Exhibit j(a)
CUSTODY AGREEMENT
This AGREEMENT, dated as of , 1995, by and between Southwest Small Cap
Equity Fund, Inc. (the "Fund"), a diversified closed-end management investment
company organized under the laws of the Delaware, and STAR BANK, N.A., a
national banking association (the "Custodian").
W I T N E S S E T H:
WHEREAS, the Fund desires that the Fund's Securities and cash be held
and administered by the Custodian pursuant to this Agreement; and
WHEREAS, the Fund is a diversified closed-end management investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the Custodian represents that it is a bank having the
qualifications prescribed in Section 26(a)(i) of the 1940 Act;
NOW, THEREFORE, in consideration of the mutual agreements herein made,
the Fund and the Custodian hereby agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:
1.1 "AUTHORIZED PERSON" means any Officer or other person duly
authorized by resolution of the Board of Directors to give Oral Instructions and
Written Instructions on behalf of the Fund and named in Exhibit A hereto or in
such resolutions of the Board of Directors, certified by an Officer, as may be
received by the Custodian from time to time.
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1.2 "BOARD OF DIRECTORS" shall mean the Directors from time to time
serving under the Fund's Agreement and Articles of Incorporation, as from time
to time amended.
1.3 "BOOK-ENTRY SYSTEM" shall mean a federal book-entry system as
provided in Subpart O of Treasury Circular Xx. 000, 00 XXX 306, in Subpart B of
31 CFR Part 350, or in such book-entry regulations of federal agencies as are
substantially in the form of such Subpart O.
1.4 "BUSINESS DAY" shall mean any day recognized as a settlement day by
The New York Stock Exchange, Inc. and any other day for which the Fund computes
the net asset value of Shares of the Fund.
1.5 "NASD" shall mean The National Association of Securities Dealers,
Inc.
1.6 "OFFICER" shall mean the President, any Vice President, the
Secretary, any Assistant Secretary, the Treasurer, or any Assistant Treasurer of
the Fund.
1.7 "ORAL INSTRUCTIONS" shall mean instructions orally transmitted to
and accepted by the Custodian because such instructions are: (i) reasonably
believed by the Custodian to have been given by an Authorized Person, (ii)
recorded and kept among the records of the Custodian made in the ordinary course
of business and (iii) orally confirmed by the Custodian. The Fund shall cause
all Oral Instructions to be confirmed by Written Instructions prior to the end
of the next Business Day. If such Written Instructions confirming Oral
Instructions are not received by the Custodian prior to a transaction, it shall
in no way affect the validity of the transaction or the authorization thereof by
the Fund. If Oral Instructions vary from the Written Instructions which purport
to confirm them, the
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Custodian shall notify the Fund of such variance but such Oral Instructions will
govern unless the Custodian has not yet acted.
1.8 "FUND CUSTODY ACCOUNT" shall mean the account in the name of the
Fund, which is provided for in Section 3.2 below.
1.9 "PROPER INSTRUCTIONS" shall mean Oral Instructions or Written
Instructions. Proper Instructions may be continuing Written Instructions when
deemed appropriate by both parties.
1.10 "SECURITIES DEPOSITORY" shall mean The Depository Trust Company
and (provided that Custodian shall have received a copy of a resolution of the
Board of Directors, certified by an Officer, specifically approving the use of
such clearing agency as a depository for the Fund) any other clearing agency
registered with the Securities and Exchange Commission under Section 17A of the
Securities and Exchange Act of 1934 as amended (the "1934 Act"), which acts as a
system for the central handling of Securities where all Securities of any
particular class or series of an issuer deposited within the system are treated
as fungible and may be transferred or pledged by bookkeeping entry without
physical delivery of the Securities.
1.11 "SECURITIES" shall include, without limitation, common and
preferred stocks, bonds, call options, put options, debentures, notes, bank
certificates of deposit, bankers' acceptances, mortgage-backed securities or
other obligations, and any certificates, receipts, warrants or other instruments
or documents representing rights to receive, purchase or subscribe for the same,
or evidencing or representing any other rights or interests therein, or any
similar property or assets that the Custodian has the facilities to clear and to
service.
