Public Equity RFQ - Appendix B - Investment Management Agreement.docx

INVESTMENT MANAGEMENT AGREEMENT

This Investment Management Agreement (this “Agreement”) is made and entered into this ____ day of __________ (the “Effective Date”), by and between the Employees Retirement System of Texas (“ERS”) and ____________, a [Delaware] [limited liability company] (together with its affiliates, subsidiaries, representatives, officers, directors, principals, partners, employees, agents, successors, and assigns, (the “Manager”), whereby the Manager will act as an investment advisor on behalf of the Employees Retirement System of Texas.

WHEREAS, ERS represents that it has the requisite authority to appoint the Manager as its investment manager with the power to manage, acquire, and dispose of assets using funds contributed to the Manager by ERS; and WHEREAS, ERS desires to appoint and retain the Manager as investment manager with respect to certain assets of ERS and any income or proceeds from such assets (all such assets, together with any dividends, interest or other distributions and any proceeds collectively referred to herein as the (“Assets”), which shall be held in one or more accounts established for the benefit of ERS (together, the “Account”); and WHEREAS, the Manager is a registered investment adviser under the Investment Advisers Act of 1940, as amended (the “Advisers Act”), and is willing to accept investment management responsibilities with respect to the Assets.

NOW, THEREFORE, in consideration of the promises and mutual considerations provided herein, and intending to be legally bound hereby, ERS and the Manager hereby agree as follows:

1. Retention as Manager.

The Manager is hereby appointed by ERS as the investment manager of the Account with the power to direct the investment and reinvestment of the Assets in accordance with the terms of this Agreement (including, without limitation, Exhibit A hereto).

By execution and delivery of this Agreement, the Manager accepts, as of the Effective Date, its appointment as investment manager and hereby acknowledges and accepts full responsibility as a fiduciary and acknowledges and agrees that it is subject to, and shall at all times comply with, the standard of care and fiduciary duties described in Section 9 (“Standard of Care”) below (collectively referred to as the Manager’s “Fiduciary Duty”).

ERS has instructed Bank of New York Mellon, as its custodian (in such capacity, the “Custodian”), to establish a separate account with respect to the Account on its books and records and to maintain the Account in a manner so as to enable the Custodian to account for the Account and transactions with respect thereto separately from ERS’ other assets.

Investment Guidelines and Restrictions. The Manager’s investment activity on behalf of the Account shall be effected in accordance with the written investment guidelines for the Account agreed to by the Manager and ERS as of the date of this Agreement (the “Investment Guidelines”) as set forth in Exhibit A hereto. The Manager shall notify ERS immediately, in writing, if it has violated the Investment Guidelines. Conversely, ERS shall notify the Manager promptly, in writing, if ERS believes any investment decisions made for the Account have been made in violation of the Investment Guidelines; provided, however, that neither ERS’ failure to provide prompt written notice, nor any delay or failure in exercising any and all remedies available to ERS for the Manager’s violation of the Investment Guidelines will constitute a waiver by ERS of any of its rights at law or equity. Without affecting any other parts of this Agreement, ERS may revise Exhibit A in its discretion at any point during the term of this Agreement, subject only to written notice to the Manager. ERS understands that the Manager shall not be responsible for advising ERS with regard to the selection of the Investment Guidelines and shall not be responsible or liable for the selection of or revisions to such Investment Guidelines.

Powers.

Subject to the Manager’s Fiduciary Duty and to the requirements set forth in the Investment Guidelines, the Manager shall have full power to supervise and direct the investment and reinvestment of the cash, securities and other property in the Account. Such authority shall include the authority to: (a) invest and reinvest the Assets; (b) purchase and sell securities and other investments for ERS in the name of, for the account of and at the sole risk of ERS; and (c) arrange for the delivery of and payment for any such investments, including securities bought and sold for the account of ERS.

ERS shall be free to direct the Manager to dispose of any investment held in the Account or to withdraw funds held in the Account at any time.

The Manager shall not delegate or subcontract any portion of the services to be provided hereunder to a third party or otherwise interpose or utilize third parties in connection with providing such services without ERS’ prior written consent.

