AMENDED AND RESTATED INVESTMENT
ADVISORY AGREEMENT
AGREEMENT made as of June 10, 2011, by and
between Highland Capital Management Fund Advisors, L.P.
(formerly, Pyxis Capital, L.P., and formerly Highland Funds
Asset Management, L.P.), a Delaware limited partnership
(the Adviser ), and Highland Funds I (formerly, Pyxis Funds
I, and formerly Highland Funds I), a Delaware statutory trust
(the Trust ), on behalf of its series listed on Exhibit A
attached hereto and made a part hereof, as such Exhibit A
may be amended from time to time (each a Fund ).
WHEREAS, the Adviser, the Trust and the Fund were
each renamed, as stated above, as of February 8, 2013 and as
of January 9, 2012;
WHEREAS, these changes did not arise from or
result in an assignment as described in Section 9(d) hereof;
WHEREAS, the Trust is engaged in business as an
open-end management investment company and is registered
as such under the Investment Company Act of 1940, as
amended (the 1940 Act ); and
WHEREAS, the Adviser is engaged principally in the
business of rendering investment management services and is
registered as an investment adviser under the Investment
Advisers Act of 1940, as amended;
NOW, THEREFORE, WITNESSETH: That it is
hereby agreed between the parties hereto that this Agreement
be amended and restated as of February 8, 2013 pursuant to
Section 9(b) hereof as follows:
SECTION 1. Appointment of Adviser.
The Trust hereby appoints the Adviser to act as
manager and investment adviser to each Fund for the period
and on the terms herein set forth. The Adviser accepts such
appointment and agrees to render the services herein set
forth, for the compensation herein provided.
SECTION 2. Duties of Adviser.
The Adviser, at its own expense, shall furnish the
following services and facilities to each Fund:
(a) Investment Program. The Adviser
shall (i) furnish continuously an investment program
for each Fund, (ii) determine (subject to the overall
supervision and review of the Trust s Board of
Trustees) the investments to be purchased, held, sold
or exchanged by each Fund and the portion, if any, of
the assets of the Fund to be held uninvested,
(iii) make changes in the investments of a Fund and
(iv) vote, exercise consents and exercise all other
rights pertaining to such investments. The Adviser
also shall manage, supervise and conduct the other
affairs and business of each Fund and matters
incidental thereto pursuant to a separate
administration agreement with the Trust, subject
always to the control of the Trust s Board of Trustees,
and to the provisions of the organizational documents
of the Trust, the Registration Statement of the Trust
with respect to each Fund and its shares of beneficial
interest ( Shares ), including each Fund s
prospectus(es) and statement of additional
information, and the 1940 Act, in each case as from
time to time amended and in effect. Subject to the
foregoing, the Adviser shall have the authority to
engage one or more sub-advisers in connection with
the portfolio management of a Fund, which sub-
advisers may be affiliates of the Adviser; provided,
however, that the Adviser shall remain responsible to
the Trust with respect to its duties and obligations on
behalf of each Fund set forth in this Agreement.
(b) Portfolio Transactions. The Adviser
shall place all orders for the purchase and sale of
portfolio securities for the account of each Fund with
brokers or dealers selected by the Adviser, although
the Fund will pay the actual brokerage commissions
on portfolio transactions in accordance with
Section 3(d).
In placing portfolio transactions for a Fund, it is
recognized that the Adviser will give primary consideration
to securing the most favorable price and efficient execution.
Consistent with this policy, the Adviser may consider the
financial responsibility, research and investment information
and other services provided by brokers or dealers who may
effect or be a party to any such transaction or other
transactions to which other clients of the Adviser may be a
party. It is understood that neither the Fund nor the Adviser
has adopted a formula for allocation of a Fund s investment
transaction business. It is also understood that it is desirable
for the Funds that the Adviser have access to supplemental
investment and market research and security and economic
analysis provided by brokers who may execute brokerage
transactions at a higher cost to a Fund than would otherwise
result when allocating brokerage transactions to other brokers
on the basis of seeking the most favorable price and efficient
execution. Therefore, subject to Section 28(e) of the
Securities Exchange Act of 1934, the Adviser is authorized to
place orders for the purchase and sale of securities for a Fund
with such brokers, subject to review by the Trust s Board of
Trustees from time to time with respect to the extent and
continuation of this practice. It is understood that the services
provided by such brokers may be useful or beneficial to the
Adviser in connection with its services to other clients.
