EXHIBIT (d)(2)
SUB-INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 1st day of July, 2002, between Signal Capital
Management, Inc. (the "Adviser"), an investment adviser having its principal
place of business in Evansville, Indiana, and Mercantile Capital Advisors, Inc.
(the "Sub-Adviser"), an investment adviser having its principal place of
business in Baltimore, Maryland.
WHEREAS, the Adviser serves as investment adviser to certain investment
portfolios of The Coventry Group (the "Trust"), a Massachusetts business trust
having its principal place of business in Columbus, Ohio, and the Trust is
registered as an open-end, management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Adviser desires to retain the Sub-Adviser to furnish
investment advisory services to certain investment portfolios of the Trust and
may retain the Sub-Adviser to serve in such capacity with respect to certain
additional investment portfolios of the Trust, all as now or hereafter may be
identified in Schedule A hereto as such Schedule may be amended from time to
time (individually referred to herein as a "Fund" and collectively referred to
herein as the "Funds") and the Sub-Adviser represents that it is willing and
possesses legal authority to so furnish such services without violation of
applicable laws and regulations;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Adviser hereby appoints the Sub-Adviser to act as
sub-investment adviser to the Funds for the period and on the terms set
forth in this Agreement. The Sub-Adviser accepts such appointment and
agrees to furnish the services herein set forth for the compensation
herein provided. Additional investment portfolios may from time to time
be added to those covered by this Agreement by the parties executing a
new Schedule A which shall become effective upon its execution and shall
supersede any Schedule A having an earlier date.
2. Delivery of Documents. The Adviser has furnished the Sub-Adviser with
copies properly certified or authenticated of each of the following:
(a) the Trust's Declaration of Trust, dated January 8, 1992, and
filed with the Secretary of State of Massachusetts on January 8,
1992, and any and all amendments thereto or restatements thereof
(such Declaration, as presently in effect and as it shall from
time to time be amended or restated, is herein called the
"Declaration of Trust");
(b) the Trust's By-Laws and any amendments thereto;
(c) resolutions of the Trust's Board of Trustees authorizing the
appointment of the Adviser and the Sub-Adviser and approving
this Agreement;
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(d) the Trust's Notification of Registration on Form N-8A under the
1940 Act as filed with the Securities and Exchange Commission
(the "Commission") on January 8, 1992, and all amendments
thereto;
(e) the Trust's Registration Statement on Form N-1A under the
Securities Act of 1933, as amended (the "1933 Act"), and under
the 1940 Act as filed with the Commission and all amendments
thereto; and
(f) the most recent Prospectus and Statement of Additional
Information of each of the Funds (such Prospectus and Statement
of Additional Information, as presently in effect, and all
amendments and supplements thereto, are herein collectively
called the "Prospectus").
The Adviser will furnish the Sub-Adviser from time to time with copies of all
amendments of or supplements to the foregoing.
3. Management. Subject to the supervision of the Trust's Board of Trustees,
the Sub-Adviser will provide a continuous investment program for the
Funds, including investment research and management with respect to all
securities and investments and cash equivalents in the Funds. The
Sub-Adviser will determine from time to time what securities and other
investments will be purchased, retained or sold by the Trust with
respect to the Funds. The Sub-Adviser will provide the services under
this Agreement in accordance with each Fund's investment objectives,
policies, and restrictions as stated in the Prospectus and resolutions
of the Trust's Board of Trustees. The Sub-Adviser further agrees that
it:
(a) will use the same skill and care in providing such services as
it uses in providing services to its other accounts for which it
has investment responsibilities;
(b) will conform with all applicable Rules and Regulations of the
Commission under the 1940 Act and in addition will conduct its
activities under this Agreement in accordance with any
applicable regulations of any governmental authority pertaining
to the investment advisory activities of the Sub-Adviser;
(c) will place or cause to be placed orders for the Funds either
directly with the issuer or with any broker or dealer. 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 and to the extent permitted by the 1940 Act, 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 Sub-Adviser with research advice and other
services. In no instance will portfolio securities be purchased
from or sold to BISYS, Inc., the Adviser, the Sub-Adviser, or
any affiliated person of the Trust, BISYS Inc., the Adviser or
the Sub-Adviser, except to the extent permitted by the 1940 Act
and the Commission;
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(d) will maintain all books and records with respect to the
securities transactions of the Funds and will furnish the
Trust's Board of Trustees with such periodic and special reports
as the Board may request; and
(e) will treat confidentially and as proprietary information of the
Trust all records and other information relative to the Trust
and the Funds and prior, present, or potential shareholders, 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 Sub-Adviser may be exposed to
civil or criminal contempt proceedings for failure to comply,
when requested to divulge such information by duly constituted
authorities, or when so requested by the Trust.
4. Services Not Exclusive. The investment management services furnished by
the Sub-Adviser hereunder are not to be deemed exclusive, and the
Sub-Adviser shall be free to solicit and furnish similar services to
others so long as its services under this Agreement are not impaired
thereby.
5. Books and Records. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Sub-Adviser hereby agrees that all records which
it maintains for the Funds are the property of the Trust and further
agrees to surrender promptly to the Trust any of such records upon the
Trust's request. 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 31 a-1 under the 1940 Act.
6. 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 other than the cost of securities (including brokerage
commissions, if any) purchased for the Funds.
7. Compensation. For the services provided and the expenses assumed
pursuant to this Agreement, each of the Funds will pay the Sub-Adviser
and the Sub-Adviser will accept as full compensation therefor a fee as
set forth on Schedule A hereto. The obligation of each Fund to pay the
above-described fee to the Sub-Adviser will begin as of the date of the
initial public sale of shares in such Fund. The fee attributable to each
Fund shall be the obligation of that Fund and not of any other Fund.