Custody. All securities and other assets in the Account shall remain in the possession of the Custodian who shall have complete custodial responsibility for such securities and other assets in the Account. The Manager shall not be responsible for any custodial arrangements involving the Account or for the payment of any custodial charges and fees, nor shall the Manager act as the custodian or take or have possession or custody of any such assets. Subject to the Manager’s Fiduciary Duty and to the requirements set forth in the Investment Guidelines, the Manager may issue such instructions to the Custodian as may be appropriate in connection with the settlement of transactions initiated by the Manager on behalf of the Account. Instructions of the Manager to the Custodian shall be through such means, which may include electronic, written or oral communication as agreed to by the Custodian and the Manager, and confirmed in writing as soon as practical thereafter and the Manager will instruct all brokers, dealers and issuers executing orders on behalf of the Account to forward to ERS and the Custodian copies of all confirmations. ERS will instruct the Custodian to maintain appropriate records as to the receipt and delivery of securities and the daily composition of the assets managed by the Manager for the Account and to retain certificates representing such securities in a manner that will facilitate prompt effecting of transactions. The Custodian will be instructed by ERS to deliver securities sold and pay for securities purchased, including all reasonable expenses relating thereto (such as brokerage fees and transfer taxes), in accordance with copies of confirmations received by the Custodian and, if the Manager so requests, to settle transactions in amounts equal to any executions confirmed, even though the execution may represent only a part of a larger order. All payments, distributions and other transactions in securities or other assets in respect of the Account shall be made directly to or from the Custodian.

Reports and Records The Manager shall furnish to ERS and each of the parties designated by ERS in Section 19 (“Notices”) of this Agreement each of the reports and other materials described in more detail in Exhibit D.

Compensation. In consideration of the Manager’s investment management and advisory services hereunder, ERS shall pay the Manager the fees calculated and paid in accordance with Exhibit B. The Manager agrees that if, during the term of this Agreement, the Manager enters into any agreement with any other governmental customer or any commercial customer not affiliated with the Manager, of a similar size or smaller, by which the Manager agrees to perform, deliver or provide equivalent services that the Manager is providing in accordance with this Agreement for the following: lower administrative fees, lower compensation, more generous discounts, more generous rebates, or more generous financial incentives or terms, then this Agreement, at ERS’ sole option, shall be amended to accord equivalent advantage to ERS. The Manager agrees that it shall notify ERS promptly in the event it enters into any such agreement containing any one or more of the above matters, and the Manager shall provide ERS with the applicable terms of such agreement.

Valuation. Any valuation of assets in the Account pursuant to this Agreement, including for purposes of calculating fees payable to the Manager pursuant to Exhibit B, shall be made by or at the direction of the Custodian.

Brokerage Placement Practices. To the extent that the Manager effects trades on behalf of ERS or the Account, the following provisions shall apply: (a) the Manager may, subject to the Manager’s Fiduciary Duty, select brokers, dealers or banks to execute orders for purchase, sale or exchange of securities for the Account, so long as the Manager uses its best efforts in seeking a combination of best available price and most favorable execution. The abilities of a broker-dealer to obtain best execution of particular Account transaction(s) will be judged by the Manager on the basis of all relevant factors and considerations including, insofar as feasible, the execution capabilities required by the transaction or transactions; the ability and willingness of the broker-dealer to facilitate the Account’s transactions by participating therein for its own account; the importance to the Account of speed, efficiency or confidentiality; the broker-dealer’s apparent familiarity with sources from or to whom particular securities might be purchased or sold; as well as any other matters relevant to the selection of a broker-dealer for particular and related transactions of the Account. (b) The Manager in no way shall directly or indirectly participate in commissions arising out of portfolio transactions of the Account. (c) ERS acknowledges and agrees that the Manager may aggregate orders for the Account with orders for the same security or instrument for other accounts, both proprietary and for other clients, where such aggregation is feasible, including satisfying minimum block trade size or cap size requirements under applicable U.S. Commodity Futures Trading Commission rules and interpretations (“CFTC”); provided that, the Manager shall allocate such aggregated trades in accordance with the Manager’s allocation policies, as described in the Manager’s Form ADV Part II, as it may be amended from time to time.

Standard of Care. The Manager is a fiduciary with respect to ERS and the Account. As a fiduciary, the Manager acknowledges and agrees that it shall at all times (a) comply with all applicable laws, rules, and regulations, including but not limited to the Constitution of the State of Texas and applicable Texas state laws, rule, regulation, legislation, and legal opinions issued by the Attorney General of the State of Texas regarding any of the foregoing; (b) act in accordance with ERS’ Investment Policy Statement, a copy of which is attached hereto as Exhibit C (the “Investment Policy”), as it may be amended from time to time in the future; and (c) make all decisions on behalf of ERS and the Account with the sole goal of maximizing financial returns and not with a view toward advancing any social, political, or other similar goals. The Manager agrees that it will be subject to any amendment to the Investment Policy promptly following notification by ERS. The Manager and ERS agree that, to the extent that any provision in the Investment Policy could be read to limit or otherwise restrict the investment parameters set forth in Exhibit A, Exhibit A will govern. The Manager shall at all times perform its duties, obligations and responsibilities under this Agreement with, and shall at all times with respect to and the Account use, the care, skill, prudence and diligence under the circumstances then prevailing that a prudent investor, who is knowledgeable about selecting and monitoring investments, acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims. The Manager shall at all times determine what information is material and relevant to its decisions, obligations, duties and responsibilities as a fiduciary with respect to the Account, and gather, examine, and understand that information and then make an informed and prudent decision based on its findings. The Manager has a fiduciary obligation to prudently select investment alternatives within the parameters of Exhibit A, as well as ongoing residual fiduciary obligation to periodically evaluate the performance of such investments and to determine, based on that evaluation, whether the investments should remain suitable and prudent investment alternatives for the Account. The Manager represents and warrants that there are no federal, state or local statutory disqualifications that apply to the Manager that may impact its fiduciary status with respect to ERS and the Account as set forth in this Agreement.

