texas
Tomorrow Fund, marketed by Mr. Horne with certain agreements, will provide
an excellent benefit to city employees at essentially no cost to the City.
Through payroll deductions, employees will be able to invest in a qualified
college savings plan. A qualified plan, established under Federal Tax Code
Section 529, allows tax -free earnings and tax -free withdrawals — provided the
withdrawals are used for qualified higher education expenses.
Mr. Horne proposes to market the Tomorrow's College Investment Plan, a
component of the Texas Tomorrow Fund, administered by Enterprise Capital
Management, an AXA Financial Company. According to AXA's website,
insurer financial strength ratings are:
Standard & Poor's AA- Positive outlook
Moody's Aa3 - Stable outlook
Fitch AA Stable outlook
The Texas Tomorrow Fund will waive the $30 annual administrative fee
associated with the Plan for Texas residents. In addition, Mr. Horne has
agreed to:
• offer Class "A" shares which have an initial sales charge but no withdrawal
charges and offer lower overall expenses than class "B" and "C" shares;
• waive the initial sales charge on CIass "A" shares; and
• conduct at least quarterly meetings with employees during non -work hours
at all available city facilities.
Shana Yelverton, City Manager
November 29, 2005
Page 2
The proposed agreement with Mr. Horne allows for an initial two -year term
with one -year renewals, and a termination clause for failure to meet specified
performance criteria.
Financial
Considerations: Cost to the City is staff time in setting up payroll deductions. There are no
expenditures of City funds involved with this Plan.
Citizen Input/
Board Review: Not Applicable.
Legal Review: The City Attorney has reviewed the associated documents.
Alternatives: Decline to authorize the agreement and seek proposals from other consultants
and/or seek alternative 529 Investment Plans.
Supporting
Documents:
• Resolution No. 05 -057
• Agreement with Kenneth P. Horne and Associates
Staff
Recommendation: City Council authorize the City Manager to enter into an agreement with
Kenneth P. Horne and Associates to establish a 529 college savings plan.
Staff Contact: Kevin Hugman, Director of Human Resources
City of Southlake, Texas
RESOLUTION NO. 05-057
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
SOUTHLAKE, TEXAS, AUTHORIZING THE CITY MANAGER TO
EXECUTE AN AGREEMENT WITH KENNETH P. HORNE &
ASSOCIATES TO ESTABLISH A SECTION 529 COLLEGE SAVINGS
PLAN.
WHEREAS, it is in the City's best interest and the best interest of the City's employees
to provide a qualifying college savings plan established pursuant to Federal Tax Code Section
529 ( "529 Plan") for all its employees eligible for such plan; and
WHEREAS, Kenneth P. Horne and Associates provides financial consulting services
and agrees to provide those services to the City's employees and to market a qualifying college
savings plan through the Texas Tomorrow Fund; NOW
THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF
SOUTHLAKE,THAT:
Section 1: The City of Southlake hereby adopts a 529 Plan available to eligible employees
through payroll deductions; and
Section 2: The City Council hereby authorizes the City Manager to execute a contract with
Kenneth P. Horne and Associates to provide a 529 Plan to the City's employees, specifically
being the Tomorrow's College Investment Plan, a component of the Texas Tomorrow Fund that
is part of Enterprise Capital Management, and AXA Financial Company.
Section 3: This resolution shall become effective after its passage and adoption by the City
Council.
PASSED AND APPROVED THIS THE DAY OF , 2005.
Andy Wambsganss, Mayor
ATTEST:
Lori Farwell, City Secretary
NAHuman Resources \DirectorlCCOUNCIL\FY05- 061Res. No. 05 -057, 529 Agreement resoIution.DOC
SERVICES CONTRACT AGREEMENT
This Services Contract Agreement ( "Agreement "), made effective as of the 15th day of
September, 2005, by and among Kenneth P. Horne & Associates, or its assigns ( "Horne ") and
the City of Southlake, Texas, a Texas municipality ( "Southlake ").
