MercerCTR057207ContractAPP.pdf

SCOPE OF WORK

Contract No.: CTR057207 Description: Investment Consulting Services: Illiquid Credit & Public Markets Projects

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A. ALL SERVICES

1. Contractor shall provide consulting and advisory services for the ASRS Investment Program in accordance with the provisions and requirements as stated in the Scope of Work.

2. Services rendered under this Contract shall comply with the ASRS Strategic Plan, the ASRS Board Governance Policy Handbook, SIP006, Strategic Asset Allocation Policy (SAAP) and the ASRS Investment Policy Statement.

B. INVESTMENT PROJECT CONSULTING

Contractor will perform the following on an as-needed basis:

1. Designate a senior private credit investment consultant with a minimum of ten (10) years’ experience related to the investments in the Investment Program to work extensively on the ASRS account. The designated senior private credit investment consultant will be expected to become thoroughly knowledgeable and up-to-date with the ASRS Credit Program, and to attend specified meetings. Consultant must be able to commit a sufficient amount of their available time to provide quality work while meeting all objectives and timelines established by ASRS staff.

2. Illiquid Credit Strategies

2.1. Perform due diligence and/or operational reviews of prospective investment managers primarily in illiquid credit strategies (i.e. private lending, distressed debt investing, etc.). Prospective investment managers will be located primarily in the U.S. and Europe and potentially in Asia.

2.1.1. Consultants will provide ASRS with a comprehensive due diligence report detailing the due diligence performed by the consultant on the prospective investment manager as outlined in Appendix 1 of SIP006.

2.1.1.1. The report will include a discussion of all topics relevant to ASRS’ decision to potentially hire the prospective manager.

2.1.1.2. The report will include the consultant’s recommendation as to the merits of ASRS hiring the prospective manager for the investment strategy.

2.1.1.3. The report will be delivered to ASRS within 60-75 calendar days of the assignment (unless otherwise mutually agreed upon by ASRS and the consultant).

2.1.2. Consultants will participate (either in-person or telephonically) in internal committee meetings of ASRS to discuss the due diligence performed, present the findings of the report and discuss the merits of ASRS hiring the prospective investment manager.

2.1.2.1. Perform ad-hoc consulting, including, but not limited to, due diligence on projects that may arise from time-to-time (i.e. evaluation of an investment opportunity).

3. Public Markets

3.1. Perform due diligence and/or operational reviews of prospective investment managers investing in publicly-traded equity and fixed income investment strategies in both the U.S. and international markets which could include equities, fixed income (i.e. high yield debt, leveraged loans, asset-backed securities, structured credit etc.) and multi-asset class strategies including hedge funds. Prospective investment managers will be located primarily in the U.S. and Europe and potentially in Asia.

3.1.1. Consultants will provide ASRS with a comprehensive due diligence report detailing the due diligence performed by the consultant on the prospective investment manager as outlined in Appendix 1 of SIP006.

SCOPE OF WORK

Description: Investment Consulting Services: Illiquid Credit & Public Markets Projects

3.1.1.1. The report will include a discussion of all topics relevant to ASRS’ decision to potentially hire the prospective manager.

3.1.1.2. The report will include the consultant’s recommendation as to the merits of ASRS hiring the prospective manager for the investment strategy.

3.1.1.3. The report will be delivered to ASRS within 60-75 calendar days of the assignment (unless otherwise mutually agreed to by ASRS and the consultant).

3.1.2. Consultants will participate (either in-person or telephonically) in internal committee meetings of ASRS to discuss the due diligence performed, present the findings of the report and discuss the merits of ASRS hiring the prospective investment manager.

3.2. Assist in searches for prospective managers in an asset class selected by ASRS (e.g., a search for a high yield bond manager).

3.2.1. Consultants will help ASRS identify, screen, interview and rank potential managers that ASRS may consider hiring.

3.3. Perform ad-hoc consulting, including, but not limited to, due diligence on projects that may arise from time-to-time.

4. Contractor shall provide any other illiquid credit or public markets investment consulting services as requested by

ASRS.

All terms not defined herein shall have the meaning given to them in the Uniform Terms and Conditions.

BEST AND FINAL OFFER

ATTACHMENT C: Pricing Schedule ARIZONA STATE

RETIREMENT SYSTEM

3300 N Central Ave

14th Floor Phoenix, AZ 85012

Investment Consulting Services: Illiquid Credit & Public Markets Projects, Private Equity, and Real Estate Investment Consulting Services

Solicitation Code: BPM003473

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The ASRS, at its discretion, may award contracts for all or any portion of the services for which an Offeror has provided a response.

Offeror must complete the Items tab in APP by entering $1 in the Unit Price field.

State pricing below for the services described in the Scope of Work. Pricing may be provided as an hourly billable rate in Section 1 and/or by task/project/retainer in Section 2.

1. PRICING BY HOURLY RATE

In addition to Offeror's key personnel assigned under a Contract, ASRS assumes a complement of Offeror staff may also be assigned to and work on a task or service requested by ASRS. Offeror should categorize staff by general titles/classifications and then provide the maximum (highest) hourly rate within that category that Offeror is proposing to invoice the ASRS. While Offeror may bill ASRS less than the max rate in any category of staff, it may not bill more than the rate listed on this Pricing Schedule.

