INVESTMENT SUB-ADVISORY
AGREEMENT
AGREEMENT made as of February 1, 2015, by
and between Highland Capital Management Fund
Advisors, L.P., a Delaware limited partnership (the
Adviser) and First Foundation Advisors, a California
corporation (the Sub-Adviser).
WHEREAS, the Adviser and Sub-Adviser are both
engaged in the business of rendering investment
management services and are registered as investment
advisers under the Investment Advisers Act of 1940, as
amended (the Advisers Act);
WHEREAS, Highland Funds II, a Massachusetts
business trust (the Trust), on behalf of its series,
Highland Total Return Fund (the Fund), and the Adviser
have entered into an investment advisory agreement (the
Advisory Agreement) pursuant to which the Adviser acts
as a manager and investment adviser to the Fund;
WHEREAS, the Advisory Agreement provides
that the Adviser shall have the authority to engage one
or more sub-advisers in connection with the portfolio
management of the Fund; and
WHEREAS, the Adviser and the Board of Trustees
of the Trust desire to engage the Sub- Adviser to render
portfolio management services in the manner and on the
terms set forth in this Agreement;
NOW, THEREFORE, WITNESSETH: That it
is hereby agreed between the parties hereto as follows:
SECTION 1. Appointment of Sub-Adviser.
The Adviser hereby appoints the Sub-Adviser to
act as investment sub-adviser to the Fund for the period
and on the terms herein set forth, and the Fund hereby
consents to such appointment. The Sub-Adviser accepts
such appointment and agrees to render the services herein
set forth, for the compensation herein provided.
SECTION 2. Duties of Sub-Adviser.
The Sub-Adviser, at its own expense, shall furnish
the following services and facilities to the Fund:
(a) Investment Program. The Sub-Adviser shall (i)
furnish continuously an investment program for
the Fund, (ii) determine (subject to the overall
supervision and review of the Adviser and 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 Sub-Adviser shall be
subject always to the control of the Adviser and
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 Investment
Company Act of 1940, as amended (the 1940 Act),
in each case as from time to time amended and in
effect.
(b) Portfolio Transactions. The Sub-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 Sub-
Adviser, although the Fund will pay the actual
brokerage commissions on portfolio transactions in
accordance with Section 3(d) of the Advisory
Agreement.
In placing portfolio transactions for the Fund, it is
recognized that the Sub-Adviser will give primary
consideration to securing the most favorable price and
efficient execution. Consistent with this policy, the Sub-
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 Sub-Adviser may be a party. It is understood
that neither the Fund nor the Sub-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 Sub-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,
subject to Section 28(e) of the Securities Exchange Act of
1934, the Sub- 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 Sub-Adviser in connection with its
services to other clients.
On occasions when the Sub-Adviser deems the
purchase or sale of a security to be in the best interest of
the Fund as well as other clients, the Sub-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 Sub-
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 Sub-Adviser does not assume nor shall it pay
any expenses for Fund operations and activities. For the
avoidance of doubt, unless the prospectus(es) or statement
of additional information of the Fund provides otherwise,
the expenses to be borne by the Fund shall include,
without limitation, those items listed in Section 3 of the
Advisory Agreement.
SECTION 4. Sub-Advisory Fee.
(a) In return for its advisory services, the Adviser
will pay the Sub-Adviser a monthly fee,
computed and accrued daily, based on an
annual rate of 0.25% of the Funds Average
Daily Managed Assets. Average Daily Managed
Assets of the Fund shall mean the average daily
value of the total assets of the Fund, less all
accrued liabilities of the Fund. 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.
The accrued fees will be payable monthly as
promptly as possible after the end of each month
during which this Agreement is in effect.
(b) The Sub-Adviser agrees that, during any period
in which the Adviser has waived a portion or
all of the advisory fee payable by the Trust on
behalf of the Fund to the Adviser under the
Advisory Agreement, if requested by the Adviser,
the Sub-Adviser will waive a portion of its fees
payable hereunder (up to and including all of the
fees paid to the Sub-Adviser hereunder) equal to
the amount waived by the Adviser that exceeds the
difference between (i) the advisory fee payable by
the Trust on behalf of the Fund to the Adviser
under the Advisory Agreement and (i) the fees
payable to the Sub-Adviser hereunder. The
Adviser agrees that, in addition to any amounts
otherwise payable to the Sub-Adviser hereunder,
the Adviser shall pay the Sub-Adviser all amounts
previously waived by the Sub-Adviser to the extent
that such amounts are subsequently paid by the
Trust on behalf of the Fund to the Adviser
under the Advisory Agreement, it being further
agreed that, with respect to any such amounts
subsequently paid by the Trust on behalf of the
Fund to the Adviser under the Advisory
Agreement, the amount to be paid by the Adviser
to the Sub-Adviser shall bear the same ratio to the
total amount subsequently paid by the Trust on
behalf of the Fund under the Advisory Agreement
as the total amount previously waived by the Sub-
Adviser bears to the total amount of the fees
previously waived by the Adviser under the
Advisory Agreement.
