FORM OF SUB-ADVISORY AMENDMENT WITH
MELLON EQUITY ASSOCIATES, LLP
SUB-ADVISORY AGREEMENT
AGREEMENT made as of the ____ day of February, 2002, by and among THE
CATHOLIC FUNDS, INC. a Maryland corporation (the "Fund Company"), CATHOLIC
FINANCIAL SERVICES CORPORATION, a Wisconsin corporation (the "Adviser" and
"Distributor"), and MELLON EQUITY ASSOCIATES, LLP, a Pennsylvania limited
liability partnership (the "Sub-Adviser").
W I T N E S S E T H
For good and valuable consideration, the receipt of which is hereby
acknowledged, it is hereby agreed by and among the parties hereto as follows:
1. In General
The Sub-Adviser agrees, as more fully set forth herein, to act as
Sub-Adviser to the Fund Company with respect to the investment and
reinvestment of the assets of The Catholic Equity Fund and, subject to the
mutual agreement of the parties, of any other series of mutual fund of the
Fund Company presently designated or designated in the future. The parties'
agreement to appoint the Sub-Adviser as sub-adviser for any such additional
series shall be reflected by modifying Exhibit A attached to this Agreement
accordingly. The Catholic Equity Fund and any such additional series are
referred to herein as a "Fund". The Sub-Adviser agrees to supervise and
arrange the purchase of securities and the sale of securities held in the
investment portfolio of each Fund.
2. Duties and Obligations of the Sub-Adviser with Respect to Investments
of Assets of the Funds
(a) Subject to the succeeding provisions of this section and subject
to the oversight and review of the Adviser and the direction and
control of the Board of Directors of the Fund Company, the
Sub-Adviser shall:
(i) Determine what securities shall be purchased or sold by each
Fund specified on Exhibit A;
(ii) Arrange for the purchase and the sale of securities held in
each Fund specified on Exhibit A; and
(iii)Provide the Adviser and the Directors with such reports as
may reasonably be requested in connection with the discharge
of the foregoing responsibilities and the discharge of the
Adviser's responsibilities under its Investment Advisory
Agreement with the Fund Company and those of the Distributor
under its Distribution Agreement with the Fund Company.
(b) Any investment purchases or sales made by the Sub-Adviser under
this section shall at all times conform to, and be in accordance
with, any requirements imposed by: (1) the provisions of the
Investment Company Act of 1940 (the "Act") and of any rules or
regulations in force thereunder; and (2) the provisions of the
Articles of Incorporation and Bylaws of the Fund Company as
amended from time to time; (3) any policies and determinations of
the Board of Directors of the Fund Company; and (4) along with
any amendments thereto, the fundamental investment policies of
the relevant Fund, as reflected in the Fund Company's
registration statement under the Act, or as amended by the
shareholders of the Fund Company; provided that copies of the
items referred to in clauses (2), (3) and (4) shall have been
furnished to the Sub-Adviser.
(c) The Sub-Adviser shall give the Fund Company the benefit of its
best judgment and effort in rendering services hereunder. In the
absence of willful misfeasance, bad faith, negligence, reckless
disregard of its obligations or duties hereunder or violation of
applicable law ("disabling conduct") on the part of the
Sub-Adviser (or any of its officers, directors, general
partner(s), agents or employees (each a "Sub-Adviser
Affiliate")), neither the Sub-Adviser nor any Sub-Adviser
Affiliate shall be subject to liability to the Fund Company or to
any shareholder of the Fund Company for any act or omission in
the course of, or connected with, rendering services hereunder,
including without limitation any error of judgment or actions
performed or for any loss suffered by any of them in connection
with the matters to which this Agreement relates, except to the
extent specified in Section 36(b) of the Act concerning loss
resulting from a breach of fiduciary duty with respect to the
receipt of compensation for services. Except for such disabling
conduct, the Fund Company shall indemnify the Sub-Adviser and
each Sub-Adviser Affiliate against any liability arising from
their conduct under this Agreement to the extent permitted by the
Fund Company's Articles of Incorporation, Bylaws and applicable
law. This Section 2(c) shall survive the termination of this
Agreement.
(d) Nothing in this Agreement shall prevent the Sub-Adviser or any
affiliated person (as defined in the Act) of the Sub-Adviser from
acting as investment advisor or manager for any other person,
firm or corporation and shall not in any way limit or restrict
the Sub-Adviser or any such affiliated person from buying,
selling or trading any securities for its or their own accounts
or for the accounts of others for whom it or they may be acting.
