EXHIBIT (k)(2)
SUB-ADMINISTRATION SERVICES AGREEMENT
THIS AGREEMENT is made as of October 18, 2004 by and between HIGHLAND
CAPITAL MANAGEMENT, L.P., a Delaware limited partnership ("Highland"), and PFPC
INC., a Massachusetts corporation ("PFPC").
W I T N E S S E T H :
WHEREAS, Highland serves as administrator of the Highland Institutional
Floating Rate Income Fund (the "Fund"), a registered as a closed-end,
non-diversified management investment company under the Investment Company Act
of 1940, as amended (the "1940 Act"); and
WHEREAS, Highland wishes to retain PFPC to provide certain
sub-administration services provided for herein, and PFPC 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" has the meaning set forth in the recitals hereof
and includes the rules and regulations of the SEC promulgated
thereunder.
(d) "AUTHORIZED PERSON" means any officer of Highland, 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 PFPC. An Authorized
Person's scope of authority may be limited by Highland by
setting forth such limitation in the Authorized Persons
Appendix.
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(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 PFPC
from an Authorized Person or from a person reasonably believed
by PFPC 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 PFPC or (ii) trade
instructions transmitted (and received by PFPC) 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. Highland hereby appoints PFPC to provide
sub-administration services to the Fund, in accordance with the terms
set forth in this Agreement. PFPC accepts such appointment and agrees
to furnish such services.
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3. COMPLIANCE WITH RULES AND REGULATIONS.
PFPC 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 PFPC hereunder. Except as specifically set forth herein,
PFPC assumes no responsibility for such compliance by Highland or the
Fund.
4. INSTRUCTIONS.
(a) Unless otherwise provided in this Agreement, PFPC shall act
only upon Oral Instructions or Written Instructions, including
standing Written Instructions related to ongoing instructions
received electronically.
(b) PFPC 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 PFPC to be an Authorized
Person) pursuant to this Agreement. PFPC 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 PFPC receives
Written Instructions to the contrary.
(c) Highland agrees to forward to PFPC Written Instructions
confirming Oral Instructions (except where such Oral
Instructions are given by PFPC or its affiliates) and shall
endeavor to ensure that PFPC 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 PFPC 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, PFPC shall incur no
liability to Highland or the Fund in acting upon such Oral
Instructions or Written Instructions provided that PFPC's
actions comply with the other provisions of this Agreement.
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5. RIGHT TO RECEIVE ADVICE.
(a) ADVICE OF HIGHLAND OR THE FUND. If PFPC is in doubt as to any
action it should or should not take, PFPC may request
directions or advice, including Oral Instructions or Written
Instructions, from Highland or the Fund.
(b) ADVICE OF COUNSEL. If PFPC shall be in doubt as to any
question of law pertaining to any action it should or should
not take, PFPC may request advice at its own cost from such
counsel of its own choosing (who may be counsel for Highland,
the Fund or PFPC, at the option of PFPC).
(c) CONFLICTING ADVICE. In the event of a conflict between
directions, advice or Oral Instructions or Written
Instructions PFPC receives from Highland or the Fund, and the
advice it receives from counsel, PFPC shall be entitled to
rely upon and follow the advice of counsel, provided that such
counsel is selected with reasonable care. PFPC shall promptly
inform Highland of such conflict and PFPC shall refrain from
acting in the event of a conflict unless counsel advises PFPC
that a failure to take action is likely to result in
additional loss, liability or expense. In the event PFPC
relies on the advice of counsel, PFPC remains liable for any
action or omission on the part of PFPC which constitutes
willful misfeasance, bad faith, negligence or reckless
disregard by PFPC of any duties, obligations or
responsibilities set forth in this Agreement.
(d) PROTECTION OF PFPC. PFPC 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
Highland or the Fund or (to the extent permitted under clause
(c) above) from counsel and which PFPC 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 PFPC (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 PFPC's properly
taking or not taking such action. Nothing in this subsection
shall excuse PFPC when an action or omission on the part of
PFPC constitutes willful misfeasance, bad faith, negligence or
reckless disregard by PFPC of any duties, obligations or
responsibilities set forth in this Agreement.
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6. RECORDS; VISITS.
(a) The books and records pertaining to the Fund, which are in the
possession or under the control of PFPC, 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. Highland,
the Fund and their duly authorized officers, employees and
agents and the staff of the SEC shall have access to such
books and records at all times during PFPC's normal business
hours. Upon the reasonable request of Highland, copies of any
such books and records shall be provided by PFPC to Highland,
the Fund or to an Authorized Person, at Highland'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 Highland's written consent.
(b) PFPC 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.
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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 Highland, the Fund or PFPC, 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 Highland, the Fund or PFPC 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. PFPC 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. PFPC 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 Highland.
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9. PFPC SYSTEM. PFPC 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 PFPC in connection with the services provided by PFPC to
Highland.
10. DISASTER RECOVERY. PFPC 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, PFPC shall, at no additional
expense to Highland, take reasonable steps to minimize service
interruptions. PFPC 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 PFPC'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 PFPC during the
term of this Agreement, Highland will pay to PFPC a fee or fees as may
be agreed to from time to time in writing by Highland and PFPC.
