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CITY COUNCIL AGENDA ITEM NO. 4

Meeting Date: June 14, 2005

Subject/Title: Adopt a resolution approving renewal of the City’s contract with PFM Asset Management, LLC

Prepared by: Gail Leech, Management Analyst

Submitted by: Pamela Ehler, Director of Finance and Information Systems

RECOMMENDATION
Adopt a resolution approving renewal of the City’s contract with PFM Asset Management, LLC.

PREVIOUS ACTION
On July 25, 1991, the City entered into an agreement with Public Financial Management to provide investment advice and management of City Funds.

While the City’s Investment Policy is updated annually, the contract with PFM has not been renewed or updated in 14 years.

BACKGROUND
The Government Code 53601(n) requires the City’s Investment Policy to be reviewed annually by the City Council at a public meeting (Section XII), and delegate the investment management responsibility to the Treasurer for a one-year period. Delegation of the investment management is included within the Policy under (Section V).

FISCAL IMPACT
For services provided by PFM pursuant to this Agreement, the City shall pay PFM an annual fee, in monthly installments, based on the daily net assets under management at an annual rate of 12 basis points (0.12%) on the first $15 million, 11 basis points (0.11%) on the next $35 million, 10 basis points (0.10%) on the next $50 million, and 9 basis points (0.09% on assets over $100 million. Currently monthly invoices average $12,000 per month. Based on our current level of investments, this new contract will save the City approximately $1,900 per month.

Attachments
Resolution
Contract

RESOLUTION NO.

ADOPT A RESOLUTION APPROVING RENEWAL OF THE CITY’S CONTRACT WITH PFM ASSET MANAGEMENT, LLC

WHEREAS, on July 25, 1991, the City entered into an agreement with Public Financial Management to provide investment management of City Funds.

WHEREAS, while the City’s Investment Policy is updated annually, the contract with PFM has not been renewed or updated in 14 years; and

WHEREAS, the Government Code 53601(n) requires the City’s Investment Policy to be reviewed annually by the City Council at a public meeting (Section XII), and delegate the investment management responsibility to the Treasurer for a one-year period. Delegation of the investment management is included within the Policy under (Section V); and

NOW, THEREFORE BE IT RESOLVED that a resolution is approved renewing of the City’s contract with PFM Asset Management, LLC.

PASSED, APPROVED AND ADOPTED by the City Council of the City of Brentwood at a regular meeting held on the 14th day of June 2005 by the following vote:

AGREEMENT FOR PROFESSIONAL SERVICES

THIS AGREEMENT, made and entered into this 14 day of June, 2005 by and between the CITY OF BRENTWOOD, a municipal corporation existing under the laws of the State of California, hereinafter referred to as “City”, and PFM Asset Management LLC, a Delaware Limited Liability Company hereinafter referred to as "Investment Advisor.”

RECITALS

A. City desires certain investment advisory services in connection with the work referred to as the City’s Investment Program (the "Project").

B. City desires to engage Investment Advisor to provide these services by reason of its qualifications and experience performing such services and Investment Advisor has offered to provide the required services on the terms and in the manner set forth herein.

C. Investment Advisor represents that it is fully licensed and qualified with all professional skills necessary to perform the services described in this Agreement and has special expertise in the performance of governmental investing services for public agencies of similar scope and complexity as the Services to be performed under this Agreement.

NOW, THEREFORE, City and Investment Advisor agree as follows:

SECTION 1 – SCOPE OF SERVICES

The scope of services subject to this agreement and to be performed by Investment Advisor for the Project is described in Exhibit “A”, Scope of Services, attached hereto and incorporated herein.

SECTION 2 – INVESTMENT ADVISOR'S REPRESENTATIONS AND RESPONSIBILITIES

A. Investment Advisor acknowledges that in entering into this agreement the City is relying upon Investment Advisor's special skills and experience to do and perform the services in accordance with best standards of professional practice in the financial investments for public projects of similar size, scope and complexity. Investment Advisor agrees to perform the services in accordance with these standards. The acceptance of Investment Advisor's services by City does not operate as a release of Investment Advisor from these obligations.

B. Investment Advisor accepts the relationship of trust and confidence established between it and City by this Agreement. Investment Advisor shall use its best efforts, skill, judgment, and abilities to assist and work with City to perform the Services, to produce the necessary sound financial investment advice, and to further the interests of City in accordance with City's requirements and procedures, each in accordance with professional standards that apply to Investment Advisor.

