AZZAD FUNDS
SUB-ADVISORY AGREEMENT
THIS SUB-ADVISORY AGREEMENT, dated as of August 8, 2002, is between Azzad
Asset Management, Inc., a Delaware corporation (the "Adviser"), and Xxxxxx
Investors' Service, Inc., a Connecticut 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 Investment Advisory Agreement dated
as of August 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
Investment Advisory Agreement (the "Agreement") subject to approval of this
Agreement by the Trustees of the Fund and 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 reasonably 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 and the Adviser. The Sub-Adviser's
primary consideration in effecting a securities transaction will be to obtain
best execution. 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, 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
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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
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, investments purchased for the Fund (including taxes and brokerage
commissions, if any) and expenses incurred by fund counsel. It is understood and
agreed that the Sub-Adviser shall not be responsible for expenses of the Fund
designated as such in the Advisory Agreement dated as of August 8, 2002, a copy
of which has been provided to 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 monthly fee at the annual rate of
0.15% of the Fund's average daily net assets throughout such month, with a
minimum payment of $416.67 per month. The investment sub-advisory fee shall be
accrued daily by the Fund and paid by the Adviser to the Sub-Adviser on the
first business day of the succeeding month. The initial fee under this Agreement
shall be payable within thirty days of the first month following the effective
date of this Agreement.
SECTION 7. ADDITIONAL ADVISER RESPONSIBILITIES. The Adviser will provide,
at no cost to the Sub-Adviser, 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.
SECTION 8. REPRESENTATIONS AND WARRANTIES OF THE ADVISER. The Adviser
hereby represents and warrants to the Sub-Adviser that: (i) the Adviser has
obtained, or will obtain within the agreed upon time, all approvals of the
Trustees of the Fund and the shareholders of the Fund necessary for the Adviser
to carry out its responsibilities under this Agreement; (ii) the Adviser has all
authority necessary to permit Sub-Adviser to access all software and other
intellectual property that the Adviser has responsibility for hereunder; and
(iii) there is no litigation, action, investigation or proceeding pending or
threatened against the Adviser or the Fund by any regulatory or law-enforcement
authority or any private party.
SECTION 9. 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 or its shareholders in
connection with the matters to which this Agreement relates except 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 10. INDEMNIFICATION OF SUB-ADVISER. The Adviser agrees to indemnify
and hold harmless the Sub-Adviser, its affiliates and any officers, directors,
employees or agents of any of the foregoing from and against any and all losses,
claims, damages, liabilities and litigation expenses (including reasonable
attorney's fees) arising directly or indirectly out of (i) the Adviser's breach
of any representation or warranty made hereunder; (ii) the Adviser's or the
Fund's actions or omissions not caused by the Sub-Adviser's willful misfeasance,
bad faith or gross negligence in the performance of its duties hereunder; (iii)
the violation or claimed violation of any intellectual property right as a
result of Sub-Adviser's access to and usage of the software in accordance with
the licenses granted to Sub-Adviser under Section 7 hereunder; and (iv) any
untrue statements or alleged untrue statements of any material fact in any
document relating to the Fund filed with the Securities and Exchange Commission
or distributed to shareholders or potential shareholders, or the omission or
alleged omission of a material fact required
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to be stated therein or necessary to make the statements therein not misleading,
except when the statement or omission is based on information provided by the
Sub-Adviser.
SECTION 11. DURATION AND TERMINATION. This Agreement shall take effect on
the date first set forth above and, unless terminated as herein provided, shall
remain in force for two years (the "Initial Term"). This Agreement shall
continue in full force and effect indefinitely thereafter, but only so long as
such continuance after the Initial Term is specifically approved at least
annually in accordance with the requirements of the 1940 Act as now in effect or
as hereafter amended, subject, however, to such exemptions as may be granted by
the Securities and Exchange Commission by any rule, regulation, order or
interpretive position.
This Agreement may, upon at least sixty days' prior written notice, be
terminated with respect to the Fund at any time, by either party, without
payment of any penalty, by the Adviser or Sub-Advisor, 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 sixty days' prior
written notice to the other party and the Trust. This Agreement will
automatically and immediately terminate in the event of its assignment (as
defined in the 1940 Act).
SECTION 12. AMENDMENT. This Agreement may be amended in writing by mutual
consent of the Adviser and the Sub-Adviser, provided that any amendment shall
not be effective until 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 13. NOTICES. Notices of any kind to be given in writing and shall
be duly given if mailed or delivered to the Sub-Adviser at 000 Xxxxxxxx Xxxxx
Xxxx, Xxxxxxx, Xxxxxxxxxxx 00000, to the Trust at 0000 Xxxxxxxx Xxxx Xxxxx,
Xxxxx 000, Xxxxx Xxxxxx, Xxxxxxxx 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 14. GOVERNING LAW. (a) This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Virginia, 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.
(c) Any controversy, claim or dispute directly or indirectly arising out of
or relating to this Agreement shall be litigated in, and only in, State and
Federal courts located in Connecticut, and the parties hereto submit irrevocably
to the exclusive jurisdiction of such courts and agree that they are a
convenient forum.
SECTION 15. 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 16. 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 17. 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 18. 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.
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SECTION 19. 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 20. 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.
SECTION 21. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties as to the subject matter hereof and supersedes any
and all agreements, representations and warranties, written or oral, regarding
such subject matter made prior to the execution of this Agreement.
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.
Azzad Asset Management, Inc. Xxxxxx Investors' Service, Inc.
By:/s/________________________ By:/s/___________________________
Name: Xxxxxx Xxxxx Name: Xxxxxx Xxxxxxxx
Title: President Title: Executive Vice President
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