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1.12 "SHARES" shall mean the units of beneficial interest issued by the
Fund.
1.13 "SUB-CUSTODIAN" shall mean and include (i) any branch of a
"qualified U.S. bank," as that term is defined in Rule 17f-5 under the 1940 Act,
(ii) any "eligible foreign custodian," as that term is defined in Rule 17f-5
under the 1940 Act, approved by the Board of Directors and having a contract
with the Custodian which contract has been approved by the Board of Directors,
and (iii) any securities depository or clearing agency, incorporated or
organized under the laws of a country other than the United States, which
operates the central system for handling of securities or equivalent
book-entries in that country or a transnational system for the central handling
of securities or equivalent book-entries, which securities depository or
clearing agency has been approved by the Board of Directors; provided, that the
Custodian, or a Sub-Custodian has entered into an agreement with such securities
depository or clearing agency.
1.14 "WRITTEN INSTRUCTIONS" shall mean (i) written communications
actually received by the Custodian and signed by an Authorized Person, or (ii)
communications by telex or any other such system from one or more persons
reasonably believed by the Custodian to be Authorized Persons, or (iii)
communications between electro-mechanical or electronic devices provided that
the use of such devices and the procedures for the use thereof shall have been
approved by resolutions of the Board of Directors, a copy of which, certified by
an Officer, shall have been delivered to the Custodian.
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ARTICLE II
APPOINTMENT OF CUSTODIAN
2.1 APPOINTMENT. The Fund hereby constitutes and appoints the Custodian
as custodian of all Securities and cash owned by or in the possession of the
Fund at any time during the period of this Agreement.
2.2 ACCEPTANCE. The Custodian hereby accepts appointment as such
custodian and agrees to perform the duties thereof as hereinafter set forth.
2.3 DOCUMENTS TO BE FURNISHED. The following documents, including any
amendments thereto, will be provided contemporaneously with the execution of the
Agreement to the Custodian by the Fund:
a. A copy of the Articles of Incorporation of the Fund
certified by the Secretary;
b. A copy of the Bylaws of the Fund certified by the
Secretary;
c. A copy of the resolution of the Board of Directors of the
Fund appointing the Custodian, certified by the Secretary;
d. A copy of the then current Prospectus of the
Fund; and
e. A certification of the President and Secretary of the Fund
setting forth the names and signatures of the current Officers of the Fund and
other Authorized Persons.
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2.4 NOTICE OF APPOINTMENT OF DIVIDEND AND TRANSFER AGENT. The Fund
agrees to notify the Custodian in writing of the appointment, termination or
change in appointment of any Dividend and Transfer Agent of the Fund.
ARTICLE III
CUSTODY OF CASH AND SECURITIES
3.1 SEGREGATION. All Securities and non-cash property held by the
Custodian for the account of the Fund (other than Securities maintained in a
Securities Depository or Book-Entry System) shall be physically segregated from
other Securities and non-cash property in the possession of the Custodian and
shall be identified as subject to this Agreement.
3.2 FUND CUSTODY ACCOUNT. The Custodian shall open and maintain in its
Trust Department a custody account in the name of the Fund coupled with the name
of the Fund, subject only to draft or order of the Custodian, in which the
Custodian shall enter and carry all Securities, cash and other assets of the
Fund which are delivered to it.
3.3 APPOINTMENT OF AGENTS. (a) In its discretion, the Custodian may
appoint one or more Sub-Custodians to act as Securities Depositories or as
sub-custodians to hold Securities and cash of the Fund and to carry out such
other provisions of this Agreement as it may determine, provided, however, that
the appointment of any such agents and maintenance of any Securities and cash of
the Fund shall be at the Custodian's expense and shall not relieve the Custodian
of any of its obligations or liabilities under this Agreement.