All pricing must be inclusive of travel.

Example:

Indicate “N/A” below if not bidding on a particular Scope of Work Service.

Service Max Hourly

Rate Year 1 Rate

Max Hourly Rate

3 Year Rate Guarantee

Max Hourly Rate

5 Year Rate Guarantee

Illiquid Credit & Public Markets Investment Project Consulting Services

Rate 1 (title or classification): Partner $300 $300 $300

Rate 2 ( title or classification ): Associate $250 $250 $250

Service Hourly Rate Year 1 Rate

Hourly Rate 3 Year Rate Guarantee

Hourly Rate 5 Year Rate Guarantee

Illiquid Credit & Public Markets Investment Project Consulting Services

Rate 1 (title or classification):_Partner / Lead Consultant

$700 $700 $700

Rate 2 ( title or classification ):_Principal $400 $400 $400

Rate 3 ( title or classification ):_Senior Associate $350 $350 $350

Rate 4 ( title or classification ):_Associate $275 $275 $275

Private Equity Investment Consulting Services

Rate 1 (title or classification):_Partner / Lead Consultant

$700 $700 $700

RETIREMENT SYSTEM

3300 N Central Ave

14th Floor Phoenix, AZ 85012

Investment Consulting Services: Illiquid Credit & Public Markets Projects, Private Equity, and Real Estate Investment Consulting Services

Solicitation Code: BPM003473

Page

Additional Comments:

2. PRICING BY TASK/PROJECT OR FLAT FEE

If the firm’s pricing structure is organized by task/project or any other fixed fee method it should be included in this section. If the task or project is billed based on hourly rates, provide those rates below a shown in Section 1 of this Pricing Schedule. If the hourly rates are the same as in Section 1, indicate as such in lieu of duplicating the rates below. ASRS reserves the right to award a contract based on any pricing structure submitted as part of the offer.

A. Project-based Private Equity Fund Due Diligence: $40,000 to $50,000 depending on the scope and complexity of the project.

B. Project-based Private Equity Co-investment Due Diligence: $50,000

Co-investment due diligence project pricing is higher than standard fund due diligence pricing as co-investments typically involve much shorter timeframes around completion of work and may entail more detailed analysis of deal metrics.

C. Project-based Illiquid Credit Consulting Services: $40,000 to $50,000 depending on the scope and complexity of the project.

D. Project-based Public Markets Consulting Services: $40,000 to $75,000 depending on the scope and complexity of the project.

E. Private Equity Investment Consulting Services: For the provision of the full scope of private equity investment consulting services within the RFP, Mercer proposes an annual fixed retainer fee as follows:

Year Annual Retainer Fee

Year 1 $650,000

Year 2 $675,000

Year 3 $700,000

Rate 2 ( title or classification ):_Principal $400 $400 $400

Rate 3 ( title or classification ):_Senior Associate $350 $350 $350

Rate 4 ( title or classification ):_Associate $275 $275 $275

Real Estate Investment Consulting Services

Rate 1 (title or classification):______________ N/A N/A N/A

Rate 2 ( title or classification ):_____________ N/A N/A N/A

Rate 3 ( title or classification ):_____________ N/A N/A N/A

Rate 4 ( title or classification ):_____________ N/A N/A N/A

RETIREMENT SYSTEM

3300 N Central Ave

14th Floor Phoenix, AZ 85012

Investment Consulting Services: Illiquid Credit & Public Markets Projects, Private Equity, and Real Estate Investment Consulting Services

Solicitation Code: BPM003473

Page

Year 4 $725,000

Year 5 $750,000

3. OPTIONAL/ALTERNATIVE PRICING

The Offeror may propose alternative pricing structures, including multi-year pricing, or fees organized in a different way that has been requested above provided that pricing in Section 1 or 2 above has been provided.

The Offeror has full discretion in what it may propose, however, the ASRS is under no obligation to accept such proposals.

If a project does not fit within in the project fee or retainer fee schedules specified in Section 2, Mercer will use the billing rates specified in Section 1 (or such lower rates as we may choose to quote from time to time) to scope out the project fee, and we will agree to bill for that project on a “not to exceed without prior written consent” basis.

4. OTHER FEES

Provide pricing for any and all other fees that are not included in the rates above. The Offeror should also disclose any additional fees associated with subcontractor arrangements that involve the services provided to ASRS and are not included in attachments.

N/A

5. PAYMENT DISCOUNT OPTIONS

For the services specified herein, the following discounts apply:

N/A

SPECIAL TERMS AND CONDITIONS

Description: Investment Consulting Services: Illiquid Credit & Public Markets Projects

The Special Terms and Conditions modify the Uniform Terms and Conditions. It can modify them by replacing, deleting, appending to, or revising the text of an existing provision or by inserting a new paragraph into an existing article. No other document modifies or adds to the Uniform Terms and Conditions, except as may subsequently be otherwise and expressly agreed and incorporated by Contract Amendment.

1. DEFINITION OF TERMS

All other terms not defined herein shall have the meaning given to them in the Uniform Terms and Conditions.

1.1. “Acceptance of Offer” means the Attachment labeled “Offer and Acceptance” bearing the State contract number once the Procurement Officer has signed it to signify the (1) formal acceptance of the Offer and (2) the formation of the Contract. For clarity of intent, the foregoing is not to be confused with the term ‘acceptance’ used throughout the Contract in the context of delivery, inspection, etc., with respect to Materials or Services.

