Exhibit
(d)(4)
INVESTMENT
SUB-ADVISORY AGREEMENT
THIS
INVESTMENT SUB-ADVISORY AGREEMENT (the “Agreement”) is between Cavanal Hill Investment Management, Inc., an Oklahoma
corporation (the “Adviser”), and Lavaca Capital, LLC, a Texas limited liability company (the “Sub-Adviser”)
for the Hedged Income Fund series (“Hedged Income Fund”) of the Cavanal Hill Funds (the “Trust”), a Massachusetts
business trust registered as an open-end, diversified, management investment company under the Investment Company Act of 1940,
as amended (the “1940 Act”), and shall be effective as of the 28th day of December, 2020.
WHEREAS,
the Adviser serves as the Investment Adviser for the Trust, including the Hedged Income Fund, pursuant to the terms of an Investment
Advisory Agreement dated May 12, 2001, as amended (the “Advisory Agreement”);
WHEREAS,
Section 4 of the Advisory Agreement permits the Adviser, subject to the approvals required under the 1940 Act, to employ an investment
sub-adviser to assist the Adviser in the performance of its duties;
WHEREAS,
the approval by Trustees, including a majority of independent trustees, and shareholders of the Hedged Income Fund has been obtained;
WHEREAS,
the Sub-Adviser is an investment adviser registered with the Securities and Exchange Commission under the Investment Advisers
Act of 1940, as amended (the “Advisers Act”);
WHEREAS,
the Hedged Income Fund principal investment strategy involves purchasing dividend paying equity securities and hedging the Fund’s
stock holdings, including buying/selling puts and writing/buying back covered calls against securities owned in the Fund (“Principal
Strategy”);
WHEREAS,
the Sub-Adviser offers options and volatility-based hedging strategies which will be used as to the hedging portion of the Principal
Strategy, specializing in the use of United States listed equity options, seeking to (i) reduce risk, (ii) enhance income and
(iii) provide an alternative source of absolute return for client portfolios (collectively, the “Lavaca Strategy”);
WHEREAS,
the Adviser desires to delegate to the Sub-Adviser, and Sub-Adviser wishes to accept such delegation of, investment advisory services
on a sub-advisory basis for the Hedged Income Fund to be managed pursuant to the Lavaca Strategy;
NOW,
THEREFORE, in consideration of the premises and the mutual promises hereinafter set forth, the Adviser and the Sub-Adviser agree
as follows:
1.
Appointment as Sub-Adviser and Authority.
Under
the terms and subject to the conditions of this Agreement and in accordance with and subject to the Advisory Agreement, the Adviser
hereby appoints the Sub-Adviser to provide investment advisory services to the Hedged Income Fund on a discretionary and sub-advisory
basis, as more fully described herein (the “Services”) subject to the supervision and direction of the board of trustees
of the Trust (the “Board”) and the Adviser. The Sub-Adviser hereby accepts such engagement and agrees to furnish such
Services on the terms and in exchange for the compensation described herein.
The
Sub-Adviser is for all purposes of this Agreement, an independent contractor and shall, except as expressly provided or authorized
by the Board or the Adviser, have no authority to act for or represent the Trust or the Adviser in any way or otherwise be deemed
an agent of the Trust or the Adviser. Nothing contained herein shall create or constitute any of the Hedged Income Fund, the Adviser,
or the Sub-Adviser as members of any partnership, joint venture, association, syndicate, unincorporated business, or other separate
entity. The Adviser and the Sub-Adviser expressly acknowledge that neither intends for the Sub-Adviser to be a “supervised
person” (as defined in the Advisers Act) of the Adviser.
2.
Obligations of and Services to be Provided by the Sub-Adviser.
(a)
Investment Advice. The Sub-Adviser shall formulate and implement a continuous investment program for the Hedged
Income Fund, consistent with the Lavaca Strategy and investment objectives and policies of the Hedged Income Fund as agreed between
the Adviser and Sub-Adviser, and in connection with such ongoing investment advice shall furnish the Adviser such factual information,
research reports and investment recommendations as the Adviser may reasonably request. Such information may include written and
oral reports and analyses.