Liability; Indemnity.

The Manager shall indemnify, defend and hold harmless ERS and its directors, officers, employees, agents and affiliates (the “ERS Parties”), from and against any and all expenses, liabilities, costs, fees, damages, taxes, charges and claims of any kind or nature that the ERS Parties may incur (including, without limitation, reasonable attorney’s fees and expenses) resulting from any action taken or omitted to be taken by the Manager that constitutes fraud, bad faith, negligence, willful misconduct, reckless disregard of its obligations, breach of this Agreement, breach of Fiduciary Duty, criminal wrongdoing, or violation of applicable law, rule or regulation (including but not limited to violation of applicable securities laws).

Neither ERS nor the ERS Parties shall be liable to the Manager for any losses, liabilities, costs, expenses, damages, taxes, charges or claims of any kind or nature that any of the Manager may incur unless caused solely by ERS’ fraud, bad faith, gross negligence, or criminal misconduct.

Nothing contained in this Agreement shall constitute a waiver by ERS of any of its legal rights under applicable U.S. federal securities laws or any other applicable laws whose applicability is not permitted to be contractually waived.

Representations and Warranties of ERS. ERS represents and warrants to the Manager that:

The execution and delivery of this Agreement by ERS shall constitute the representation by ERS that the terms hereof do not violate any obligation by which ERS is bound, whether arising by contract, operation of law or otherwise;

ERS is not an ERISA Plan;

ERS qualifies as a Qualified Institutional Buyer for purposes of Rule 144A transactions;

No person or entity, at all times during the management of the Account by the Manager, will have any interest in or control of the Account other than ERS;

ERS has full power, authority and capacity to execute and deliver this Agreement;

The assets or funds contributed by ERS to the Account, to ERS’ knowledge, were not and are not directly or indirectly derived from activities that may contravene federal, state or international laws and regulations, including anti-money laundering laws and regulations, and ERS is not an entity named on a list of prohibited persons or entities to which the Manager or ERS is subject, including, but not limited to, the list maintained by the U.S. Treasury Department’s Office of Foreign Assets Control;

ERS agrees to provide the Manager with commercially reasonable notice in the event of any update, amendment or change to any document ERS contractually requires the Manager to comply with; and ERS is (A) a “qualified client” as defined in Rule 205-3(d)(1) under the Advisers Act, (B) an “accredited investor” as that term is defined in Rule 501(a) of the Securities Act of 1933, as amended, (C) a “qualified purchaser” as that term is defined in Section 2(a)(51) of the Investment Company Act of 1940, as amended, (D) a qualified eligible person (“QEP”) as defined by CFTC Rule 4.7, and (E) consents to being treated as a QEP in accordance with CFTC Rule 4.7.

Representations and Warranties of the Manager. The Manager hereby makes each of the following representations and warranties to ERS and acknowledges that all of its representations and warranties contained in any part of this Agreement are material and have been relied upon by ERS in selecting the Manager, entering into this Agreement with the Manager, and continuing to contract with the Manager to provide the services described in this Agreement. The Manager agrees that the representations and warranties included in this Agreement (including, without limitation, this Section 12) are intended to be continuing representations and warranties that will be true and correct throughout the term of the Agreement. The Manager agrees to immediately notify ERS in the event it discovers that any representation or warranty was not true and correct when made or is no longer true and correct.

The Manager is registered with the U.S. Securities and Exchange Commission (“SEC”) as an investment adviser under the Advisers Act;

The Manager has full power and authority under the provisions of the applicable instruments and law governing the Manager to execute, deliver and perform this Agreement;

The Manager has full power, authority, and capacity to execute and deliver this Agreement, and this Agreement has been duly authorized, executed, and delivered by the Manager and constitutes the valid and binding obligation of the Manager, enforceable against the Manager in accordance with its terms;

The Manager shall deliver to ERS such evidence of its authority as ERS may reasonably require, whether by way of appropriate limited liability company documentation or otherwise;

The Manager has completed, obtained or performed (and, when required, will complete, obtain or perform) all registrations, filings, approvals, authorizations, consents or examinations required by any applicable law (or any government or governmental authority) for the performance of the acts contemplated by this Agreement and, during the term of this Agreement, it shall comply with all existing, new or amended statutes of the United States (and any other government or governmental authority) having jurisdiction over its activities which are applicable to its performance under this Agreement;