1.2. “Order” means the instrument by which ASRS authorizes Contractor to perform some or all of the Work. Whether the Contract will have one Order or many Orders depends on the scope of the Contract and how the ASRS will use it. Any of the following is to be construed as being an “Order”:

1.2.1. A purchase order;

1.2.2. A task order or service order;

1.2.3. Written correspondence or instruction.

1.3. “Subcontractor” has the meaning given in A.R.S. § 41-2503(38), which, for convenience of reference only, is “… a person who contracts to perform work or render service to … [C]ontractor or to another [S]ubcontractor as a part of a contract with a state governmental unit. . . .” The Contract is to be construed as “a contract with a state governmental unit” for purposes of the definition. For clarity of intent, a person carrying out any element of the Work is a Subcontractor from the moment they first carry out that element of the Work regardless of whether or not a Subcontract exists then or subsequently.

1.4. “Work” means the totality of the materials and the Services and all the acts of administration, creation, production, and performance necessary to fulfill and incidental to fulfilling all of Contractor's obligations and duties under the Contract in conformance with the Contract and applicable laws.

2. CONTRACT INTERPRETATION

2.1. Usage. Where the Contract:

2.1.1. assigns obligations to Contractor, any reference to “Contractor” is to be construed to be a reference to Contractor and all Subcontractors, whether they are first-tier subcontractors, sub-subcontractors, suppliers, sub-suppliers, consultants, or sub-consultants, as well as all of Contractor’s and the Subcontractors’ respective agents, representatives, and employees in every instance unless the context plainly requires that it is be a reference only to Contractor as apart from Subcontractors;

2.1.2. uses the permissive “may” with respect to a party’s actions, determinations, etc., the term is to be interpreted as in A.A.C. R2-7-101(31) [Definitions]. For clarity of intent, any right given to ASRS using “ASRS may” or a like construction denotes discretion and freedom to act so far as any regulatory or operative constraints permit in the relevant circumstances, provided that: (a) where written “may, at its discretion,” the discretion extends to whatever is most advantageous to ASRS; and (b) where written only as “may,” the discretion is constrained by what is fair, reasonable, and as accommodating of the respective best interests of both parties as practicable under the circumstances;

2.1.3. uses the imperative “shall” with respect to a party’s actions, duties, etc., the term is to be interpreted as in A.A.C. R2-7-101(43) [Definitions]. Conversely, the phrase “shall not” is to be interpreted as an imperative prohibition.

Description: Investment Consulting Services: Illiquid Credit & Public Markets Projects

2.1.4. uses the term “must” with respect to a requirement, criterion, etc., the term is to be interpreted as conveying compulsion or strict necessity, and is to be read as though written “must, if [the subject] is to be entitled to have [the object] considered or credited as being compliant with, conforming to, or satisfying [the requirement, criterion, constraint, etc.], otherwise, [the object] will be considered or debited as being non-compliant, non-conforming, or unsatisfactory for its Contract-related purposes” in every instance;

2.1.5. uses the term “might” with respect to an event, outcome, action, etc., the term is to be interpreted as conveying contingency or non-discretionary conditionality; and

2.1.6. uses the term “will” or the phrases “is to be” or “are to be” with respect to an event, outcome, action, etc., the term or phrase is to be interpreted as conveying such certainty or imperativeness that “shall” is either unnecessary or irrelevant in that instance.

2.2. Independent Contractor. Contractor is an independent contractor and shall act in an independent capacity in performance under the Contract. Neither party is or is to be construed as being to be the employee or agent of the other party, and no action, inaction, event, or circumstance will be grounds for deeming it to be so.

2.3. Complete Integration. The Contract, including any documents incorporated into the Contract by reference, is intended by the parties as a final and complete expression of their agreement. There are no prior, contemporaneous, or additional agreements, either oral or in writing, pertaining to the Contract.

3. CONTRACT ADMINISTRATION AND OPERATION

3.1. Authority to Contract. This Contract activity is issued under the authority of the State Procurement Administrator, through the Arizona State Retirement System (“ASRS”). No alteration of any portion of the Contract, any services awarded, or any other agreement that is based upon this Contract may be made without express written approval of the ASRS Chief Procurement Officer or other personnel delegated authority in the form of an official Contract Amendment. Any such action is subject to the legal and contractual remedies available to the State inclusive of, but not limited to, Contract termination, cancellation, suspension, and/or debarment of the Contractor.

3.2. Contract Applicability. Any Contract resulting from this Solicitation shall be for the exclusive use of the ASRS.

3.3. Term of Contract. The term of the Contract shall commence on the effective date indicated in the “Acceptance of Offer” and shall remain in effect for a period of twelve (12) months thereafter unless terminated, canceled or extended as otherwise provided herein.

3.4. Contract Usage. Contractor shall understand and agree that no quantity of service is guaranteed under the Contract and that ASRS does not guarantee that Contractor’s services will be utilized to any degree. ASRS reserves the right to contract for the services as a whole, or any of the various parts/scenarios listed separately.