(b) If, after the initial approval of Sub-Custodians by the Board of
Directors in connection with this Agreement, the Custodian wishes to appoint
other Sub-Custodians to
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hold property of the Fund, it will so notify the Fund and provide it with
information reasonably necessary to determine any such new Sub-Custodian's
eligibility under Rule 17f-5 under the 1940 Act, including a copy of the
proposed agreement with such Sub-Custodian. The Fund shall at the meeting of the
Board Of Directors next following receipt of such notice and information give a
written approval or disapproval of the proposed action.
(c) The Agreement between the Custodian and each Sub-Custodian acting
hereunder shall contain the required provisions set forth in Rule
17f-5(a)(1)(iii).
(d) If the Custodian intends to remove any Sub-Custodian previously
approved by the Board Of Directors, it shall so notify the Fund and move the
Securities and cash of the Fund deposited with such Sub-Custodian to another
Sub-Custodian previously approved by the Board Of Directors. The Custodian shall
promptly take such steps as may be required to remove any Sub-Custodian that has
ceased to meet the requirements of Rule 17f-5 under the 1940 Act.
(e) The Custodian hereby warrants to the Fund that in its opinion,
after due inquiry, the established procedures to be followed by each
Sub-Custodian in connection with the safekeeping of property of the Fund
pursuant to this Agreement afford protection for such property not materially
different from that afforded by the Custodian's established safekeeping
procedures with respect to similar property held by it (and its securities
depositories) in Cincinnati, Ohio.
(f) The Custodian shall oversee the maintenance of any Securities held
for the Fund by any Sub-Custodian. Any Securities held by a Sub-Custodian will
be subject only to the instructions of the Custodian or its agents; and any
Securities held in an eligible foreign
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securities depository for the account of a Sub-Custodian will be subject only to
the instructions of such Sub-Custodian. In the event that a Sub-Custodian
permits any of the Securities placed in its care to be held in an eligible
foreign securities depository, such Sub-Custodian will be required by its
agreement with the Custodian to identify on its books such Securities as being
held for the account of the Custodian as a custodian for its customers.
3.4 DELIVERY OF ASSETS TO CUSTODIAN. The Fund shall deliver, or cause
to be delivered, to the Custodian all of the Fund's Securities, cash and other
assets, including (a) all payments of income, payments of principal and capital
distributions received by the Fund with respect to such Securities, cash or
other assets owned by the Fund at any time during the period of this Agreement,
and (b) all cash received by the Fund for the issuance, at any time during such
period, of Shares. The Custodian shall not be responsible for such Securities,
cash or other assets until actually received by it.
3.5 SECURITIES DEPOSITORIES AND BOOK-ENTRY SYSTEMS. The Custodian may
deposit and/or maintain Securities of the Fund in a Securities Depository or in
a Book-Entry System, subject to the following provisions:
(a) Prior to a deposit of Securities of the Fund in any Securities
Depository or Book-Entry System, the Fund shall deliver to the Custodian a
resolution of the Board Of Directors, certified by an Officer, authorizing and
instructing the Custodian on an on-going basis to deposit in such Securities
Depository or Book-Entry System all Securities eligible for deposit therein and
to make use of such Securities Depository or Book-Entry System to the extent
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possible and practical in connection with its performance hereunder, including,
without limitation, in connection with settlements of purchases and sales of
Securities, loans of Securities, and deliveries and returns of collateral
consisting of Securities.
(b) Securities of the Fund kept in a Book-Entry System or Securities
Depository shall be kept in an account ("Depository Account") of the Custodian
in such Book-Entry System or Securities Depository which includes only assets
held by the Custodian as a fiduciary, custodian or otherwise for customers.
(c) The records of the Custodian with respect to Securities of the Fund
maintained in a Book-Entry System or Securities Depository shall, by book-entry,
identify such Securities as belonging to the Fund.