(c) The Sub-Adviser agrees that, during any period
in which the Sub-Adviser asks the Adviser to
waive any non-advisory fees it receives from
the Fund and/or pay or reimburse the Trust for
the expenses of the Fund, the Sub-Adviser
shall waive any portion of its fees payable
hereunder (up to and including all of the fees paid
to the Sub- Adviser hereunder) to the extent such
fees have not already been waived by the Sub-
Adviser pursuant to another section of this
Agreement. To the extent the amount waived or
paid or reimbursed by the Adviser pursuant to this
Section 4(c) exceeds the amount of the Sub-
Advisers waiver of its fee pursuant to this
Section 4(c), the Sub-Adviser shall pay or
reimburse the Adviser up to the amount of all
such fees waived or expenses paid or reimbursed
by the Adviser. The Adviser agrees that, in
addition to any amounts otherwise payable to the
Sub-Adviser hereunder, the Adviser shall pay the
Sub-Adviser all amounts previously paid or
reimbursed by the Sub-Adviser to the extent that
such amounts are subsequently paid by the Trust
on behalf of the Fund to the Adviser under the
Advisory Agreement.
SECTION 5. Compliance with Applicable
Regulations. In performing its duties hereunder,
the Sub-Adviser:
(a) Shall establish compliance policies and procedures
(copies of which shall be provided to the Adviser,
and shall be subject to review and approval by the
Adviser and the Board of Trustees) reasonably
designed to ensure compliance at all times with: all
applicable provisions of the Federal Securities
Laws (as such term is defined in Rule 38a-1 under
the 1940 Act); Subchapter M of the Internal
Revenue Code of 1986, as amended (the Code);
the provisions of the Registration Statement of
the Trust with respect to the Fund; the
provisions of the organizational documents of the
Trust, as the same may be amended from time to
time; Rule 206(4)-7 under the Advisers Act;
and any other applicable provisions of state,
federal or foreign law (the Sub-Advisers
compliance program). The Sub-Adviser shall
provide the Funds Chief Compliance Officer
(CCO) with reasonable access to information
regarding the Sub-Advisers compliance program,
which access shall include on-site visits by the
CCO with the Sub-Adviser as may be reasonably
requested from time to time. The Sub-
Adviser shall provide reasonable assistance to
the Fund and the CCO in complying with Rule
38a-1 under the
1940 and, upon the request of the Fund and/or the
CCO, including in connection with the CCOs
annual written report to the Board required
pursuant to Rule 38a-1, the Sub- Adviser agrees to
provide reports and certifications from the Sub-
Advisers Chief Compliance Officer regarding:
(i) the adequacy and operation of the Sub-
Advisers compliance policies and procedures and
any material changes made or recommended to be
made to those policies and procedures; and
(ii) the effectiveness of their implementation.
(b) Shall promptly notify the Fund and Adviser
regarding: (i) any material changes made to its
policies and procedures since the date of the
last report delivered pursuant to paragraph (a) of
this Section 5; (ii) any material changes to the
policies and procedures recommended as a result
of the annual review conducted pursuant to Rule
38a-1 under the 1940 Act; and (iii) any (A)
material violation of the Federal Securities Laws
by the Sub-Adviser; (B) material violation by the
Sub-Adviser of the Sub-Advisers, the Funds or the
Advisers policies and procedures to the extent the
Board would reasonably need to know to
oversee Fund compliance; and (C) known
weakness in the design or implementation of
the Sub-Advisers policies and procedures.
