AZZAD FUNDS
INTERIM SUB-ADVISORY AGREEMENT
THIS INTERIM SUB-ADVISORY AGREEMENT, dated as of April 8, 2002, is between
Azzad Asset Management, Inc., a Delaware corporation (the "Adviser"), and Xxxxx
Xxxxxxx Capital Management Co.,(TM)a Texas corporation (the "Sub-Adviser").
WHEREAS, the Adviser acts as the investment manager to the Azzad/Dow Xxxxx
Ethical Market Fund (the "Fund"), a series of the Azzad Funds, a Massachusetts
business trust (the "Trust"), pursuant to an Interim Investment Advisory
Agreement dated as of April 8, 2002 (the "Advisory Agreement"), a copy of which
has been provided to the Sub-Adviser; and
WHEREAS, the Trust is an open-end management investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, the Adviser desires to retain the Sub-Adviser to render investment
advisory services to the Fund; and
WHEREAS, the Adviser and the Sub-Adviser desire to enter into this Interim
Investment Advisory Agreement (the "Agreement") pursuant to the terms of Rule
15a-4 of the 1940 Act pending approval of a final sub-advisory agreement by a
majority of the Fund's outstanding voting securities designating the Sub-Adviser
as the sub-adviser of the Fund.
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 and By-Laws, the Fund's Prospectus and Statement of
Additional Information and the applicable provisions of the Advisory Agreement,
and with the 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 effect 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 request; and
(f) The Sub-Adviser shall provide the Trust's custodian with such
information relating to the Trust as may be required under the terms of the
then-current custody agreement between the Trust and the custodian.
SECTION 3. EXECUTION OF PURCHASE AND SALE ORDERS. The Sub-Adviser shall
be responsible for decisions to buy and sell securities for the Fund, for
broker-dealer selection and for negotiation of brokerage commission rates,
provided that the Sub-Adviser shall not direct orders to an affiliated person of
the Sub-Adviser without general prior authorization to use such affiliated
broker or dealer from the Board of Trustees. The Sub-Adviser's primary
consideration in effecting a securities transaction will be execution at the
most favorable price. In selecting a broker-dealer to execute each particular
transaction, the Sub-Adviser may take the following into consideration: the best
net price available; the reliability, integrity and financial condition of the
broker-dealer; the size of and difficulty in executing the order; and the value
of the expected contribution of the broker-dealer to the investment performance
of the Fund on a continuing basis. The price to the Fund in any transaction may
be less favorable than that available from another broker-dealer if the
difference is reasonably justified by other aspects of the portfolio execution
services offered.
Subject to such policies as the Board of Trustees may determine, the
Sub-Adviser shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of its having
caused the Fund to pay a broker or dealer that provides (directly or indirectly)
brokerage or research services to the Sub-Adviser an amount of commission for
effecting a portfolio transaction 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 such amount of commission was
reasonable in relation to the value
of the brokerage and research services provided by such broker or dealer, viewed
in terms of either that particular transaction or the Sub-Adviser's overall
responsibilities with respect to the Fund or accounts for which the Sub-Adviser
has investment discretion. The Sub-Adviser is further authorized to allocate the
orders placed by it on behalf of the Fund to such brokers or dealers who also
provide research or statistical material, or other services, to the Fund, the
Sub-Adviser, or any affiliate of either. Such allocation shall be in such
amounts and proportions as the Sub-Adviser shall determine, and the Sub-Adviser
shall report on such allocations regularly to the Fund, indicating the
broker-dealers to whom such allocations have been made, the amount of such
allocation and the basis therefor. The Sub-Adviser is also authorized to
consider sales of shares as a factor in the selection of brokers or dealers to
execute portfolio transactions, subject to the requirements of best price and
execution, i.e., that such brokers or dealers are able to execute the order
promptly and at the best obtainable securities price.
On occasions when the Sub-Adviser deems the purchase or sale of a security
to be in the best interest of the Fund as well as of other clients (to the
extent that the Sub-Adviser may, in the future, have other clients), the
Sub-Adviser, to the extent permitted by applicable laws and regulations, may
aggregate the securities to be so purchased or sold in order to obtain the most
favorable price and execution or lower brokerage commissions and the most
efficient execution. In such event, allocation of the securities so purchased or
sold, as well as the expenses incurred in the transaction, will be made by the
Sub-Adviser in the manner it considers to be the most equitable and consistent
with its fiduciary obligations to the Fund and to such other clients.
Subject to the provisions of the 1940 Act and other applicable law, and
prior authorization of the Board as described above, 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 any Fund, the Sub-Adviser will act solely as investment counsel for such
client and not in any way on behalf of the Fund.
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 which 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.
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 who are "interested
person" 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).
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 monthly fee at the annual rate of
0.30% of the Fund's average daily net assets, with a minimum payment of $750 per
month.
If the Sub-Adviser shall serve for less than the whole of any monthly
period, its compensation determined as provided herein will be calculated and
payable on a pro rata basis for the period of the calendar month for which it
has served as sub-adviser.
SECTION 7. ADDITIONAL ADVISER RESPONSIBILITIES. The Adviser will
provide unlimited access and usage to all software licenses and updates/upgrades
required by the Sub-Adviser to perform its duties, including, without
limitation, the Dow Xxxxx Islamic Market Index License and the Investment
Xxxxx-A Filtering Application.
The Adviser will pay for all database information feeds necessary to
operate all software applications. The Adviser will reimburse the Sub-Adviser
for expenses incurred for Bloomberg Services at a rate of $500.00 per month in
arrears. Notwithstanding the forgoing, if another sub-advisory agreement is in
place between the parties, the amount reimbursed to the Sub-Adviser by the
Adviser for Bloomberg Services will not exceed $500 in the aggregate.
SECTION 8. LIABILITY OF THE SUB-ADVISER. Neither 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 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 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 Sub-Adviser, or one under
Sub-Adviser's control or direction, even though paid by Sub-Adviser.
SECTION 9. DURATION AND TERMINATION. This Agreement shall take effect
on the date first set forth above and shall remain in force for a period not to
exceed 150 days thereafter. This Agreement may, upon ten days written notice, be
terminated with respect to the Fund at any time, without the payment of any
penalty, by the Adviser with the consent of the Trust's Board of Trustees, by
the Trust's Board of Trustees, or by vote of a majority of the outstanding
voting securities (as defined in the 0000 Xxx) of the Fund, in any such case on
10 days' written notice to the Sub-Adviser. 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 those Trustees of the Trustee who are not parties
to this Agreement or "interested persons" (as defined in the 0000 Xxx) of any
such party 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 1940 Act).
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 00000 Xxxxxx
Xxxxx Xxxxxxxxx, Xxxxx 000, Xxxxxxx, Xxxxx 00000, and to the Adviser at 0000
Xxxxxxxx Xxxx Xxxxx, Xxxxx 000, Xxxxx Xxxxxx, Xxxxxxxx 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 Texas, 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.
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 for otherwise affect their construction or effect.
SECTION 17. CHANGE OF CONTROL. Sub-Adviser shall notify Adviser and the
Trust in writing sufficiently 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
partners, 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.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below on the date and year first above
written.
Assad Asset Management, Inc. Xxxxx Xxxxxxx Capital
Management Co.,(TM)
By: /s/ By: /s/
-------------------------------- --------------------------------
Name: Xxxxxx Xxxxx Name: Xxxxxxx X. Xxxxx
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Title: President & CEO Title: President
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374526.1
