INVESTMENT MANAGEMENT AGREEMENT (6)� , . S
Dated 2012
EAGLE CAPITAL MANAGEMENT, LLC
(the "Investment Manager")
- and -
CITY OF CLEARWATER EMPLOYEE'S PENSION FUND
(the "CGent")
INVESTMENT MANAGEMENT AGREEMENT
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TABLE OF CONTENTS
1. Appointment of Investment Manager . ........................................................................... 2
2. Investment Account Assets ............................................................................................ 2
3. Investment Authority . .................................................................................................... 2
4. Fees and Expenses . ........................................................................................................ 3
5. Aggregation and Allocation ...........................................................................................3
6. Broker-Dealer Transactions ...........................................................................................4
7. Voting Rights; Legal Claims . ........................................................................................5
8. Investment Manager Representations ............................................................................ 5
9. Client Representations . .................................................................................................. 5
10. Liability ..........................................................................................................................7
11. Valuation ........................................................................................................................7
12. Termination ....................................................................................................................8
13. Reporting .......................................................................................................................8
14. Books and Records . ....................................................................................................... 8
15. Coniidentiality ...............................................................................................................8
16. Assignment ....................................................................................................................8
17. Notices ...........................................................................................................................9
18. General Provisions .........................................................................................................9
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THIS INVESTMENT MANAGEMENT AGREEMENT (the "Agreement") is made effective
as of DECEMBER 1, 2012 between CITY OF CLEARWATER EMPLOYEE'S PENSION
FUND (the "Client") and Eagle Capital Management, LLC (the "Investment Manager").
1. Appointment of Investment Manager.
The Client appoints the Investment Manager as a discretionary manager of the
Investment Account Assets (as deiined in paragraph 2.2 below) in accordance with
the terms of this Agreement. The Investment Manager accepts the appointment and
agrees to manage the Investment Account Assets in accordance with the terms of this
Agreement and the Investment Guidelines set out in the Schedule to this Agreement
(the "Investment Guidelines"). The services of the Investment Manager are not
exclusive and the Investment Manager is free to render similar services to others.
2. Investment Account Assets.
2.1 The Client will appoint an independent custodian or trustee (the "Custodian") and the
Investment Account Assets will be held by the Custodian in a segregated account (the
"Investment Account"). At no time will the Investment Manager have or take direct or
indirect custody of the Investment Account Assets.
2.2 The "Investment Account Assets" will consist of the portfolio of assets entrusted from
time to time to the management of the Investment Manager by the Client under this
Agreement, being:
the cash, stocks, bonds, securities, funds and other investments or property of
any kind whatsoever (reasonably acceptable to the Investment Manager); plus
ii. all investments, reinvestments and proceeds of the sale of those assets,
including (but not limited to) all dividends, interest and earnings on
investments, and all appreciation on and additions to such assets; minus
iii. any losses, expenses, withdrawals and distributions,
The Investment Account Assets will not include, and the Investment Manager will not
have responsibility for, any assets of the Client not expressly allocated to the
Investment Account under this Agreement, and the Investment Manager will only be
responsible for such assets for as long as they remain in the Investment Account.
2.3 The Client may make contributions and withdrawals to the Investment Account by
providing an acknowledged written notice to the Investment Manager. Any additions
to the Investment Account must be reasonably acceptable to the Investment Manager.
3. Investment Authority.
3.1 Subject to the Investment Guidelines, the Investment Manager will, without obtaining
further instructions and in accordance with its own judgment and discretion, sell,
retain, exchange or otherwise deal in investments and other assets, subscribe to issues
and offers for sale, advise on or execute transactions, effect transactions on any
markets, negotiate and execute counterparty and account opening documentation, take
all routine or day-to-day decisions and otherwise take any actions, which it considers
necessary or desirable in connection with the Investment Account Assets.
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4. Fees and Expenses.