C. Investment Advisor shall perform the Services in full compliance with applicable federal, state and local laws and regulations in effect at the time such services are rendered (collectively, "Applicable Laws").

D. Investment Advisor shall be responsible for employing or engaging all persons necessary to perform the Services. All of Investment Advisor's staff shall be qualified by training and experience to perform their assigned tasks. Investment Advisor shall give its personal attention to the fulfillment of the provisions of this Agreement by all of its employees and sub-Investment Advisors, if any, and shall keep the Services under its control. If any employee or sub-Investment Advisor of Investment Advisor fails or refuses to carry out the provisions of this Agreement or appears to be incompetent or to act in a disorderly or improper manner, he or she shall be discharged immediately from the work under this Agreement on demand of City.

E. One or more members or employees of Investment Advisor's firm are licensed by the State of California to perform their services and these services will be performed by them or under their supervision.

F. Investment Advisor's services are unique and personal. Investment Advisor shall not assign or transfer any of its interest or obligation under this Agreement without the City's written consent. Investment Advisor shall not subcontract its duties under this Agreement without the City's written consent. No sub-Investment Advisor will be recognized by City as such; rather, all sub-Investment Advisors are deemed to be the agents of Investment Advisor, and Investment Advisor agrees to be responsible for their performance.

SECTION 3 - INDEPENDENT CONTRACTOR

The services to be provided to the City as set forth in this Agreement shall be provided by Investment Advisor as an independent contractor as defined in Labor Code 3353, under the control of the City as to the result of the work but not the means by which the result is accomplished, and nothing herein contained shall be construed to make Investment Advisor an agent or employee of the City while providing these services. Investment Advisor shall be entitled to no other benefits or compensation except as provided in this Agreement.

SECTION 4 - DUTIES OF INVESTMENT ADVISOR

A. Investment Advisor's Services shall be furnished as described below and as more particularly described in Exhibit “A”, Scope of Services. Any changes in the Scope of Services must be approved in advance, in writing, by the City Manager or her designee, or if verbally requested by City, confirmed in writing by Investment Advisor within five (5) working days.

B. Investment Advisor shall be responsible for the professional quality, technical accuracy and coordination of all Services. Investment Advisor shall, without additional compensation, correct or revise any errors or deficiencies in its Services.

C. Investment Advisor shall furnish City with every reasonable opportunity for City to ascertain that the Services are being performed in accordance with the requirement and intentions of this Agreement.

SECTION 5 - TERM, PROGRESS AND COMPLETION

A. The term of this Agreement shall begin on June 14, 2005. This agreement may be terminated by the City in the event of any material breach of its terms immediately upon notice by certified mail, return receipt requested. This agreement may be terminated by the City, on not less than thirty (30) days written notice to PFM. PFM may terminate this agreement immediate upon any material breach of its terms by the City, or at any time after one year upon thirty (30) days written notice.
B. Investment Advisor shall promptly commence performance of the Services upon execution of this Agreement, and shall diligently pursue performance of the Services until completion.

SECTION 6 - PAYMENT

A. Basic Services.

1. City shall pay Investment Advisor as follows:

For services provided by PFM pursuant to this Agreement, the City shall pay PFM an annual fee, in monthly installments, based on the daily net assets under management at an annual rate of 12 basis points (0.12%) on the first $15 million, 11 basis points (0.11%) on the next $35 million, 10 basis points (0.10%) on the next $50 million, and 9 basis points (0.09% on assets over $100 million.

2. Payments for various items of service may be modified with approval of City so long as there is no change in the maximum contract amount.

B. Reimbursable Expenses. PFM shall furnish at its own expense all necessary administrative services, office space, equipment, clerical personnel, telephone and other communication facilities, investment advisory facilities, and executive and supervisory personnel for management the investments.

C. If CITY disagrees with any portion of a billing, the CITY shall promptly notify Investment Advisor of the disagreement, and the CITY and the Investment Advisor shall attempt to resolve the disagreement. CITY’S payment of any amounts shall not constitute a waiver of any disagreement and CITY shall promptly pay all amounts not in dispute.