3.5. Contract Extensions. The Contract shall not bind nor purport to bind the ASRS for any contractual commitment in excess of the original Contract term. The ASRS shall have the right, as its sole option, to extend the Contract for one or more months, provided that the maximum aggregate term of the Contract including extensions cannot exceed five (5) years. If the ASRS exercises such rights, all terms, conditions, and provisions of the original Contract shall remain the same and apply during an extension period.

3.5.1. The Contractor shall provide the ASRS with notice of any requests for program/operation changes or modifications of any type, including those on price, at least ninety (90) days prior to the effective date for each extension period. Any such request shall be accompanied by supporting documentation.

3.6. Notices. All notices, requests, demands, consents, approvals, and other communications which may or are required to be served or given hereunder (collectively, “Notices”):

3.6.1. If intended for the ASRS, shall be hand-delivered, emailed to ASRSProcurement@azasrs.gov or sent by registered or certified United States mail, return receipt requested, postage prepaid, and addressed to the mailto:ASRSProcurement@azasrs.gov

Description: Investment Consulting Services: Illiquid Credit & Public Markets Projects

ASRS as indicated on the Offer and Acceptance document of this Contract or to such other address as may from time be furnished in writing to the Contractor.

3.6.2. If intended for the Contractor, such Notice shall be given to the person named in the Offer and Acceptance document of this Contract or to such other person as the Contractor may from time to time furnish in writing to the ASRS.

3.6.3. Any Notice so given shall be deemed to have been given as of the date such Notice is received as shown on the return receipt or on the date such Notice is personally delivered to the other party.

3.7. Key Personnel. It is essential that the Contractor provide an adequate staff of experienced personnel capable of and devoted to the successful accomplishment of work to be performed under this Contract. The Contractor must assign specific individuals. Once key personnel are assigned to work under the Contract, the ASRS shall have the opportunity to review the qualifications and approve the assignment of additional or replacement key personnel, which approval shall not be unreasonably withheld or delayed.

3.8. Intellectual Property

3.8.1. Ownership of lntellectual Property. Any and all intellectual property, including but not limited to copyright, invention, trademark, trade name, service mark, or trade secrets created or conceived solely pursuant to or as a result of this Contract and any related subcontract (collectively, the "Intellectual Property"), shall be work made for hire and the ASRS shall be the owner of such Intellectual Property. The ASRS shall own (for and on behalf of the State) the entire right, title and interest to the Intellectual Property throughout the world.

Software and other Materials developed or otherwise obtained by or for Contractor or its affiliates independently of this Contract ("Independent Materials") do not constitute Intellectual Property. If Contractor creates derivative works of Independent Materials, then the elements of such derivative works created pursuant to this Contract shall constitute Intellectual Property owned by the ASRS. Contractor shall notify the ASRS, within thirty (30) days, of the creation of any Intellectual Property by it or its subcontractor(s).

Contractor, on behalf of itself and any subcontractor(s), agrees to execute any and all document(s) necessary to assure ownership of the Intellectual Property vests in the ASRS and shall take no affirmat ive actions that might have the effect of vesting all or part of the Intellectual Property in any entity other than the ASRS. The Intellectual Property shall not be disclosed by Contractor or its subcontractor(s) to any entity not the ASRS without the express written authorization of the ASRS.

Notwithstanding the foregoing, if the ASRS elects, in its sole and absolute discretion, to relinquish its ownership interest in any or all of the Intellectual Property, the ASRS shall have the rights to use, modify, reproduce, release, perform, display, sublicense or disclose such Intellectual Property within State government and operations without restriction for any activity in which the ASRS is a party (collectively, "Government Purpose Rights").

3.8.2. Pre-Existing Material. All pre-existing software and other materials developed or otherwise obtained by or for Contractor or its affiliates independently of the Contract or applicable Purchase Orders are not part of the work product to which rights are granted State under subparagraph 3.9.1 above, and will remain the exclusive property of Contractor, provided that:

3.8.2.1. any derivative works of such pre-existing material or elements thereof that are created pursuant to the Contract are part of that work product;

3.8.2.2. any elements of derivative work of such pre-existing material that was not created pursuant to the Contract are not part of that work product; and

3.8.2.3. except as expressly stated otherwise, nothing in the Contract is to be construed to interfere or diminish Contractor’s or its affiliates’ ownership of such pre-existing materials.

3.9. Warranty

Unless otherwise modified elsewhere in the terms and conditions, the Contractor warrants that, for one year after acceptance by the ASRS, the Materials shall be fully compatible with the ASRS's computer hardware and software

Description: Investment Consulting Services: Illiquid Credit & Public Markets Projects environment. Contractor represents and warrants to the ASRS that Contractor has the skill and knowledge possessed by members of its trade or profession and Contractor will apply that skill and knowledge with care and diligence so Contactor and Contractor's employees and any authorized subcontractors shall perform the Services described in this Contract in accordance with the Statement of Work.

Contractor represents and warrants that the Materials provided through this Contract and Statement of Work shall be free of viruses, backdoors, worms, spyware, malware and other malicious code that will hamper performance of the Materials, collect unlawful personally identifiable information on users or prevent the Materials from performing as required under the terms and conditions of this Contract.

3.10. Offers of Employment

The Contractor shall comply with A.R.S. § 41-2517, as it relates to a person, firm or lobbyist making an offer of employment to an employee having a significant procurement role, as defined in A.R.S. § 41-741 and A.R.S. § 41- 2503.