(c) Shall exercise voting rights with respect to
portfolio securities held by the Fund in
accordance with written policies and procedures
adopted by the Sub-Adviser, which may be
amended from time to time, and which at all times
shall comply with the requirements of applicable
federal statutes and regulations and any related
guidance from the Securities and Exchange
Commission and its staff relating to such statutes
and regulations (collectively, Proxy Voting
Policies and Procedures). The Sub-Adviser shall
vote proxies on behalf of the Fund in a manner
deemed by the Sub-Adviser to be in the best
interests of the Fund pursuant to the Sub-Advisers
written Proxy Voting Policies and Procedures.
The Sub-Adviser shall provide disclosure
regarding the Proxy Voting Policies and
Procedures in accordance with the requirements of
Form N-1A for inclusion
in the Registration Statement of the Trust. The
Sub-Adviser shall report to the Adviser in a timely
manner a record of all proxies voted, in such form
and format that complies with acceptable federal
statutes and regulations (e.g., requirements of
Form N-PX). The Sub- Adviser shall certify at
least annually or more often as may reasonably
be requested by the Adviser, as to its compliance
with its Proxy Voting Policies and Procedures and
applicable federal statutes and regulations.
(d) Agrees that it will maintain for the Fund all and
only such records as required under Rules 31a-1
and 31a-2 under the 1940 Act in respect to its
services hereunder and that such records are the
property of the Fund and further agrees to
surrender promptly to the Fund any such records
upon the Funds request all in accordance with
Rule 31a-3 under the 1940 Act.
(e) Agrees to regularly report to the Adviser on the
investment program for the Fund and the issuers
and securities represented in the Fund, and will
furnish the Adviser, with respect to the Fund, such
periodic and special reports as the Board and the
Adviser may reasonably request, including, but not
limited to, reports concerning transactions and
performance of the Fund, a quarterly compliance
checklist, reports regarding compliance with the
Funds procedures pursuant to Rules 17e-1, 17a-7,
10f-3 and 12d3-1 under the
1940 Act, fundamental investment restrictions,
procedures for opening brokerage accounts and
commodity trading accounts, liquidity
determination of securities purchased pursuant to
Rule 144A and 4(2) commercial paper, IOs/POs,
confirmation of the liquidity of all other securities
in the Fund, and compliance with the Sub-Advisers
Code of Ethics, and such other reports or
certifications that the Adviser may reasonably
request from time to time.
(f) Will be responsible for the preparation and filing
of Schedule 13G and Form 13F with respect to
the assets of the Fund reflecting holdings over
which the Sub-Adviser and its affiliates have
investment discretion.
(g) Will comply with the Funds policy on selective
disclosure of portfolio holdings of the Fund (the
Procedure for Compliance with Regulation FD), as
provided in writing to the Sub-Adviser and as may
be amended from time to time. The Sub-Adviser
agrees to provide a certification with respect to
compliance with the Funds Procedure for
Compliance with Regulation FD as may be
reasonably requested by the Fund from time to
time.
(h) Shall promptly notify the Adviser and the Fund
(i) in the event that the SEC, CFTC, or any
banking or other regulatory body has censured the
Sub-Adviser; placed limitations upon its activities,
functions or operations; suspended or revoked its
registration or ability to serve as an investment
adviser; or has commenced proceedings or an
investigation that can reasonably be expected to
result in any of these actions; (ii) upon having a
reasonable basis for believing that the Fund has
ceased to qualify or might not qualify as a
regulated investment company under Subchapter
M of the Code; and (iii) upon having a reasonable
basis for believing that the Fund has ceased to
comply with the diversification provisions of
Section 817(h) of the Code or the regulations
thereunder. The Sub-Adviser further
agrees notify the Adviser and Fund promptly of
any material fact known to the Sub- Adviser
respecting or relating to the Sub-Adviser that
should be but is not contained in the Registration
Statement of the Trust, or any amendment or
supplement thereto, or of any statement contained
therein that becomes untrue in any material
respect.
(i) For the avoidance of doubt, the Sub-Adviser shall
not be responsible for compliance by the Trusts
Board of Trustees or officers (including the Chief
Compliance Officer) or by the Adviser with their
respective obligations under the 1940 Act
(including Rule 38a-1 under the 1940 Act), the
Code, and the regulations thereunder, and under
any federal, state or self-regulatory organizations
laws, rules, regulations or orders applicable to
them, and the Sub-Adviser shall only be
responsible for the Funds compliance with the
1940 Act (including Rule 38a-1 under the 1940
Act), the Code, and the regulations thereunder,
and with any applicable federal, state or self-
regulatory organizations laws, rules, regulations or
orders to the extent that the Funds compliance with
such laws, rules, regulations, and orders is affected
by the activities of the Sub-Adviser in furnishing
an investment program for the Fund under this
Agreement.