8. Limitation of Liability. In the absence of (a) willful misfeasance, bad
faith or gross negligence on the part of the Sub-Adviser in performance
of its obligations and duties hereunder, (b) reckless disregard by the
Sub-Adviser of its obligations and duties hereunder, or (c) a loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services, the Sub-Adviser shall not be subject to any
liability whatsoever to the Trust, or to any shareholder of the Funds
for any error of judgment, mistake of law or any other act or omission
in the course of, or connected with, rendering services hereunder
including, without limitation, for any losses that may be sustained in
connection with the purchase, holding, redemption or sale of any
security on behalf of the Funds.
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9. Indemnification. To the fullest extent permitted by law, the Trust and
the Adviser shall indemnify the Sub-Adviser (including for this purpose
each officer, director, partner, principal, employee or agent of, or any
person who controls, is controlled by or is under common control with,
the Sub-Adviser, and their respective executors, heirs, assigns,
successors or other legal representatives)(each such person being
referred to as an "indemnitee") against all losses, claims, damages,
liabilities, costs and expenses arising by reason of being or having
been Sub-Adviser to the Funds, or in connection with the past or present
performance of services to the Trust in accordance with this Agreement,
except to the extent that the loss, claim, damage, liability, cost or
expense was caused by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties on the part of the
Sub-Adviser in the performance of its duties and obligations under this
Agreement. These losses, claims, damages, liabilities, costs and
expenses include, but are not limited to, amounts paid in satisfaction
of judgments, in compromise, or as fines or penalties, and counsel fees
and expenses, incurred in connection with the defense or disposition of
any action, suit, investigation or other proceeding, whether civil or
criminal, before any judicial, arbitral, administrative or legislative
body, in which the indemnitee may be or may have been involved as a
party or otherwise, or with which such indemnitee may be or may have
been threatened, while in office or thereafter. The rights of
indemnification provided under this Section are not to be construed so
as to provide for indemnification of the Sub-Adviser for any liability
(including liability under U.S. federal securities laws which, under
certain circumstances, impose liability even on persons that act in good
faith) to the extent that indemnification would be in violation of
applicable law, but shall be construed so as to effectuate the
applicable provisions of this Section.
10. Duration and Termination. This Agreement will become effective with
respect to each Fund listed on Schedule A as of the date first written
above (or, if a particular Fund is not in existence on that date, on the
date a registration statement relating to that Fund becomes effective
with the Commission), provided that it shall have been approved by vote
of a majority of the outstanding voting securities of such Fund, in
accordance with the requirements under the 1940 Act, and, unless sooner
terminated as provided herein, shall continue in effect until June 30,
2004. Thereafter, if not terminated, this Agreement shall continue in
effect as to a particular Fund for successive one-year terms, provided
that such continuance is specifically approved at least annually (a) by
the vote of a majority of those members of the Trust's Board of Trustees
who are not parties to this Agreement or interested persons of any party
to this Agreement, cast in person at a meeting called for the purpose of
voting on such approval, and (b) by the vote of a majority of the
Trust's Board of Trustees or by the vote of a majority of all votes
attributable to the outstanding shares of such Fund. Notwithstanding the
foregoing, this Agreement may be terminated as to a particular Fund at
any time on sixty days' written notice, without the payment of any
penalty, by the Trust (by vote of the Trust's Board of Trustees or by
vote of a majority of the outstanding voting securities of such Fund) or
by the Investment Adviser. This Agreement will immediately terminate in
the event of its assignment. (As used in this Agreement, the terms
"majority of the outstanding voting securities", "interested persons"
and "assignment" shall have the same meanings as ascribed to such terms
in the 1940 Act.)
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11. Sub-Adviser's Representations. The Sub-Adviser hereby represents and
warrants that it is willing and possesses all requisite legal authority
to provide the services contemplated by this Agreement without violation
of applicable law and regulations.
12. Amendment of this Agreement. 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.
13. Governing Law. This Agreement shall be governed by and its provisions
shall be construed in accordance with the laws of the Commonwealth of
Massachusetts.
14. Miscellaneous. The names "The Coventry Group" and "Trustees of The
Coventry Group" 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
January 8, 1992 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 "The
Coventry Group" 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.
15. Severability. If any provisions 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, and to this extent, the
provisions of this Agreement shall be deemed to be severable.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
SIGNAL CAPITAL MANAGEMENT, INC.
By:
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Name:
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Title:
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MERCANTILE CAPITAL ADVISORS, INC.
By:
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Name:
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Title:
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Dated: July 1, 2002
Schedule A
to the
Sub-Investment Advisory Agreement
between Signal Capital Management, Inc.
and Mercantile Capital Advisors, Inc.
Name of Fund Compensation*
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Signal Money Market Fund Annual rate of five-one
of $100 million. hundredths of one percent
(0.05%) on the first $100
million of net assets of
such Fund and four-one
hundredths of one percent
(0.04%) on net assets in
excess
Signal Tax-Exempt Money Market Fund Annual rate of six-one
of net assets and four-one hundredths of one percent
(0.06%) on the first $100
million of net assets of
such Fund, five-one
hundredths of one percent
(0.05%) on the next $100
million hundredths of one
percent (0.04%) on net
assets in excess of $200
million.
SIGNAL CAPITAL MANAGEMENT, INC.
By:
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Name:
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Title:
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MERCANTILE CAPITAL ADVISORS, INC.
By:
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Name:
-----------------------------------
Title:
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* All fees are computed daily and paid monthly.
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