D. Investment Advisor shall maintain complete and accurate records of the number of hours worked by persons and Reimbursable Expenses on the Project during each phase under this Agreement. All such records shall be maintained on a generally accepted accounting basis and shall be clearly identified and readily accessible. CITY shall have the right to examine and copy such books and records at all times. Investment Advisor shall permit the CITY to examine and audit those books and records, shall permit the CITY to make copies of those books and records, and shall permit the CITY to inspect all work data, documents, proceedings and activities related to this Agreement for a period of three (3) years from the date of final payment under this Agreement. All accounting records shall provide an understandable breakdown of costs charged to this Agreement.

SECTION 7 - CONFLICT OF INTEREST

Investment Advisor understands that its professional responsibility is solely to City. Investment Advisor warrants that it presently has no interest, and will not acquire any direct or indirect interest, that would conflict with its performance of this Agreement. Investment Advisor shall not knowingly, and shall take reasonable steps to ensure that it does not, employ a person having such an interest in the performance of this Agreement. If after employment of a person, Investment Advisor discovers that it has employed a person with a direct or indirect interest that would conflict with its performance of this Agreement, Investment Advisor shall promptly disclose the relationship to the City and take such action as the City may direct to remedy the conflict.

SECTION 8 - TERMINATION

A. If Investment Advisor at any time refuses or neglects to prosecute its Services in a timely fashion or in accordance with the Project schedule, or is adjudicated a bankrupt, or commits any act of insolvency, or makes an assignment for the benefit of creditors without City's consent, or fails to make prompt payment to persons furnishing labor, equipment, or materials, or fails in any respect to properly and diligently prosecute its services, or otherwise fails to perform fully any and all of the agreements herein contained, Investment Advisor shall be in default.

B. If Investment Advisor fails to cure the default within seven (7) days after written notice thereof, City may, at its sole option, take possession of any Documents or other materials (in paper and electronic form) prepared or used by Investment Advisor in connection with the Project and (1) provide any such work, labor, or materials as may be necessary to overcome the default and deduct the cost thereof from any money then due or thereafter to become due to Investment Advisor under this Agreement; or (2) terminate Investment Advisor's right to proceed with this Agreement.

C. In the event City elects to terminate, City shall have the right to immediate possession of all Documents and work in progress prepared by Investment Advisor, whether located at the Project, at Investment Advisor's place of business, or at the offices of a Investment Advisor, and may employ any other person or persons to finish the design work and provide the materials therefor. In case of such default termination, Investment Advisor shall not be entitled to receive any further payment under this Agreement until the Project is completely finished. At that time, if the unpaid balance of the amount to be paid under this Agreement exceeds the expenses incurred by City in obtaining investment services for the Project, such excess shall be paid by City to Investment Advisor, but, if such expense shall exceed such unpaid balance, then Investment Advisor shall promptly pay to City the amount by which such expense exceeds such unpaid balance. The expense referred to in the last sentence shall include expenses incurred by City in causing the services called for under this Agreement to be provided by others, for attorneys' fees, and for any costs or damages sustained by City by reason of Investment Advisor's default or defective work.

D. In addition to the foregoing right to terminate for default, City reserves the absolute right to terminate this Agreement without cause, upon 72-hours' written notice to Investment Advisor. In the event of termination without cause, Investment Advisor shall be entitled to payment in an amount not to exceed the Maximum Contract Amount, which shall be calculated as follows: (1) Payment for Services then satisfactorily completed and accepted by City, plus (2) Payment for Additional Services satisfactorily completed and accepted by City, plus (3) Reimbursable Expenses actually incurred by Investment Advisor, as approved by City. The amount of any payment made to Investment Advisor prior to the date of termination of this Agreement shall be deducted from the amounts described in (1), (2) and (3) above. Investment Advisor shall not be entitled to any claim or lien against City or the Project for any additional compensation or damages in the event of such termination and payment. In addition, the City's right to withhold funds under Section 6(E) shall be applicable in the event of a termination for convenience.

E. If this Agreement is terminated by City for default and it is later determined that the default termination was wrongful, such termination automatically shall be converted to and treated as a termination for convenience under this Article and Investment Advisor shall be entitled to receive only the amounts payable hereunder in the event of a termination for convenience.