3.11. Performance in Public Health Emergency. The Contractor warrants that it will:

3.11.1. Have in effect promptly after commencement a plan for continuing performance in the event of a declared public health emergency that addresses, at a minimum: (a) identification of response personnel by name;

(b) key succession and performance responses in the event of sudden and significant decrease in workforce; and (c) alternative avenues to keep sufficient product on hand or in the supply chain; and

3.11.2. Provide a copy of its current plan to the ASRS within three (3) business days after the ASRS’s written request. If Contractor claims relief under paragraph 6.4 (Force Majeure) of the Uniform Terms and Conditions for an occurrence of force majeure that is a declared public health emergency, then that relief will be conditioned on Contractor having first implemented its plan and exhausted all reasonable opportunity for that plan implementation to overcome the effects of that occurrence, or mitigate those effects to the extent that overcoming entirely is not practicable.

For clarification of intent, being obliged to implement the plan is not of itself an occurrence of force majeure, and Contractor will not be entitled to any additional compensation or extension of time by virtue of having to implement it. Furthermore, failure to have or implement an appropriate plan will be a material breach of contract.

4. PRICING AND PAYMENTS

4.1. Client Pricing. In responding to each project request pursuant to this Contract, Contractor affirms that it will provide the ASRS with its best fee for such project.

4.2. Price Adjustments

4.2.1. The Contractor shall agree that the prices stated in the original Contract shall not be increased unless otherwise negotiated.

4.2.2. A price increase adjustment shall only be considered at the time of a contract extension and shall be a factor in the extension review process. The ASRS shall determine whether the requested price increase or an alternate option is in the best interest of the ASRS.

4.2.3. Price reduction may be offered at any time during the term of the Contract and shall become effective upon acceptance by the ASRS.

4.2.4. The Contractor understands and agrees the needs of the ASRS may change during the life of the Contract and the ASRS may propose changes to any part of this Contract with a commensurate, fair, and equitable adjustment in price. Any such changes shall be made in accordance with Article 5.1 (Amendments) of the Uniform Terms and Conditions of this Contract.

Description: Investment Consulting Services: Illiquid Credit & Public Markets Projects

4.3. Billing

4.3.1. All billing notices should be identified by Contractor’s name, list the Contract number, and clearly identify the line item, if applicable. Billing notices or invoices must be submitted by email to: asrsap@azasrs.gov.

4.3.2. Without prejudice to its other rights under the Contract or further obligation to Contractor, the ASRS may, at its discretion, reject any material defective invoice if it is determined that the invoice is materially defective.

4.3.3. If ASRS determines that an over-payment has been made to Contractor on any prior invoice, ASRS may deduct the over-paid amount from amounts then or thereafter due to Contractor.

4.4. Travel. In accordance the Pricing Schedule, travel must be inclusive of all fee. ASRS will not reimburse travel expenses unless ASRS requests travel not related to services contemplated within the Contract. In the case of ASRS approved travel expense reimbursement, Contractor may be reimbursed travel expenses in accordance with the published rates specified in the State of Arizona Travel Policy, located at https://gao.az.gov/travel/welcome-gao-travel, and incorporated herein.

5. CONTRACT CHANGES

5.1. Contract Amendments. The Contract may be modified only through a Contract Amendment within the scope of the Contract. Changes to the Contract, including the addition of Work or Materials, the revision of payment terms, or the substitution of Work or Materials, directed by a person who is not specifically authorized by the Procurement Officer in writing or made unilaterally by Contractor are violations of the Contract and of applicable law. Such changes, including unauthorized written Contract Amendments shall be void and without effect, and Contractor shall not be entitled to any claim under this Contract based on those changes.

5.1.1. Signing of Contract Amendments. Both ASRS and Contractor signatures are required to give effect to a Contract Amendment, except that Contractor’s countersignature – or “approval” in the Arizona Procurement Portal (APP) – is not required to give effect if the Contract Amendment only covers either:

5.1.1.1. extension of the term of the Contract within the maximum aggregate term; or

5.1.1.2. modifications of a clerical nature that have no effect on terms, conditions, price, scope, or other material aspect of the Contract.

5.2. Contract Assignment. Contractor may not assign (including within the meaning of the U.S. Investment Advisers Act of 1940, as amended),, transfer or convey any of its rights or obligations under this Contract without the written permission of the ASRS.

6. CONTRACT TERMINATION

6.1. Termination for Default

6.1.1. The ASRS reserves the right to terminate the whole or any part of this Contract due to failure of Contractor to carry out any obligation, term, or condition of the Contract, subject to sections 6.2 and 6.3 below.

6.1.1.1. The ASRS will issue a written ten (10) day notice of default to the Contractor for acting or failing to act, including in doing the following:

6.1.1.2. The Contractor fails to adequately perform the services set forth in the Scope of Work of the Contract;

6.1.1.3. The Contractor fails to complete the work required within the time stipulated in the Contract;

https://gao.az.gov/travel/welcome-gao-travel

Description: Investment Consulting Services: Illiquid Credit & Public Markets Projects

6.1.1.4. The Contractor attempts to impose on the ASRS, personnel which are of an unacceptable quality;

6.1.1.5. The Contractor fails to make progress in the performance of the Contract and/or gives the ASRS reason to believe the Contractor will not or cannot perform to the requirements of the Contract.

