AMENDED AND RESTATED INVESTMENT ADVISORY
AGREEMENT
AGREEMENT made as of December 4, 2006, 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, Highland Long/Short Equity Fund (formerly,
Pyxis Long/Short Equity Fund, formerly Highland Long/Short
Equity Fund, and formerly Highland Equity Opportunities Fund)
(the Fund ).
WHEREAS, the Adviser and the Trust were each
renamed, as stated above, as of February 8, 2013, and as of
January 9, 2012;
WHEREAS, the Fund was renamed, as stated above, as of
February 8, 2013, as of January 9, 2012, and as of December 23,
2008;
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 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 among 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 Fund 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 Trust s 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
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 the Fund and its shares of beneficial
interest ( Shares ), including the 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 the 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 the 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 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 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 Fund s 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 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 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.
Except for the services and facilities to be provided by the
Adviser pursuant to a separate administration agreement with the
Trust, 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 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, the Fund will pay the
Adviser a monthly fee, computed and accrued daily, based on an
annual rate of 2.45% of the Fund s Average Daily Managed
Assets. Average Daily Managed 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
whether reimbursement 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 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 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) 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 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: (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 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 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.
(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 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 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 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 first set forth above.
HIGHLAND CAPITAL
MANAGEMENT FUND ADVISORS,
L.P.
By: STRAND ADVISORS, INC., its
general partner
By: /s/ Xxxxx Xxxxxx
Name: Xxxxx Xxxxxx
Title:
Strand Advisors, Inc., General
Partner of Highland Capital
Management Fund Advisors,
L.P.
HIGHLAND FUNDS I
on behalf of its series,
Highland Long/Short Equity Fund
By: /s/ Xxxx Head
Name: Xxxx Head
Title: CCO