WITNESSETH:
R -1. Horne owns and conducts a business consisting primarily of the marketing, sales and
support of financial services.
R -2. Southlake is a municipality that employs individuals that makes available to its
employees a payroll deduction for contributions made to qualifying college savings plans
established pursuant to Federal Tax Code Section 529 ( "529 Plan ").
NOW, THEREFORE, in consideration of the mutual representations, warranties, covenants, and
agreements of the parties hereinafter set forth, the parties hereto, intending to be legally bound,
do hereby agree as follows:
ARTICLE 1
EXCLUSIVE RIGHT TO MARKET SALE
1.1 Exclusive Right to Market and Sale 529 Plans. Upon the terms and subject to the
conditions of this Agreement, Southlake agrees to the following:
a. Exclusive Right to Market. Horne shall have the sole and exclusive right to
advertise, communicate information concerning or otherwise market and sale 529
Plans to Southlake employees. Southlake will not permit any other individual or
entity to market, solicit or contract for a payroll deduction to a 529 Plan.
b. Referral of Inquiries. Any inquiries made by Southlake employees to the Human
Resources department or other department within Southlake concerning 529 Plans
shall be referred to Horne.
C. Establishment of Payroll Deduction. Southlake will authorize, permit and
establish a payroll deduction for Southlake employees for contributions to a 529
Plan only if the 529 Plan is brokered by Horne. No payroll deduction will be
authorized by Southlake without the 529 Plan being brokered by Horne.
d. Authorized Plans. Horne shall market exclusively the Tomorrow's College
Investment Plan, a component of the Texas Tomorrow Fund that is a part of
Enterprise Capital Management, an AXA Financial Company ( "Authorized
Plan") unless the Southlake employee already has an existing 529 Plan in which
SERVICES CONTRACT AGREEMENT CONFIDENTIAL PAGE I OF 8
case Horne shall be permitted to use a plan that is listed on Exhibit A to this
Agreement.
e. Commission and Annual Account Fee Limitation. Horne agrees to waive any
front -end sales load for the 529 Plans,
f The Annual Account Fee, currently $30.00 per year is also waived for all Texas
residents.
g. All shares are to be A shares as indicated in the Plan Description.
h. Performance Standard. Horne agrees to schedule quarterly meetings with
Southlake employees to market the 529 Plans at meeting places to be provided by
Southlake.
i. Horne agrees to respond to employee requests within five (5) working days of
date request is made.
j. The employee contact number for Tomorrow's College Investment Plan is 1 -800-
445 -GRAD (4723). This is a 24 -hour contact line with customer service
representatives available from 9am to 5pm (CST) Monday through Friday.
1.2 Duration. The rights and obligations conferred by this Agreement shall be binding on the
parties until January 1, 2008 and shall be renewed automatically at one (1) year unless notice is
received by either party sixty (60) days prior to the termination of this Agreement.
a. If Horne fails to perform according to the terms of the Contract, and thusly
is deemed unacceptable to Southlake, Southlake will notify Horne in writing
of its intent to terminate the Contract within sixty (60) days unless Horne
corrects his performance within thirty (30) days of receipt of his notice of
termination.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF HORNE
Horne hereby represents and warrants to Southlake as follows:
2.1 Organization. Horne is a sole proprietorship existing and in good standing under the
laws of the State of Texas with the power and authority to conduct its business having executed
and filed with Tarrant County, Texas an Assumed Name Certificate.
2.2 Power and Authority. Horne has the power and authority to execute, deliver, and
perform this Agreement and Horne has taken all necessary action to authorize the execution and
SERVICES CONTRACT AGREEMENT CONFIDENTIAL PAGE 2 OF 8
delivery of this Agreement. This Agreement is the legal, valid, and binding obligation of Horne,
enforceable in accordance with its terms.
