Exhbit (j)
CUSTODIAN SERVICES AGREEMENT
THIS AGREEMENT is made as of October 18, 2004 by and between PFPC TRUST
COMPANY, a limited purpose trust company incorporated under the laws of Delaware
("PFPC Trust"), and HIGHLAND FLOATING RATE LIMITED LIABILITY COMPANY, a Delaware
limited liability company (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 PFPC Trust to provide custodian
services, and PFPC Trust wishes to furnish custodian services.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. DEFINITIONS. AS USED IN THIS AGREEMENT:
"1933 ACT" means the Securities Act of 1933, as amended, and the rules and
regulations of the SEC promulgated thereunder.
"1934 ACT" means the Securities Exchange Act of 1934, as amended, and the
rules and regulations of the SEC promulgated thereunder.
"1940 ACT" has the meaning set forth in the recitals hereof and includes
the rules and regulations of the SEC promulgated thereunder.
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"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 PFPC Trust. An Authorized Person's scope of
authority may be limited by the Fund by setting forth such limitation in
the Authorized Persons Appendix.
"BOARD OF MANAGERS" means the Board of Managers of the Fund.
"BOOK-ENTRY SYSTEM" means Federal Reserve Treasury book-entry system for
United States and federal agency securities, its successor or successors,
and its nominee or nominees and any book-entry system maintained by an
exchange registered with the SEC under the 1934 Act.
"ORAL INSTRUCTIONS" mean oral instructions received by PFPC Trust from an
Authorized Person or from a person reasonably believed by PFPC Trust to be
an Authorized Person.
"PFPC TRUST" means PFPC Trust Company, or a subsidiary or affiliate of
PFPC Trust Company.
"PROPERTY" means:
(i) any and all Securities and other investment items which the
Fund may from time to time deposit, or cause to be deposited,
with PFPC Trust or which PFPC Trust may from time to time hold
for the Fund;
(ii) all income in respect of any of such Securities or other
investment items;
(iii) all proceeds of the sale of any of such Securities or
investment items; and
(iv) all proceeds of the sale of securities issued by the Fund,
which are received by PFPC Trust from time to time, from or on
behalf of the Fund.
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"SEC" means the Securities and Exchange Commission.
"SECURITIES" means securities (including without limitation equities, debt
obligations, options, and other "securities" as that term is defined in
Section 2(a)(36) of the 0000 Xxx) and any contracts for forward or future
delivery of any security, debt obligation or currency or commodity, all
manner of derivative instruments and any contracts based on any index or
group of securities or debt obligations or currencies or commodities, and
any options thereon, as well as investments in registered investment
companies and private investment funds.
"SECURITIES LAWS" mean the 1933 Act, the 1934 Act and the 1940 Act.
"SHARES" means the Fund's limited liability company interests.
"Shareholders" means holders of the Fund's Shares.
"WRITTEN INSTRUCTIONS" means (i) written instructions signed by two
Authorized Persons, unless specified otherwise herein, and received by
PFPC Trust or (ii) trade instructions transmitted by means of an
electronic transaction reporting system which requires the use of a
password or other authorized identifier in order to gain access. The
instructions may be delivered electronically or by hand, mail, tested
telegram, cable, telex or facsimile sending device.
2. APPOINTMENT. The Fund hereby appoints PFPC Trust to provide custodian
services to the Fund in accordance with the terms set forth in this
Agreement and PFPC Trust accepts such appointment and agrees to furnish
such services.
3. COMPLIANCE WITH LAWS. PFPC Trust agrees to comply with the applicable
requirements
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of the Securities Laws, and any laws, rules and regulations of
governmental authorities having jurisdiction with respect to the duties to
be performed by PFPC Trust hereunder. Except as specifically set forth
herein, PFPC Trust assumes no responsibility for such compliance by the
Fund.
4. INSTRUCTIONS.
(a) Unless otherwise provided in this Agreement, PFPC Trust shall act
only upon Oral Instructions or Written Instructions, including
standing Written Instructions related to ongoing instructions
received electronically.