(b)
Transactions. The Sub-Adviser shall provide execution services for the
Hedged Income Fund pursuant to the Lavaca Strategy, including the buying/selling of protective puts and writing/buying back covered
calls against securities owned in the fund. In carrying out its obligations, the Sub-Adviser shall coordinate and cooperate with
the Adviser and other service providers to the Hedged Income Fund. Furthermore, to carry out such obligations, the Sub-Adviser
shall, subject to the limitations in this section, exercise full discretion and act for the Hedged Income Fund in the same manner
and with the same force and effect as the Adviser might or could do with respect to purchases, sales, and other transactions involving
the buying/selling of puts and writing/buying back covered calls against securities the Adviser has purchased for the Fund, as
well as with respect to all other such activities necessary or incidental to the furtherance or conduct of such purchases, sales,
or other transactions. The Sub-Adviser shall be permitted to direct the transfer cash from the Hedged Income Fund only in association
with the buying/selling of puts and writing/buying back covered calls against securities the Adviser has purchased for the Fund
and shall, upon written instructions from the Adviser, effect such portfolio transactions for the Hedged Income Fund as the Adviser
may from time to time direct. No reference in this Agreement to the Sub-Adviser having full discretionary authority over the Hedged
Income Fund’s investments pursuant to the Lavaca Strategy shall in any way limit the right of the Adviser or the Board,
each in its sole and absolute discretion, to establish or revise policies in connection with the management of the Hedged Income
Fund’s assets, from time to time and upon written notice to the Sub-Adviser, or otherwise to exercise its right to control
the overall management of the Hedged Income Fund’s assets.
In
connection with the purchase and sale of securities for the Hedged Income Fund, the Sub-Adviser shall arrange for the transmission
to the Adviser (or its designee) on a daily basis, to be no later than 1:00 p.m. CST on trade date + 1 (T+1) such confirmation,
standing instructions and other documents as may be necessary to enable them to perform their administrative responsibilities
with respect to the Hedged Income Fund.
The
Sub-Adviser will place or cause to be placed orders for the Hedged Income Fund either directly with the issuer or with any broker
or dealer and, in placing orders with brokers and dealers, the Sub-Adviser will attempt to obtain prompt execution of orders in
an effective manner at the most favorable price. Consistent with this obligation, when the execution and price offered by two
or more brokers or dealers are comparable, the Sub-Adviser may, in its discretion, purchase and sell portfolio securities to and
from brokers and dealers who provide the Adviser with research advice and other services. In no instance will portfolio securities
be purchased from or sold to Cavanal Hill Distributors, BOK Financial Securities, Inc., Cavanal Hill Investment Management, Inc.,
Lavaca Capital, LLC, or any affiliated person (as defined in the 0000 Xxx) of the Trust or the identified entities, except as
permitted in the 1940 Act.
(c)
Information and Reports: The Sub-Adviser shall comply with all reasonable
requests of the Adviser and the Board for information regarding the Services provided to the Hedged Income Fund and shall render
such reasonable reports evaluations, information or analyses to the Adviser and to the Board concerning the Services provided
to the Hedged Income Fund and its performance in such reasonable form and at such reasonable intervals as the Adviser or the Board
may from time to time require or as the Sub-Adviser may deem to be desirable.
(d)
Books and Records. The Sub-Adviser shall not be responsible for the provision
of administrative, bookkeeping, or accounting services to the Hedged Income Fund, except as otherwise provided herein or as may
be reasonably necessary for the Sub-Adviser to supply to the Adviser or the Hedged Income Fund the information required to be
supplied under this Agreement. The Sub-Adviser shall maintain on behalf of the Trust records with respect to customary matters
(e.g., trade information, account statements, etc.,) pertaining to the Hedged Income Fund’s assets advised by the Sub-Adviser
relating to its responsibilities provided hereunder with respect to the Hedged Income Fund, and shall preserve such records for
the periods and in the manner prescribed by applicable law. The records maintained by the Sub-Adviser pursuant to this Section
2(d) are the property of the Trust and shall be delivered to the Adviser upon request and at the termination of this Agreement.