2.3 No Conflict. To the best of actual knowledge of Horne, neither the execution and
delivery of this Agreement and the other agreements and instruments to be executed and
delivered in connection with the transactions contemplated hereby or thereby, nor the
consummation of the transactions contemplated hereby or thereby, will violate or conflict with
(1) any federal, state, or local law, regulation, ordinance, zoning requirement, governmental
restriction, order, judgment, or decree applicable to Horne, or its business or assets, (2) any
provision of any charter, bylaw or other governing or organizational instrument of Horne, or (3)
any mortgage, indenture, license, instrument, trust, contract, agreement, or other commitment or
arrangement to which Horne is a parry or by which Horne or any of the assets of Horne is bound.
2.4 Required Government Consents. To the best of actual knowledge of Horne no
approval, authorization, certification, consent, variance, permission, license, or permit to or from,
or notice, filing, or recording to or with, federal, state, or local governmental authorities is
necessary for the execution and delivery of this Agreement with the exception of approval by
Southlake as may be required.
2.5 Required Contract Consents. To the best of actual knowledge of Horne no approval,
authorization, consent, permission, or waiver to or from, or notice, filing, or recording to or with,
any person is necessary for the execution and delivery of this Agreement and the other
agreements and instruments to be executed and delivered in connection with the transactions
contemplated hereby or thereby by Horne or the consummation by Horne of the transactions
contemplated hereby or thereby.
2.6 Broker's or Finder's Fees. Horne has not authorized any person to act as broker, finder,
or in any other similar capacity in connection with the transactions contemplated by this
Agreement.
2.7 No Conflict. Neither the execution and delivery by Horne of this Agreement will violate
or conflict with (1) any federal, state, or local law, regulation, ordinance, governmental
restriction, order, judgment, or decree applicable to Horne, or (2) any provision of any charter,
bylaw, or other governing or organizational instrument of Horne.
2.8 Disclosure. To the best of actual knowledge of Horne, no representation, warranty, or
statement made by Horne in this Agreement or in any document or certificate furnished or to be
furnished to Southlake pursuant to this Agreement contains or will contain any untrue statement
or omits or will omit to state any fact necessary to make the statements contained herein or
herein not misleading.
2.9 Litigation. No claim, action, suit, proceeding, inquiry, hearing, arbitration,
administrative proceeding, or investigation (collectively, "Litigation") is pending, or, to Home's
best knowledge, threatened against Horne, and Horne knows of no facts that could reasonably be
expected to serve as the basis for litigation against Horne.
SERVICES CONTRACT AGREEMENT CONFIDENTIAL. PAGE 3 OF 8
2.10 Compliance With Laws. To the best of actual knowledge of Horne, there is no
outstanding or, to Home's best knowledge, threatened order, writ, injunction, or decree of any
court, governmental agency, or arbitration tribunal against Horne. Horne is not in violation of
any applicable federal, state, or local law, regulation, ordinance, zoning requirement,
governmental restriction, order, judgment, or decree affecting, involving, or relating to its
business, except where noncompliance has no material adverse effect upon its financial
condition, operation, or prospects, and Horne has received no notices of any allegation of any
such violation.
2.11 Tax Returns and Payment of Taxes. All tax returns of every kind (including returns of
real and personal property taxes, intangible taxes, withholding taxes, and FICA and
unemployment compensation taxes) that are due to have been filed in accordance with any
applicable law have been duly filed; and all taxes shown to be due on such returns have been
paid in full.
2.12 Knowledge of Horne. As used in this Agreement, the term "to the best of actual
knowledge of Horne," shall mean including the actual knowledge of Kenneth P. Horne, or any
other partner, employee, attorney or agent of Horne.
SERVICES CONTRACT AGREEMENT CONFIDENTIAL PAGE 4 OF 8
ARTICLE 3
INDEMNITY
3.1 Indemnification by Horne. Horne shall indemnify, defend, and hold harmless Southlake
from and against any and all demands, claims, actions or causes of action, assessments, losses,
damages, liabilities, costs, and expenses, including reasonable fees and expenses of counsel,
other expenses of investigation, handling, and litigation, and settlement amounts together with
interest and penalties and including any net income tax amount associated with all such
indemnification recoveries (collectively, a "Loss" or "Losses "), asserted against, resulting to,
imposed upon, or incurred by the Southlake, to the extent arising from any of the following:
a. Breach of Obligation. Any breach of any representation, warranty, or agreement
of Horne contained in or made pursuant to this Agreement.
b. Incidental Matters. To the extent not covered by the foregoing, any and all
demands, claims, actions or causes of action, assessments, losses, damages,
liabilities, costs, and expenses, including reasonable fees and expenses of counsel,
other expenses of investigation, handling, and litigation, and settlement amounts,
together with interest and penalties, incident to the foregoing.
