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 Floating Rate
Limited Liability Company (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 Managers to give
Oral Instructions or
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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.
(e) "BOARD OF MANAGERS" means the Board of Managers of the Fund.
(f) "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.
(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 Fund Shares.
(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.
3. COMPLIANCE WITH RULES AND REGULATIONS.
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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
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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.
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.
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
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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
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information is made available to such independent public accountants as
reasonably requested by Highland.
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.
12. INDEMNIFICATION.
(a) Highland agrees to indemnify and hold harmless PFPC and its
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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
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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.
(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.
14. DESCRIPTION OF SUB-ADMINISTRATION SERVICES ON A CONTINUOUS BASIS. PFPC
will
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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; 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 and proxy materials relating to such meetings;
(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;
(xv) Attend board meetings and draft minutes thereof;
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(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
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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.
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
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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.
(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
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(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.
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: ______________________
Title: ____________________
HIGHLAND CAPITAL MANAGEMENT, L.P.
By: _____________________
Title: ____________________
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AUTHORIZED PERSONS APPENDIX
NAME (TYPE) SIGNATURE
Xxxxx Xxxxxxx _______________________
Xxxxx Xx Xxxxxx _______________________
Xxxx Paris _______________________
Xxxx Xxxxxxx _______________________
Xxxxxxx Xxxxxxxx _______________________
Xxxx X. Xxxxx _______________________
M. Xxxxx Xxxxxxxxx _______________________
R. Xxxxxx Xxxxxxxxx _______________________
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