The Sub-Adviser further agrees to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act the records required to
be maintained by Rule 31a-1 under the 1940 Act.
(e)
Standard of Care. The Sub-Adviser shall exercise good faith and due care
and shall under no circumstances discharge its obligations hereunder in a manner that is inferior to the procedures and standard
of care employed by it for any other account for which the Sub-Adviser or any of its affiliates discharges obligations (either
alone or in conjunction with others) similar to those undertaken by the Sub-Adviser hereunder. The Sub-Adviser’s allocation
of time and staff resources between the Hedged Income Fund and other accounts under management shall be at Sub-Adviser’s
sole discretion, and variances in time and resources between accounts shall not be determinative in deciding whether any particular
accounts (including the Hedged Income Fund) under management have been favored or disfavored.
(f)
Compliance with the Law and Trust Documents. The Sub-Adviser shall materially
comply with all applicable laws, including rules and regulations of the SEC, in providing Services to the Hedged Income Fund.
Services shall at all times be subject to (i) the applicable provisions of the Trust’s Declaration of Trust, Bylaws, and
the current Registration Statement (Prospectus, Statement of Additional Information and Part C), (ii) the investment objectives,
policies and restrictions applicable to the Hedged Income Fund (iii) resolutions of the Board and (iv) any undertakings with state
or other regulatory authorities which are provided to the Sub-Adviser. The Sub-Adviser shall maintain compliance procedures for
the Hedged Income Fund that it reasonably believes are adequate to ensure the Hedged Income Fund’s compliance with the foregoing,
the overall investment program, and applicable law.
(g)
Confidentiality. The Sub-Adviser will treat confidentially and as proprietary information of the Trust all records
and other information relative to the Trust and prior, present, or potential shareholders of the Trust learned by, or disclosed
to, the Adviser in the course of its performance of its responsibilities and duties under the Agreement, and will not use such
records and information for any purpose other than performance of its responsibilities and duties hereunder, except after prior
notification to and approval in writing by the Trust, which approval shall not be unreasonably withheld and may not be withheld
where the Investment Adviser may be exposed to civil, regulatory or criminal sanctions for failure to comply, when requested to
divulge such information by duly constituted authorities, or when so requested by the Trust.
The
Adviser will treat confidentially and as proprietary information of the Sub-Adviser, including, but not limited to, investment
approaches, trading history, trading systems or programs, mathematical models, simulated results, simulation software, price or
research databases, other research, algorithms, numerical techniques, analytical results, technical data, strategies and methodologies,
business methods, trade secrets, internal marketing materials or memoranda, corporate policies, supervisory and risk control techniques
and procedures, fee and compensation structures, trader trial programs, client and investor lists and information and contact
lists, knowledge of facilities, and any books research and analysis that is disclosed to the Adviser by the Sub-Adviser, unless
required to do so by applicable law, any regulatory body or valid legal process.
(h)
Notice Required. The Sub-Adviser shall promptly notify the Adviser of
(i) any financial condition that is likely in the commercially reasonable judgment of Sub-Adviser to impair the Sub-Adviser’s
ability to fulfill its commitment under this Agreement, (ii) any termination or resignation of senior (key) personnel and (iii)
any legal or regulatory action against the Sub-Adviser involving the affairs of the Hedged Income Fund or non-compliance by the
Sub-Adviser with federal or state securities laws.
3.
Compensation.
