Exhibit K-1
ADMINISTRATION SERVICES AGREEMENT
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THIS AGREEMENT is made as of May 16, 2005 by and between HIGHLAND
CAPITAL MANAGEMENT, L.P., a Delaware limited partnership ("Highland"), and
HIGHLAND CORPORATE OPPORTUNITES FUND, a Massachusetts business trust (the
"Fund").
W I T N E S S E T H :
WHEREAS, the Fund is registered as a closed end, non-diversified
management investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"); and
WHEREAS, the Fund wishes to retain Highland to provide certain
administration services provided for herein, and Highland wishes to furnish
such services.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, and intending to be legally bound hereby, the
parties hereto agree as follows:
1. Definitions. As Used in this Agreement:
(a) "1933 Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
(b) "1934 Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC promulgated
thereunder.
(c) "1940 Act" means the Investment Company Act of 1940, as amended,
and the rules and regulations of the SEC promulgated thereunder.
(d) "Authorized Person" means any officer of the Fund and any other
person duly authorized by the Fund's Board of Trustees to give
Oral Instructions or Written Instructions on behalf of the Fund
and listed on the Authorized Persons Appendix attached hereto
and made a part hereof or any amendment thereto as may be
received by Highland. An Authorized Person's scope of authority
may be limited by the Fund by setting forth such limitation in
the Authorized Persons Appendix.
(e) "Board of Trustees" and "Shareholders" shall have the same
meanings as used in the Fund's Amended and Restated Agreement
and Declaration of Trust.
(f) "Declaration" means the Fund's Amended and Restated Agreement
and Declaration of Trust, as amended from time to time.
(g) "Oral Instructions" mean oral instructions received by Highland
from an Authorized Person or from a person reasonably believed
by Highland to be an Authorized Person.
(h) "SEC" means the Securities and Exchange Commission.
(i) "Securities Laws" mean the 1933 Act, the 1934 Act and the 1940
Act.
(j) "Shares" means the Fund's shares of beneficial interest.
(k) "Written Instructions" mean (i) written instructions signed by
an Authorized Person and received by Highland or (ii) trade
instructions transmitted (and received by Highland) by means of
an electronic transaction reporting system, access to which
requires use of a password or other authorized identifier. The
instructions may be delivered by hand, mail, tested telegram,
cable, telex or facsimile sending device.
2. Appointment. The Fund hereby appoints Highland to provide
administration services to the Fund, in accordance with the terms set
forth in this Agreement. Highland accepts such appointment and agrees
to furnish such services.
3. Compliance with Rules and Regulations.
Highland agrees to comply with the applicable requirements of the
Securities Laws, and any laws, rules and regulations of governmental
authorities having jurisdiction with respect to the duties to be
performed by Highland hereunder. Except as specifically set forth
herein, Highland assumes no responsibility for such compliance by the
Fund.
4. Instructions.
(a) Unless otherwise provided in this Agreement, Highland shall act
only upon Oral Instructions or Written Instructions, including
standing Written Instructions related to ongoing instructions
received electronically.
(b) Highland shall be entitled to rely upon any Oral Instructions or
Written Instructions it receives from an Authorized Person (or
from a person reasonably believed by Highland to be an
Authorized Person) pursuant to this Agreement. Highland may
assume that any Oral Instruction or Written Instruction received
hereunder is not in any way inconsistent with the provisions of
organizational documents or this Agreement or of any vote,
resolution or proceeding of the Fund's Board of Trustees or the
Fund's Shareholders, unless and until Highland receives Written
Instructions to the contrary.
(c) The Fund agrees to forward to Highland Written Instructions
confirming Oral Instructions (except where such Oral
Instructions are given by Highland or its affiliates) and shall
endeavor to ensure that Highland receives the Written
Instructions by the close of business on the same day that such
Oral Instructions are received. The fact that such confirming
Written Instructions are not received by Highland shall in no
way invalidate the transactions or enforceability of the
transactions authorized by the Oral Instructions. Where Oral
Instructions or Written Instructions reasonably appear to have
been received from an Authorized Person, Highland shall incur no
liability to the Fund or the Fund in acting upon such Oral
Instructions or Written Instructions provided that Highland's
actions comply with the other provisions of this Agreement.
5. Right to Receive Advice.
(a) Advice of the Fund. If Highland is in doubt as to any action it
should or should not take, Highland may request directions or
advice, including Oral Instructions or Written Instructions,
from the Fund.
(b) Advice of Counsel. If Highland shall be in doubt as to any
question of law pertaining to any action it should or should not
take, Highland may request advice at its own cost from such
counsel of its own choosing (who may be counsel for the Fund or
Highland, at the option of Highland).
