INVESTMENT ADVISORY AGREEMENT
This Investment Advisory Agreement (this “Agreement”), made as of this ___ day of
__________________, 2017, by and between the City of Lawrence, Kansas (the “City”) and Columbia Capital Management, LLC (the “Adviser”).
WITNESSETH
WHEREAS, the City is a duly constituted city of the first class of the State of Kansas;
WHEREAS, the City seeks to properly manage and invest the idle funds of the City pursuant to Kansas law, including but not limited to K.S.A. 12-1675 et seq., K.S.A. 12-1677b et seq. and K.S.A. 10-131 et seq.;
WHEREAS, the City desires to appoint the Adviser as the investment adviser to assume the responsibilities of investment management of the pooled cash of the City including all idle funds, cash, deposits, investments, capital accounts and bond proceeds (the “Accounts”); and
WHEREAS, the City has the right pursuant to K.S.A. 12-1675(e)(2) to appoint one or more third-party custodians to hold cash and securities in its name and intends to appoint a custodian to further this Agreement (the “Custodian”).
NOW THEREFORE, in consideration of the mutual promises and agreements herein contained, the City and the Adviser hereby agree as follows:
1. Appointment of Adviser. The City hereby appoints Adviser to act as the investment adviser with respect to the assets in the Accounts. Adviser does hereby accept said appointment as an investment adviser under the Accounts. By accepting such appointment, Adviser agrees that at all times it shall act in accordance with the terms and conditions of this Agreement and all other provisions of law applicable to this undertaking.
2. Fiduciary. In addition to, but not in lieu of any and all applicable fiduciary standards imposed under federal or state law, Adviser shall act as a fiduciary with respect to the assets it manages pursuant to this Agreement. As a fiduciary, Adviser shall perform its duties under this Agreement with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with such matters would use in an enterprise of like character and with like aims.
3. Investment Management Services.
a. Adviser’s scope of services shall include:
i. Providing recommendations to the City regarding updating, developing and maintaining an investment policy for the City, consistent with various Kansas statutes pertaining to deposits, investments and collateral management. Philosophically, the City’s investments will be evaluated for safety, liquidity and yield, in that order, with the recognition that ensuring adequate liquidity is also often the best way to preserve principal (safety).
ii. Implementing an investment strategy that allocates the City’s pooled cash into multiple subportfolios with the investments in each subportfolio targeted to the unique needs for and statutory constraints on those subportfolios. Subordinate to the core investment goals of preserving principal and providing adequate liquidity, Adviser shall seek to maximize income from the portfolio that the City can use to support its operations.
iii. Complying with the requirements of K.S.A. 12-1675 et seq. providing local banks with a “first look” at the City’s investment opportunities where required.
iv. Monitoring and marking-to-market the collateral posted by the City’s bank depositories on a weekly basis to ensure compliance with state law and City policy.
v. Selecting investment securities for the City’s portfolio, consistent with state law and the City’s investment policy.
vi. Providing monthly portfolio reporting to the City, including information on holdings, transactions, portfolio income and performance.
vii. Working with the city attorney to draft an ordinance designating certain of the City’s funds as multi-year capital funds.
viii. Providing the City with general market information, ad hoc reporting and other routine requests related to investment management.
ix. Assisting the City in maintaining its “expanded” powers granted pursuant to KSA 12-1677b.
b. Adviser shall invest and otherwise manage the assets held by the City, its banks and any Custodian in the Accounts. Responsibility for the investment and management is assigned to Adviser by the City. Adviser shall have broad discretion with respect to investment of funds in the Accounts but with prior consultation with the City in a manner and scope both parties agree on; and, Adviser shall be bound by such written investment policy objectives and guidelines for the management of the assets as shall from time to time be provided to Adviser by the City. Adviser shall have the authority to select the brokerage firms, consistent with the requirements of K.S.A. 12-1675(b)(4), through which orders will be placed. Adviser may combine orders for the Accounts with orders for other accounts or funds under management. Adviser shall effect all purchases and sales of securities in a manner consistent with the principles of best execution, taking into account net price (including commissions) and execution capability and other services that the broker or dealer may provide. Adviser shall use investment strategies designed to ensure that all securities transactions are executed in such a manner that the total explicit and implicit costs and total proceeds in every transaction are the most favorable under the circumstances. Adviser shall issue suitable instructions to the Custodian with respect to deliveries and payments.
4. Duties of the City. In order to fully effect this agreement, the City agrees to:
a. Timely provide Adviser with balances, account statements and interest earned on the City’s funds and accounts.
b. Upon request, provide Adviser with historical account balances and monthly account cash flows to permit Adviser to properly determine required liquidity.
c. Upon request and with reasonable notice, respond to Adviser’s requests to move money via Federal Reserve wire or other means between the City’s various accounts as necessary to effect the investment plan.