Highland hereby represents and warrants to PFPC that (i) the terms of
this Agreement and (ii) the fees and expenses associated with this
Agreement have been fully disclosed to the Board of Trustees of the
Fund and that, if required by applicable law, such Board of Trustees
has approved or will approve the terms of this Agreement and any such
fees and expenses.
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12. INDEMNIFICATION.
(a) Highland agrees to indemnify and hold harmless PFPC 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 PFPC takes (i) at the request or on the direction of or
in reliance on the advice of Highland or the Fund or (ii) upon
Oral Instructions or Written Instructions; PROVIDED, HOWEVER,
neither PFPC nor any of its affiliates, shall be indemnified
against any liability (or any expenses incident to such
liability) arising out of PFPC'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,
Highland shall not be liable to PFPC or its affiliates for any
consequential, special or indirect losses or damages which
PFPC 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 Highland.
13. RESPONSIBILITY OF PFPC.
(a) PFPC shall be under no duty to take any action on behalf of
Highland 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 PFPC in writing. PFPC 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. PFPC agrees to indemnify
and hold harmless Highland from Losses arising out of PFPC's
failure to perform its duties under this Agreement to the
extent such damages arise out of PFPC's willful misfeasance,
bad faith, negligence or reckless disregard of such duties.
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(b) Without limiting the generality of the foregoing or of any
other provision of this Agreement, (i) PFPC shall not be
liable for losses beyond its control, provided that PFPC has
acted in accordance with the standard of care set forth above;
and (ii) PFPC 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 PFPC reasonably believes to be genuine; or
(B) subject to Section 10, delays or errors or loss of data
occurring by reason of circumstances beyond PFPC'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 PFPC nor its affiliates shall be liable to Highland
for any consequential, special or indirect losses or damages
which Highland may incur or suffer by or as a consequence of
PFPC's or its affiliates' performance of the services provided
hereunder, whether or not the likelihood of such losses or
damages was known by PFPC or its affiliates.
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14. DESCRIPTION OF SUB-ADMINISTRATION SERVICES ON A CONTINUOUS BASIS. PFPC
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 Highland;
(x) Assist in the preparation of notices of meetings of
shareholders;
(xi) Assist in obtaining the fidelity bond and directors'
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
Directors;
(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;
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(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) If the chief executive officer or chief financial
officer of the Fund is required to provide a
certification as part of the Fund's Form N-CSR or Form
N-Q filing pursuant to regulations promulgated by the
SEC under Section 302 of the Xxxxxxxx-Xxxxx Act of
2002, PFPC will provide (to such person or entity as
agreed between the Fund and PFPC) a sub-certification
in support of certain matters set forth in the
aforementioned certification, such sub-certification
to be in such form and relating to such matters as
agreed between Highland and PFPC from time to time.
PFPC shall be required to provide the
sub-certification only during the term of the
Agreement and only if it receives such cooperation as
it may request to perform its investigations with
respect to the sub-certification. For clarity, the
sub-certification is not itself a certification under
the Xxxxxxxx-Xxxxx Act of 2002 or under any other
regulatory requirement; and
(xix) Perform such additional administrative duties relating
to the administration of the Fund as may subsequently
be agreed upon in writing between Highland and PFPC.
15. DURATION AND TERMINATION. This Agreement shall continue until
terminated by Highland or by PFPC on sixty (60) days' prior written
notice to the other party. In the event Highland 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 PFPC, will be borne by Highland.
16. NOTICES. Notices shall be addressed (a) if to PFPC, at 000 Xxxxxxxx
Xxxxxxx, Xxxxxxxxxx, Xxxxxxxx 00000, Attention: President; (b) if to
Highland, at 00000 Xxxx Xxxx, Xxxxx 0000, Xxxxxx, Xxxxx 00000,
Attention: General Counsel 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.
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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.
20. 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.
21. FURTHER ACTIONS. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the
purposes hereof.
22. 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.
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(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) Highland will provide such information and documentation as
PFPC may reasonably request in connection with services
provided by PFPC to Highland.
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(h) To help the U.S. government fight the funding of terrorism and
money laundering activities, U.S. Federal law requires each
financial institution to obtain, verify, and record certain
information that identifies each person who initially opens an
account with that financial institution on or after October 1,
2003. PFPC and certain of its affiliates are financial
institutions, and PFPC may, as a matter of policy, request (or
may have already requested) the Fund's name, address and
taxpayer identification number or other government-issued
identification number, and, if such party is a natural person,
that party's date of birth. PFPC may also ask (and may have
already asked) for additional identifying information, and
PFPC may take steps (and may have already taken steps) to
verify the authenticity and accuracy of these data elements.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
PFPC INC.
By:
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Title:
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HIGHLAND CAPITAL MANAGEMENT, L.P.
By:
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Title:
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AUTHORIZED PERSONS APPENDIX
NAME (TYPE) SIGNATURE
Xxxxx X. Xxxxxxx
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Xxxx X. Xxxxx
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M. Xxxxx Xxxxxxxxx
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Xxxxxxx X. Minces
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R. Xxxxxx Xxxxxxxxx
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