SECTION 6. Adviser Representations and
Warranties.
(a) The Adviser represents and warrants to the Sub-
Adviser that (i) the retention of the Sub- Adviser
by the Adviser as contemplated by this
Agreement is authorized by the governing
documents of the Adviser; (ii) the execution,
delivery and performance of each of this
Agreement and the Advisory Agreement does not
violate any obligation by which the Adviser or its
property is bound, whether arising by contract,
operation of law or otherwise; and (iii) each of this
Agreement and the Advisory Agreement has been
duly authorized by appropriate action of the
Adviser and when executed and delivered by the
Adviser will be the legal, valid and binding
obligation of the Adviser, enforceable against the
Adviser in accordance with its terms hereof
subject, as to enforcement, to applicable
bankruptcy, insolvency and similar laws
affecting creditors rights generally and to
general equitable principles (regardless of whether
enforcement is sought in a proceeding in equity or
law).
SECTION 7. Sub-Adviser Representations and
Warranties.
(a) The Sub-Adviser represents and warrants to
the Adviser that (i) the Sub-Adviser is
registered as an investment adviser under the
Advisers Act and will continue to be so registered
for so long as this Agreement remains in effect;
(ii) the Sub-Adviser is not prohibited by the 1940
Act, the Advisers Act or other law, regulation or
order from performing the services contemplated
by this Agreement; (iii) the Sub-Adviser has met
and will seek to continue to meet for so long as
this Agreement remains in effect, any other
applicable federal or state requirements, or the
applicable requirements of any regulatory or
industry self-regulatory agency necessary to be
met in order to perform the services contemplated
by this Agreement; (iv) the Sub-Adviser has the
authority to enter into and perform the services
contemplated by this Agreement; (v) the Sub-
Adviser will promptly notify the Adviser of the
occurrence of any event that would disqualify the
Sub- Adviser from serving as an investment
adviser of an investment company pursuant to
Section 9(a) of the 1940 Act or otherwise;
and (vi) this Agreement has been duly
authorized by appropriate action of the Sub-
Adviser and when executed and delivered by the
Sub-Adviser will be the legal, valid and binding
obligation of the Sub-Adviser, enforceable against
the Sub-Adviser in accordance with its terms
hereof, subject, as to enforcement, to applicable
bankruptcy, insolvency and similar laws affecting
creditors rights generally and to general equitable
principles (regardless of whether enforcement is
sought in a proceeding in equity or law). The Sub-
Adviser will also promptly notify the Fund and the
Adviser if it is served or otherwise receives notice
of any action, suit, proceeding, inquiry or
investigation, at law or in equity, before or by any
court, public board or body, involving the affairs
of the Fund.
(b) The Sub-Adviser represents and warrants to the
Adviser that the Sub-Adviser has adopted a written
Code of Ethics complying with the requirements
of Rule 17j-1 under the 1940
Act and Rule 204A-1 under the Advisers Act and
will provide the Adviser and the Board with a
copy of such Code of Ethics, together with
evidence of its adoption. Within
30 days of the end of the last calendar quarter
of each year that this Agreement is in effect, and
as otherwise reasonably requested, the president,
Chief Operating Officer, Chief Compliance Officer
or a vice-president of the Sub-Adviser shall certify
to the Adviser that the Sub-Adviser has
complied with the requirements of Rule 17j-1
and Rule 204A-1 during the previous year and that
there has been no material violation of the Sub-
Advisers Code of Ethics or, if such a material
violation has occurred, that appropriate action
was taken in response to such violation. Upon
the written request of the Adviser, the Sub-
Adviser shall permit the Adviser, its employees or
its agents to examine the reports required to be
made to the Sub-Adviser by Rule 17j-1(c)(1)
and Rule 204A-1(b) and all other records relevant
to the Sub-Advisers Code of Ethics.
(c) The Sub-Adviser represents and warrants to
the Adviser that the Sub-Adviser has provided
the Fund and the Adviser with a copy of its Form
ADV Part 1 and Part 2, which as of the date of
this Agreement is its Form ADV Part 1 as most
recently filed with the SEC and promptly will
furnish a copy of all amendments to its Form
ADV Part 1 and Part 2 to the Trust and the
Adviser at least annually. Such amendments shall
reflect all changes in the Sub-Advisers
organizational structure, professional staff or other
significant developments affecting the Sub-
Adviser, as required by the Advisers Act.