(b) PFPC Trust shall be entitled to rely upon any Oral Instruction or
Written Instruction it receives from an Authorized Person (or from a
person reasonably believed by PFPC Trust to be an Authorized Person)
pursuant to this Agreement. PFPC Trust may assume that any Oral
Instruction or Written Instruction received hereunder is not in any
way inconsistent with the provisions of organizational documents of
the Fund or of any vote, resolution or proceeding of the Board of
Managers or the Fund's Shareholders, unless and until PFPC Trust
receives Written Instructions to the contrary.
(c) The Fund agrees to forward to PFPC Trust Written Instructions
confirming Oral Instructions given on behalf of the Fund (except
where such Oral Instructions are given by PFPC Trust or its
affiliates) and shall endeavor to ensure that PFPC Trust 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 by PFPC Trust shall
in no way invalidate the
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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,
PFPC Trust shall incur no liability to the Fund in acting upon such
Oral Instructions or Written Instructions provided that PFPC Trust's
actions comply with the other provisions of this Agreement.
5. RIGHT TO RECEIVE ADVICE.
(a) ADVICE OF THE FUND. If PFPC Trust is in doubt as to any action it
should or should not take, PFPC Trust may request directions or
advice, including Oral Instructions or Written Instructions, from
the Fund.
(b) ADVICE OF COUNSEL. If PFPC Trust shall be in doubt as to any
question of law pertaining to any action it should or should not
take, PFPC Trust may request advice at its own cost from such
counsel of its own choosing (who may be counsel for the Fund, the
Fund's investment adviser or PFPC Trust, at the option of PFPC
Trust).
(c) CONFLICTING ADVICE. In the event of a conflict between directions,
advice or Oral Instructions or Written Instructions PFPC Trust
receives from the Fund, and the advice it receives from counsel,
PFPC Trust shall be entitled to rely upon and follow the advice of
counsel, provided that such counsel is selected with reasonable
care. PFPC Trust shall promptly inform the Fund of such conflict and
PFPC Trust shall refrain from acting in the event of a conflict
unless counsel advises PFPC Trust that a failure to take action is
likely to result in additional loss, liability or expense. In the
event PFPC Trust relies on the advice of counsel,
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PFPC Trust remains liable for any action or omission on the part of
PFPC Trust which constitutes willful misfeasance, bad faith,
negligence or reckless disregard by PFPC Trust of any duties,
obligations or responsibilities set forth in this Agreement.
(d) PROTECTION OF PFPC TRUST. PFPC Trust 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 PFPC Trust 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 PFPC Trust (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 PFPC
Trust's properly taking or not taking such action. Nothing in this
subsection shall excuse PFPC Trust when an action or omission on the
part of PFPC Trust constitutes willful misfeasance, bad faith,
negligence or reckless disregard by PFPC Trust of any duties,
obligations or responsibilities set forth in this Agreement.
6. RECORDS; VISITS. The books and records pertaining to the Fund, which are
in the possession or under the control of PFPC Trust 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
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authorized officers, employees and agents and the staff of the SEC shall
have access to such books and records at all times during PFPC Trust's
normal business hours. Upon the reasonable request of the Fund, copies of
any such books and records shall be provided by PFPC Trust to the Fund or
to an Authorized Person, at the Fund's expense. No records will be
destroyed without the Fund's written consent. No records will be destroyed
without the Fund's written consent.
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, present or future business
activities of the Fund or PFPC Trust, 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 PFPC
Trust 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
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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. COOPERATION WITH ACCOUNTANTS. PFPC Trust shall cooperate with the Fund's
independent public accountants and shall take all reasonable action in the
performance of its obligations under this Agreement to assure that the
necessary information is made available to such independent public
accountants, as reasonably requested by the Fund.
9. DISASTER RECOVERY. PFPC Trust 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, PFPC Trust shall, at no additional
expense to the Fund, take reasonable steps to minimize service
interruptions. PFPC Trust 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 PFPC Trust's own willful
misfeasance, bad faith, negligence or reckless disregard of its duties or
obligations under this Agreement.