SECTION 9- OWNERSHIP OF DOCUMENTS

A. The plans, specifications, estimates, programs, reports, models, and other material prepared by or on behalf of Investment Advisor under this Agreement including all drafts and working documents, and including electronic and paper forms (collectively the "Documents"), shall be and remain the property of the City, whether the Services or Project is completed or not. Investment Advisor shall deliver all Documents to City upon (1) the substantial completion date of the Services, (2) the date of termination of this Agreement for any reason, or (3) at any time requested by City, upon five (5) days written notice.

B. The Documents may be used by City and its agents, employees, representatives, and assigns, in whole or in part, or in modified form, for all purposes City may deem advisable, without further employment of or payment of any compensation to Investment Advisor; provided, however, that if this Agreement is terminated for any reason prior to completion of the Project and if under such circumstances City uses, or engages the services of and directs another Investment Advisor to use, such documents, CITY agrees to hold Investment Advisor harmless from any and all liability, costs, and expenses (including reasonable legal fees and disbursements), relative to claims arising out of matters and/or events which occur subsequent to the termination of this Agreement as a result of causes other than the fault or negligence of Investment Advisor, or anyone for whose acts it is responsible, in preparation of the Documents. Investment Advisor shall not be responsible for deficiencies solely attributable to modifications to the Documents performed by others, or that arise from use of the Documents in connection with a project or site other than that shown in the Documents.

C. All reports, information, data, and exhibits prepared or assembled by Investment Advisor in connection with the performance of its services pursuant to this Agreement are confidential until released by the City to the public, and the Investment Advisor shall not make any of these documents or information available to any individual or organization not employed by the Investment Advisor or the City without the written consent of the City before any such release.

SECTION 10 – INDEMNITY

A. Claims for Professional Liability – Investment Advisor shall, with respect to all Services performed in connection with this Agreement, defend, indemnify, and hold the City of Brentwood, its elected and appointed officers, employees, and volunteers harmless from and against any and all claims, liability, loss, damage, costs, or expenses, including reasonable attorneys' fees, awards, fines, or judgments (collectively, "Claims"), arising from or relating to negligent acts, errors, or omissions in the performance of professional services by Investment Advisor, its Investment Advisors, agents or employees. Investment Advisor shall not be obligated under this Agreement to indemnify City to the extent that the damage is caused by the sole or active negligence or willful misconduct of City, its agents or employees.

B. Claims for Other Liability – Investment Advisor shall, with respect to all Services performed in connection with this Agreement, defend, indemnify, and hold the City of Brentwood, its elected and appointed officers, employees, and volunteers harmless from and against any and all liens and Claims by firms or individuals claiming through Investment Advisor, and all Claims for compensation, the death or bodily injury to persons, injury to property, or other loss, damage, or expense arising from or related to the Services of Investment Advisor , its subcontractors, agents or employees. Investment Advisor shall not be obligated under this Agreement to indemnify City to the extent that the damage is caused by the sole or active negligence or willful misconduct of City, its agents or employees.

C. Claims involving intellectual property - In addition to the obligations set forth in (A) and (B) above, Investment Advisor shall indemnify, defend, and hold the City of Brentwood, its elected and appointed officers, employees, and volunteers, harmless against any Claim is alleged in which a violation of intellectual property rights, including but not limited to copyright or patent rights, that arises out of or relates to the Services of Investment Advisor, its subcontractors, agents or employees. Investment Advisor shall not be obligated under this Agreement to indemnify City to the extent that the damage is caused by the sole or active negligence or willful misconduct of City, its agents or employees.

SECTION 11 – INSURANCE

A. Investment Advisor shall, at all times it is performing Services under this Agreement, provide and maintain insurance in the following types and with limits no less than the following amounts:

1. Commercial General Liability Insurance, occurrence form, with a limit of not less than $2,000,000 each occurrence. If such insurance contains a general aggregate limit, it shall apply separately to this Agreement or be no less than two (2) times the occurrence limit;

2. Automobile Liability Insurance, occurrence form, with a limit of not less than $1,000,000.00 each occurrence. Such insurance shall include coverage for owned, hired, and non-owned automobiles.

3. Professional Liability (errors and omissions) insurance in the minimum amount of $2,000,000.00 aggregate.

4. Workers Compensation in at least the minimum statutory limits.

5. Employers Liability Insurance, with minimum limits of $1 million per occurrence.

B. General Provisions:

1. Investment Advisor's general and automobile liability insurance policies shall be endorsed to name the City of Brentwood, its elected and appointed officers, employees, and volunteers as additional insureds with respect to this Agreement and the performance of services in this Agreement. The coverage shall contain no special limitations on the scope of its protection to the above-designated insureds except for Workers Compensation and errors and omissions insurance.