6.1.2. If the Contractor does not correct the above problem(s) within ten (10) days after receiving the notice of default, the ASRS may terminate the Contract. If the ASRS terminates the Contract pursuant to this clause, the ASRS reserves all rights or claims to damage for breach of contract.

6.1.3. The ASRS may recover reasonable excess costs from the Contractor by:

6.1.3.1. Deduction from an unpaid balance;

6.1.3.2. Collection against the offer and/or performance bond; or

6.1.3.3. Any combination of the above or any other remedies as provided by law.

6.2. Termination for Convenience. The Contract is for the convenience of the ASRS and as such may be terminated without default by the ASRS when in the best interest of the ASRS by providing a written thirty (30) day notice of termination to Contractor.

6.3. Performance of Contract Following Termination or Expiration

6.4. In the event the Contract expires or is terminated for any reason or cause, Contractor agrees to continue performance of its duties, if so requested by the ASRS, as though no expiration or termination had occurred for a period not to exceed six (6) months from the first day of the month following termination. Contractor shall cooperate fully with a replacement service contractor (“Replacement Contractor”) who assumes the Services under the Contract. In such event, Contractor shall continue to receive compensation set forth in the Contract unless modified by Contract Amendment to address unforeseen transition costs.

6.5. Data Relating to Contract

6.5.1. In the event of the expiration, termination or non-renewal of the Contract, Contractor, at its own expense, is obligated to return all data and records relating to the acquisition and performance of the Contract (“Data”) to the ASRS and to provide such Data to the Replacement Contractor in a format acceptable to the Replacement Contractor and that will ensure no loss of crucial data is incurred and no Services are interrupted.

6.5.2. The ASRS does not expect the Contractor to release any proprietary or trade secret information to the Replacement Contractor.

6.5.3. Notwithstanding anything to the contrary in this Contract, Contractor may (i) retain copies of Data that is required to be retained by law or regulation, (ii) retain copies of Contractor’s work product that contain Data for archival purposes or to defend Contractor’s work product, and (iii) in accordance with legal, disaster recovery and records retention requirements, store such copies and derivative works in an archival format (e.g., tape backups), which may not be returned or destroyed.

7. RISK AND LIABILITY

7.1. Risk of Loss. Contractor shall bear all risk of loss to Materials while in pre-production, production, storage, transit, staging, assembly, installation, testing, and commissioning, if and as those duties are within the scope of the Work, until they have been accepted as conforming by State in the particular location and situation specified in the Order, or as specified generally elsewhere in the Contract if the Order does not provide particulars, provided that, risk of loss for nonconforming Materials will remain with Contractor notwithstanding acceptance to the extent the loss stems from the nonconformance.

Description: Investment Consulting Services: Illiquid Credit & Public Markets Projects

7.2. Indemnification Clause

To the fullest extent permitted by law, Contractor shall defend, indemnify, and hold harmless the State of Arizona, and its departments, agencies, boards, commissions, universities, officers, officials, agents, and employees (hereinafter referred to as “Indemnitee”) from and against any and all claims, actions, liabilities, damages, losses, or expenses (including court costs, attorneys’ fees, and costs of claim processing, investigation and litigation) (hereinafter referred to as “Claims”) for bodily injury or personal injury (including death), or loss or damage to tangible property caused, or alleged to be caused, in whole or in part, by the negligent acts or omissions of Contractor or any of its owners, officers, directors, agents, employees or subcontractors in the performance of services under the Contract. This indemnity includes any claim or amount arising out of, or recovered under, the Workers’ Compensation Law or arising out of the failure of such Contractor to conform to any federal, state, or local law, statute, ordinance, rule, regulation, or court decree. It is the specific intention of the parties that the Indemnitee shall, in all instances, except for Claims arising from the negligent acts or omissions of the Indemnitee, be indemnified by Contractor from and against any and all claims. It is agreed that Contractor will be responsible for primary loss investigation, defense, and judgment costs where this indemnification is applicable. In consideration of the award of this contract, the Contractor agrees to waive all rights of subrogation against the State of Arizona, its officers, officials, agents, and employees for losses arising from the work performed by the Contractor for the State of Arizona. This indemnity shall not apply if the contractor or sub-contractor(s) is/are an agency, board, commission or university of the State of Arizona. In no event shall the Contractor be liable in connection with the services or the Contract for any losses resulting from: (i) acts or omissions by any investment manager, custodian or other third party unaffiliated with the Contractor, (ii) any inaccuracy or incompleteness of the data to be provided by the ASRS or its representatives, or (iii) indirect, special, punitive, consequential or incidental damages.

7.3. Limitation of Liability

First Party Limitation of Liability

7.3.1. Contractor's liability for first party damages to the ASRS arising from this Contract shall be limited to three time(s) the maximum-not-to-exceed amount of this Contract. The foregoing limitation of liability shall not apply to: (i) liability, including indemnification obligations, for third party claims, including but not limited to, infringement of third party intellectual property rights; (ii) claims covered by any specific provision of the Contract calling for liquidated damages or other amounts, including but not limited to, performance requirements; or (iii) costs or attorneys' fees that the ASRS is entitled to recover as a prevailing party in any action.

