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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