The Sub-Adviser will, however, promptly notify the Adviser when
the Sub-Adviser undertakes to manage the assets of any other
mutual fund sponsored by a Catholic organization. In addition,
the Sub-Adviser expressly represents that it will undertake no
activities which, in its judgment, will adversely affect the
performance of its obligation to the Fund Company under this
Agreement or under the Act. It is agreed that the Sub-Adviser
shall have no responsibility or liability for the accuracy or
completeness of the Fund Company's Registration Statement under
the Act and the Securities Act of 1933, except for information
supplied by the Sub-Adviser for inclusion therein. The
Sub-Adviser shall be deemed to be an independent contractor and,
unless otherwise expressly provided or authorized, have no
authority to act for or represent the Fund Company in any way or
otherwise be deemed an agent of the Fund Company.
(e) In connection with its duties to arrange for the purchase and
sale of each Fund's portfolio securities, the Sub-Adviser shall
follow the principles set forth in any investment advisory
agreement in effect from time to time between the Fund Company
and the Adviser, provided that a copy of any such agreement and
any amendment thereto shall have been provided to the
Sub-Adviser. The Sub-Adviser will promptly communicate to the
Adviser and to the officers and the Directors of the Fund Company
such information relating to portfolio transactions as they may
reasonably request.
Without limiting the generality of the foregoing, with respect to
the execution of transactions on behalf of a Fund, and except as
otherwise instructed from time to time by the Board of Directors
of the Fund Company, the Sub-Adviser shall place, or arrange for
the placement of, all orders for purchases, sales or loans either
directly with the issuer or with a broker-dealer, or other
counterparty or agent selected by the Sub-Adviser. In connection
with the selection of all such parties for the placement of all
such orders, the Sub-Adviser shall attempt to obtain most
favorable execution and price, but may nevertheless in its sole
discretion, as a secondary factor, purchase and sell portfolio
securities from and to broker-dealers who provide research and
analysis to the Sub-Adviser which the Sub-Adviser lawfully and
appropriately may use in its capacity as Sub-Adviser, whether or
not such research and analysis also may be useful to the
Sub-Adviser in connection with its services to other clients. In
recognition of such research and analytical services or brokerage
services provided by a broker or dealer, the Sub-Adviser is
authorized to pay such broker or dealer a commission or spread in
excess of that which might be charged by another broker or dealer
for the same transaction if the Sub-Adviser determines in good
faith that the commission or spread is reasonable in relation to
the value of the services so provided.
The Fund Company hereby authorizes any entity or person
associated with the Sub-Adviser that is a member of a national
securities exchange to effect any transaction on the exchange for
the account of a Fund to the extent permitted by and accordance
with Section 11(a) of the Securities Exchange Act of 1934 and
Rule 11a2-2(T) thereunder. The Fund Company hereby consents to
the retention by such entity or person of compensation for such
transaction in accordance with Rule 11a2-2(T)(a)(iv).
The Sub-Adviser may, where it deems it to be advisable, aggregate
orders for its other customers together with any securities of
the same type to be sold or purchased for one or more Funds,
and/or other clients of the Sub-Adviser in order to obtain best
execution or lower brokerage commissions. In such event, the
Sub-Adviser shall allocate the shares so purchased or sold, as
well as the expense incurred in the transaction, in a manner it
considers to be equitable and fair, and consistent with its
fiduciary obligations to the Fund Company, the Funds and the
Sub-Adviser's other customers.
(f) The Sub-Adviser shall, where it deems it appropriate, make
recommendations to the Fund Company as to the manner in which
voting rights, rights to consent to the Fund Company or Fund
Action, and any other rights pertaining to the Fund Company or
any of the Funds shall be exercised; provided that the
Sub-Adviser shall have no obligation nor any authority to execute
any voting proxies or consents on behalf of the Fund Company or
any Fund, but rather shall promptly forward to the Fund Company
all proxy and other solicitation materials that the Sub-Adviser
may receive with respect to any such voting rights or consents.
(g) The Sub-Adviser shall be responsible for preparing and filing
with the SEC all reports on Schedule 13F required under Section
13(f) of the Securities Exchange Act of 1934 in connection with
equity positions held by each Fund for which the Sub-Adviser has
investment or voting discretion.
