EXHIBIT (k)(1)
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
HIGHLAND FLOATING RATE LIMITED LIABILITY COMPANY, a Delaware limited liability
company (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 Managers 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 MANAGERS" means the Board of Managers of the Fund.
(f) "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.
(g) "SEC" means the Securities and Exchange Commission.
(h) "SECURITIES LAWS" mean the 1933 Act, the 1934 Act and the 1940
Act.
(i) "SHARES" means the Fund's limited liability company interests.
(j) "SHAREHOLDERS" means holders of the Fund's Shares.
(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.
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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 Managers or the Fund's
Shareholders, unless and until Highland receives Written
Instructions to the contrary.
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(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.
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(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.
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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 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.
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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 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.
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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.
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(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.
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(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;
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(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;
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 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
Managers;
(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
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(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.
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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.
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(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 board members, 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.
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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.
HIGHLAND CAPITAL MANAGEMENT, L.P.
By: ______________________________
Title: ___________________________
HIGHLAND FLOATING RATE LIMITED
LIABILITY COMPANY
By: ______________________________
Title: ___________________________
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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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