CATALYST FUNDS
SUB-ADVISORY AGREEMENT
SUB-ADVISORY AGREEMENT, dated as of _______, 2006, between Catalyst
Capital Advisors LLC (the "Adviser"), and Xxxxxx & Company Mutual Funds, Inc.
(the "Sub-Adviser").
WHEREAS, the Adviser acts as an investment adviser to multiple series of
Catalyst Funds, an Ohio business trust (the "Trust"), pursuant to a Management
Agreement dated as of June 21, 2006 (the "Management Agreement");
WHEREAS, the Trust is an open-end management investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Adviser desires to retain the Sub-Adviser to render
investment advisory services to the Catalyst Alternative Strategy Fund (the
"Fund"), a series of shares of beneficial interest of the Trust, and the
Sub-Adviser is willing to render such services.
NOW, THEREFORE, in consideration of the premises and mutual agreements
hereinafter set forth, the parties hereto agree as follows:
Section 1. Appointment and Status of Sub-Adviser. The Adviser hereby
appoints the Sub-Adviser to provide investment advisory services to the Fund for
the period and on the terms set forth in this Agreement. The Sub-Adviser accepts
such appointment and agrees to render the services herein set forth, for the
compensation herein provided. The Sub-Adviser shall for all purposes herein be
deemed to be an independent contractor of the Adviser and the Trust and shall,
unless otherwise expressly provided herein or authorized by the Adviser or the
Board of Trustees of the Trust from time to time, have no authority to act for
or represent the Adviser or the Trust in any way or otherwise be deemed an agent
of the Adviser or the Trust.
Section 2. Sub-Adviser's Duties. Subject to the general supervision of the
Trust's Board of Trustees (the "Board") and the Adviser, the Sub-Adviser shall,
employing its discretion, manage the investment operations of the Fund and the
composition of the portfolio of securities and investments (including cash)
belonging to the Fund, including the purchase, retention and disposition thereof
and the execution of agreements relating thereto, in accordance with the Fund's
investment objective, policies and restrictions as stated in the Fund's
then-current Prospectus and Statement of Additional Information (together, the
"Prospectus") and subject to the following understandings:
(a) The Sub-Adviser shall furnish a continuous investment program for the
Fund and determine from time to time what investments or securities will be
purchased, retained or sold by the Fund and what portion of the assets belonging
to the Fund will be invested or held uninvested as cash;
(b) The Sub-Adviser shall use its best judgment in the performance of its
duties under this Agreement;
(c) The Sub-Adviser, in the performance of its duties and obligations
under this Agreement for the Fund, shall act in conformity with the Trust's
Declaration of Trust, its By-Laws and the Fund's Prospectus and with the
reasonable instructions and directions of the Trust's Board of Trustees and the
Adviser, and will conform to and comply with the requirements of the 1940 Act
and all other applicable federal and state laws and regulations;
(d) The Sub-Adviser shall determine the securities to be purchased or sold
by the Fund and will place portfolio transactions pursuant to its determinations
either directly with the issuer or with any broker and/or dealer in such
securities, subject to Section 3 below;
(e) The Sub-Adviser shall maintain books and records with respect to the
securities transactions of the Fund and shall render to the Adviser and the
Trust's Board of Trustees such periodic and special reports as the Adviser or
the Board may reasonably request;
(f) The Sub-Adviser shall provide the Trust's custodian and fund
accountant on each business day with information about Fund securities
transactions, and with such other information relating to the Trust as may be
required under the terms of the then-current custody agreement between the Trust
and the custodian;
(g) The Sub-Adviser shall respond immediately to any request from the
Adviser or the Fund's fund accountant for assistance in obtaining price sources
for securities held by the Fund or determining a price when a price source is
not available, and shall periodically review the prices used by the fund
accountant to determine net asset value and advise the fund accountant promptly
if any price appears to be incorrect;
(h) The Sub-Adviser shall vote all proxies solicited by or with respect to
the issuers of securities in which assets of the Fund may be invested from time
to time. Such proxies will be voted in a manner that the Sub-Adviser deems, in
good faith, to be in the best interests of the Fund and in accordance with the
Sub-Adviser's proxy voting policy. The Sub-Adviser shall provided a copy of its
proxy voting policy, and any amendments thereto, to the Adviser prior to the
execution of this Agreement;
(i) The Sub-Adviser hereby represents that it has adopted a written code
of ethics complying with the requirements of Rule 17j-1 under the 1940 Act and
will provide the Adviser and the Trust with a copy of the code and evidence of
its adoption. Within 45 days of the last calendar quarter of each year while
this Agreement is in effect, the Sub-Adviser shall provide to the Board a
written report that describes any issues arising under the code of ethics since
the last report to the Board, including, but not limited to, information about
material violations of the code and sanctions imposed in response to the
material violations; and which certifies that the Sub-Adviser has adopted
procedures reasonably necessary to prevent access persons (as that term is
defined in Rule 17j-1) from violating the code;
(j) The Sub-Adviser agrees to maintain adequate compliance procedures to
ensure its compliance with the 1940 Act, the Investment Advisers Act of 1940, as
amended, and other applicable federal and state regulations. The Sub-Adviser
shall provide to the Trust's Chief Compliance Officer an annual written report
regarding the Sub-Adviser's compliance program.