All personnel of the Manager who will be responsible for carrying out the terms of this Agreement are individuals experienced in the making of investments of the nature contemplated by this Agreement;

The Manager shall promptly advise ERS in the event of any material change in control of the Manager or of any proposed change in the key investment personnel responsible for the management of the Account, (for purposes of this provision, a material change in control shall be any sale, merger, consolidation or any other event that results in the transfer to another person or entity (a) more than 50% of the outstanding equity of the Manager or (b) all or substantially all of the assets of the Manager);

Except as disclosed to ERS in writing, there are no actions, proceedings or investigations pending before any court or governmental authority, including, without limitation, the SEC or any state securities regulatory authority against the Manager or its principals or senior officers;

Except as disclosed to ERS in writing, neither the Manager nor any of its subsidiaries or divisions, nor any of their respective officers, directors, employees, or advisory affiliates (as “advisory affiliates” is defined in Form ADV), has ever been (a) convicted of or pleaded guilty (or nolo contendere) to a felony or misdemeanor involving (i) an investment or investment-related business, (ii) fraud, false statements or omissions, or (iii) the wrongful taking of property, bribery, forgery, counterfeiting or extortion; (b) found by a court to be in violation of any federal or state investment (or investment-related) statutes or regulations; (c) found by the U.S. Securities and Exchange Commission, or any other federal or state regulatory agency or self-regulating organization, to have (i) made a false statement or omission, (ii) been involved in a violation of its regulations or statutes, or (iii) been a cause of an investment-related business having its authorization to do business denied, suspended, revoked or restricted; or (d) has any pending action against it, by any employee benefit plan, the United States Department of Labor or any other federal or state regulatory or administrative agency or self-regulating organization in connection with services it has rendered to any employee benefit plan;

Neither the Manager nor any of its subsidiaries, divisions or other affiliates, nor any of their respective officers or directors or any employees that will have direct responsibility with respect to the management of the Account has (a) had an insurance or bonding company deny, pay out on or revoke a fidelity bond or fiduciary liability insurance policy; (b) filed a bankruptcy or insolvency petition (or been declared bankrupt) or had a trustee appointed under the Securities Investor Protection Act; or (c) had its registration revoked or its activities restricted;

The Manager shall maintain in full force and effect reasonable insurance policies throughout the term of this Agreement. The Manager shall, on or before the Effective Date, provide ERS with a certificate of insurance evidencing proof of such insurance coverage; and To the extent applicable, by entering into this Agreement, the Manager certifies and ensures that it utilizes and will continue to utilize, throughout the term of this Agreement, the U.S. Department of Homeland Security’s E-Verify system, or another similar system as approved by ERS, to determine the eligibility of: (i) all persons employed to perform duties within Texas, throughout the term of this Agreement; and (ii) all persons (including subcontractors) assigned by the Manager to perform work pursuant to this Agreement, within the United States of America.

Delivery of Part 2 of Form ADV.

The Manager hereby represents that the Manager has electronically delivered to ERS (i) at or prior to the execution of this Agreement, a copy of Part 2A of the Manager’s Form ADV, as amended (the “Brochure”), as required by Rule 204-3 under the Advisers Act, (ii) a current copy of Form ADV, Part 2B (the “Brochure Supplement”) which provides information about the specific individuals providing investment advisory services for the strategy referenced in Exhibit A, and (ii) a copy of the Manager’s privacy policy no later than the date of execution of this Agreement;

The Manager further represents and warrants to ERS that the information contained in the Brochure and Brochure Supplement is true and accurate as the date hereof;

The Manager agrees that it will submit to ERS any future Part 2A of the Manager’s Form ADV filing within ten (10) business days after any material amendments have been made and submitted to the SEC and (if no such material amendments have been made), no less frequently than annually in the ordinary course;

The Manager agrees that a senior representative of the Manager shall be available for personal consultation with individuals designated by ERS, including attendance at meetings of ERS upon reasonable advance notice.

Conflicts of Interest.

The Manager represents and warrants that it has not and agrees that it shall not engage in any actions that are or could be perceived to be a conflict of interest, appearance of impropriety or Prohibited Communication (as defined below) in connection with the performance of its obligations under this Agreement;

The Manager hereby represents and warrants to ERS that, for a period of two (2) years prior to the Effective Date, the Manager has not communicated with, caused or permitted any other person or entity to communicate with (a) any member of the Board or the Investment Advisory Committee (“IAC”), (b) ERS’ Executive Director or designee or other member of ERS executive management, or (c) any member, officer, or staff employee of any office of the executive or legislative branches of the state of Texas (collectively referred to as “Public Servants”), in any way related to the subject matter of this Agreement or any other contract or program administered by ERS; or that in any manner affects ERS’ administration of any existing or prospective contract; or that attempts to facilitate and/or influence the obtaining of any contract, rights, payment, or direct or indirect benefit in relation to the subject matter of this Agreement. This warranty and representation also applies if the Manager knew or should have known that any of the foregoing occurred and did not stop or prevent the communication. This warranty and representation does not apply to communications scheduled or approved by ERS between the Manager and/or (i) the Board, (ii) the IAC, or (iii) ERS’ Executive Director or other ERS executive management. It also does not apply to communications with the Board, the IAC, or ERS’ Executive Director or other ERS executive management regarding matters related to any other contract between the Manager and ERS if such communications are expressly permitted under the relevant contract or expressly authorized by ERS’ Executive Director;