4.1 For the Investment Manager's services, the Investment Manager is authorized to
charge the Investment Account quarterly with one quarter of the annual fee at the rate
of 1.0% of the assets on the iirst $5 million and 0.75% above $5 million (the
"Management Fee"). The Management Fee will be calculated on the value of the
Investment Account Assets at the end of each quarter and will be payable in arrears;
provided that, to the extent that the Client makes a contribution or withdrawal to the
Investment Account of an amount in excess of $10 million dollars or 5% of the value
of the Investment Account Assets (such an amount being the "Prorated Amount") on
any day other than the �rst day of a calendar quarter, the Management Fee payable in
respect of the Prorated Amount will be prorated to reflect the number of days in the
calendar quarter that the Prorated Amount formed part of the Investment Account
Assets.
4.2 Any and all expenses directly relating to the investment of Investment Account Assets
(including, but not limited to, all brokerage, commission and other transaction
charges, custodian fees, interest charges, transfer and registration fees and all taxes,
including any interest and penalties relating to such expenses), which may be levied
or assessed under existing or future laws will, unless otherwise agreed, be charged to
and paid out of the Investment Account Assets. The Client will be responsible for any
such expenses that are not paid out of the Investment Account Assets.
5. Aggregation and Allocation.
5.1 The Investment Manager will have the authority, but not the obligation, to aggregate
purchase or sale orders for the Investment Account Assets with similar orders being
made simultaneously for other accounts managed by Investment Manager, or with
accounts of the affiliates of the Investment Manager, if in the Investment Manager's
reasonable judgment such aggregation will result in an overall economic benefit to the
Investment Account considering the advantageous selling or purchase price,
brokerage commission and other expenses.
5.2 The Client acknowledges that the determination of such economic beneiit to the
Investment Account Assets by the Investment Manager is subjective and represents
the Investment Manager's evaluation that the Investment Account Assets are
benefited by relatively better purchase or sales prices, lower commission expenses
and beneficial timing of transactions or a combination of these and other factors.
5.3 In accounting for such aggregated order price, commission and other expenses will be
averaged on a per bond or share basis daily.
5.4 It is understood that the Investment Manager performs investment advisory services
for various clients and that other accounts and persons advised by the Investment
Manager may have different investment objectives or considerations to the Investment
Account. As a result, decisions regarding purchases and sales for each management
account are made separately and independently in light of the objectives and purposes
of each account.
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5.5 The Investment Manager will allocate investment opportunities in a manner which it
believes to be in the best interests of the accounts involved and in accordance with the
Investment Manager's fiduciary responsibilities.
5.6 The Client agrees that the Investment Manager may give advice and take action in the
performance of its duties with respect to any of its other clients which differ from
action taken with respect to the Investment Account Assets.
6. Broker-Dealer Transactions.
6.1 The Investment Manager will have full authority and discretion to select the broker or
dealer who will execute any transaction in respect of the Investment Account. If the
Client directs the Investment Manager to execute transactions through one (or more)
specific broker(s), the Investment Manager will not be liable for any loss resulting
from acceptance of that direction. Nothing shall require the Investment Manager to
accept direction to use a broker designated by the Client.
6.2 In the selection of brokers or dealers and the placing of orders, the Investment
Manager will attempt to obtain the most favorable price and execution available,
except to the extent it may be permitted to pay higher brokerage commissions for
brokerage and research services as described below.
6.3 In using its best efforts to obtain favorable price and execution, the Investment
Manager may take into account all factors it considers relevant, including, for
example, price, the size of the transaction, the nature of the market for the security,
the amount of the commission, the timing of the transaction taking into account
market prices and trends, the reputation, experience, and financial stability of the
broker or dealer involved and the quality of service provided by the broker or dealer
in other transactions.
6.4 The Investment Manager will not be deemed to have acted unlawfully or to have
breached any duty created by this Agreement solely because it caused the Investment
Account to pay a broker or dealer who provides brokerage and research services to the
Investment Manager a higher commission for carrying out a portfolio investment
transaction than another broker or dealer would have charged for that transaction, if
the Investment Manager determines in good faith that the commission was reasonable
considering the value of the brokerage and research services provided by that broker
or dealer. That good faith determination may consider the needs and interests of all
accounts managed by the Investment Manager.