For
the Services provided and the expenses assumed pursuant to this Agreement, the Adviser will pay the Sub-Adviser and the Sub-Adviser
will accept as full compensation therefor, a monthly Fee equal to: 50% of the monthly management fee payable to the Adviser by
the Hedged Income Fund under the Advisory Agreement for the applicable month (“Management Fee”). If in any fiscal
year the aggregate expenses of the Hedged Income Fund exceed any applicable expense limitation imposed by any state or federal
securities laws or regulations, and the Adviser waives all or a portion of its management fee or reimburses the Hedged Income
Fund for expenses to the extent required to satisfy such limitation, the Fee paid to the Sub-Adviser will be reduced by 50% of
the amount of such waivers or reimbursements. If the Sub-Adviser fees are reduced in accordance with the preceding sentence to
reflect such waivers or reimbursements and the Adviser subsequently recovers all or any portion of such waivers or reimbursements,
then the Sub-Adviser shall be entitled to receive from the Adviser a proportionate share of the amount recovered. The Adviser
shall pay the amount of such Management Fee to the Sub-Adviser monthly in arrears no later than ten (10) calendar days from the
end of the applicable month for which such Management Fee is due.
If
the Management Fee payable to the Sub-Adviser begins to accrue after the beginning of any month or if this Agreement terminates
before the end of any month, the Management Fee shall be prorated by multiplying the total Management Fee that would have been
due for such calendar month by a fraction, the numerator of which is the number of days in the calendar month during which the
Sub-Adviser managed the assets, and the denominator of which is the total number of days in the calendar month. For purposes of
calculating fees, the value of the Hedged Income Fund’s net assets shall be computed in the manner specified in the Prospectus.
4.
Expenses.
During
the term of this Agreement, the Sub- Adviser will pay all expenses incurred by it in connection with its activities under this
Agreement (including the salaries and fees of all personnel of the Sub-Adviser performing Services for the Hedged Income Fund
and/or relating to the Services provided to the Hedged Income Fund including research, statistical analysis, reporting and investment
activities) other than the cost of securities (including brokerage commissions or other transaction charges, if any) purchased
or otherwise acquired, sold or otherwise disposed of for the Hedged Income Fund or all fees and expenses specific to the Hedged
Income Fund (e.g. custodial fees). The Trust will be responsible for all of the Trust’s expenses and liabilities.
5.
Delivery of Documents to the Adviser.
(a)
Documents Provided. The Sub-Adviser has furnished the Adviser with copies
of each of the following documents:
| (i) | The
Sub-Adviser’s current Form ADV, Part 1, Part 2, and Part 3, and any amendments
thereto, if applicable; |
| (ii) | Separate
lists of individuals whom the Sub-Adviser wishes to have authorized to give written and/or
oral instructions to the Trusts Custodian and Transfer Agent; |
| (iii) | The
Code of Ethics of the Sub-Adviser as currently in effect; and |
| (iv) | The
Sub-Adviser’s compliance policies and procedures adopted pursuant to Rule 206(4)-7
under the Advisers Act. |
(b) Ongoing Obligation. The Sub-Adviser will provide to the Adviser in a reasonable time (i) copies of all material amendments
of or supplements to the foregoing (not to exceed 60 days), if any and (ii) such other documents relating to the Services under
this Agreement as the Adviser may reasonably request.
6. Services
to Other Companies or Accounts. The services of the Sub-Adviser to the Adviser are not to be deemed to be exclusive, the Sub-Adviser
being free to render services to others and engage in other activities and may render different services to other clients and
accounts during the term of this Agreement and may utilize the same or different systems, strategies, programs, methods, policies,
and guidelines in connection therewith, the results of which may differ from the results achieved for the Hedged Income Fund;
provided, however, that such other services and activities do not, during the term of this Agreement, interfere, in a material
manner, with the Sub-Adviser’s ability to meet all of its obligations hereunder.