5. Custodian. Pursuant to K.S.A. 12-1675(e)(1) the City shall instruct the Custodian to deliver securities sold and pay for securities purchased, including all expenses relating to the purchase and sale of such securities, such as brokerage commissions and transfer taxes, in accordance with copies of confirmations provided to the Custodian by Adviser.
6. Potential Conflicts of Adviser. It is understood that Adviser will be acting in a similar capacity for other institutional clients, including other municipal governments in Kansas and that investments and reinvestments for the Accounts of the City may differ from those made or recommended with respect to the accounts and clients even though the investment objectives may be the same or similar; however, Adviser shall allocate investment opportunities among clients on a fair and equitable basis. In addition, Adviser serves as financial advisor to municipal governments within and beyond Kansas that issue bonds (“Issuer Clients”), including, in the case of Kansas issuers, bonds eligible for investment by the City. To prevent any appearances of favoring an issuer client over an investment client, or of favoring an investment client over an issuer client, it is the policy of Adviser to not purchase bonds of an Issuer Client issuing bonds in the primary market on behalf an investing client or to purchase callable bonds of an Issuer Client at any time on behalf of an investing client. This policy serves to protect both clients from potential conflicts but may limit investment opportunities for the City from time to time.
7. Directions to Adviser. The names, titles and authorities of the individuals authorized to act on behalf of the City with respect to the Accounts and this Agreement are set forth in Schedule B to this Agreement, which is attached hereto and incorporated herein, and which may be amended in writing at any time by the City with notice provided to Adviser. Adviser may include information regarding the Accounts in aggregate performance data of Adviser that does not identify the City.
8. Management Fees. Adviser will be compensated for its services under this Agreement in a amount equal to 0.09% of the market value of the Accounts, billed quarterly in arrears based upon the average of the month-end Account balances for such quarter, subject to a minimum fee of $80,000 per calendar year (which minimum shall be pro rated by month for a partial contract year). Market value, including accrued income, will be determinative for the purpose of calculating fees. Such amount shall be the sole compensation owing by reason of investment advisory services under this Agreement. The fee for services for any period less than a full quarterly period will be pro-rated on a daily basis on the annualized fee for the period and on the market value of the portfolio as described on the final date of such period.
9. Notice of Events. Adviser shall provide written notice to the City regarding certain events pertaining to the Accounts and/or Adviser. Such notice shall include, at a minimum, the date, identification and description of the event triggering the notice requirement and shall be signed by an authorized party of Adviser.
a. Written notice shall be immediately provided upon the occurrence of any of the following events:
i. A material adverse change to Adviser’s financial condition or status;
ii. Adviser’s insolvency, filing of a petition in bankruptcy, becoming party to an involuntary bankruptcy proceeding, or Adviser making an assignment for the benefit of creditors;
iii. Any material violation or incidence of non-compliance with the City’s investment policy objectives and guidelines;
b. Adviser agrees to furnish written notice to the City within ten (10) business days, if any of the following events occur:
i. A material change(s) in senior officers or senior personnel involved in the management of the Accounts;
ii. A material change(s) in ownership of Adviser, including the addition or departure of any person owning five (5) percent or more of the membership interests in Adviser;
iii. Any significant legal actions instituted against Adviser or its members; and
iv. Any investigations, examinations or other proceedings commenced by any governmental or regulatory agency, which are not conducted in the ordinary course of Adviser’s business, including investigations, examinations or other proceedings involving Adviser’s members.
10. Term of Agreement. This Agreement shall commence on the date hereof and shall continue until it is terminated by the City or Adviser. Adviser may terminate this Agreement at any time with sixty (60) days’ prior written notice to the City. The City may terminate this Agreement at any time after December 31, 2017, with sixty (60) days’ prior written notice. Adviser understands and agrees that Adviser’s fiduciary responsibilities under this Agreement extend through the orderly wind-up and transfer of the Accounts to any party or entity designated by the City, and, if Adviser is so directed by the City, such responsibilities may include decisions related to the liquidation or conversion of specific investments within the Accounts. The City’s obligation to pay Adviser’s fees for investment advisory services shall cease upon the later of: (i) termination of this Agreement, or (ii) completion of the orderly wind-up and transfer of the Accounts and removal of all assets under management.
11. Governing Law. Adviser shall comply with all applicable laws of the State of Kansas and the United States of America. Regulatory reports required under laws applicable to Adviser by any regulatory authority shall be the responsibility of Adviser. This Agreement shall be construed and governed in accordance with the laws of the State of Kansas to the extent that such laws are not pre-empted by the laws of the United States of America. By entering into this Agreement, Adviser agrees to submit to the exclusive jurisdiction of the state and federal court of Kansas and agrees that any action or proceedings against the City arising out of or in connection with this Agreement shall be instituted in the [District Court of Douglas County, Kansas].