6.5 Subject to the foregoing, the Investment Manager may elect to trade the securities
through or with any registered brokers or dealers, or through alternate trading
systems, or directly with other holders and may use block transactions or consolidate
for trading purposes the Investment Account's trades with similar trades being
executed for other funds managed by the Investment Manager. However, the
Investment Manager, and any firm afiiliated with the Investment Manager, may not
be the broker, dealer, agent, or principal for any of the Investment Account's security
trades without the Investment Manager first notifying the Client in writing.
6.6 The Investment Manager will not be liable for any acts or omissions of any broker or
dealer selected by the Investment Manager, as long as the Investment Manager has
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not acted with negligence in its selection or continuance of dealings with a broker or
dealer.
7. Voting Rights; Legal Claims.
7.1 The Investment Manager will vote all proxies relating to the Investment Account, but
will not be responsible for participation in class action law suits.
8. Investment Manager Representations.
8.1 The Investment Manager acknowledges that it is a fiduciary with respect to the Client
and the management of the Investment Account Assets under this Agreement.
8.2 The Investment Manager coniirms that it is an investment adviser registered with the
United States Securities and Exchange Commission under the Investment Advisers
Act 1940. The Client acknowledges receipt of the Investment Manager's current form
ADV Part II and Privacy Disclosure Document. In compliance with Rule 204-3 under
the Advisers Act, the Client has the right to terminate this agreement, without penalty,
within five business days after entering if the Investment Manager's form ADV Part
II was not received more than 48 hours prior to entering this agreement.
8.3 The Investment Manager warrants that:
it has full power and authority to enter into this Agreement and to perform its
obligations under this Agreement and to carry out all the agreements and
transactions within the scope of this Agreement; and
ii. it holds all necessary registrations, licenses and similar instruments under
applicable laws to carry out its duties and this Agreement.
8.4 There exists in full force and effect an insurance policy protecting the Investment
Manager (and its ofiicers, directors, and employees) against liability or loss for a
breach of fiduciary responsibility, errors and omissions and negligent acts by the
Investment Manager in connection with its duties under the Agreement, and the
coverage limitations of such policy equal or exceeds Five Million Dollars
($5,000,000).
9. Client Representations.
9.1 The Client warrants that it is authorized to enter into this Agreement and perform its
obligations in accordance with the terms of this Agreement and has obtained all
corporate authorizations and approvals necessary to permit the Investment Manager to
carry out its duties and obligations under this Agreement.
9.2 The Client warrants that neither its entry into this Agreement nor into any transactions
within the scope of this Agreement will breach in any material respect any law, rule or
regulation applicable to the Client.
9.3 The Client understands that, from time to time, the Investment Account Assets may
be invested in a"new issue," as deiined in the U.S. Financial Industry Regulatory
Authority's ("FINRA") Rule 5130 and the Client represents that it is not a restricted
person for purposes of participation in new issues. The Client also represents that it is
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not (i) an executive officer or director of a public company or a covered non-public
company for purposes of FINRA Rule 5131(b) (i.e., the "spinning" rule), (ii) a person
materially supported by such an officer or director, or (iii) an entity that is more than
25% owned by such an officer or director andlor a person materially supported by
such an officer or director.
9.4 The Client (or an advisor or consultant relied upon by the Client) in reaching a
decision to seek to enter into this Agreement, has sufficient knowledge and
experience in financial, tax and business matters as to enable the Client (or such
advisor or consultant) to evaluate the merits and risks of the investment of the
Investment Account Assets in accordance with the Investment Guidelines and to
make an informed investment decision with respect to such considerations.
9.5 The Client represents that:
it is not an entity that would subject the Investment Manager to recordkeeping
or other restrictions or requirements under rule 206(4)-5 of the Investment
Advisers Act 1940 (i.e., the "pay to play rule"); and
ii. no fees, bonuses or other compensation are being received by the Client or any
of its personnel or related persons in connection with the Client's selection and
appointment of the Investment Manager.