(c) Conflicting Advice. In the event of a conflict between
directions, advice or Oral Instructions or Written Instructions
Highland receives from the Fund, and the advice it receives from
counsel, Highland shall be entitled to rely upon and follow the
advice of counsel, provided that such counsel is selected with
reasonable care. Highland shall promptly inform the Fund of such
conflict and Highland shall refrain from acting in the event of
a conflict unless counsel advises Highland that a failure to
take action is likely to result in additional loss, liability or
expense. In the event Highland relies on the advice of counsel,
Highland remains liable for any action or omission on the part
of Highland which constitutes willful misfeasance, bad faith,
negligence or reckless disregard by Highland of any duties,
obligations or responsibilities set forth in this Agreement.
(d) Protection of Highland. Highland shall be protected in any
action it takes or does not take in reliance upon directions,
advice or Oral Instructions or Written Instructions it receives
from the Fund or (to the extent permitted under clause (c)
above) from counsel and which Highland believes, in good faith,
to be consistent with those directions, advice or Oral
Instructions or Written Instructions. Nothing in this section
shall be construed so as to impose an obligation upon Highland
(i) to seek such directions, advice or Oral Instructions or
Written Instructions, or (ii) to act in accordance with such
directions, advice or Oral Instructions or Written Instructions
unless, under the terms of other provisions of this Agreement,
the same is a condition of Highland's properly taking or not
taking such action. Nothing in this subsection shall excuse
Highland when an action or omission on the part of Highland
constitutes willful misfeasance, bad faith, negligence or
reckless disregard by Highland of any duties, obligations or
responsibilities set forth in this Agreement.
6. Records; Visits.
(a) The books and records pertaining to the Fund, which are in the
possession or under the control of Highland, shall be the
property of the Fund. Such books and records shall be prepared,
preserved and maintained as required by the 1940 Act and other
applicable securities laws, rules and regulations. The Fund and
its duly authorized officers, employees and agents and the staff
of the SEC shall have access to such books and records at all
times during Highland's normal business hours. Upon the
reasonable request of the Fund, copies of any such books and
records shall be provided by Highland to the Fund or to an
Authorized Person, at the Fund's expense. Any such books and
records may be maintained in the form of electronic media and
stored on any magnetic disk or tape or similar recording method.
No records shall be destroyed without the Fund's written
consent.
(b) Highland shall keep the following records:
(i) all books and records with respect to the Fund's books of
account; and
(ii) records of the Fund's securities transactions.
7. Confidentiality.
Each party shall keep confidential any information relating to the
other party's business ("Confidential Information"). Confidential
Information shall include (a) any data or information that is
competitively sensitive material, and not generally known to the
public, including, but not limited to, information about product
plans, marketing strategies, finances, operations, customer
relationships, customer profiles, customer lists, sales estimates,
business plans, and internal performance results relating to the past,
present or future business activities of the Fund or Highland, their
respective subsidiaries and affiliated companies and the customers,
clients and suppliers of any of them; (b) any scientific or technical
information, design, process, procedure, formula, or improvement that
is commercially valuable and secret in the sense that its
confidentiality affords the Fund or Highland a competitive advantage
over its competitors; (c) all confidential or proprietary concepts,
documentation, reports, data, specifications, computer software,
source code, object code, flow charts, databases, inventions, know
how, and trade secrets, whether or not patentable or copyrightable;
and (d) anything designated as confidential. Notwithstanding the
foregoing, information shall not be subject to such confidentiality
obligations if it: (a) is already known to the receiving party at the
time it is obtained; (b) is or becomes publicly known or available
through no wrongful act of the receiving party; (c) is rightfully
received from a third party who, to the best of the receiving party's
knowledge, is not under a duty of confidentiality; (d) is released by
the protected party to a third party without restriction; (e) is
required to be disclosed by the receiving party pursuant to a
requirement of a court order, subpoena, governmental or regulatory
agency or law (provided the receiving party will provide the other
party written notice of such requirement, to the extent such notice is
permitted); (f) is relevant to the defense of any claim or cause of
action asserted against the receiving party; or (g) has been or is
independently developed or obtained by the receiving party.
8. Liaison with Accountants. Highland shall act as liaison with the
Fund's independent public accountants and shall provide account
analyses, fiscal year summaries, and other audit related schedules
with respect to the Fund. Highland shall take all reasonable action in
the performance of its obligations under this Agreement to ensure that
the necessary information is made available to such independent public
accountants as reasonably requested by the Fund.
9. Highland System. Highland shall retain title to and ownership of any
and all data bases, computer programs, screen formats, report formats,
interactive design techniques, derivative works, inventions,
discoveries, patentable or copyrightable matters, concepts, expertise,
patents, copyrights, trade secrets, and other related legal rights
utilized by Highland in connection with the services provided by
Highland to the Fund.