10. COMPENSATION. As compensation for custody services rendered by PFPC Trust
during the term of this Agreement, the Fund will pay to PFPC Trust a fee
or fees as may be
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agreed to in writing from time to time by the Fund and PFPC Trust.
11. INDEMNIFICATION.
(a) The Fund agrees to indemnify and hold harmless PFPC Trust and its
affiliates from all taxes, charges, expenses, assessments, claims
and liabilities (including without limitation reasonable attorneys'
fees and disbursements and liabilities arising 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 PFPC Trust 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 PFPC Trust, nor any of its affiliates, shall be
indemnified against any liability (or any expenses incident to such
liability) arising out of PFPC Trust'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 PFPC Trust or its affiliates for any
consequential, special or indirect losses or damages which PFPC
Trust 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.
12. RESPONSIBILITY OF PFPC TRUST.
(a) PFPC Trust shall be under no duty to take any action on behalf of
the Fund except as necessary to fulfill its duties and obligations
as specifically set forth herein or
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as may be specifically agreed to by PFPC Trust in writing. PFPC
Trust 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. PFPC Trust agrees to
indemnify and hold harmless the Fund from Losses arising out of PFPC
Trust's failure to perform its duties under this Agreement to the
extent such damages arise out of PFPC Trust's willful misfeasance,
bad faith, negligence or reckless disregard of its duties under this
Agreement.
(b) Without limiting the generality of the foregoing or of any other
provision of this Agreement, (i) PFPC Trust shall not be liable for
losses beyond its control, PROVIDED, that PFPC Trust has acted in
accordance with the standard of care set forth above; and (ii) PFPC
Trust 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 PFPC Trust
reasonably believes to be genuine; or (B) subject to Section 9,
delays or errors or loss of data occurring by reason of
circumstances beyond PFPC Trust's control, including acts of civil
or military authority, national emergencies, 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
PFPC Trust nor its affiliates shall be liable to the Fund for any
consequential, special or
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indirect losses or damages which the Fund may incur or suffer by or
as a consequence of PFPC Trust's or its affiliates' performance of
the services provided hereunder, whether or not the likelihood of
such losses or damages was known by PFPC Trust or its affiliates.
13. DESCRIPTION OF SERVICES.
(a) DELIVERY OF THE PROPERTY. The Fund will deliver or arrange for
delivery to PFPC Trust, all the Property owned by the Fund,
including cash received as a result of the distribution of Shares
during the term of this Agreement. PFPC Trust will not be
responsible for such Property until actual receipt.
(b) RECEIPT AND DISBURSEMENT OF MONEY. PFPC Trust, acting upon Written
Instructions, shall open and maintain separate accounts (each an
"Account") in the Fund's name using all cash received from or for
the account of the Fund, subject to the terms of this Agreement.
Cash and other assets applicable to a particular Account will be
recorded in the records maintained with respect to that Account.
PFPC Trust shall make cash payments from or for the Accounts only
for:
(i) purchases of Securities in the name of the Fund, PFPC Trust or
PFPC Trust's nominee or a sub-custodian or nominee thereof as
provided in sub-section (j) and for which PFPC Trust has
received a copy of the broker's or dealer's confirmation or
payee's invoice, as appropriate;
(ii) the repurchase of Shares of the Fund;
(iii) payment of, subject to Written Instructions, interest, taxes,
administration, accounting, distribution, advisory, management
fees or similar expenses which are to be borne by the Fund;
(iv) payment to, subject to receipt of Written Instructions, the
Fund's transfer agent and dividend disbursing agent (the
"Dividend Disbursing Agent"), as agent for the Shareholders,
of an amount equal to the amount of
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dividends and distributions stated in the Written Instructions
to be distributed in cash by the Dividend Disbursing Agent to
Shareholders, or, in lieu of paying the Fund's Dividend
Disbursing Agent, PFPC Trust may arrange for the direct
payment of cash dividends and distributions to Shareholders in
accordance with procedures mutually agreed upon from time to
time by and among the Fund, PFPC Trust and the Fund's Dividend
Disbursing Agent.