(d) The Sub-Adviser represents and warrants to the
Adviser that the Sub-Adviser will notify the Fund
and the Adviser of any assignment of this
Agreement or change of control of the Sub-
Adviser, as applicable, by providing at least 60
days written notice or such notice as is reasonably
practicable, and any changes in the portfolio
manager(s) of the Fund or senior management of
the Sub-Adviser, prior to or promptly after, such
change. The Sub- Adviser agrees to bear all
reasonable expenses of the Fund, if any, arising out
of an assignment or change in control, other
than an assignment or change in control that
results in control of the Sub-Adviser by the
Adviser, or a company controlling, controlled by
or under common control with, the Adviser,
provided that if the Fund is required to seek the
approval of Fund shareholders in connection with
any such change of control, the Adviser agrees to
bear all expenses related to such shareholder
approval.
(e) The Sub-Adviser represents and warrants to the
Adviser that the Sub-Adviser agrees to maintain
an appropriate level of errors and omissions or
professional liability insurance coverage. The
Sub-Adviser shall provide prior written notice to
the Adviser (i) of any material changes in its
insurance policies or insurance coverage; or (ii) if
any claims will be made under its insurance
policies. Furthermore, it shall upon request provide
to the Adviser any information it may reasonably
require concerning the amount of or scope of such
insurance.
(f) The Sub-Adviser represents and warrants to the
Adviser that the Sub-Adviser agrees that neither it,
nor any of its affiliates, will knowingly in any way
refer directly or indirectly to its relationship with
the Trust, the Fund, the Adviser or any of their
respective affiliates in offering, marketing or other
promotional materials without the express written
consent of the Adviser, except as required by rule,
regulation or upon the request of a governmental
authority. However, the Sub-Adviser may use the
performance of the Fund in its composite
performance.
(g) The Sub-Adviser represents and warrants to the
Adviser that the Sub-Adviser shall ensure that
sufficient and competent investment
management, administrative and compliance staff
experienced in managing accounts similar to the
Fund shall have charge at all times of the
conduct of, and shall maintain close
supervision of, the investment and
management of the Fund. For the avoidance of
doubt, the Sub-Adviser shall ensure that any
affiliate or third party to whom its duties have been
delegated shall comply with the foregoing.
(h) The Sub-Adviser represents and warrants to the
Adviser that the Sub-Adviser shall act honestly,
in good faith and in the best interests of the Fund
including requiring any of its personnel with
knowledge of the Funds activities to place the
interest of the Fund first, ahead of their own
interests, in all personal trading scenarios that
may involve a conflict of interest with the Fund.
(i) The Sub-Adviser represents and warrants to
the Adviser that the Sub-Adviser has reviewed
and will in the future review, the Registration
Statement, and any amendments or supplements
thereto, the annual or semi-annual reports to
shareholders, other reports filed with the
Commission and any marketing material of the
Fund provided to the Sub- Adviser by the Adviser
or the Trust (collectively the Disclosure
Documents) and represents and warrants that with
respect to disclosure about the Sub-Adviser, the
manner in which the Fund is managed or
information relating directly or indirectly to the
Sub- Adviser (collectively, the Sub-Adviser
Information), such Disclosure Documents contain
or will contain, as of the date thereof, no untrue
statement of any material fact and does not omit
any statement of material fact which was required
to be stated therein or necessary to make the
statements contained therein not misleading. The
Adviser will review with or identify for the Sub-
Adviser any changes to the Sub-Adviser
Information that the Sub-Adviser has previously
supplied or reviewed.
SECTION 8. Liability and Indemnification.