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Section 3. Execution of Purchase and Sale Orders. In connection with
purchases or sales of portfolio securities for the account of the Fund, the
Sub-Adviser will arrange for the placing of all orders for the purchase and sale
of portfolio securities for the account with brokers or dealers selected by the
Sub-Adviser, subject to review of this selection by the Board from time to time.
The Sub-Adviser will be responsible for the negotiation and the allocation of
principal business and portfolio brokerage. In the selection of such brokers or
dealers and the placing of such orders, the Sub-Adviser will at all times seek
for the Fund the best qualitative execution, taking into account such factors as
price (including the applicable brokerage commission or dealer spread), the
execution capability, financial responsibility and responsiveness of the broker
or dealer and the brokerage and research services provided by the broker or
dealer.
The Sub-Adviser should generally seek favorable prices and
commission rates that are reasonable in relation to the benefits received. In
seeking best qualitative execution, the Sub-Adviser is authorized to select
brokers or dealers who also provide brokerage and research services to the Fund
and/or the other accounts over which it exercises investment discretion. The
Sub-Adviser is authorized to pay a broker or dealer who provides such brokerage
and research services a commission for executing a Fund portfolio transaction
that is in excess of the amount of commission another broker or dealer would
have charged for effecting that transaction if the Sub-Adviser determines in
good faith that the amount of the commission is reasonable in relation to the
value of the brokerage and research services provided by the executing broker or
dealer. The determination may be viewed in terms of either a particular
transaction or the Sub-Adviser's overall responsibilities with respect to the
Fund and to accounts over which the Sub-Adviser exercises investment discretion.
The Trust and the Sub-Adviser understand and acknowledge that, although the
information may be useful to the Fund and the Sub-Adviser, it is not possible to
place a dollar value on such information. The Board shall periodically review
the commissions paid by the Fund to determine if the commissions paid over
representative periods of time were reasonable in relation to the benefits to
the Fund. The Sub-Adviser may not give consideration to sales of shares of the
Fund as a factor in the selection of brokers and dealers to execute Fund
portfolio transactions.
Subject to the provisions of the 1940 Act, and other applicable law,
the Sub-Adviser, any of its affiliates or any affiliates of its affiliates may
retain compensation in connection with effecting the Fund's portfolio
transactions, including transactions effected through others. If any occasion
should arise in which the Sub-Adviser gives any advice to clients of the
Sub-Adviser concerning the shares of the Fund, the Sub-Adviser will act solely
as investment counsel for such client and not in any way on behalf of the Fund.
The Sub-Adviser's services to the Fund pursuant to this Agreement are not to be
deemed to be exclusive and it is understood that the Sub-Adviser may render
investment advice, management and other services to others, including other
registered investment companies.
Section 4. Books and Records. The Sub-Adviser shall keep the Trust's books
and records required to be maintained by it pursuant to Section 2(e) of this
Agreement. The Sub-Adviser agrees that all records that it maintains for the
Trust are the property of the Trust and it will promptly surrender any of such
records to the Trust upon the Trust's request. The Sub-Adviser further agrees to
preserve for the periods prescribed by Rule 31a-2 under the 1940 Act any such
records as are required to be maintained by the Sub-Adviser with respect to the
Trust by Rule 31a-1 under the 1940 Act.