(v) payments, upon receipt of Written Instructions signed by one
Authorized Person, in connection with the conversion, exchange
or surrender of Securities owned or subscribed to by the Fund
and held pursuant to this Agreement or delivered to PFPC
Trust;
(vi) payments of, subject to receipt of Written Instructions signed
by one Authorized Person, the amounts of dividends received
with respect to Securities sold short;
(vii) payments made to a sub-custodian pursuant to provisions in
sub-section (c) of this Section; and
(viii) other payments, upon Written Instructions.
PFPC Trust is hereby authorized to endorse and collect all checks,
drafts or other orders for the payment of money received as
custodian for the Fund.
(c) Receipt of Securities; Subcustodians.
(i) PFPC Trust shall hold all Securities received by it with
respect to a particular Account in a separate account that
physically segregates such Securities from those relating to
any other Account or any other persons, firms or corporations,
except for Securities held in a Book-Entry System or through a
sub-custodian. All such Securities shall be held or disposed
of only upon Written Instructions of the Fund pursuant to the
terms of this Agreement. PFPC Trust shall have no power or
authority to assign, hypothecate, pledge or otherwise dispose
of any such Securities or investment, except upon the express
terms of this Agreement or upon Written Instructions
authorizing the transaction. In no case may any member of the
Fund's Board of Managers, or any officer, employee or agent of
the Fund withdraw any Securities.
At PFPC Trust's own expense and for its own convenience, PFPC
Trust may enter into sub-custodian agreements with other
United States banks or trust companies, which are banks as
defined by the 1940 Act, to perform duties described in this
sub-section (c) with respect to domestic assets. Such bank or
trust company shall have an aggregate capital, surplus and
undivided profits, according to its last published report, of
at least one
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million dollars ($1,000,000), if it is a subsidiary or
affiliate of PFPC Trust, or at least twenty million dollars
($20,000,000) if such bank or trust company is not a
subsidiary or affiliate of PFPC Trust. In addition, such bank
or trust company must be qualified to act as custodian and
agree to comply with the relevant provisions of the 1940 Act
and other applicable rules and regulations. Any such
arrangement will not be entered into without prior written
notice to the Fund.
In addition, PFPC Trust may enter into arrangements with
sub-custodians with respect to services regarding foreign
assets; if required, such sub-custodians will be "U.S. Banks"
(as defined in Rule 17f-5 under the 0000 Xxx) or "Eligible
Foreign Custodians" (as defined in Rule 17f-5 under the 1940
Act). Any such arrangement will be entered into as agreed in
writing with the Fund and in accordance with the 1940 Act.
PFPC Trust shall remain responsible for the performance of all
of its duties as described in this Agreement and shall hold
the Fund harmless from its own acts or omissions, under the
standards of care provided for herein and from the acts and
omissions of any sub-custodian chosen by PFPC Trust under the
terms of this sub-section (c).
(d) TRANSACTIONS REQUIRING INSTRUCTIONS. Upon receipt of Oral
Instructions or Written Instructions and not otherwise, PFPC Trust,
directly or through the use of a Book-Entry System, shall:
(i) deliver any Securities held for the Fund against the receipt
of payment for the sale of such Securities or otherwise in
accordance with standard market practice;
(ii) execute and deliver to such persons as may be designated in
such Oral Instructions or Written Instructions, proxies,
consents, authorizations, and any other instruments received
by PFPC Trust as custodian whereby the authority of the Fund
as owner of any Securities may be exercised;
(iii) deliver any Securities to the issuer thereof, or its agent,
when such Securities are called, redeemed, retired or
otherwise become payable (on a voluntary basis); provided
that, in any such case, the cash or other consideration is to
be delivered to PFPC Trust;
(iv) deliver any Securities held for the Fund against receipt of
other Securities or cash issued or paid in connection with the
liquidation, reorganization, refinancing, tender offer,
merger, consolidation or recapitalization of any corporation,
or the exercise of any conversion privilege;
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(v) deliver any Securities held for the Fund to any protective
committee, reorganization committee or other person in
connection with the reorganization, refinancing, merger,
consolidation, recapitalization or sale of assets of any
corporation, and receive and hold under the terms of this
Agreement such certificates of deposit, interim receipts or