7. Limitation of Liability. The Sub-Adviser shall not be liable to the Hedged Income
Fund, the Adviser, the Trust or any of their employees, officers, controlling persons or affiliates (each, an Adviser Indemnitee”),
for any losses, claims, damages, costs, liabilities, or litigation (including legal and other expenses) (collectively, “Losses”)
incurred or suffered by an Adviser Indemnitee as a result of any error of judgment or mistake of law by the Sub-Adviser with respect
to the Hedged Income Fund or in connection with the performance of this Agreement, except a Loss resulting from a breach of fiduciary
duty under the 1940 Act with respect to the receipt of compensation for services or a Loss resulting from willful misfeasance,
bad faith or gross negligence on the part of the Sub-Adviser in the performance of its duties or from reckless disregard by it
of its obligations and duties under this Agreement. In no case shall the Sub-Adviser be liable for actions taken or non-actions
with respect to the performance of Services based upon specific information, instructions, or requests given or made to the Sub-Adviser
by the Adviser or an officer of the Trust thereunto duly authorized.
8. Duration and Termination of Agreement; Amendments.
(a) Duration. Subject to prior termination as provided
in subparagraph (b) of this section 8, this Agreement shall continue in force until December 31, 2021 and thereafter for
successive periods of twelve months, but only so long as the continuance after such period shall be specifically approved at
least annually by vote of the Trust’s Board of Trustees, including a majority of independent trustees, or by vote of a
majority of the outstanding voting securities of the Hedged Income Fund.
(b) Termination. Either the Adviser, the Trust or the Sub-Adviser may, at
any time on sixty (60) days’ prior written notice to the other parties, terminate this Agreement, without payment of any
penalty, or by vote of a majority of the Hedged Income Fund’s outstanding voting securities. This Agreement shall terminate
automatically in the event of its assignment or on the effective date of termination of the Advisory Agreement. Upon the termination
of this Agreement, unless otherwise directed in writing by the Adviser, the Sub-Adviser shall, immediately upon notice of termination
or on such later date as may be specified in such notice, cease all activity with respect to the Hedged Income Fund.
(c) Amendment. No provision of this
Agreement may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is sought. Any modification shall be subject to the
provisions of Section 15 of the 1940 Act, as modified by or interpreted by any applicable order or orders of the Securities
and Exchange Commission (the “Commission”) or any rules or regulations adopted by, or interpretative releases or
no-action letters of, the Commission or its staff, including the approval of a majority of independent trustees.
9. Miscellaneous.
(a) Governing Law. This Agreement shall be governed
by, and construed in accordance with, the laws of the Commonwealth of Massachusetts, without giving effect to the choice of
laws provisions thereof.
(b) Interpretation.
The captions in this Agreement are included for convenience of reference only and in no way define or delimit any of the provisions
hereof or otherwise affect their construction or effect. This Agreement is to be interpreted in accordance with the 1940 Act as
now in effect or as hereafter amended, and subject to such orders or no-action letters as may be granted by the SEC or its staff.
(c) Severability. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected thereby.
(d) Massachusetts Business Trust. The names “Cavanal Hill Funds”
and “Trustees of Cavanal Hill Funds” refer respectively to the Trust created and the Trustees, as trustees but not
individually or personally, acting from time to time under an Agreement and Declaration of Trust dated as of October 1, 1987 to
which reference is hereby made and a copy of which is on file at the office of the Secretary of State of The Commonwealth of Massachusetts
and elsewhere as required by law, and to any and all amendments thereto so filed or hereafter filed. The obligations of “Cavanal
Hill Funds” entered into in the name or on behalf thereof by any of the Trustees, representatives or agents are made not
individually, but in such capacities, and are not binding upon any of the Trustees, shareholders or representatives of the Trust
personally, but bind only the assets of the Trust, and all persons dealing with any series of shares of the Trust must look solely
to the assets of the Trust belonging to such series for the enforcement of any claims against the Trust.
IN
WITNESS WHEREOF the parties hereto have caused this instrument to be signed in their behalf by their respective officers thereunto
duly authorized, and their respective seals to be hereunto affixed, all as of the date written above.
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CAVANAL HILL INVESTMENT MANAGEMENT, INC. |
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By: |
/s/ Xxxxxxx Xxxxxxxx |
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Xxxxxx Xxxxxxxx |
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President |
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LAVACA CAPITAL, LLC |
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By: |
/s/ Xxxxx Xxxxxxxx |
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Xxxxx Xxxxxxxx |
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President |