On occasions when the Adviser deems the purchase
or sale of a security to be in the best interest of a Fund as
well as other clients, the Adviser, to the extent permitted by
applicable laws and regulations, may, but shall be under no
obligation to, aggregate the securities to be so sold or
purchased in order to obtain the most favorable price or
lower brokerage commissions and efficient execution. In
such event, allocation of the securities so purchased or sold,
as well as the expenses incurred in the transaction, will be
made by the Adviser in the manner it considers to be the
most equitable and consistent with its fiduciary obligations to
the Fund and to such other clients.
SECTION 3. Allocation of Expenses.
Except for the services and facilities to be provided
by the Adviser pursuant to a separate administration
agreement with the Trust, each Fund assumes and shall pay
all expenses for all other Fund operations and activities, and
shall reimburse the Adviser for any such expenses incurred
by the Adviser. Unless the prospectus(es) or statement(s) of
additional information of the Fund provides otherwise, the
expenses to be borne by a Fund shall include, without
limitation:
(a) all expenses of organizing the Fund;
(b) the charges and expenses of any
registrar, stock transfer or dividend disbursing agent,
shareholder servicing agent, custodian or depository
appointed by the Fund for the safekeeping of its cash,
portfolio securities and other property, including the
costs of servicing shareholder investment accounts,
and bookkeeping, accounting and pricing services
provided to the Fund (other than those utilized by the
Adviser in providing the services described in
Section 2);
(c) the charges and expenses of
bookkeeping, accounting and auditors;
(d) brokerage commissions and other costs
incurred in connection with transactions in the
portfolio securities of the Fund, including any portion
of such commissions attributable to brokerage and
research services as defined in Section 28(e) of the
Securities Exchange Act of 1934;
(e) taxes, including issuance and transfer
taxes, and trust registration, filing or other fees
payable by the Fund to federal, state or other
governmental agencies;
(f) expenses, including the cost of printing
certificates, relating to the issuance of Shares of the
Fund;
(g) expenses involved in registering and
maintaining registrations of the Fund and of its Shares
with the Securities and Exchange Commission ( SEC
) and various states and other jurisdictions, including
reimbursement of actual expenses incurred by the
Adviser or others in performing such functions for the
Fund, and including compensation of persons who are
employees of the Adviser, in proportion to the
relative time spent on such matters;
(h) expenses of shareholders and trustees
meetings, including meetings of committees, and of
preparing, printing and mailing proxy statements,
quarterly reports, if any, semi-annual reports, annual
reports and other communications to existing
shareholders;
(i) expenses of preparing and printing
prospectuses and marketing materials;
(j) compensation and expenses of trustees
who are not affiliated with the Adviser;
(k) charges and expenses of legal counsel
in connection with matters relating to the Fund,
including, without limitation, legal services rendered
in connection with the Fund s trust and financial
structure and relations with its shareholders, issuance
of Shares of the Fund and registration and
qualification of Shares under federal, state and other
laws;
(l) the cost and expense of maintaining
the books and records of the Fund, including general
ledger accounting;
(m) insurance premiums on fidelity, errors
and omissions and other coverages, including the
expense of obtaining and maintaining a fidelity bond
as required by Section 17(g) of the 1940 Act which
may also cover the Adviser;
(n) expenses incurred in obtaining and
maintaining any surety bond or similar coverage with
respect to securities of the Fund;
(o) interest payable on Fund borrowings;
(p) such other non-recurring expenses of
the Fund as may arise, including expenses of actions,
suits or proceedings to which the Trust on behalf of
the Fund is a party and expenses resulting from the
legal obligation that the Trust on behalf of the Fund
may have to provide indemnity with respect thereto;
(q) expenses and fees reasonably
incidental to any of the foregoing specifically
identified expenses; and
(r) all other expenses permitted by the
prospectus(es) and statement of additional
information of the Fund as being paid by the Fund.
SECTION 4. Advisory Fee.
In return for its advisory services, each Fund will pay
the Adviser a monthly fee, computed and accrued daily,
based on an annual rate set forth in Exhibit A hereto of each
Fund s Average Daily Managed Assets. Average Daily
Managed Assets of a Fund shall mean the average daily
value of the total assets of the Fund, less all accrued
liabilities of the Fund (other than the aggregate amount of
any outstanding borrowings constituting financial leverage).