other instruments or documents as may be issued to it to
evidence such delivery;
(vi) make such transfer or exchanges of the assets of the Fund and
take such other steps as shall be stated in said Oral
Instructions or Written Instructions to be for the purpose of
effectuating a duly authorized plan of liquidation,
reorganization, merger, consolidation or recapitalization of
the Fund;
(vii) release Securities belonging to the Fund to any bank or trust
company for the purpose of a pledge or hypothecation to
secure any loan incurred by the Fund; provided, however, that
Securities shall be released only upon payment to PFPC Trust
of the monies borrowed, except that in cases where additional
collateral is required to secure a borrowing already made
subject to proper prior authorization, further Securities may
be released for that purpose; and repay such loan upon
redelivery to it of the Securities pledged or hypothecated
therefor and upon surrender of the note or notes evidencing
the loan;
(viii) release and deliver Securities owned by the Fund in
connection with any repurchase agreement entered into on
behalf of the Fund, but only on receipt of payment therefor;
and pay out moneys of the Fund in connection with such
repurchase agreements, but only upon the delivery of the
Securities;
(ix) release and deliver or exchange Securities owned by the Fund
in connection with any conversion of such Securities,
pursuant to their terms, into other Securities;
(x) release and deliver Securities to a broker in connection with
the broker's custody of margin collateral relating to futures
and options transactions;
(xi) release and deliver Securities owned by the Fund for the
purpose of redeeming in kind Shares of the Fund upon delivery
thereof to PFPC Trust; and
(xii) release and deliver or exchange Securities owned by the Fund
for other purposes.
(e) USE OF BOOK-ENTRY SYSTEM. PFPC Trust is authorized and instructed on
a continuous basis, to deposit in Book-Entry Systems all Securities
belonging to the
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Fund eligible for deposit therein and to utilize Book-Entry Systems
to the extent possible in connection with settlements of purchases
and sales of Securities by the Fund, and deliveries and returns of
Securities loaned, subject to repurchase agreements or used as
collateral in connection with borrowings. PFPC Trust shall continue
to perform such duties until it receives Written Instructions or
Oral Instructions authorizing contrary actions.
PFPC Trust shall administer the Book-Entry System as follows:
(i) With respect to Securities of the Fund which are maintained in
the Book-Entry System, the records of PFPC Trust shall
identify by book-entry or otherwise those Securities belonging
to the Fund.
(ii) Assets of the Fund deposited in the Book-Entry System will at
all times be segregated from any assets and cash controlled by
PFPC Trust in other than a fiduciary or custodian capacity but
may be commingled with other assets held in such capacities.
PFPC Trust and its sub-custodian, if any, will pay money only
upon receipt of Securities and will deliver Securities only
upon the receipt of money.
PFPC Trust will provide the Fund with such reports on its own system
of internal control as the Fund may reasonably request from time to
time.
(f) REGISTRATION OF SECURITIES. All Securities held for the Fund which
are issued or issuable only in bearer form, except such Securities
held in the Book-Entry System, shall be held by PFPC Trust in bearer
form; all other Securities held for the Fund may be registered in
the name of the Fund, PFPC Trust, a Book-Entry System, a
sub-custodian, or any duly appointed nominees of the Fund, PFPC
Trust, Book-Entry System or sub-custodian. The Fund reserves the
right to instruct PFPC Trust as to the method of registration and
safekeeping of the Securities of the Fund. The Fund agrees to
furnish to PFPC Trust appropriate
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instruments to enable PFPC Trust to hold or deliver in proper form
for transfer, or to register in the name of its nominee or in the
name of the Book-Entry System or in the name of another appropriate
entity, any Securities which it may hold for the Fund and which may
from time to time be registered in the name of the Fund.
(g) VOTING AND OTHER ACTION. Neither PFPC Trust nor its nominee shall
vote any of the Securities held pursuant to this Agreement by or for
the account of the Fund, except in accordance with Written
Instructions. PFPC Trust, directly or through the use of a
Book-Entry System, shall execute in blank and promptly deliver all
notices, proxies and proxy soliciting materials received by PFPC
Trust as custodian to the registered holder of such Securities. If
the registered holder is not the Fund, then Written Instructions or
Oral Instructions must designate the person who owns such
Securities.