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Section 5. Expenses of the Sub-Adviser. During the term of this Agreement,
the Sub-Adviser will pay all expenses (including without limitation the
compensation of all trustees or officers of the Trust, if any, who are
"interested persons" of the Sub-Adviser, as defined in the 0000 Xxx) incurred by
it in connection with its activities under this Agreement other than the cost of
securities and investments purchased for the Fund (including taxes and brokerage
commissions, if any). Notwithstanding the foregoing, the Sub-Adviser is not
obligated to pay the compensation or expenses of the Trust's Chief Compliance
Officer, regardless of whether the Chief Compliance Officer is affiliated with
the Sub-Adviser.
Section 6. Compensation of the Sub-Adviser. For the services provided and
the expenses borne pursuant to this Agreement, the Adviser will pay to the
Sub-Adviser as full compensation therefor a fee equal to seventy percent (0.70)
of the net advisory fees paid by the Fund to the Adviser. Net advisory fees are
defined as management fees less fee waivers due to the expense caps and any
revenue sharing, administration or sub-transfer agency fees not paid by the
Fund. This fee for each month will be paid to the Sub-Adviser during the
succeeding month. The Adviser is solely responsible for the payment of the
Sub-Adviser's fees, and the Sub-Adviser agrees not to seek payment of its fees
from the Trust or the Fund.
Section 7. Use of Names. The Trust and Sub-Adviser acknowledge that all
rights to the name "Catalyst" belong to the Adviser, and that the Trust is being
granted a limited license to use such words in its Fund name or in any class
name. In the event the Adviser ceases to be the adviser, the Trust's right to
the use of the name "Catalyst" shall automatically cease on the ninetieth day
following the termination of this Agreement. The right to the name may also be
withdrawn by the Adviser during the term of the Management Agreement upon ninety
(90) days' written notice by the Adviser to the Trust. Nothing contained herein
shall impair or diminish in any respect the Adviser's right to use the name
"Catalyst" in the name of, or in connection with, any other business enterprises
with which the Adviser is or may become associated. There is no charge to the
Trust for the right to use this name.
Section 8. Liability. Neither the Sub-Adviser nor its shareholders,
members, officers, directors, employees, agents, control persons or affiliates
of any thereof, shall be liable for any error of judgment or mistake of law or
for any loss suffered by the Fund in connection with the matters to which this
Agreement relates except a loss resulting from a breach of fiduciary duty with
respect to the receipt of compensation for services (in which case any award of
damages shall be limited to the period and the amount set forth in Section
36(b)(3) of the 0000 Xxx) or a loss resulting from willful misfeasance, bad
faith or gross negligence on its part in the performance of its duties or from
reckless disregard by it of its obligations and duties under this Agreement.
Any person, even though also a director, officer, employee,
shareholder, member or agent of the Sub-Adviser, who may be or become an
officer, director, trustee, employee or agent of the Trust, shall be deemed,
when rendering services to the Trust or acting on any business of the Trust
(other than services or business in connection with the Sub-Adviser's duties
hereunder), to be rendering such services to or acting solely for the Trust and
not as a director, officer, employee, shareholder, member or agent of the
Sub-Adviser, or one under the Sub-Adviser's control or direction, even though
paid by the Sub-Adviser.
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Section 9. Duration and Termination. The term of this Agreement shall
begin on the date of this Agreement and shall continue in effect for a period of
two years from the date of this Agreement. This Agreement shall continue in
effect from year to year thereafter, subject to termination as hereinafter
provided, if such continuance is approved at least annually (a) by a majority of
the outstanding voting securities (as defined in the 0000 Xxx) of such Fund or
by vote of the Trust's Board of Trustees, cast in person at a meeting called for
the purpose of voting on such approval, and (b) by vote of a majority of the
Trustees of the Trust who are not parties to this Agreement or "interested
persons" (as defined in the 0000 Xxx) of any party to this Agreement, cast in
person at a meeting called for the purpose of voting on such approval. The
Sub-Adviser shall furnish to the Adviser and the Trust, promptly upon their
request, such information as may reasonably be necessary to evaluate the terms
of this Agreement or any extension, renewal or amendment thereof.