2. Investment Advisor's general and automobile liability insurance policies shall be endorsed so that they are primary with respect to any insurance or self-insurance programs of CITY, its officers, employees, and volunteers.

3. Before performing any services under this Agreement, Investment Advisor shall provide evidence of the required coverage and limits, and properly executed policy endorsements satisfactory to City.

4. No changes in insurance may be made without the written approval of the City.

SECTION 12 - WAIVERS

The waiver by either party of any breach or violation of any term, covenant, or condition of this agreement or of any provisions of any ordinance or law shall not be deemed to be a waiver of such term, covenant, condition, ordinance or law or of any subsequent breach or violation of same or of any other term, covenant, condition, ordinance or law or of any subsequent breach or violation of the same or of any other term, condition, ordinance, or law. The subsequent acceptance by either party of any fee or other money which may become due hereunder shall not be deemed to be a waiver of any preceding breach or violation by the other party of any term, covenant, or condition of this agreement of any applicable law or ordinance.

SECTION 13 - COSTS AND ATTORNEYS FEES

Attorney fees in an amount not exceeding Eighty Five Dollars ($85.00) per hour per attorney, and in total amount not exceeding Five Thousand Dollars ($5,000.00), shall be recoverable as costs (by the filing of a cost bill) by the prevailing party in any action or actions to enforce the provisions of the agreement. The above $5,000 limit is the total of attorneys’ fees recoverable whether in the trial court, appellate court, or otherwise, and regardless of the number of attorneys, trials, appeals, or actions. It is the intent of this agreement that neither party shall have to pay the other more than $5,000 for attorneys’ fees arising out of an action, or actions to enforce the provisions of this agreement.

SECTION 14 - NON-DISCRIMINATION

Investment Advisor warrants that it is an Equal Opportunity Employer and shall comply with applicable regulations governing equal employment opportunity. Neither Investment Advisor nor any of its subcontractors shall discriminate in the employment of any person because of race, color, national origin, ancestry, physical handicap, medical condition, marital status, sex, or age, unless based upon a bona fide occupational qualification pursuant to the California Fair Employment and Housing Act.

SECTION 15 - MEDIATION

Should any dispute arise out of this Agreement, either party may request that it be submitted to mediation. The parties shall meet in mediation within 30 days of a request. The cost of mediation shall be borne equally by the parties. Neither party shall be deemed the prevailing party. No party shall be permitted to file a legal action without first requesting mediation and making a good faith attempt to reach a mediated settlement. The mediation process, once commenced by a meeting with the mediator shall last until agreement is reached by the parties but not more than 60 days, unless the maximum time is extended by the parties.

SECTION 16 - LITIGATION

Investment Advisor shall testify at City's request if litigation is brought against City in connection with Investment Advisor's services under this agreement. Unless the action is brought by Investment Advisor, or is based upon Investment Advisor's actual or alleged negligence or other wrongdoing, City shall compensate Investment Advisor for time spent in preparation for testimony, testimony, and travel at Investment Advisor's standard hourly rates at the time of actual testimony.

SECTION 17 - NOTICES

All notices hereunder shall be given in writing and mailed, postage prepaid, addressed as follows:

To City: City of Brentwood
150 City Park Way
Brentwood, CA 94513

To Investment Advisor: PFM Asset Management, LLC
50 California Street
Suite 2300
San Francisco, CA 94111

SECTION 18 – AGREEMENT CONTAINS ALL UNDERSTANDINGS; AMENDMENT

This document represents the entire and integrated agreement between City and Investment Advisor and supersedes all prior negotiations, representations, and agreements, either written or oral.

This document may be amended only by written instrument signed by both City and Investment Advisor.

All Exhibits referenced in or attached to this Agreement are incorporated herein by this reference.

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SECTION 19 – GOVERNING LAW

This agreement shall be governed by the laws of the State of California.

IN WITNESS WHEREOF, CITY and INVESTMENT ADVISOR have executed this agreement the day and year first above written.