The Manager agrees that throughout the term of this Agreement, including any renewal or extension thereof, and for a period of two (2) years following the termination of this Agreement: the Manager has been instructed and has agreed that, except as otherwise expressly permitted in the Agreement or expressly authorized by ERS’ Executive Director, the Manager is prohibited from any Prohibited Communications (as defined below); and except as otherwise expressly permitted in this Agreement or expressly authorized by ERS’ Executive Director, the Manager shall refrain from making directly or indirectly, on its own or through any person or entity including any Advocate, and prohibited communications.

“Prohibited Communications” specifically includes any communications to any member of ERS’ Board or IAC, any officer or employee of ERS, or any Public Servants (including advising, consulting or communicating with any Public Servants) regarding (i) this Agreement; (ii), the subject matter of this Agreement or any other contract or program administered by ERS; (iii) anything that in any manner affects ERS’ administration of any existing or prospective contract; or (iv) any attempt to facilitate and/or influence the obtaining of any contract, rights, payment, or direct or indirect benefit in relation to the subject matter of this Agreement.

Voting Proxies.

Unless otherwise directed in writing by ERS, the Manager shall not be responsible for voting proxies for any securities held in the Account. ERS has retained an agent that is authorized and directed to vote said proxies in accordance with proxy voting guidelines adopted by ERS (which may be amended from time to time) The Manager will not take action or render advice for ERS in legal matters with respect to securities or other investments held in the Account or the issues thereof, including, but not limited to, any class action lawsuits, bankruptcy proceedings, restructurings, workouts, amendments, consents, or exchange offers involving a security purchased or held in the Account. If the Manager becomes aware of any lawsuit with respect to securities presently or formerly held in the Account, and such lawsuit may be material to the Account, the Manager shall confirm that ERS and the Custodian have received notice of such lawsuit.

Attendance at Meetings. A senior representative of the Manager shall personally meet with ERS’ representatives to explain its investment management activities on behalf of the Account, as well as any reports related thereto, at a time and location as may be mutually agreed by the Manager and ERS.

Assignment; Other Similar Matters. The Manager agrees that it may not “assign” (as that term is defined in Advisers Act, as amended from time to time), this Agreement without ERS’ prior written consent. The Manager shall promptly notify ERS in writing within five (5) days of any material changes in any of the following: (a) the list of senior officers or other senior personnel that are involved in the management of the Account; (b) the ownership of the Manager; (c) any significant legal actions instituted against the Manager; or (d) any investigation, examination, or other proceeding commenced against the Manager or any personnel involved in managing the Account by any governmental authority or regulatory agency (other than any routine audit or other matter that is conducted in the ordinary course of the Manager’s business).

Amendments. No provision of this Agreement may be waived, altered, or amended except by written agreement between the parties.

Notices. Unless otherwise specified in this Agreement, all notices, instructions, requests, and other communications with respect to matters contemplated by this Agreement shall be made in writing and shall be sent to the appropriate party at the addresses appearing below. Notice shall be considered effectively given: (a) upon personal delivery to the party to be notified; (b) when sent by confirmed electronic mail, telex or facsimile, if sent during normal business hours of the recipient; if not, then on the next business day; (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid; or (d) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. Either party may change its contact information for notice purposes upon ten (10) days’ advance written notice to the other party.

Notices shall be sent to the Manager at:

Attn: ___________________________________________

Notices shall be sent to ERS at:

Email: general.counsel@ers.texas.gov

Term; Termination.

This Agreement shall continue until terminated in accordance with the terms herein. Without limiting any other rights or remedies that ERS may have at law or equity, ERS shall have the right to terminate this Agreement immediately in the event that the Manager, in ERS’ sole discretion, breaches, fails or refuses to perform, is negligent in performing, is unable to perform, or it reasonably appears that the Manager will not perform any of its duties or obligations, in whole or in part, as provided by this Agreement. In addition to and without restricting or waiving any other legal, contractual, or equitable remedies otherwise available to ERS, ERS may terminate this Agreement at any time by giving five (5) days’ prior written notice to the Manager. The parties may also terminate this Agreement by mutual written consent. To the extent any fees have been paid in advance, they will be prorated to the date of termination specified in the notice of termination and any unearned portion thereof will be promptly refunded to the Account. Such termination shall in no way affect the validity of this Agreement with reference to any transactions, trades, dealings and actions for the Account initiated by the Manager prior to such termination to the extent they are compliant with the terms hereof. Following any termination of the Agreement, the provisions of this Agreement (other than those contained in Sections 9, 10, 21, 22, 24, 25, and 26 hereof, each of which provisions shall survive the termination of this Agreement) shall become null and void.