(d) If Securities purchased by the Fund are to be held in a Book-Entry
System or Securities Depository, the Custodian shall pay for such Securities
upon (i) receipt of advice from the Book-Entry System or Securities Depository
that such Securities have been transferred to the Depository Account, and (ii)
the making of an entry on the records of the Custodian to reflect such payment
and transfer for the account of the Fund. If Securities sold by the Fund are
held in a Book-Entry System or Securities Depository, the Custodian shall
transfer such Securities upon (i) receipt of advice from the Book-Entry System
or Securities Depository that payment for such Securities has been transferred
to the Depository Account, and (ii) the making of an
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entry on the records of the Custodian to reflect such transfer and payment for
the account of the Fund.
(e) The Custodian shall provide the Fund with copies of any report
(obtained by the Custodian from a Book-Entry System or Securities Depository in
which Securities of the Fund are kept) on the internal accounting controls and
procedures for safeguarding Securities deposited in such Book-Entry System or
Securities Depository.
(f) Anything to the contrary in this Agreement notwithstanding, the
Custodian shall be liable to the Fund for any loss or damage to the Fund
resulting (i) from the use of a Book-Entry System or Securities Depository by
reason of any negligence or willful misconduct on the part of Custodian or any
Sub-Custodian appointed pursuant to Section 3.3 above or any of its or their
employees, or (ii) from failure of Custodian or any such Sub-Custodian to
enforce effectively such rights as it may have against a Book-Entry System or
Securities Depository. At its election, the Fund shall be subrogated to the
rights of the Custodian with respect to any claim against a Book-Entry System or
Securities Depository or any other person from any loss or damage to the Fund
arising from the use of such Book-Entry System or Securities Depository, if and
to the extent that the Fund has not been made whole for any such loss or damage.
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3.6 DISBURSEMENT OF MONEYS FROM FUND CUSTODY ACCOUNT. Upon receipt of
Proper Instructions, the Custodian shall disburse moneys from the Fund Custody
Account but only in the following cases:
(a) For the purchase of Securities for the Fund but only in accordance
with Section 4.1 of this Agreement and only (i) in the case of Securities (other
than options on Securities, futures contracts and options on futures contracts),
against the delivery to the Custodian (or any Sub-Custodian appointed pursuant
to Section 3.3 above) of such Securities registered as provided in Section 3.9
below or in proper form for transfer, or if the purchase of such Securities is
effected through a Book-Entry System or Securities Depository, in accordance
with the conditions set forth in Section 3.5 above; (ii) in the case of options
on Securities, against delivery to the Custodian (or such Sub-Custodian) of such
receipts as are required by the customs prevailing among dealers in such
options; (iii) in the case of futures contracts and options on futures
contracts, against delivery to the Custodian (or such Sub-Custodian) of evidence
of title thereto in favor of the Fund or any nominee referred to in Section 3.9
below; and (iv) in the case of repurchase or reverse repurchase agreements
entered into between the Fund and a bank which is a member of the Federal
Reserve System or between the Fund and a primary dealer in U.S. Government
securities, against delivery of the purchased Securities either in certificate
form or through an entry crediting the
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Custodian's account at a Book-Entry System or Securities Depository with
such Securities;
(b) In connection with the conversion, exchange or surrender, as set
forth in Section 3.7(f) below, of Securities owned by the Fund;
(c) For the payment of any dividends or capital gain distributions
declared by the Fund;
(d) In payment of the redemption price of Shares as provided in Section
5.1 below;
(e) For the payment of any expense or liability incurred by the Fund,
including but not limited to the following payments for the account of the Fund:
interest; taxes; administration, investment advisory, accounting, auditing,
transfer agent, custodian, trustee and legal fees; and other operating expenses
of the Fund; in all cases, whether or not such expenses are to be in whole or in
part capitalized or treated as deferred expenses;
(f) For transfer in accordance with the provisions of any agreement
among the Fund, the Custodian and a broker-dealer registered under the 1934 Act
and a member of the NASD, relating to compliance with rules of The Options
Clearing Corporation and of any registered national securities exchange (or of
any similar organization or organizations) regarding escrow or other
arrangements in connection with transactions by the Fund;
(g) For transfer in accordance with the provision of any agreement
among the Fund, the Custodian, and a futures commission merchant registered
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under the Commodity Exchange Act, relating to compliance with the rules of the
Commodity Futures Trading Commission and/or any contract market (or any similar
organization or organizations) regarding account deposits in connection with
transactions by the Fund;
(h) For the funding of any uncertificated time deposit or other
interest-bearing account with any banking institution (including the Custodian),
which deposit or account has a term of one year or less; and
(i) For any other proper purpose, but only upon receipt, in addition to
Proper Instructions, of a copy of a resolution of the Board Of Directors,
certified by an Officer, specifying the amount and purpose of such payment,
declaring such purpose to be a proper corporate purpose, and naming the person
or persons to whom such payment is to be made.