The Adviser may waive a portion of its fees. If this
Agreement becomes effective subsequent to the first day of a
month or shall terminate before the last day of a month,
compensation for such month shall be computed in a manner
consistent with the calculation of the fees payable on a
monthly basis. Subject to the provisions of Section 5 below,
the accrued fees will be payable monthly as promptly as
possible after the end of each month during which this
Agreement is in effect.
SECTION 5. Reimbursements.
The parties agree that they may negotiate from time
to time for the Adviser to reimburse certain costs and
expenses of a Fund. If such an agreement is in effect, the
determination of whether reimbursement for such costs and
expenses is due a Fund from the Adviser will be made on an
accrual basis once monthly, and if it is so determined that
such reimbursement is due, the accrued amount of such
reimbursement that is due shall serve as an offset to the
investment advisory fee payable monthly by the Fund to the
Adviser pursuant to Section 4 hereof, and the amount to be
paid by the Adviser to the Fund as soon as is practicable at
the end of a fiscal year of the Fund shall be equal to the
difference between the aggregate reimbursement due the
Fund from the Adviser for that fiscal year and the aggregate
offsets made by the Fund against the aggregate investment
advisory fees payable to the Adviser pursuant to Section 4
hereof for that fiscal year by virtue of such aggregate
reimbursement. The foregoing reimbursement of costs and
expenses shall exclude distribution and service fees,
brokerage commissions, short sale dividend and interest
expense, taxes, organizational expenses and extraordinary
expenses (as determined by the Board of the Trustees of the
Fund in the exercise of its business judgment).
SECTION 6. Indemnification.
(a) The Trust hereby agrees to indemnify the
Adviser and each of the Adviser s partners, officers,
employees, and agents (including any individual who serves
at the Adviser s request as director, officer, partner, trustee or
the like of another corporation) and controlling persons (each
such person being an Indemnitee ) against any liabilities and
expenses, including amounts paid in satisfaction of
judgments, in compromise or as fines and penalties, and
counsel fees (all as provided in accordance with applicable
state law) reasonably incurred by such Indemnitee in
connection with the defense or disposition of any action, suit
or other proceeding, whether civil or criminal, before any
court or administrative or investigative body in which he may
be or may have been involved as a party or otherwise or with
which he may be or may have been threatened, while acting
in any capacity set forth above in this paragraph or thereafter
by reason of his having acted in any such capacity, except
with respect to any matter as to which he shall have been
adjudicated not to have acted in good faith in the reasonable
belief that his action was in the best interest of the Trust and
furthermore, in the case of any criminal proceeding, so long
as he had no reasonable cause to believe that the conduct was
unlawful, provided, however, that (1) no Indemnitee shall be
indemnified hereunder against any liability to the Trust or its
shareholders or any expense of such Indemnitee arising by
reason of (i) willful misfeasance, (ii) bad faith, (iii) gross
negligence (iv) reckless disregard of the duties involved in
the conduct of his position (the conduct referred to in such
clauses (i) through (iv) being sometimes referred to herein as
Disabling Conduct ), (2) as to any matter disposed of by
settlement or a compromise payment by such Indemnitee,
pursuant to a consent decree or otherwise, no indemnification
either for said payment or for any other expenses shall be
provided unless there has been a determination that such
settlement or compromise is in the best interests of the Trust
and that such Indemnitee appears to have acted in good faith
in the reasonable belief that his action was in the best
interests of the Trust and did not involve Disabling Conduct
by such Indemnitee and (3) with respect to any action, suit or
other proceeding voluntarily prosecuted by any Indemnitee
as plaintiff, indemnification shall be mandatory only if the
prosecution of such action, suit or other proceeding by such
Indemnitee was authorized by a majority of the full Board of
Trustees of the Trust. Notwithstanding the foregoing, the
Trust shall not be obligated to provide any such
indemnification to the extent such provision would waive any
right that the Trust cannot lawfully waive.
