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 FUND, a Massachusetts business trust (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.
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.
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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.
(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
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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
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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.
(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.
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,
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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
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necessary information is made available to such independent public
accountants as reasonably requested by the Fund.
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
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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.
(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
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damages arise out of Highland'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) 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
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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.
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 FUND
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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