(h) TRANSACTIONS NOT REQUIRING INSTRUCTIONS. In the absence of contrary
Written Instructions, PFPC Trust is authorized to take the following
actions:
(i) COLLECTION OF INCOME AND OTHER PAYMENTS.
(A) collect and receive for the account of the Fund, all
income, dividends, distributions, coupons, option
premiums, other payments and similar items, included or
to be included in the Property, and, in addition,
promptly advise the Fund of such receipt and credit such
income, as collected, to the applicable Account;
(B) endorse and deposit for collection, in the name of the
Fund, checks, drafts, or other orders for the payment of
money;
(C) receive and hold for the account of the Fund all
Securities received as a distribution on the Fund's
Securities as a result of a stock dividend, share
split-up or reorganization, recapitalization,
readjustment or other rearrangement or distribution of
rights or
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similar Securities issued with respect to any Securities
belonging to the Fund and held by PFPC Trust hereunder;
(D) present for payment and collect the amount payable upon
all Securities which may mature or be called, redeemed,
or retired or otherwise become payable (on a mandatory
basis) on the date such Securities become payable; and
(E) take any action which may be necessary and proper in
connection with the collection and receipt of such
income and other payments and the endorsement for
collection of checks, drafts, and other negotiable
instruments.
(ii) MISCELLANEOUS TRANSACTIONS.
(A) PFPC Trust is authorized to deliver or cause to be
delivered Property against payment or other
consideration or written receipt therefor in the
following cases:
(1) for examination by a broker or dealer selling for
the account of the Fund in accordance with street
delivery custom;
(2) for the exchange of interim receipts or temporary
Securities for definitive Securities; and
(3) for transfer of Securities into the name of the
Fund or PFPC Trust or a sub-custodian or a nominee
of one of the foregoing, or for exchange of
Securities for a different number of bonds,
certificates, or other evidence, representing the
same aggregate face amount or number of units
bearing the same interest rate, maturity date and
call provisions, if any; provided that, in any
such case, the new Securities are to be delivered
to PFPC Trust.
(B) unless and until PFPC Trust receives Oral Instructions
or Written Instructions to the contrary, PFPC Trust
shall:
(1) pay all income items held by it which call for
payment upon presentation and hold the cash
received by it upon such payment for the account
of the Fund;
(2) collect interest and cash dividends received, with
notice to the Fund, for the account of the Fund;
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(3) hold for the account of the Fund all stock
dividends, rights and similar Securities issued
with respect to any Securities held by PFPC Trust;
and
(4) execute as agent on behalf of the Fund all
necessary ownership certificates required by the
Internal Revenue Code or the Income Tax
Regulations of the United States Treasury
Department or under the laws of any state now or
hereafter in effect, inserting the Fund's name, on
such certificate as the owner of the Securities
covered thereby, to the extent it may lawfully do
so.
(i) SEGREGATED ACCOUNTS.
PFPC Trust shall upon receipt of Written Instructions or Oral
Instructions establish and maintain segregated accounts on its
records for and on behalf of the Fund. Such accounts may be used to
transfer cash and Securities, including Securities in a Book-Entry
System:
(i) for the purposes of compliance by the Fund with the procedures
required by a securities, futures or option exchange,
providing such procedures comply with the 1940 Act and any
releases of the SEC relating to the maintenance of segregated
accounts by registered investment companies; and
(ii) upon receipt of Written Instructions, for other purposes.
(j) PURCHASES OF SECURITIES. PFPC Trust shall settle purchased
Securities upon receipt of Oral Instructions or Written Instructions
that specify:
(i) the name of the issuer and the title of the Securities,
including CUSIP number if applicable;
(ii) the number of units or the principal amount purchased and
accrued interest, if any;
(iii) the date of purchase and settlement;
(iv) the purchase price per unit;
(v) the total amount payable upon such purchase; and
(vi) the name of the person from whom or the broker through whom
the purchase was made.