As soon as possible following the effective date of any termination of this Agreement, the Manager shall provide ERS with a final report pertaining to the Account and the investments therein, which shall be signed by the Manager. Upon request and with reasonable advance notice, the Manager shall make available to ERS full and complete access to all records and information of the Manager relating to the Account.

Confidential Information; Consent to Limited Use of ERS’ Name.

All information and advice furnished by either party to the other hereunder, including their respective agents and employees, shall be treated as confidential and shall not be disclosed to third parties except as required by applicable laws, where it is necessary for purposes of performing the Manager’s duties and responsibilities under this Agreement, or where ERS requests or authorizes the Manager to do so. Notwithstanding any provision herein to the contrary, the Manager agrees not to use or disclose ERS’ nonpublic information for any purpose other than performance of its responsibilities and duties under this Agreement or as required or permitted by applicable laws and regulations.

The Manager acknowledges that ERS is an agency of the state of Texas and is subject to the Texas Public Information Act, Texas Government Code Ann. ch. 552 (West 2012 & Supp. 2014) (the “PIA”). The Manager agrees that it is required by Texas law to make any information pursuant to this Agreement, and not otherwise excepted from disclosure under the PIA, available in a format that is accessible by the public at no additional charge to ERS. The Manager agrees that it will comply with all requirements of Section 552.372(a) of the Texas Government Code. The Manager acknowledges that, except as provided for in Section 552.374(c) of the Texas Government Code, the requirements of Subchapter J, Chapter 552 of the Government Code may apply to this Agreement and the Manager agrees that this Agreement can be terminated if the Manager knowingly or intentionally fails to comply with a requirement of that subchapter. ERS maintains documents and information that are considered confidential by law. In connection with this Agreement, the Manager will have access to information that is considered confidential. The Manager understands that public availability of individual items of ERS’ confidential information does not release its obligation of confidentiality. The Manager is not permitted to disregard its obligations of confidentiality by use of items of ERS’ confidential information to guide a search of publicly available information. The Manager also is not permitted to piece together a series of items of information from unconnected sources and fit these items of information together by use of ERS’ confidential information to make a showing that all or part of ERS’ confidential information was “public”. The Manager agrees that during and after the term of this Agreement, such confidential information shall not be sold, assigned, provided, conveyed, released, disseminated, or otherwise disclosed by the Manager, its Agents or any other persons or entities without ERS’ express written permission, and that the Manager shall instruct its Agents that they shall not so use or disclose such confidential information to any other person or entity, during or after the term of this Agreement, without the express written permission of ERS, except as absolutely necessary for the Manager to provide the Services or as required by law. The Manager warrants and represents that it has a tested and proven system in effect to protect all confidential information as defined herein.

The Manager agrees that the Manager and its Agents shall not, for any purpose, use, sell, assign, convey, provide or otherwise disseminate, copy, make available or otherwise distribute to any person or entity, other than to ERS or to a person or entity designated by ERS, any information regarding ERS or this Agreement without the prior express written consent of ERS’ authorized representative or except as is absolutely necessary for the Manager to perform its obligations under this Agreement or as required by law. Nothing in this provision restricts the Manager’s ability to offer benefits and services to other Texas entities as part of the Manager’s normal business activities as long as neither the Manager nor any of its Agents utilizes confidential information obtained directly or indirectly because of, or in connection with, the Manager’s relationship with ERS arising from this Agreement.

Further Assurances. The Manager hereby agrees to provide ERS’ auditors, consultants, and other representatives, with such evidence as ERS may reasonably request from time to time demonstrating that the Manager satisfies the requirements of this Agreement. Further, ERS and its staff, auditors and consultants will have the right to review the Manager’s investment performance on a consistent basis, which review may include records of written or electronic communications, oral communications, meetings held in person, and on-site visits with the Manager, among others.

Successors. Subject to Section 17 (Assignment), this Agreement shall inure to the benefit of the Manager and its successors, irrespective of any change at any time in the personnel thereof.

Governing Law. This Agreement shall be construed and enforced in accordance with the laws of Texas without giving effect to any conflict of law-related provisions or principles.