CITY OF BRENTWOOD INVESTMENT ADVISOR
________________________________ _____________________________
DONNA LANDEROS, City Manager
Title: ______________________

ATTEST:
________________________________
Cynthia Garcia, Acting City Clerk

APPROVED AS TO FORM:
________________________________
Thomas R. Curry, Interim City Attorney

EXHIBIT "A"

SCOPE OF SERVICES

INVESTMENT ADVISORY AGREEMENT

THIS AGREEMENT, entered into as of the ______ day of __________ in the year of 2005, by and between the CITY OF BRENTWOOD a California public agency (hereinafter "the City"), and PFM ASSET MANAGEMENT LLC, a Delaware limited liability company with an office in San Francisco, CA (hereinafter "PFM" or the "Investment Advisor").

W I T N E S S E T H

WHEREAS, the City has funds available for investment purposes (the “Initial Funds”) for which it intends to conduct an investment program; and

WHEREAS, the City desires to avail itself of the experience, sources of information, advice, assistance and facilities available to PFM; to have PFM undertake certain duties and responsibilities; and to perform certain services as investment advisor on behalf of the City, as provided herein; and

WHEREAS, PFM is willing to provide such services on the terms and conditions hereinafter set forth;

NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, it is agreed as follows:

1. SERVICES OF ADVISOR.
PFM will provide investment management of the Initial Funds and such other funds as the City may from time to time assign by written notice to PFM (collectively the "Managed Funds"). In connection therewith, PFM will provide investment research and supervision of the City's Managed Funds investments and conduct a continuous program of investment, evaluation and, when appropriate, sale and reinvestment of the City's Managed Funds assets. PFM shall continuously monitor investment opportunities and evaluate investments of the City’s Funds. PFM shall furnish the City with statistical information and reports with respect to investments of the Managed Funds. PFM shall place all orders for the purchase, sale, loan or exchange of portfolio securities for the City's account with brokers or dealers recommended by PFM and/or the City, and to that end PFM is authorized as agent of the City to give instructions to the depository designated by the City as its custodian as to deliveries of securities and payments of cash for the account of the City. In connection with the selection of such brokers and dealers and the placing of such orders, PFM is directed to seek for the City the most favorable execution and price, the determination of which may take into account, subject to any applicable laws, rules and regulations, whether statistical, research and other information or services have been or will be furnished to PFM by such brokers and dealers. The depository designated by the City shall have custody of cash, assets and securities of the City. PFM shall not take possession of or act as custodian for the cash, securities or other assets in the Managed Funds and shall have no responsibility in connection therewith. Authorized investments shall include only those investments which are currently authorized by the California Government Code and bond covenants and as supplemented by such other written instructions as may from time to time be provided by the City to PFM. PFM shall be entitled to rely upon the City's written advice with respect to anticipated drawdowns of Managed Funds. PFM will observe the instructions of the City with respect to broker/dealers who are approved to execute transactions involving the City's Managed Funds and in the absence of such instructions will engage broker/dealers which PFM reasonably believes to be reputable, qualified and financially sound.

2. COMPENSATION.
(a) For services provided by PFM pursuant to this Agreement, the City shall pay PFM an annual fee, in monthly installments, based on the daily net assets under management at an annual rate of 12 basis points (0.12%) on the first $15 million, 11 basis points (0.11%) on the next $35 million, 10 basis points (0.10%) on the next $50 million, and 9 basis points (0.09%) on assets over $100 million.

(b) PFM will bill the City monthly for service performed under this Agreement, said bill to include a statement indicating the basis upon which the fee was calculated. The City shall pay to PFM the amount payable pursuant to this Agreement not later than on the 15th day of the month following the month during which PFM's statement was rendered.

(c) Assets invested by PFM under the terms of this Agreement may from time to time be invested in a money market mutual fund or local government investment pool managed by PFM (either a Pool), or in individual securities. Average daily net assets subject to the fees described in this paragraph shall not take into account any funds invested in the Pool. Expenses of the Pool, including compensation for PFM and the Pool custodian, are described in the relevant prospectus or information statement and are paid from the Pool.

(d) If and to the extent that the City shall request PFM to render services other than those to be rendered by PFM hereunder, such additional services shall be compensated separately on terms to be agreed upon between PFM and the City.

3. EXPENSES.
(a) PFM shall furnish at its own expense all necessary administrative services, office space, equipment, clerical personnel, telephone and other communication facilities, investment advisory facilities, and executive and supervisory personnel for managing the investments.