9.6 The Client represents and warrants that, to the best of its knowledge, none of:
i. the Client;
ii. any person controlling or controlled by the Client, or if the Client is a privately
held entity, any person having a beneiicial interest in the Client; or,
iii. any person for whom the Client is acting as agent or nominee in connection
with the Investment Account,
is either:
i. a country, territory, individual or entity named on any list maintained by the
Office of Foreign Assets Control ("OFAC"), nor is a person or entity
prohibited under the OFAC Programs; or
ii. a senior foreign political iigure (being a current or former senior ofiicial in the
executive, legislative, administrative, military or judicial branches of a non-
U.S. government, whether elected or not; a cunent or former senior official of
a major non-U.S. political party; or a current or former senior executive of a
non-U.S. government-owned commercial enterprise), or any immediate family
member or close associate of a senior foreign political figure.
9.7 The Client represents and warrants that it is not:
i. an employee benefit plan, as deiined in Section 3(3) of ERISA;
ii. a plan, as that term is used in Section 4975 of the Code, that is subject to
Section 4975 of the Code;
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iii. a governmental plan or other entity that is subject to any federal, state or local
law that is similar to the provisions of Section 406 of ERISA or Section 4975
of the Code; or
iv. an entity the assets of which constitute "plan assets" within the meaning of
Department of Labor Regulation 29 C.F.R. Section 2510.3-101, as modiiied
by Section 3(42) of ERISA.
The Client will provide the Investment Manager with immediate written notice should
the Client determine that it is in breach of this representation and warranty.
10. Liability.
10.1 The Investment Manager will not be liable to the Client for any punitive, indirect or
consequential damages or for damages that are not reasonably foreseeable, arising as
a result of or in connection with:
events or circumstances beyond the Investment Manager's reasonable control
including, but not limited to nationalization, expropriation, currency
restrictions, act of war or terrorism, riot, revolution, acts of God or other
similar events or acts;
ii. errors by the Client or by the Custodian in its instructions to the Investment
Manager; or
iii. errors or omissions caused by a securities exchange, clearing system or similar
third party securities processing, clearing or settlement system.
10.2 The Investment Manager will not be responsible for the title, validity or genuineness,
including good deliverable form, of any property or evidence of title received or
delivered by it pursuant to this Agreement and will be held harmless in acting upon
any notice, request, consent, certificate or instrument reasonably believed by it to be
genuine and to be signed or otherwise given by the proper party or parties.
10.3 No guarantee is given by the Investment Manager as to the performance or
profitability of the Investment Account Assets or the success of any investment
strategy recommended or used by the Investment Manager.
11. Valuation.
11.1 The valuation of the Investment Account Assets will be determined by the Client or
its Custodian and the Investment Manager will have no responsibility or liability for
such valuations. If the Investment Manager disagrees with a particular valuation for
purposes of calculating the fee payable to the Investment Manager under Section 4,
the parties will negotiate in good faith to resolve that disagreement. The Investment
Manager also performs regular reconciliations of the determination of the net asset
value of the Investment Account Assets performed by the Custodian and will make
the results of those reconciliations available on reasonable request.
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12. Termination.
12.1 This Agreement will continue in effect until terminated: (i) at any time by the Client
or (ii) on 30 days' prior notice by the Investment Manager to the Client.
12.2 Notwithstanding the foregoing, the Investment Manager may terminate this
Agreement with immediate effect if the Client commits a material breach of this
Agreement.
12.3 The Client will pay any accrued but unpaid fee up to and including the date of
termination.
13. Reporting.
The Investment Manager will provide the Client with quarterly reports that set out the
assets held in the Investment Account. It is understood that custodial records will be
the prevailing source for tax information.
14. Books and Records.
The Investment Manager will maintain complete records relating to the provision of
investment services under this Agreement for a period of at least iive (5) years
following each transaction or activity (or in accordance with applicable laws).
15. Confidentiality.
15.1 Each party will treat as confidential and not disclose to third parties the terms and
conditions of this Agreement and all non-public information and advice given by
either party to the other, under or in connection with this Agreement or the parties'
activities under this Agreement (the "Confidential Information").
15.2 Neither party will make use of or disclose any Confidential Information of the other
party except as expressly authorized in this Agreement or as required by law or legal
process, or as part of a routine regulatory examination. Each party's obligations
under this Section 15 with respect to the Coniidential Information of the other party
will extend only to the earlier of (i) such time as the information enters the public
domain through no fault of the party seeking to disclaim a confidentiality obligation
or; (ii) two (2) years following the termination of this Agreement.