Jurisdiction and Venue. Subject to and without waiving ERS’ or the state of Texas’ sovereign or official immunity and pursuant to Texas Government Code Ann. § 811.010 (West 2012), ERS and the Manager agree and consent to Austin, Travis County, Texas as the exclusive proper venue for any court proceedings between the parties, and that a Texas state court sitting in Austin, Travis County, Texas shall have exclusive jurisdiction over the Manager in connection with any action or proceeding arising out of, in connection with or related to this Agreement or the parties’ relationship. The parties agree and acknowledge that nothing contained in this Agreement, or in any amendment, extension or renewal thereof, is intended to nor will it have the effect of waiving the sovereign or official immunity of ERS, its past, present or future trustees, officers, employees and agents, or of the state of Texas, its past, present or future officers, employees, agents, or its departments, or agencies, nor does ERS’ acceptance of any services, benefits, supplies or products under this Agreement constitute any waiver, express, implied or otherwise, of sovereign or official immunity to suit or liability of ERS, its trustees, officers, agents or employees or of the state of Texas. As described herein, ERS’ sovereign immunity includes, but is not limited to, all immunities, privileges, defenses, rights or actions available to ERS and its employees, trustees, and directors based on ERS’ sovereign status and such protections to which it may be entitled as an agency of the state of Texas under Texas law (by comity or otherwise) and under the Eleventh Amendment to the Constitution of the United States of America. The parties further agree that ERS’ exercise of any legal, regulatory, equitable or contractual remedies in connection with this Agreement shall not constitute a waiver of the immunities identified herein.

Texas-specific Provisions. (a) In accordance with Texas Government Code Chapter 2271, the Manager certifies that either (i) it qualifies for an exemption under Section 2271.002 or (ii) it does not currently boycott Israel and agrees that it will not boycott Israel during the term of this Agreement. “Boycott Israel” is defined in Texas Government Code Section 808.001. (b) Under Section 2155.0061 of the Texas Government Code, the Manager certifies that it is not ineligible to receive this Agreement and acknowledges that this Agreement may be terminated and payment withheld if this certification is inaccurate. (c) Under Texas Government Code Ann. §§ 403.055, 2155.004, 2155.006, and 2261.053, the manager certifies that it is eligible to receive this Agreement, it acknowledges that this Agreement may be terminated and payment withheld if this certification is inaccurate, and in the event the Manager is indebted to ERS or the state of Texas or delinquent in paying any taxes owed the state of Texas at the time this Agreement is entered into, the Manager agrees that any payment owed to the Manager under this Agreement shall first be applied towards such debt or delinquent taxes until the debt or delinquent taxes are paid in full. The Manager warrants and represents that at the time it entered into this Agreement, the Manager was not indebted to ERS or the state of Texas or delinquent in paying any taxes owed the state of Texas. (d) In accordance with Texas Family Code Ann. § 231.006, (West 2014), relating to delinquent child support obligations, the Manager certifies that it is eligible to receive payments in connection with this Agreement and acknowledges that, in addition to other remedies available to ERS, this Agreement may be terminated immediately and any such payments withheld if this certification is inaccurate. (e) The Manager warrants and represents that it is not engaged in business with Iran, Sudan, or a foreign terrorist organization, as prohibited by Section 2252.152 of the Texas Government Code. (f) The Manager verifies that: (1) it does not, and will not for the duration of this Agreement, boycott energy companies or (2) the verification required by Section 2276.002 of the Texas Government Code does not apply to this Agreement. If circumstances relevant to this provision change during the course of this Agreement, The Manager shall promptly notify ERS. (g) The Manager verifies that: (1) it does not, and will not for the duration of this Agreement, have a practice, policy, guidance, or directive that discriminates against a firearm entity or firearm trade association or (2) the verification required by Section 2274.002 of the Texas Government Code does not apply to this Agreement. If circumstances relevant to this provision change during the course of this Agreement, The Manager shall promptly notify ERS.

Entire Agreement. The parties hereby agree that the Request for Qualifications to Provide Public Equity Investment Advisory Services dated [ ] (including, without limitation, the Scope of Services set forth therein), the Manager’s submission in response to same, and this Agreement collectively represent the entire agreement between the parties, and that no other agreement or understanding between the parties, their agents or employees, oral or otherwise, will constitute a part of the Agreement, will be binding upon the parties, or will be effective to interpret, change, restrict, or otherwise modify the provisions of the Agreement, and any such other prior agreements, statements, or understandings between the parties, their agents, representatives or employees, oral or otherwise, are hereby superseded.

Severability. If any provision of this Agreement is held to be invalid, void or unenforceable by reason of any law, rule, administrative order or judicial decision, this Agreement shall be considered divisible as to such provision, such provision shall be deemed to have been deleted only in the jurisdiction(s) in which it is invalid, and the remainder of this Agreement shall remain in full force and effect.

Counterparts. This Agreement may be executed in several counterparts, each of which, when so executed and delivered, shall be deemed to be an original and all of which, when taken together, shall constitute one and the same signatory page of the Agreement.

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IN WITNESS WHEREOF, the parties have set their hands hereto as of the date written below.