This Agreement may be terminated at any time on at least 60 day's prior
written notice to the Sub-Adviser, without the payment of any penalty, (i) by
vote of the Board of Trustees, (ii) by the Adviser, (iii) by vote of a majority
of the outstanding voting securities (as defined in the 0000 Xxx) of the Fund,
or (iv) in accordance with the terms of any exemptive order obtained by the
Trust or the Fund under Section 6(c) of the 1940 Act, exempting the Trust or the
Fund from Section 15(a) and Rule 18f-2 under the 1940 Act. The Sub-Adviser may
terminate this Agreement at any time, without the payment of any penalty, on at
least 60 days' prior written notice to the Adviser and the Trust. This Agreement
will automatically and immediately terminate in the event of its assignment (as
defined in the 1940 Act).
Section 10. Amendment. This Agreement may be amended by mutual consent of
the Adviser and the Sub-Adviser, provided the Trust approves the amendment (a)
by vote of a majority of the Trustees of the Trust, including Trustees who are
not parties to this Agreement or "interested persons" (as defined in the 0000
Xxx) of any such party, cast in person at a meeting called for the purpose of
voting on such amendment, and (b) if required under then current interpretations
of the 1940 Act by the Securities and Exchange Commission, by vote of a majority
of the outstanding voting securities (as defined in the 0000 Xxx) of each Fund
affected by such amendment.
Section 11. Notices. Notices of any kind to be given in writing and shall
be duly given if mailed or delivered to the Sub-Adviser at 0000 Xxxx Xxxxxxx
Xxxxxx, 0xx xxxxx, Xxxxxx, Xxxxxxxxxx, 00000, and to the Adviser at 0 Xxxxxxxxx
Xxxxx, Xxxxx Xxxxxx, Xxx Xxxx, 00000, or at such other address or to such other
individual as shall be specified by the party to be given notice.
Section 12. Governing Law. (a) This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to the conflicts of laws principles thereof, and (b) any question of
interpretation of any term or provision of this Agreement having a counterpart
in or otherwise derived from a term or provision of the 1940 Act, shall be
resolved by reference to such term or provision of the 1940 Act and to
interpretation thereof, if any, by the United States courts or in the absence of
any controlling decision of any such court, by rules, regulations or orders of
the Securities and Exchange Commission issued pursuant to said 1940 Act. In
addition, where the effect of a requirement of the Act reflected in any
provision of this Agreement is revised by rule, regulation or order of the
Securities and Exchange Commission, such provision shall be deemed to
incorporate the effect of such rule, regulation or order.
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Section 13. Severability. In the event any provision of this Agreement is
determined to be void or unenforceable, such determination shall not affect the
remainder of this Agreement, which shall continue to be in force.
Section 14. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 15. Binding Effect. Each of the undersigned expressly warrants and
represents that he has the full power and authority to sign this Agreement on
behalf of the party indicated and that his signature will operate to bind the
party indicated to the foregoing terms.
Section 16. Captions. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereto or otherwise affect their construction or effect.
Section 17. Change of Control. The Sub-Adviser shall notify Adviser and
the Trust in writing at least 60 days in advance of any change of control, as
defined in Section 2(a)(9) of the 1940 Act, as will enable the Trust to consider
whether an assignment, as defined in Section 2(a)(4) of the 1940 Act, would
occur.
Section 18. Other Business. Except as set forth above, nothing in this
Agreement shall limit or restrict the right of any of the Sub-Adviser's
directors, officers or employees who may also be a trustee, officer, partner or
employee of the Trust to engage in any other business or to devote his or her
time and attention in part to the management or other aspects of any business,
whether of a similar or a dissimilar nature, nor limit or restrict the
Sub-Adviser's right to engage in any other business or to render services of any
kind to any other corporation, firm, individual or association.
Section 19. Confidentiality. The Sub-Adviser agrees to treat all records
and other information relating to the Trust and the securities holdings of the
Fund as confidential and shall not disclose any such records or information to
any other person unless (i) the Board of Trustees of the Trust has approved the
disclosure or (ii) such disclosure is compelled by law. In addition,
Sub-Adviser, and Sub-Adviser's officers, directors and employees are prohibited
from receiving compensation or other consideration, for themselves or on behalf
of the Fund, as a result of disclosing the Fund's portfolio holdings.
Sub-Adviser agrees that, consistent with its Code of Ethics, neither it nor its
officers, directors or employees may engage in personal securities transactions
based on nonpublic information about the Fund's portfolio holdings.
[Signature block on following page.]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the date and year first above
written.
Catalysts Capital Advisors LLC Xxxxxx & Company Mutual Funds, Inc.
By: By:
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Name: Name:
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Title: Title:
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