(b) The Trust shall make advance payments in
connection with the expenses of defending any action with
respect to which indemnification might be sought hereunder
if the Trust receives a written affirmation of the Indemnitee s
good faith belief that the standard of conduct necessary for
indemnification has been met and a written undertaking to
reimburse the Trust unless it is subsequently determined that
he is entitled to such indemnification and if the Trustees of
the Trust determine that the facts then known to them would
not preclude indemnification. In addition, at least one of the
following conditions must be met: (1) the Indemnitee shall
provide adequate security for his undertaking, (2) the Trust
shall be insured against losses arising by reason of any lawful
advances, (3) a majority of a quorum of Trustees of the Trust
who are neither interested persons of the Trust (as defined
in Section 2(a)(19) of the 0000 Xxx) nor parties to the
proceeding ( Disinterested Non-Party Trustees ) or an
independent legal counsel in a written opinion, shall
determine, based on a review of readily available facts (as
opposed to a full trial-type inquiry), that there is reason to
believe that the Indemnitee ultimately will be found entitled
to indemnification or (4) if there is not a Disinterested Non-
Party Trustee, Indemnitee provides the written affirmation
referred to above.
(c) All determinations with respect to
indemnification hereunder shall be made (1) by a final
decision on the merits by a court or other body of competent
jurisdiction before whom the proceeding was brought that
such Indemnitee is not liable by reason of Disabling Conduct
or, (2) in the absence of such a decision, by (i) a majority
vote of a quorum of the Disinterested Non-Party Trustees of
the Trust, or (ii) if such a quorum is not obtainable or even if
obtainable, if a majority vote of such quorum so directs,
independent legal counsel in a written opinion.
(d) Each Indemnitee shall, in the performance of
its duties, be fully and completely justified and protected
with regard to any act or any failure to act resulting from
reliance in good faith upon the books of account or other
records of the Trust, upon an opinion of counsel, or upon
reports made to the Trust by any of the Trust s officers or
employees or by any advisor, administrator, manager,
distributor, selected dealer, accountant, appraiser or other
expert or consultant selected with reasonable care by the
Trustees, officers or employees of the Trust, regardless of
whether such counsel or other person may also be a Trustee.
(e) The rights accruing to any Indemnitee under
these provisions shall not exclude any other right to which he
may be lawfully entitled.
SECTION 7. Relations with a Fund.
Subject to and in accordance with the organizational
documents of the Adviser and the Trust, as well as their
policies and procedures and codes of ethics, it is understood
that Trustees, officers, agents and shareholders of a Fund are
or may be interested in the Adviser (or any successor thereof)
as directors, officers or otherwise, that partners, officers and
agents of the Adviser (or any successor thereof) are or may
be interested in a Fund as Trustees, officers, agents,
shareholders or otherwise, and that the Adviser (or any such
successor thereof) is or may be interested in the Fund as a
shareholder or otherwise.
SECTION 8. Liability of Adviser.
The Adviser shall not be liable to a Fund for any error
of judgment or mistake of law or for any loss suffered by the
Fund in connection with the matters to which this Agreement
relates; provided, however, that no provision of this
Agreement shall be deemed to protect the Adviser against
any liability to a Fund or its shareholders to which it might
otherwise be subject by reason of any Disabling Conduct nor
shall any provision hereof be deemed to protect any trustee or
officer of the Fund against any such liability to which he
might otherwise be subject by reason of any Disabling
Conduct.
SECTION 9. Duration and Termination of this
Agreement.
(a) Duration. This Agreement shall become
effective with respect to the initial Funds on Exhibit A on the
date first set forth above, such date being the date on which
this Agreement has been executed following: (1) the approval
of the Trust s Board of Trustees, including approval by a vote
of a majority of the Trustees who are not interested persons
(as defined in the 0000 Xxx) of the Adviser or the Funds, cast
in person at a meeting called for the purpose of voting on
such approval; and (2) the approval by a vote of a majority
of the outstanding voting securities (as defined in the 0000
Xxx) of each Fund. Unless terminated as herein provided, this
Agreement shall remain in full force and effect until the date
that is two years after the effective date of this Agreement.
Subsequent to such initial period of effectiveness, this
Agreement shall continue in full force and effect, subject to
paragraph 9(c), so long as such continuance is approved at
least annually (a) by either the Trust s Board of Trustees or
by a vote of a majority of the outstanding voting securities
(as defined in the 0000 Xxx) of the Fund and (b) in either
event, by the vote of a majority of the Trustees of the Fund
who are not parties to this Agreement or interested persons
(as defined in the 0000 Xxx) of any such party, cast in person
at a meeting called for the purpose of voting on such
approval. With respect to each new Fund added to the
Agreement on or after the initial effective date, each such
Fund shall have an initial term of up to two years beginning
on the date indicated on Exhibit A and thereafter, if not
terminated, shall continue in effect if approved at least
annually as set forth above.