3.7 DELIVERY OF SECURITIES FROM FUND CUSTODY ACCOUNT. Upon receipt of
Proper Instructions, the Custodian shall release and deliver Securities from the
Fund Custody Account but only in the following cases:
(a) Upon the sale of Securities for the account of the Fund but only
against receipt of payment therefor in cash, by certified or cashiers check or
bank credit;
(b) In the case of a sale effected through a Book-Entry System or
Securities Depository, in accordance with the provisions of Section 3.5 above;
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(c) To an offeror's depository agent in connection with tender or other
similar offers for Securities of the Fund; provided that, in any such case, the
cash or other consideration is to be delivered to the Custodian;
(d) To the issuer thereof or its agent (i) for transfer into the name
of the Fund, the Custodian or any Sub-Custodian appointed pursuant to Section
3.3 above, or of any nominee or nominees of any of the foregoing, or (ii) for
exchange for a different number of certificates or other evidence representing
the same aggregate face amount or number of units; provided that, in any such
case, the new Securities are to be delivered to the Custodian;
(e) To the broker selling Securities, for examination in accordance
with the "street delivery" custom;
(f) For exchange or conversion pursuant to any plan or merger,
consolidation, recapitalization, reorganization or readjustment of the issuer of
such Securities, or pursuant to provisions for conversion contained in such
Securities, or pursuant to any deposit agreement, including surrender or receipt
of underlying Securities in connection with the issuance or cancellation of
depository receipts; provided that, in any such case, the new Securities and
cash, if any, are to be delivered to the Custodian;
(g) Upon receipt of payment therefor pursuant to any repurchase or
reverse repurchase agreement entered into by the Fund;
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(h) In the case of warrants, rights or similar Securities, upon the
exercise thereof, provided that, in any such case, the new Securities and cash,
if any, are to be delivered to the Custodian;
(i) For delivery in connection with any loans of Securities of the
Fund, but only against receipt of such collateral as the Fund shall have
specified to the Custodian in Proper Instructions;
(j) For delivery as security in connection with any borrowings by the
Fund requiring a pledge of assets by the Fund, but only against receipt by the
Custodian of the amounts borrowed;
(k) Pursuant to any authorized plan of liquidation, reorganization,
merger, consolidation or recapitalization of the Fund;
(l) For delivery in accordance with the provisions of any agreement
among the Fund, the Custodian and a broker-dealer registered under the 1934 Act
and a member of the NASD, relating to compliance with the rules of The Options
Clearing Fund and of any registered national securities exchange (or of any
similar organization or organizations) regarding escrow or other arrangements in
connection with transactions by the Fund;
(m) For delivery in accordance with the provisions of any agreement
among the Fund, the Custodian, and a futures commission merchant registered
under the Commodity Exchange Act, relating to compliance with the rules of the
Commodity Futures Trading Commission and/or any contract market (or
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any similar organization or organizations) regarding account deposits in
connection with transactions by the Fund; or
(n) For any other proper corporate purpose, but only upon receipt, in
addition to Proper Instructions, of a copy of a resolution of the Board Of
Directors, certified by an Officer, specifying the Securities to be delivered,
setting forth the purpose for which such delivery is to be made, declaring such
purpose to be a proper corporate purpose, and naming the person or persons to
whom delivery of such Securities shall be made.