7.3.2. Contractor shall not be liable for Losses (defined below) sustained by the ASRS in connection with the services, this Contract or the acts or omissions of any third party (other than Contractor’s subcontractors) unless such Losses have been finally determined to have directly resulted from the gross negligence, fraud, or bad faith conduct by Contractor or any officer, director or employee of Contractor’s or its affiliates (“Contractor Party”) in connection with Contractor’s performance of the services.

7.3.3. In no event shall either party or its affiliates be liable in connection with this Contract or the services to the other party, its affiliates or any third party for any loss of profit or incidental, consequential, special, indirect, punitive or similar damages. The provisions of this section shall apply to the fullest extent permitted by law.

Nothing in this section limiting the liability of a party shall apply to (i) any liability that has been finally determined by a court to have been caused by the fraud of such party or (ii) the extent such limitation of liability is not permissible under applicable law, including laws that may hold parties liable for certain acts of good faith.

7.3.4. For purposes of this Contract, “Loss” means damages, claims, liabilities, losses, awards, judgments, penalties, third party claims, interest, costs and expenses, including reasonable attorneys’ fees, whether arising under any legal theory including, but not limited to claims sounding in tort (such as for negligence, misrepresentation or otherwise), contract (whether express or implied), by statute, or otherwise, claims seeking any kind of damages and claims seeking to apply any standard of liability such as negligence, statutory violation or otherwise. For the avoidance of doubt, multiple claims arising out of or based upon

Description: Investment Consulting Services: Illiquid Credit & Public Markets Projects the same act, error or omission, or series of continuous, interrelated or repeated acts, errors or omissions shall be considered a single Loss.

7.3.5. Each of the parties acknowledges that the compensation for the services to be provided under this Contract reflects the allocation of risk set forth in this section.

7.4. Subcontractors

Solely to the extent that Contractor uses Subcontractors in connection with the Contract, Contractor’s certificate(s) shall include all subcontractors as insureds under its policies or Contractor shall be responsible for ensuring and/or verifying that all subcontractors have valid and collectable insurance as evidenced by the certificates of insurance and endorsements for each subcontractor. All coverages for subcontractors shall be subject to the minimum Insurance Requirements identified above. The ASRS reserves the right to require, at any time throughout the life of this contract, proof from the Contractor that its subcontractors have the required coverage.

8. INFORMATION SECURITY AND DATA PRIVACY

8.1. Applicability. Article 8 applies to the extent the Work includes handling of any (1) ASRS proprietary and sensitive data or (2) confidential or access-restricted information obtained from the ASRS or from others at ASRS’s behest.

8.2. Definitions. For the purposes of this Article:

8.2.1. “Confidential Information” (CI) means data that is protected from unauthorized disclosure based on laws, regulations, and other legal agreements. CI includes critical business infrastructure information as defined by A.R.S. § 41-1801.

8.2.2. “Incident” means the (a) actual unauthorized access to or use of CI, or (b) unauthorized disclosure, loss, theft or manipulation of unencrypted CI (or encrypted CI where unauthorized decryption has or is likely to occur) that has the potential to cause identity theft or financial harm to ASRS’ employees or plan participants.

8.2.3. “Unauthorized Access” occurs when a user, legitimate or unauthorized, accesses a resource that the user is not permitted to use or any access that violates a stated security policy. It may include the loss or other unauthorized access of a device, technology component or record containing PI, CI or Sensitive Data or the destruction/disposal of records that does not comply with the Arizona Record Destruction Law, A.R.S.

§ 44-7601.

8.3. Contractor’s Obligation Regarding Information Security and Data Privacy

8.3.1. Contractor shall establish and maintain procedures and controls for the purpose of ensuring that the ASRS’s proprietary information or any CI in Contractor’s possession and contained in its records is protected from unauthorized access and is accessed, viewed, used, disclosed, retained or disposed of by its agents, subcontractors, officers or employees only as intended and consistent with applicable law.

8.3.2. Contractor acknowledges that all information disclosed to it concerning the ASRS’s operations during performance of the Contract and after the full term of the Contract shall not be disclosed to other parties except as determined necessary by the ASRS and only with the ASRS’s prior written consent or except as required pursuant to applicable law or regulations.

8.3.3. During the term of the Contract and for an 18-month period thereafter, the ASRS shall have the right to assess, inspect, review, monitor and validate compliance with information and data requirements of the Contract upon reasonable prior written notice, during normal business hours, conducted at ASRS’ sole expense, and shall be subject to the execution of a confidentiality agreement reasonably satisfactory to Contractor. The ASRS’s right to inspect shall apply to all physical locations where performance of this Contract occurs, to personnel performing work authorized by this Contract, to any records (as defined by A.R.S. §41-151.18) or devices directly used in performance of this Contract, and to documented policies

Description: Investment Consulting Services: Illiquid Credit & Public Markets Projects and procedures, including but not limited to information security and privacy controls. The right to inspect shall apply to all subcontractors or other agents who perform under the Contract.