10. Disaster Recovery. Highland shall enter into and shall maintain in
effect with appropriate parties one or more agreements making
reasonable provisions for emergency use of electronic data processing
equipment. In the event of equipment failures, Highland shall, at no
additional expense to the Fund, take reasonable steps to minimize
service interruptions. Highland shall have no liability with respect
to the loss of data or service interruptions caused by equipment
failure, provided such loss or interruption is not caused by
Highland's own willful misfeasance, bad faith, negligence or reckless
disregard of its duties or obligations under this Agreement.
11. Compensation. As compensation for services rendered by Highland during
the term of this Agreement, the Fund will pay to Highland a fee or
fees as may be agreed to from time to time in writing by the Fund and
Highland.
12. Indemnification.
(a) The Fund agrees to indemnify and hold harmless Highland and its
affiliates from all taxes, charges, expenses, assessments,
claims and liabilities (including without limitation reasonable
attorneys' fees and disbursements and liabilities arising under
the Securities Laws and any state and foreign securities and
blue sky laws) (collectively, "Losses") arising directly or
indirectly from any action or omission to act which Highland
takes (i) at the request or on the direction of or in reliance
on the advice of the Fund or (ii) upon Oral Instructions or
Written Instructions; provided, however, neither Highland nor
any of its affiliates, shall be indemnified against any
liability (or any expenses incident to such liability) arising
out of Highland's or its affiliates' own willful misfeasance,
bad faith, negligence or reckless disregard of its duties and
obligations under this Agreement.
(b) Notwithstanding anything in this Agreement to the contrary, the
Fund shall not be liable to Highland or its affiliates for any
consequential, special or indirect losses or damages which
Highland or its affiliates may incur or suffer as a consequence
of this Agreement, whether or not the likelihood of such damages
or losses was known by the Fund.
13. Responsibility of Highland.
(a) Highland shall be under no duty to take any action on behalf of
the Fund or the Fund except as necessary to fulfill its duties
and obligations as specifically set forth herein or as may be
specifically agreed to by Highland in writing. Highland shall be
obligated to exercise care and diligence in the performance of
its duties hereunder and to act in good faith and to use its
best efforts, within reasonable limits, in performing services
provided for under this Agreement. Highland agrees to indemnify
and hold harmless the Fund from Losses arising out of Highland's
failure to perform its duties under this Agreement to the extent
such damages arise out of Highland's willful misfeasance, bad
faith, negligence or reckless disregard of such duties.
(b) Without limiting the generality of the foregoing or of any other
provision of this Agreement, (i) Highland shall not be liable
for losses beyond its control, provided that Highland has acted
in accordance with the standard of care set forth above; and
(ii) Highland shall not be liable for (A) the validity or
invalidity or authority or lack thereof of any Oral Instruction
or Written Instruction, notice or other instrument which
conforms to the applicable requirements of this Agreement and
which Highland reasonably believes to be genuine; or (B) subject
to Section 10, delays or errors or loss of data occurring by
reason of circumstances beyond Highland's control, including
acts of civil or military authority, national emergencies, labor
difficulties, fire, flood, catastrophe, acts of God,
insurrection, war, riots or failure of the mails,
transportation, communication or power supply.
(c) Notwithstanding anything in this Agreement to the contrary,
neither Highland nor its affiliates shall be liable to the Fund
for any consequential, special or indirect losses or damages
which the Fund may incur or suffer by or as a consequence of
Highland's or its affiliates' performance of the services
provided hereunder, whether or not the likelihood of such losses
or damages was known by Highland or its affiliates.
14. Description of Administration Services on a Continuous Basis. Highland
will perform the following administration services:
(i) Prepare monthly security transaction listings;
(ii) Supply various normal and customary portfolio and Fund
statistical data as requested on an ongoing basis;
(iii) Prepare for execution and file the Fund's Federal and
state tax returns: prepare a fiscal tax provision in
coordination with the annual audit; prepare an excise
tax provision; and prepare all relevant 1099
calculations;
(iv) Coordinate contractual relationships and communications
between the Fund and its contractual service providers;
(v) Coordinate printing of the Fund's annual and
semi-annual shareholder reports;
(vi) Prepare income and capital gain distributions;
(vii) Prepare the semiannual and annual financial statements;
(viii) Monitor the Fund's compliance with IRC, SEC and
prospectus requirements;
(ix) Prepare, coordinate with the Fund's counsel and
coordinate the filing with the SEC: Post-Effective
Amendments to the Fund's Registration Statement and
supplements to or revisions of the Fund's prospectus
and statement of additional information; Quarterly
Repurchase Offer Filings on Form N-23c-3; semi-annual
reports on Form N-SAR and Form N-CSR; Form N-Q; and
Form N-PX based upon information provided by the Fund;
(x) Assist in the preparation of notices of meetings of
shareholders;
(xi) Assist in obtaining the fidelity bond and trustees' and
officers'/errors and omissions insurance policies for
the Fund in accordance with the requirements of Rule
17g-1 and 17d-1(d)(7) under the 1940 Act as such bond
and policies are approved by the Fund's Board of
Trustees;
(xii) Monitor the Fund's assets to assure adequate fidelity
bond coverage is maintained;
(xiii) Draft agendas and resolutions for quarterly and special
board meetings;
(xiv) Coordinate the preparation, assembly and mailing of
board materials;
(xv) Attend board meetings and draft minutes thereof;
(xvi) Maintain the Fund's corporate calendar to assure
compliance with various filing and board approval
deadlines;
(xvii) Assist the Fund in the handling of SEC examinations and
responses thereto; and
(xviii) Perform such additional administrative duties relating
to the administration of the Fund as may subsequently
be agreed upon in writing between the Fund and
Highland.