3.2 Notice of Claim. The party entitled to indemnification hereunder (the "Claimant") shall
promptly deliver to the party liable for such indemnification hereunder (the "Obligor ") notice in
writing (the "Required Notice ") of any claim for recovery specifying in reasonable detail the
nature of the Loss, and, if known, the amount, or an estimate of the amount, of the liability
arising therefrom (the "Claim "). The Claimant shall provide to the Obligor as promptly as
practicable thereafter information and documentation reasonably requested by the Obligor to
support and verify the claim asserted, provided that, in so doing, it may restrict or condition any
disclosure in the interest of preserving privileges of importance in any foreseeable litigation.
3.3 Defense. If the facts pertaining to the Loss arise out of the claim of any third party for
which Southlake intends to assert right of indemnification from Horne, then Horne shall have the
right to assume the defense thereof, including the employment of counsel or accountants, at its
cost and expense. Southlake shall have the right to employ counsel separate from counsel
employed by Horne in any such action and to participate therein, but the fees and expenses of
such counsel employed by the Southlake shall be at its expense. Horne shall have the right to
determine and adopt (or, in the case of a proposal by Southlake, to approve) a settlement of such
matter in its reasonable discretion. Horne shall not be liable for any settlement of any such claim
effected without its prior written consent. All the parties hereto shall cooperate in the defense or
prosecution or any claims and shall furnish such records, information, and testimony, and attend
such conferences, discovery proceedings, hearings, trials, and appeals, as may be reasonably
requested in connection therewith. Horne shall have all rights to pre - litigation and litigation
defenses that Southlake might possess.
3.4 Offset for Insurance Recoveries. The amount of any Loss recovered by a Claimant shall
be reduced by the amount, if any, of any insurance recovery then or theretofore realized by the
Claimant with respect to such Loss but only to the extent of any amount actually exceeding the
SERVICES CONTRACT AGREEMENT CONFIDENTIAL PAGE 5 OF 8
amount necessary to make the Claimant whole for the entire Loss. To the extent such an
insurance recovery is thereafter realized, the Claimant shall reimburse the Obligor for the amount
of any such insurance recovery when and as realized at any time.
3.5 Recovery of Attorney Fees For Frivolous Actions. The Obligor shall be entitled to
recover its reasonable out -of- pocket costs (including court costs and actual attorney fees)
incurred in defending any Claim brought by the Claimant on frivolous grounds or pursued for the
purpose of delay or harassment. The Claimant shall be entitled to recover its reasonable out-of-
pocket costs (including court costs and actual attorney fees) incurred in pursuing any Claim
defended by the Obligor on frivolous grounds or opposed for the purpose of delay or harassment.
A frivolous claim shall include any Claim that is not bona fide and that is not brought in good
faith after consultation with counsel.
ARTICLE 4
MISCELLANEOUS
4.1 Entire Agreement. This Agreement constitutes the sole understanding of the parties with
respect to the subject matter hereof. No amendment, modification, or alteration of the terms or
provisions of this Agreement shall be binding unless the same shall be in writing and duly
executed by the parties hereto.
4.2 Parties Bound by Agreement; Successors and Assigns. The terms, conditions, and
obligations of this Agreement shall inure to the benefit of and be binding upon the parties hereto
and the respective successors and assigns thereof.
4.3 Counterparts. This Agreement may be executed in one or more counterparts, each of
which shall for all purposes be deemed to be an original and all of which shall constitute the
same instrument.
