AMENDED AND RESTATED INVESTMENT ADVISORY AGREEMENT
This Amended and Restated Investment Advisory Agreement (the Agreement) made
June 5, 2017, by and between Highland CapitalManagement Fund Advisors, L.P., a
Delaware limited partnership (the Adviser), and Highland Funds I, a Delaware
statutory trust (the Trust), on behalf of its series, Highland Merger
Arbitrage Fund (the Fund).
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; and
WHEREAS, the Trust has retained the Adviser to provide investment management
services pursuant to an Investment Advisory Agreement dated May 12, 2016 (the
Original Agreement);
NOW, THEREFORE, WITNESSETH: That it is hereby agreed between the parties hereto
that the Original Agreement is hereby amended and restated pursuant to Section
9(b) thereof as of the date written above as follows:
SECTION 1. Appointment of Adviser.
The Trust hereby appoints the Adviser to act as manager and investment adviser
to the 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 the Fund:
(a) Investment Program. The Adviser shall (i) furnish continuously an
investment program for the Fund, (ii) determine (subject to the overall
supervision and review of the Trusts Board of Trustees) the investments to be
purchased, held, sold or exchanged by the Fund and the portion, if any, of the
assets of the Fund to be held uninvested, (iii) make changes in the investments
of the 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 the Fund and matters incidental
thereto , subject always to the control of the Trusts Board of Trustees, and
to the provisions of the organizational documents of the Trust, the
Registration Statement of the Trust with respect to the Fund and its shares of
beneficial interest (Shares), including the Funds 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, terminate and replace one or more sub-advisers in
connection with the portfolio management of the Fund, which subadvisers 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 the Fund set forth in this Agreement. The Adviser agrees to furnish advice
and recommendations to the Fund and the Board with respect to the selection and
continued employment of any sub-adviser(s) to provide investment advisory
services for the portion(s) of the Funds portfolio specified by the Adviser
and on terms and conditions, including but not limited to the compensation
payable to any such sub-adviser(s), approved in the manner provided by
applicable law.
(b) Portfolio Transactions. The Adviser shall place all orders for the purchase
and sale of portfolio securities for the account of the 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 the 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, to the
extent permitted by Section 28(e) of the Securities Exchange Act of 1934,
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 the Funds investment transaction
business. It is also understood that it is desirable for the Fund 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 the 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, the Adviser is
authorized to place orders for the purchase and sale of securities for the Fund
with such brokers, subject to review by the Trusts 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 the 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.
The 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 or Statement of Additional Information of
the Fund provides otherwise, the expenses to be borne by the 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 Funds 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 the services and facilities to be provided to the Fund by the
Adviser as provided in Section 2 hereof, the Fund will pay the Adviser a
monthly fee, computed and accrued daily, based on an annual rate of 1.20% of
the Funds Average DailyManaged Assets, so long as the Adviser has not waived
all or a portion of such compensation. Average DailyManaged Assets of the
Trust shall mean the average daily value of the total assets of the Trust, less
all accrued liabilities of the Trust (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 the Fund. If such an agreement is in
effect, the determination of whetherreimbursement for such costs and expenses
is due the 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 limitation on reimbursement of costs and expenses shall exclude
distribution and service fees, brokerage commissions, short sale dividend
expense, taxes, deferred organization 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 Advisers
partners, officers, employees, and agents (including any individual who serves
at the Advisers 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 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 Indemnitees 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.
(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
rust by any of the Trusts 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 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 the 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 the 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 the 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 the 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 on the date first set forth
above, such date being the date on which this Agreement has been executed
following the approval of the Trusts 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 Fund, cast in person at a
meeting called for the purpose of voting on such approval. Unless terminated as
herein provided, 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 Trusts 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.
(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 Trusts 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 Trusts Board of Trustees, or by a vote of a
majority of the outstanding voting securities (as defined in the 0000 Xxx) of
the Fund, 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 the 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 the 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 000 Xxxxxxxx Xxxxx, 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. Use of the Name Highland.
The Adviser has consented to the use by the Trust of the name or identifying
word Highland in the name of the Trust. Such consent is conditioned upon the
employment of the Adviser as the investment adviser to the Trust. The name or
identifying word Highland may be used from time to time in other connections
and for other purposes by the Adviser and any of its affiliates. The Adviser
may require the Trust to cease using Highland in the name of the Trust if the
Trust ceases to employ, for any reason, the Adviser, any successor thereto or
any affiliate thereof as investment adviser of the Trust.
SECTION 14. Miscellaneous.
The Adviser agrees to advise the 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
the 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.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date set forth above.
HIGHLAND CAPITAL MANAGEMENT FUND ADVISORS, L.P.
By: Strand Advisors XVI, Inc., its general partner
Name: Xxxxx Xxxxxxxxxx
Title: Treasurer
HIGHLAND FUNDS I, on behalf of its series,
Highland Merger Arbitrage Fund
Name: Xxxxxx Xxxxxx
Title: Assistant Secretary