15. Duration and Termination. This Agreement shall continue until
terminated by the Fund or by Highland on sixty (60) days' prior
written notice to the other party. In the event the Fund gives notice
of termination, all expenses associated with movement (or duplication)
of records and materials and conversion thereof to a successor
administration services agent (and any other service provider(s)), and
all trailing expenses incurred by Highland, will be borne by the Fund.
16. Notices. Notices shall be addressed (a) if to Highland, at 00000 Xxxx
Xxxx, Xxxxx 0000, Xxxxxx, Xxxxx 00000, Attention: General Counsel; (b)
if to the Fund, at 00000 Xxxx Xxxx, Xxxxx 0000, Xxxxxx, Xxxxx 00000,
Attention: Secretary of the foregoing, at such other address as shall
have been given by like notice to the sender of any such notice by the
other party. If notice is sent by confirming telegram, cable, telex or
facsimile sending device, it shall be deemed to have been given
immediately. If notice is sent by first class mail, it shall be deemed
to have been given three days after it has been mailed. If notice is
sent by messenger, it shall be deemed to have been given on the day it
is delivered.
17. Amendments. This Agreement, or any term thereof, may be changed or
waived only by a written amendment, signed by the party against whom
enforcement of such change or waiver is sought.
18. Delegation; Assignment; Sub-Contracting. This Agreement and the rights
and duties of the parties herein may not be assigned or delegated by
any party without the written consent of each party. The Fund hereby
authorizes and instructs Highland to enter into a Sub-Administration
Services Agreement with PFPC Inc. ("PFPC"), in substantially the form
set forth as Exhibit A hereto, including the fees referenced therein
and in the Fee Letter between Highland and PFPC.
19. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
20. Further Actions. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the
purposes hereof.
21. Miscellaneous.
(a) Entire Agreement. This Agreement embodies the entire agreement
and understanding between the parties and supersedes all prior
agreements and understandings relating to the subject matter
hereof, provided that the parties may embody in one or more
separate documents their agreement, if any, with respect to
delegated duties and Oral Instructions.
(b) Captions. 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.
(c) Governing Law. This Agreement shall be deemed to be a contract
made in Delaware and governed by Delaware law, without regard to
principles of conflicts of law.
(d) Partial Invalidity. 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.
(e) Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
(f) Facsimile Signatures. The facsimile signature of any party to
this Agreement shall constitute the valid and binding execution
hereof by such party.
(g) The Fund will provide such information and documentation as
Highland may reasonably request in connection with services
provided by Highland to the Fund.
(h) It is expressly agreed that the obligations of the Fund under
this Agreement shall not be binding upon any past, present or
future trustee, nominee, officer, shareholder, employee or agent
of the Fund individually, and shall only be binding upon the
Fund and its assets, as provided in the Fund's Amended and
Restated Agreement and Declaration of Trust, a copy of which is
on file at the office of the Secretary of the Commonwealth of
Massachusetts and at the principal offices of the Fund. This
Agreement was executed on behalf of the Fund by an officer of
the Fund in such capacity, and shall not be deemed to have been
executed by such officer individually or to impose any liability
on such officer, of the shareholders of the Fund, personally,
but shall bind only the assets and property of the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the day and year first above written.
HIGHLAND CAPITAL MANAGEMENT, L.P.
By: /s/ Xxxxx Dondsro
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Title: President
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HIGHLAND CORPORATE OPPORTUNITIES FUND
By: /s/ R. Xxxxxx Xxxxxxxxx
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Title: President
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AUTHORIZED PERSONS APPENDIX
NAME (Type) SIGNATURE
Xxxx X. Xxxxx
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R. Xxxxxx Xxxxxxxxx
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M. Xxxxx Xxxxxxxxx
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Xxxxxxx Minces
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