(b) Amendment. No provision of this Agreement
may be amended, waived, discharged or terminated orally,
but only by an instrument in writing signed by the party
against which enforcement of the amendment, waiver,
discharge or termination is sought. Any amendment of this
Agreement shall be subject to the 1940 Act including the
interpretation thereof that amendments that do not increase
the compensation of the Adviser or otherwise fundamentally
alter the relationship of the Trust with the Adviser do not
require shareholder approval if approved by the requisite
majority of the Trust s Trustees who are not interested
persons (as defined in the 0000 Xxx) of the Trust.
(c) Termination. This Agreement may be
terminated at any time, without payment of any penalty, by
vote of the Trust s Board of Trustees, or by a vote of a
majority of the outstanding voting securities (as defined in
the 0000 Xxx) of the Funds, or by the Adviser, in each case
on not more than 60 days nor less than 30 days prior written
notice to the other party.
(d) Automatic Termination. This Agreement shall
automatically and immediately terminate in the event of its
assignment (as defined in the 1940 Act).
SECTION 10. Services Not Exclusive.
The services of the Adviser to each Fund hereunder
are not to be deemed exclusive, and the Adviser (and its
affiliates) shall be free to render similar services to others so
long as its services hereunder are not impaired thereby;
provided, however, that the Adviser will undertake no
activities that, in its reasonable good faith judgment, will
adversely affect the performance of its obligations under this
Agreement. In addition, the parties may enter into other
agreements pursuant to which the Adviser provides
administrative or other, non-investment advisory services to a
Fund, and the Adviser may be compensated for such other
services.
SECTION 11. Notices.
Notices under this Agreement shall be in writing and
shall be addressed, and delivered or mailed postage prepaid,
to the other party at such address as such other party may
designate from time to time for the receipt of such notices.
Until further notice to the other party, the address of each
party to this Agreement for this purpose shall be NexBank
Tower, 00000 Xxxx Xxxx, Xxxxx 000, Xxxxxx, Xxxxx 00000.
SECTION 12. Governing Law; Severability;
Counterparts.
This Agreement shall be construed in accordance
with the laws of the State of Delaware and the applicable
provisions of the 1940 Act. To the extent that applicable law
of the State of Delaware, or any of the provisions herein,
conflict with applicable provisions of the 1940 Act, the latter
shall control. 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. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be
an original, but such counterparts shall, together, constitute
only one instrument.
SECTION 13. Miscellaneous.
The Adviser agrees to advise each Fund of any
change of its membership (which shall mean its general
partner) within a reasonable time after such change. If the
Adviser enters into a definitive agreement that would result
in a change of control (within the meaning of the 0000 Xxx)
of the Adviser, it agrees to give each Fund the lesser of
60 days written notice and such notice as is reasonably
practicable before consummating the transaction.
Where the effect of a requirement of the 1940 Act
reflected in or contemplated by any provisions of this
Agreement is altered by a rule, regulation or order of the
SEC, whether of special or general application, such
provision shall be deemed to incorporate the effect of such
rule, regulation or order.
[Signature Page Follows]
IN WITNESS WHEREOF, the parties hereto have
caused this Agreement to be executed as of the date first set
forth above.
HIGHLAND FUNDS I
By: _/s/ Xxxx Head ________________________
Name: Xxxx Head
Title: CCO
HIGHLAND CAPITAL MANAGEMENT FUND
ADVISORS, L.P.
By: STRAND ADVISORS, INC.,
its general partner
By: __/s/ Ethan Powell_______________________
Name: Xxxxx Xxxxxx
Title:
EXHIBIT A
Initial Funds
Portfolio
Highland Floating Rate Opportunities
Fund (formerly Pyxis Floating Rate
Opportunities Fund and formerly
Highland Floating Rate Opportunities
Fund)
Breakpoint
Advisory Fee
First $1 billion
0.65%
Next $2 billion
0.60%
Over $2 billion
0.55%