(b) Except as expressly provided otherwise herein, the City shall pay all of its own expenses including, without limitation, taxes, commissions, fees and expenses of the City's independent auditors and legal counsel, if any, brokerage and other expenses connected with the execution of portfolio security transactions, insurance premiums, fees and expenses of the custodian of the Managed Funds including safekeeping of funds and securities and the keeping of books and accounts.

4. RESPONSIBILITY OF PFM.
PFM hereby represents it is a registered investment advisor under the Investment Advisers Act of 1940. PFM shall immediately notify the City if at any time during the term of this Agreement it is not so registered or if its registration is suspended. PFM agrees to perform its duties and responsibilities under this Agreement with reasonable care.

5. CONFLICT OF INTEREST.
The City understands that PFM performs investment advisory services for various other clients which may include investment companies and/or commingled trust funds. The City agrees that PFM may give advice or take action with respect to any of its other clients which may differ from advice given or the timing or nature of action taken with respect to the City's Managed Funds accounts, so long as it is the policy of PFM, to the extent practical, to allocate investment opportunities to this account over a period of time on a fair and equitable basis relative to other clients. PFM shall not have any obligation to purchase, sell or exchange any security for the City's Managed Funds solely by reason of the fact that PFM, its principals, affiliates, or employees may purchase, sell or exchange such security for the account of any other client or for itself or its own accounts.

6. TERM.
This Agreement may be terminated by the City in the event of any material breach of its terms immediately upon notice by certified mail, return receipt requested. This Agreement may be terminated by the City, on not less than thirty (30) days written notice to PFM. PFM may terminate this Agreement immediately upon any material breach of its terms by the City, or at any time after one year upon thirty (30) days written notice.

7. SUSPENSIONS, COMPLAINTS.
PFM shall promptly notify the City in writing of any complaints or disciplinary actions filed against it, or any investment professional employed by it, who has performed any service with respect to the City's account in the 24 preceding months, by the Securities and Exchange Commission of the United States, the New York Stock Exchange, the American Stock Exchange, the National Association of Securities Dealers, any Attorney General or any regulatory agency or authority of any state of the United States, any department or agency or authority of the Government of the United States, or any governmental agency or authority regulating securities of any country in which PFM is doing business.

8. INDEPENDENT CONTRACTOR.
Except as described in Paragraph 1, PFM, its employees, officers and representatives, shall not be deemed to be employees, agents, partners, servants, and/or joint ventures of the City by virtue of this Agreement or any actions or services rendered under this Agreement.

9. BOOKS.
PFM shall maintain appropriate records of all its activities hereunder. PFM shall provide the City with a monthly statement showing deposits, withdrawals, purchases and sales (or maturities) of investments, earnings received, and the value of assets held on the last business day of the month. The statement shall be in the format and manner that is mutually agreed upon by PFM and the City.

10. PFM'S DISCLOSURE STATEMENT.
PFM warrants that it has delivered to the City, at least five business days prior to the execution of this Agreement, PFM's current Securities and Exchange Commission Form ADV, Part II (PFM's disclosure statement). The City acknowledges receipt of such disclosure statement at least five business days prior to the execution of this Agreement.

11. MODIFICATION.
This Agreement shall not be changed, modified, terminated or discharged in whole or in part, except by an instrument in writing signed by both parties hereto, or their respective successors or assigns.

12. SUCCESSORS AND ASSIGNS.
The provisions of this Agreement shall be binding on PFM and its respective successors and assigns, provided, however, that the rights and obligations of PFM may not be assigned without the prior written consent of the City.

13. APPLICABLE LAW.
This Agreement shall be construed, enforced, and administered according to the laws of the STATE OF CALIFORNIA PFM and the City agree that, should a disagreement arise as to the terms or enforcement of any provision of this Agreement, each party will in good faith attempt to resolve said disagreement prior to filing a lawsuit.

14. VALIDITY.
The invalidity in whole or in part of any provision of this Agreement shall not void or affect the validity of any other provision.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their authorized representatives as of the date set forth in the first paragraph of this Agreement.

PFM ASSET MANAGEMENT LLC

By:

Title:

CITY OF BRENTWOOD

By:

Title:

City Administration
City of Brentwood City Council
150 City Park Way
Brentwood, CA 94513
(925) 516-5440
Fax (925) 516-5441
E-mail allcouncil@brentwoodca.gov