8.4. Information Security and Data Privacy Incident Reporting To comply with 8.3, unless authorized by law or in writing by the ASRS, Contractor shall report Incident. Contractor shall use commercially reasonable efforts make the report to the ASRS’s Privacy or Information Security Officer as soon as possible but in no event any later than three (3) business days after the Contractor learns of the Incident. In its report, the Contractor shall, at a minimum:

8.4.1. Identify the nature of the unauthorized access, use or disclosure;

8.4.2. Identify the CI or Sensitive Data accessed, used or disclosed;

8.4.3. Identify who made the unauthorized access/use or received the unauthorized disclosure;

8.4.4. Identify what Contractor has done or will do to mitigate or contain the risk of harm of the unauthorized access, use or disclosure;

8.4.5. Identify what corrective action Contractor has taken or shall take to prevent future similar unauthorized access, use or disclosure; and

8.4.6. Provide such other information, including a written report as requested by the ASRS’s Privacy or Information Security Officer.

8.5. Unauthorized Access Mitigation

8.5.1. The Contractor agrees to mitigate, to the extent practicable, any harmful effect that is known to the Contractor of an access, use or disclosure of the ASRS’s information in violation of the requirements of this Contract.

8.5.2. Mitigation will include the Contractor’s cooperation with the ASRS to investigate the unauthorized access, use or disclosure, identify the individuals and their contact information for purposes of breach notification and other collaboration as may be reasonably requested to notify, respond to inquiries and remediate the risk associated with the unauthorized access, including credit protection or other information theft prevention services. The ASRS at its sole discretion may require the Contractor to pay for or reimburse the ASRS for expenses and costs associated with unauthorized access and risk mitigation.

8.6. Secure Facilities

8.6.1. The Contractor’s work area(s) shall provide for a secure locked location where uncompleted work shall be stored. This area shall be secure enough whereby access by unauthorized personnel shall be restricted or eliminated. The ASRS reserves the right to visit the Contractors to confirm security, throughout the term of the Contract.

8.6.2. Upon termination of the Contract, all goods, materials, documents, data and reports prepared specifically and exclusively for ASRS by the Contractor under the Contract shall become the property of and be delivered to the ASRS upon request. Contractor may retain copies as applicable in order to meet its record retention requirements.

8.7. Network Security

Contractor and its subcontractors shall maintain the following minimum network security controls:

8.7.1. Encryption of data in transit over public networks (i.e., the Internet) or when transmitted wirelessly and at rest if the data contains confidential. Data at rest includes laptops, thumb drives, CDs, and any other removable media; it does not include data resting on a server;

Description: Investment Consulting Services: Illiquid Credit & Public Markets Projects

8.7.2. Maintain updated patches on all software and technology infrastructure;

8.7.3. Role based access controls and network access authentication controls;

8.7.4. Immediate removal from network access for employees, agents, and subcontractors who leave employment or whose contractual relationships terminate;

8.7.5. Firewalls are installed and reviewed;

8.7.6. Logs are continuously monitored for threats and vulnerabilities at all points of entry to organization’s network;

8.7.7. All organizational technology infrastructure and devices maintain continuously updated security software to safeguard against malware and other technology threats;

8.7.8. Employees and subcontractors receive data security awareness training;

8.7.9. Organization has a disaster recovery plan which is tested on a periodic basis;

8.7.10. Technology infrastructure has an effective and periodically tested continuity of business operations plan and process; and

8.7.11. Use commercially reasonably efforts to ensure that network outages or other security events are reported as soon as possible but no later than three (3) days to the agency’s Chief Information Security Officer or other designated security officer as indicated by the Contract when the affected system contains data or performs services related to the performance of this Contract.

8.8. Personnel Security and Background Checks

To the extent that future applicable laws, regulations or rules obligate the ASRS to require Contractor to comply with certain personnel security and background checks (“Required Checks”), the parties will use commercially reasonable efforts to work together in good faith to comply. This includes limiting the Required Checks to only the Key Personnel who consents (which Contractor will take commercially reasonable efforts to obtain) and not any other employees of Contractor who may assist with the Services pursuant to the Contract, provided that such other employees are subject to Contractor’s own personnel security and background checks. In the event that any Key Personnel refuses to consent to performance of the Required Checks, Contractor shall not be in breach of this Contract or responsible for any delay resulting therefrom. Contractor will remove and replace such Key Personnel with someone who consents to the Required Checks as soon as practicable.

8.9. Remote Access

To the extent the Contractor or any subcontractors is authorized by ASRS to and must perform work that requires remote access to a network containing ASRS information or data, Contractor shall ensure that such remote access

(i) is obtained through a secure connection, (ii) is restricted to authorized users, (iii) is used solely for the purposes of fulfilling Contractor’s obligations, (iv) shall not permit access to Contractor’s computer system or browser capabilities, and (v) shall not permit printing/faxing/copying or other reproduction or the ability to retain data or application software data on Contractor’s computer or network.

8.10. Access Privileging and Authorization Requirements

8.10.1. Contractor’s access to ASRS facilities and resources shall be properly authorized by ASRS personnel, based on business need and will be restricted to least possible privilege. Upon approval of access privileges to ASRS systems and facilities, the Contractor shall maintain strict adherence to the ASRS’s and State’s information security and privacy policies, standards, and procedures.

Description: Investment Consulting Services: Illiquid Credit & Public Markets Projects

8.10.2. Upon removal of an employee, agent, or officer, Contractor shall immediately revoke logical and physical access to a device, network, system, operating infrastructure or physical location containing the State’s information or…