EMPLOYEES RETIREMENT SYSTEM OF TEXAS

Porter Wilson Executive Director

FG: 103900756.1

FG: 103900756.1

Investment Management Agreement

EXHIBIT A

INVESTMENT GUIDELINES

(a) Benchmark Index. The applicable Benchmark Index for the Account will be: [ ] (the “Benchmark”).

(b) Investment Objectives. The Manager shall seek to provide capital appreciation and an income stream to the Account by investing in a portfolio of global equities (the “Portfolio”). The objective of the Portfolio is to outperform the Benchmark by [ ] basis points gross of fees, annualized and measured over a full market cycle (defined here for this purpose as 5 to 7 years). The long-term target for the Portfolio’s annualized tracking error (calculated over 5 year periods) is to fall within a range of [ ] to [ ]basis points.

(c) General Guidelines. All investments made by the Manager on behalf of the Account are subject to compliance with applicable local, state, federal, and foreign laws and shall be managed in a diversified and prudent manner pursuant to the ERS Investment Policy, these Investment Guidelines and the Agreement. ERS may amend these Investment Guidelines from time to time upon prompt written notice to the Manager.

(d) Prohibited Transactions. The following transactions involving the Account are prohibited:

0. Transactions for the account of the Manager or its agents; and

0. Transactions that involve a broker acting as a “principal”, where such broker is also the investment advisor who is making the transaction. Transactions shall be recommended on the basis of “best execution,” for the sole and exclusive benefit of ERS’ beneficiaries as set forth in the Agreement.

(e) Authorized Investments. An investment in any of the following shall constitute an Authorized Investment for the purposes of this Agreement:

(i) Equity securities of all companies traded or listed on an organized stock exchange, market or equivalent.

(ii) Equity securities of companies from countries included in the Benchmark except where otherwise prohibited by these Investment Guidelines.

(iii) For purposes of the foregoing, equity securities shall include, but shall not be limited to, common stocks, preferred stocks, rights, warrants, units and depositary receipts (i.e., ADRs, GDRs), and other similar instruments that trade publicly in accordance with regulations applicable to the country in which they are issued, without regard to the issuer’s principal place of business or jurisdiction of incorporation or organization, including common or preferred stock issued in registered initial public offerings (IPOs), and participation notes and other equity-linked notes and instruments related thereto.

(iv) To the extent that they are traded or listed on an organized stock exchange, market or equivalent, mutual funds, closed-end funds, exchanged traded funds (ETFs), commingled funds, real estate investment trusts or other pooled vehicles shall also be considered “Authorized Investments.” The Account may also participate in private placements of listed or soon-to-be listed securities (via subscription rights, shares, warrants, options or otherwise) in connection with a corporate action event.

(f) Portfolio Guidelines. The Manager shall comply with the following guidelines when making investments on behalf of the Account:

(i) Limit cash held in the Account to [ ]% except during the initial funding, during periods of high cash flows, and for transactional purposes.

(ii) Limit investments in any one stock to no more than [ ]% of the Account.

(iii) Limit investments in any single country to no more than [ ]% of the Account, with the exception of the United States, in which a maximum of [ ]% of the Account may be invested.

(iv) Generally maintain active sector exposure aligned with the Benchmark weight. The value of investments made in any single sector will generally be within [ ] basis points relative to that sector’s weight in the Benchmark, but shall not fall below 0% on an absolute basis.

(v) Limit investments in emerging markets countries (as defined by MSCI) to no more than [ ]% of the Portfolio.

(g) Portfolio Restrictions. The Manager shall comply with the following restrictions:

(i) The Account shall be subject to restrictions set forth in the Scrutinized Investment Program Policy (the “Scrutinized Investment Program Policy”) as adopted by the ERS Board and provided to the Manager from time to time. Among other requirements set forth within the Scrutinized Investment Program Policy, the Manager agrees that it shall comply with required divestments immediately following the delivery of notice by ERS. ERS has initially provided the Manager with a list of restricted securities which it may not purchase for the Portfolio (the “Restricted List”). Updates to the Restricted List shall be provided to the Manager by ERS at the following email address: [ ].

(ii) The Account may be subject to additional restrictions based on ERS’ internal policies and pursuant to applicable law. Any such additional restrictions will be communicated to the Manager promptly at the email address set forth above.

(iii) No investments shall be made in any securities that trade in frontier markets.

(iv) The Manager acknowledges that ERS may wish to prohibit the trading of securities in certain other countries designated by ERS from time to time. Any such country-based restrictions shall be communicated by ERS via email to [ ]. Country classifications will be determined by the Benchmark provider.

(v) No more than [ ]% of the Account may be invested in illiquid assets (defined fo purposes of these Investment Guidelines as an asset that is not reasonably expected to be able to be sold or otherwise disposed of within twenty-one (21) business days at approximately the same or greater value as its acquisition price).

(vi) Any use of derivatives on behalf of the Account shall require ERS’ prior written consent.