(a) Except as may otherwise be provided by the 1940
Act or any other federal securities law, neither the
Sub-Adviser nor any of its officers, directors or
employees (its Affiliates) shall be liable for any
losses, claims, damages, liabilities or litigation
(including legal and other expenses) incurred or
suffered by the Adviser, the Trust or the Fund as a
result of any error of judgment or mistake of law
by the Sub-Adviser or its Affiliates with respect to
the Fund, except that nothing in this Agreement
shall operate or purport to operate in any way to
exculpate, waive or limit the liability of the Sub-
Adviser or its Affiliates for, and the Sub-Adviser
shall indemnify and hold harmless the Trust, the
Adviser, all affiliated persons thereof (within the
meaning of Section 2(a)(3) of the 0000 Xxx) and
all controlling persons (as described in Section 15
of the Securities Act of 1933, as amended (1933
Act)) (collectively, Adviser Indemnitees) against
any and all losses, claims, damages, liabilities or
litigation (including reasonable legal and other
expenses) to which any of the Adviser
Indemnitees may become subject under the 1933
Act, the 1940 Act, the Advisers Act, or under any
other statute, or common law or otherwise arising
out of or based on (i) any willful misfeasance, bad
faith, reckless disregard or gross negligence of the
Sub-Adviser in the performance of any of its
duties or obligations hereunder, (ii) the Sub-
Adviser being in violation of any applicable
federal or state law, rule or regulation or any
investment policy or restriction set forth in the
Funds Registration Statement on Form N-1A or
any written guidelines or instruction provided in
writing by the Trusts Board of Trustees or the
Adviser, (iii) the Funds failure to satisfy the
diversification or source of income requirements of
Subchapter M of the Code by reason of any
action or omission of the Sub-Adviser, unless
acting at the direction of the Adviser, (iv) the
Fund being in material violation of any applicable
federal or state law, rule or regulation or any
investment policy or restriction set forth in the
Funds Registration Statement or any written
guidelines or instruction provided in writing by the
Trusts Board of Trustees or the Adviser, by reason
of any action or omission of the Sub- Adviser, or
(v) any untrue statement of a material fact
contained in the prospectus and statement of
additional information, proxy materials, reports,
advertisements, sales literature, or other materials
pertaining to the Fund or the omission to state
therein a material fact known to the Sub-Adviser
which was required to be stated therein or
necessary to make the statements therein not
misleading, if such statement or omission was
made in reliance upon information furnished to the
Adviser or the Trust by the Sub- Adviser for use
therein (collectively, Sub- Adviser Culpable
Conduct).
(b) The Adviser shall indemnify and hold harmless
the Sub-Adviser, all affiliated persons thereof
(within the meaning of Section 2(a)(3) of the
0000 Xxx) and controlling persons, if any
(collectively, the Sub-Adviser Indemnitees), from
and against any and all losses, claims, damages,
liabilities or litigation (including reasonable legal
and other expenses) to which any of the Sub-
Adviser Indemnitees may become subject under
the 1933 Act, the 1940 Act, the Advisers Act, or
under any other statute, or common law or
otherwise arising out of or based on any violation
by the Adviser or the Trust of any applicable law,
rule or regulation, or any provision of this
Agreement (collectively, Losses), provided,
however, that the Adviser shall not be required to
indemnify or hold harmless any Sub- Adviser
Indemnitee against any Losses other than those
arising out of or based on the
willful misfeasance, bad faith or gross negligence
of the Adviser, or reckless disregard of the duties
involved in the conduct of its position
(collectively, Adviser Culpable Conduct), and
provided, further, that the Adviser shall not be
required to indemnify or hold harmless any Sub-
Adviser Indemnitee against any Losses arising out
of or based on Adviser Culpable Conduct if and to
the extent that such Losses would not have
occurred absent Sub-Adviser Culpable 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: (1) 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, the Sub-Adviser or the Fund, 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 the
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 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 Sub- Adviser or otherwise fundamentally
alter the relationship of the Trust with the Sub-
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
(i) 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 (ii) by the Adviser or by the Sub-
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 0000
Xxx) or upon termination of the Advisory
Agreement.
SECTION 10. Services Not Exclusive.
The services of the Sub-Adviser to the Fund
hereunder are not to be deemed exclusive, and the Sub-
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 Sub-
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 Sub-Adviser provides administrative or other,
noninvestment advisory services to the Fund, and the Sub-
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 the Trust and the Adviser for this purpose shall
be 000 Xxxxxxxx Xxxxx, Xxxxx 000, Xxxxxx, Xxxxx
00000 and the address of the Sub-Adviser for this
purpose shall be 0000 XxXxxxxx Xxxxxx, 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.
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
CAPITAL
MANAGEM
ENT FUND
ADVISORS,
L.P.
By: Strand
Advisors
XVI, Inc., its
general
partner
By: /s/ Xxxxx
X. Xxxxxx
Name: Xxxxx
X. Xxxxxx
Title:
Secretary
FIRST
FOUNDATI
ON
ADVISORS
By: /s/ Xxxx
Xxxxxxxx
Name: Xxxx
Xxxxxxxx
Title:
President