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PFPC Trust shall upon receipt of Securities purchased with respect
to an Account (or otherwise in accordance with standard market
practice and as is consistent with the 1940 Act) pay out of the
moneys held with respect to that Account the total amount payable to
the person from whom or the broker through whom the purchase was
made, provided that the same conforms to the total amount payable as
set forth in such Oral Instructions or Written Instructions.
(k) SALES OF SECURITIES. PFPC Trust shall settle sold Securities upon
receipt of Oral Instructions or Written Instructions that specify:
(i) the name of the issuer and the title of the security,
including CUSIP number if applicable;
(ii) the number of units or principal amount sold, and accrued
interest, if any;
(iii) the date of trade and settlement;
(iv) the sale price per unit;
(v) the total amount payable to the Fund upon such sale;
(vi) the name of the broker through whom or the person to whom the
sale was made; and
(vii) the location to which the security must be delivered and
delivery deadline, if any.
PFPC Trust shall deliver the Securities upon receipt of the total
amount payable to the Fund upon such sale, provided that the total
amount payable is the same as was set forth in the Oral Instructions
or Written Instructions. Notwithstanding the other provisions
hereof, PFPC Trust may accept payment in such form which is
consistent with industry practice and may deliver Securities and
arrange for
19
payment in accordance with the customs prevailing among dealers in
Securities, in each case as is consistent with the 1940 Act.
(l) REPORTS; PROXY MATERIALS.
(i) PFPC Trust shall furnish to the Fund the following reports:
(A) such periodic and special reports as the Fund may
reasonably request;
(B) a monthly statement summarizing all transactions and
entries for the Accounts, listing each portfolio
security with the adjusted average cost of each issue
and the market value and the cash balance belonging to
the Fund at the end of such month;
(C) the reports required to be furnished to the Fund
pursuant to Rule 17f-4 of the 1940 Act; and
(D) such other information as may be agreed upon from time
to time between the Fund and PFPC Trust.
(ii) PFPC Trust shall transmit promptly to the Fund any proxy
statement, proxy material, notice of a call or conversion,
other corporate action or similar communication received by it
as custodian of the Property. PFPC Trust shall be under no
other obligation to inform the Fund as to such actions or
events.
(m) CREDITING OF ACCOUNTS. If PFPC Trust in its sole discretion credits
the Fund with respect to (a) income, dividends, distributions,
coupons, option premiums, other payments or similar items on a
contractual payment date or otherwise in advance of PFPC Trust's
actual receipt of the amount due, (b) the proceeds of any sale or
other disposition of assets on the contractual settlement date or
otherwise in advance of PFPC Trust's actual receipt of the amount
due or (c) provisional
20
crediting of any amounts due, and (i) PFPC Trust is subsequently
unable to collect full and final payment for the amounts so credited
within a reasonable time period using reasonable efforts or (ii)
pursuant to standard industry practice, law or regulation PFPC Trust
is required to repay to a third party such amounts so credited, or
if any Property has been incorrectly credited, PFPC Trust shall have
the absolute right in its sole discretion without demand to reverse
any such credit or payment, to debit or deduct the amount of such
credit or payment from the applicable Account, and to otherwise
pursue recovery of any such amounts so credited from the Fund.
Nothing herein or otherwise shall require PFPC Trust to make any
advances or to credit any amounts until PFPC Trust's actual receipt
thereof. The Fund hereby grants a first priority contractual
possessory security interest in and a right of setoff against the
assets maintained under this Agreement in the amount necessary to
secure the return and payment to PFPC Trust of any advance or credit
made by PFPC Trust (including reasonable charges related thereto).
(n) COLLECTIONS. All collections of monies or other property in respect,
or which are to become part, of the Property (but not the
safekeeping thereof upon receipt by PFPC Trust) shall be at the sole
risk of the Fund. If payment is not received by PFPC Trust within a
reasonable time after proper demands have been made, PFPC Trust
shall notify the Fund in writing, including copies of all demand
letters, any written responses and memoranda of all oral responses
and shall await instructions from the Fund. PFPC Trust shall not be
obliged to take legal action for collection unless and until
reasonably indemnified to its satisfaction. PFPC
21
Trust shall also notify the Fund as soon as reasonably practicable
whenever income due on Securities is not collected in due course and
shall provide the Fund with periodic status reports of such income
collected after a reasonable time.