3. Allocation of Expenses
The Sub-Adviser agrees that it will furnish the Fund Company, at the
Sub-Adviser's expense, with all office space and facilities, equipment
and clerical personnel necessary for carrying out the Sub-Adviser's
duties under this Agreement.
4. Certain Records
Any records required to be maintained and preserved pursuant to the
provisions of Rule 31a-1 and Rule 31a-2 under the Act which are
prepared or maintained by the Sub-Adviser on behalf of the Fund
company are the property of the Fund Company and will be surrendered
promptly to the Fund Company or the Adviser on request.
5. Reference to the Sub-Adviser
Neither the Fund Company nor the Adviser or any affiliate or agent
thereof shall make reference to or use the name of the Sub-Adviser or
any of its affiliates in any advertising or promotional materials
without the prior written approval of the Sub-Adviser, which approval
shall not be unreasonably withheld.
6. Compensation of the Sub-Adviser
The Adviser agrees to pay the Sub-Adviser, and the Sub-Adviser agrees
to accept as full compensation for all services rendered by the
Sub-Adviser as such, a management fee as specified on Exhibit A.
7. Duration and Termination
(a) This Agreement shall go into effect with respect to The Catholic
Equity Fund on the date specified on Exhibit A attached hereto.
In the event the parties hereto mutually agree that one or more
series of the Fund Company should be included as additional
"Fund(s)" hereunder, this Agreement shall become effective with
respect to each such additional Fund(s) on the date(s) specified
on Exhibit A hereto. Once effective with respect to any Fund,
this Agreement shall, unless terminated as hereinafter provided,
continue in effect for a period of two years with respect to such
Fund, and thereafter from year to year, but only so long as such
continuance is specifically approved at least annually by a
majority of the Fund Company's Board of Directors, or by the vote
of the holders of a "majority" (as defined in the Act) of the
outstanding voting securities of the relevant Fund, and, in
either case, a majority of the Directors who are not parties to
this Agreement or "interested persons" (as defined in the Act) of
any such party cast in person at a meeting called for the purpose
of voting on such approval.
(b) This Agreement may be terminated by the Sub-Adviser in its
entirety or with respect to any one or more specifically
identified Funds at any time without penalty upon giving the Fund
Company and the Adviser sixty (60) days' written notice (which
notice may be waived by the Fund Company and the Adviser) and may
be terminated by the Fund Company or the Adviser in its entirety
or with respect to any one or more specifically identified Funds
at any time without penalty upon giving the Sub-Adviser sixty
(60) days' written notice (which notice may be waived by the
Sub-Adviser), provided that such termination by the Fund Company
shall be directed or approved by the vote of a majority of all of
its Directors in office at the time or by the vote of the holders
of a "majority" (as defined in the Act) of the voting securities
of each Fund with respect to which the Agreement is to be
terminated. This Agreement shall automatically terminate in the
event of its "assignment" (as defined in the Act). This Agreement
will also automatically terminate in the event that the
Investment Advisory Agreement by and between the Fund Company and
the Adviser is terminated for any reason.
8. Notification of Ownership Change
For so long as the Sub-Adviser is organized as a partnership, it will
notify the Adviser of any change in its ownership within a reasonable time
of such change.
IN WITNESS WHEREOF, the parties hereto have caused the foregoing instrument
to be executed by their duly authorized officers and their seals to be hereto
affixed, all as of the day and year first above written.
THE CATHOLIC FUNDS, INC. CATHOLIC FINANCIAL SERVICES CORPORATION
By: By:
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Xxxxxxxx X. Xxxxxx, President Xxxxx X. Xxxxx, President
MELLON EQUITY ASSOCIATES, LLP
By:
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Xxxxxxx X. Xxxxxx, President and CEO
EXHIBIT A
THE CATHOLIC FUNDS, INC.
MELLON EQUITY ASSOCIATES, LLP
SUB-ADVISORY AGREEMENT
1. The Catholic Equity Fund:
a. Effective Date: Effective date of Post-Effective Amendment No. 4 to
The Catholic Funds, Inc.'s SEC Registration Statement on Form N-1A,
which Amendment was filed with the SEC on January 9, 2002.
b. Management Fee: computed daily and paid monthly at the annual rate of
0.12 of one percent (0.12%) on the first $50 million of the Fund's
average daily net assets, and 0.06 of one percent (0.06%) on the
Fund's average daily net assets in excess of $50 million.