12. Notices. All notices required by this Agreement shall be effective:
a. if sent by certified or registered mail, return receipt requested, by United States express mail, or by courier service, then when actually received;
b. if sent by facsimile transmission, then on the date sent, provided confirmatory notice is sent via electronic mail;
c. if sent by electronic mail, then on the date sent;
d. if delivered by hand, then on the date so delivered.
e. Notice shall be addressed to the respective parties as follows:
i. to the Adviser:
Columbia
Capital Management, LLC
c/o Chief Compliance Officer
6330 Lamar, Suite 200
Overland Park, Kansas 66202
ii. to the City:
City of Lawrence,
Kansas
c/o City Clerk
6 East Sixth Street
Lawrence,
Kansas 66044
13. Proxy Voting. The City shall direct the Custodian in voting of all proxies and Adviser shall have no responsibility in respect of the voting of proxies.
14. Assignment. No party may assign this Agreement, in whole or in part, nor delegate except as contemplated herein all or part of the performance of duties required of it by this Agreement without the prior consent of the other party, and any attempted assignment or delegation without such consent shall be void.
15. Affiliates. Adviser shall disclose the names and addresses of: (i) Adviser; (ii) any entity that is a parent of, or owns a controlling interest in, Adviser; (iii) any entity that is a subsidiary of, or in which a controlling interest is owned by, Adviser; (iv) any persons who have an ownership or distributive income share in Adviser that is in excess of 5%; or (v) any persons who serve as executive officers of Adviser. Such disclosure shall be provided in Schedule A to this Agreement, which is attached hereto and incorporated herein.
16. Execution of Originals. This Agreement may be executed in two or more counterparts.
17. No Waiver. A party’s failure at any time to enforce any of the provisions of this Agreement or any right with respect thereto, will not be construed to be a waiver of such provision or right, or to affect the validity of this Agreement. The exercise or non-exercise by a party of any right under the terms or covenants herein shall not preclude or prejudice the exercising thereafter of the same or other rights under this Agreement.
18. Legality. If any provision of this Agreement shall be held invalid, illegal or unenforceable, the validity, legality or enforceability of the other provisions of this Agreement shall not be affected, and there shall be deemed substituted for the provision at issue a valid, legal and enforceable provision as similar as possible to the provision at issue.
19. Related Activities. The parties acknowledge Adviser’s existing agreement with the City to provide financial advisor services with respect to the City’s debt management and debt issuance.
20. Appropriation. Any amount of compensation due according to the terms of this Agreement for which an appropriation is required and for which no appropriation has been authorized by the Lawrence City Commission shall not be due and payable and this Agreement shall become null and void as to such compensation unless and until the required appropriation is made.
21. Adviser Certifications, Representations and Acknowledgements. Adviser hereby certifies, represents, and acknowledges as follows:
a. Adviser (i) is registered as an “investment adviser” under the Investment Advisers Act of 1940 as amended (the “Advisers Act”); (ii) will promptly advise the City if at any time during the term of this Agreement Adviser ceases being so registered; and (iii) has delivered to the City a copy of Part II of its Form ADV or comparable Brochure pursuant to the Advisers Act;
b. Adviser is a fiduciary with respect to the assets it manages pursuant to this Agreement;
c. Prior to the execution of this Agreement, Adviser has disclosed to the City any action, event or occurrence that would be reportable in Section 11 of Adviser’s next ADV filing with the Securities and Exchange Commission;
d. Adviser and members: (i) are not legally prohibited from contracting with the City and (ii) have no public or private interest, direct or indirect, and shall not acquire directly or indirectly any such interest, which does or may conflict in any manner with the performance of Adviser’s obligations under this Agreement;
e. Adviser did not retain a person or entity to influence (i) the outcome of the investment decision made by the City with respect to Adviser or (ii) the procurement of investment advice or services by the City with respect to Adviser, for compensation, contingent in whole or in party, upon the decision or procurement; and
f. Adviser is duly authorized and fully empowered to execute, deliver and perform this Agreement.
IN WITNESS WHEREOF, the parties hereto, have executed this Agreement as of the day and year first above written.
[signature blocks]
SCHEDULE A—ADVISER NAME, ADDRESS AND OWNERSHIP
Columbia Capital Management, LLC
6330 Lamar, Suite 200
Overland Park, Kansas 66202
Dennis Lloyd 40%
Jeff White 40%
Courtney Shea 20%
SCHEDULE B—CITY OFFICIALS AUTHORIZED TO TAKE ACTION UNDER THIS AGREEMENT
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