153 The Investment Manager may disclose to prospective ar existing investors that the
Client is a client of the Investment Manager, except that the disclosure may not reveal
the investment performance, amount or composition of the Client's Investment
Account.
16. Assignment.
16.1 The Investment Manager will not assign (as that term is deiined in the Investment
Advisers Act 1940) this Agreement without the prior consent of the Client.
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17. Notices.
17.1 Any notice, direction, instruction, acknowledgment, or other communication required
by this Agreement will be in writing to Client or the Manager, as applicable, at the
following addresses:
To the Manager:
Eagle Capital Management, LLC
499 Park Avenue, 17th Floor
New York, NY 10022
Attention: Ravenel B. Curry, III
To the Client:
Stuart Kaufman, Esq.
Klausner, Kaufman, Jensen and Levinson
10059 NW 1 st Court
Plantation, Florida 33324
General Provisions.
17.2 This Agreement, together with the Investment Guidelines, constitutes the entire
agreement between the parties on the subject matter of this Agreement. This
Agreement supersedes all prior agreements and understandings (written or oral), and
there are no other agreements, understandings, representations or warranties of any
kind, expressed or implied, not expressly set forth in this Agreement.
173 This Agreement and its Investment Guidelines may not be amended, modified or
waived without an agreement in writing signed by each of the parties to this
Agreement.
17.4 If any provision of this Agreement is determined to be invalid, illegal or
unenforceable, the remaining provisions of this Agreement remain in full force, as
long as the essential terms and conditions of this Agreement for each party remain
valid, binding, and enforceable.
17.5 This Agreement may be executed in any number of counterparts, all of which together
will constitute one and the same instrument.
17.6 No failure or delay on the part of either party in exercising any right, power or remedy
under this Agreement in respect of any occurrence or event on one occasion will
operate as a waiver of any such right, power or remedy in respect of such an
occurrence or event on any other occasion. Either party's failure to insist at any time
on strict compliance with this Agreement or with any term hereof or any continued
course of such conduct on its part will in no event constitute or be considered a waiver
by such party of any rights or privileges.
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17.7 This Agreement will be construed and interpreted in accordance with the laws of the
State of Florida to the extent not superseded by any federal law. Any legal
proceeding arising out of this Agreement will be brought in the courts of the State of
Florida located in Hillsborough County.
17.8 Disclosure
The Investment Manager agrees to disclose, in writing to Client within ten (10) business days,
if the Investment Manager becomes the subject of an investigation by the Securities and
Exchange Commission for alleged breach of federal securities laws; any investigation by the
U.S. Department of Justice for allegations relating to violation of federal securities laws or
related allegations of fraud; or if the Investment Manager is named as the defendant in any
civil action alleging fraud, negligence or breach of fiduciary responsibility.
17.9 INVESTMENT OBJECTIVE AND POLICY
The primary objective of the portfolio is to seek as high a level of total return that is
consistent with prudent risk through investments in a diversified portfolio of marketable
equity securities. The Investment Manager agrees to observe the Pension Plan for the Fund
and the investment policy as set forth by the Client in Exhibit "A". In the event that the
Investment Manager should purchase any security in violation of the investment policy of the
Client, and as a result of any sale thereof realizes a loss as measured by the initial purchase
price of the security, the Investment Manager shall make the Client whole for any such losses.
Additionally, the decision to continue to hold or dispose of an asset subsequent to its purchase
that no longer meets the investment policy standards shall be made in accordance with the
Client's investment policy.
[Remainder of page left intentionally blank; signature page follows immediately.]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of
the date iirst above written.
EAGL PITAL MENT, C
By
Name:
Title:
BOARD OF TRUSTEES OF THE EMPLOYEE5'
PENSION FUND OF THE CITY OF
CLEARWATER, FLORIDA
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George N. Cretekos
Chairperson
Approved as to form:
Attest:
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Rosemarie Call � __�
City Clerk
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