4.4 Headings. The headings of the Sections and paragraphs of this Agreement are inserted
for convenience only and shall not be deemed to constitute part of this Agreement or to affect the
construction hereof.
4.5 Modification and Waiver. Any of the terms or conditions of this Agreement may be
waived in writing at any time by the party that is entitled to the benefits thereof. No waiver of
any of the provisions of this Agreement shall be deemed to or shall constitute a waiver of any
other provision hereof (whether or not similar).
4.6 Expenses. Southlake and Horne shall each pay all costs and expenses incurred by it or on
its behalf in connection with this Agreement and the transactions contemplated hereby, including
fees and expenses of its own financial consultants, accounts, and counsel.
4.7 Notices. Any notice, request, instruction, or other document to be given hereunder by any
party hereto to any other party hereto shall be in writing and delivered personally or sent by
registered or certified mail, postage prepaid:
SERVICES CONTRACT AGREEMENT CONFIDENTIAL, PAGE 6 OF 8
if to Southlake, to: City Manager
1400 Main Street
Suite 460
Southlake, Texas 76092
if to Horne, to: Kenneth P. Horne
1215 Ashrnoore Court
Southlake, Texas 76092
or at such other address for a party as shall be specified by like notice. Any notice that is
delivered personally in the manner provided herein shall be deemed to have been duly given to
the party to whom it is directed upon actual receipt by such party (or its agent for notices
hereunder). Any notice that is addressed and mailed in the manner herein provided shall be
conclusively presumed to have been duly given to the party to which it is addressed at the close
of business, local time of the recipient, on the fourth business day after the day it is so placed in
the mail.
4.8 Governing Law. This Agreement shall be construed in accordance with and governed by
the laws of the State of Texas without giving effect to the principles of conflicts of law thereof.
4.9 "Including." Words of inclusion shall not be construed as terms of limitation herein, so
that references to "included" matters shall be regarded as nonexclusive, non - characterizing
illustrations.
4.10 References. Whenever reference is made in this Agreement to any Article, Section, or
Schedule, such reference shall be deemed to apply to the specified Article or Section of this
Agreement or the specified Schedule to this Agreement.
4.11 Survival of Agreements. All covenants, agreements, representations, and warranties
made herein shall survive the execution and delivery of this Agreement.
4.12 Dispute Resolution. Except for certain emergency judicial relief ( "Injunctive Relief)
which may be brought at any time, the parties agree, prior to instituting litigation, to submit all
disputes which the parties are unable to resolve, to non - binding mediation by a mediator to be
agreed upon by the parties with each party bearing one -half of the mediation expense. If the
parties are unable to agree on a mediator or if the parties are unable to resolve the dispute
through mediation, litigation may be initiated with venue in Tarrant County, Texas.
SERVICES CONTRACT AGREEMENT CONFIDENTIAL PAGE 7 OF 8
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed
on its behalf under seal as of the date first above stated.
Kenneth P. Horne & Associates
By:
Kenneth P. Horne, Owner
City of Southlake
By:
Title
Notary
Date
Date
SERVICES CONTRACT AGREEMENT CONFIDENTIAL. PAGE 8 OF 8
EXHIBIT A
529 PLANS
AIM 529 — Nebraska
Alliance Capital 529 — Rhode Island
American Century 529 — Kansas
American Funds 529 — Virginia
American Skandia 529 — Nevada
Bank of America 529 — South Carolina
Citigroup — Colorado (529)
Columbia 529 — New York
Delaware 529 — Hawaii
Delaware 529 — Pennsylvania
Enterprise Funds 529 — Texas
Fidelity 529 — New Hampshire
Financial Authority of Maine (FAME) 529 — Maine
Franklin Templeton 529 — Arkansas
Franklin Templeton 529 — New Jersey
Hartford 529 — West Virginia
Manulife (529 plan only)
MFS 529 — Oregon
MFS 529 — Wyoming
New York Life 529 — New Mexico
Oppenheimer 529 — New Mexico
Pacific Funds 529 — Montana