(o) PFPC Trust shall arrange for the establishment of XXX custodian
accounts for such Shareholders holding Shares through XXX accounts,
in accordance with the Internal Revenue Code of 1986, as amended
(including regulations promulgated thereunder), and with such other
procedures as are mutually agreed upon from time to time by and
among the Fund, PFPC Trust and the Fund's transfer agent.
14. DURATION AND TERMINATION. This Agreement shall continue until
terminated by either party upon sixty (60) days' prior written
notice to the other party by certified mail with confirmed receipt.
In the event this Agreement is terminated (pending appointment of a
successor to PFPC Trust or vote of the Shareholders of the Fund to
dissolve or to function without a custodian of its cash, Securities
or other property), PFPC Trust shall not deliver cash, Securities or
other property of the Fund to the Fund. It may deliver them to a
bank or trust company of PFPC Trust's choice, having an aggregate
capital, surplus and undivided profits, as shown by its last
published report, of not less than two hundred million dollars
($200,000,000) and which is qualified to act as a custodian to the
Fund under the 1940 Act, as a custodian for the Fund to be held
under terms similar to those of this Agreement.
15. NOTICES. All notices and other communications, including Written
Instructions, shall be in writing or by confirming telegram, cable,
telex or facsimile sending device. Notices shall be addressed (a) if
to PFPC Trust at 8800 Tinicum
00
Xxxxxxxxx, 0xx Xxxxx, Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000, Attention:
Xxx Xxxxxxxx; (b) if to the Fund, at 00000 Xxxx Xxxx, Xxxxx 0000,
Xxxxxx, Xxxxx 00000, Attention: Secretary or (c) if to neither of
the foregoing, at such other address as shall have been given by
like notice to the sender of any such notice or other communication
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 five 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.
16. AMENDMENTS. This Agreement, or any term hereof, may be changed or
waived only by a written amendment, signed by the party against whom
enforcement of such change or waiver is sought.
17. DELEGATION; ASSIGNMENT. 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.
18. 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.
19. FURTHER ACTIONS. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the
purposes hereof.
20. MISCELLANEOUS.
23
(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. PFPC Trust is qualified to act as a custodian
to the Fund under the 1940 Act. 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.
(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
PFPC Trust
24
may reasonably request in connection with services provided by
PFPC Trust to the Fund.
(h) To help the U.S. government fight the funding of terrorism and
money laundering activities, U.S. Federal law requires each
financial institution to obtain, verify, and record certain
information that identifies each person who initially opens an
account with that financial institution on or after October 1,
2003. Certain of PFPC Trust's affiliates are financial
institutions, and PFPC Trust may, as a matter of policy,
request (or may have already requested) the Fund's name,
address and taxpayer identification number or other
government-issued identification number, and, if such party is
a natural person, that party's date of birth. PFPC Trust may
also ask (and may have already asked) for additional
identifying information, and PFPC Trust may take steps (and
may have already taken steps) to verify the authenticity and
accuracy of these data elements.
25
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
PFPC TRUST COMPANY
By: ____________________________
Title: _________________________
HIGHLAND FLOATING RATE LIMITED
LIABILITY COMPANY
By: ____________________________
Title: _________________________
26
AUTHORIZED PERSONS APPENDIX
NAME (TYPE) SIGNATURE
Xxxxx Xxxxxxx ______________________________
Xxxxx Xx Xxxxxx ______________________________
Xxxx Paris ______________________________
Xxxx Xxxxxxx ______________________________
Xxxxxxx Xxxxxxxx ______________________________
Xxxxx X. Xxxxxxx ______________________________
Xxxx X. Xxxxx ______________________________
M. Xxxxx Xxxxxxxxx ______________________________
Xxxxxxx X. Minces ______________________________
R. Xxxxxx Xxxxxxxxx ______________________________
27