3.8 ACTIONS NOT REQUIRING PROPER INSTRUCTIONS. Unless otherwise
instructed by the Fund, the Custodian shall with respect to all Securities held
for the Fund:
(a) Subject to Section 7.4 below, collect on a timely basis all income
and other payments to which the Fund is entitled either by law or pursuant to
custom in the securities business;
(b) Present for payment and, subject to Section 7.4 below, collect on a
timely basis the amount payable upon all Securities which may mature or be
called, redeemed, or retired, or otherwise become payable;
(c) Endorse for collection, in the name of the Fund, checks, drafts and
other negotiable instruments;
(d) Surrender interim receipts or Securities in temporary form for
Securities in definitive form;
(e) Execute, as custodian, any necessary declarations or certificates
of ownership under the federal income tax laws or the laws or regulations of
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any other taxing authority now or hereafter in effect, and prepare and submit
reports to the Internal Revenue Service ("IRS") and to the Fund at such time, in
such manner and containing such information as is prescribed by the IRS;
(f) Hold for the Fund, either directly or, with respect to Securities
held therein, through a Book-Entry System or Securities Depository, all rights
and similar securities issued with respect to Securities of the Fund; and
(g) In general, and except as otherwise directed in Proper
Instructions, attend to all non-discretionary details in connection with the
sale, exchange, substitution, purchase, transfer and other dealings with
Securities and assets of the Fund.
3.9 REGISTRATION AND TRANSFER OF SECURITIES. All Securities held for
the Fund that are issued or issuable only in bearer form shall be held by the
Custodian in that form, provided that any such Securities shall be held in a
Book-Entry System if eligible therefor. All other Securities held for the Fund
may be registered in the name of the Fund, the Custodian, or any Sub-Custodian
appointed pursuant to Section 3.3 above, or in the name of any nominee of any of
them, or in the name of a Book-Entry System, Securities Depository or any
nominee of either thereof. The Fund shall furnish to the Custodian appropriate
instruments to enable the Custodian to hold or deliver in proper form for
transfer, or to register in the name of any of the nominees hereinabove referred
to or in the name of a Book-Entry System or Securities Depository, any
Securities registered in the name of the Fund.
3.10 RECORDS. (a) The Custodian shall maintain, by Fund, complete and
accurate records with respect to Securities, cash or other property held for the
Fund, including (i)
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journals or other records of original entry containing an itemized daily record
in detail of all receipts and deliveries of Securities and all receipts and
disbursements of cash; (ii) ledgers (or other records) reflecting (A) Securities
in transfer, (B) Securities in physical possession, (C) monies and Securities
borrowed and monies and Securities loaned (together with a record of the
collateral therefor and substitutions of such collateral), (D) dividends and
interest received, and (E) dividends receivable and interest receivable; and
(iii) canceled checks and bank records related thereto. The Custodian shall keep
such other books and records of the Fund as the Fund shall reasonably request,
or as may be required by the 1940 Act, including, but not limited to, Section 31
of the 1940 Act and Rule 31a-2 promulgated thereunder.
(b) All such books and records maintained by the Custodian shall (i) be
maintained in a form acceptable to the Fund and in compliance with rules and
regulations of the Securities and Exchange Commission, (ii) be the property of
the Fund and at all times during the regular business hours of the Custodian be
made available upon request for inspection by duly authorized officers,
employees or agents of the Fund and employees or agents of the Securities and
Exchange Commission, and (iii) if required to be maintained by Rule 31a-1 under
the 1940 Act, be preserved for the periods prescribed in Rule 31a-2 under the
1940 Act.
3.11 FUND REPORTS BY CUSTODIAN. The Custodian shall furnish the Fund
with a daily activity statement and a summary of all transfers to or from the
Fund Custody Account on the day following such transfers. At least monthly and
from time to time, the Custodian
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shall furnish the Fund with a detailed statement of the Securities and moneys
held by the Custodian and the Sub-Custodians for the Fund under this Agreement.
3.12 OTHER REPORTS BY CUSTODIAN. The Custodian shall provide the Fund
with such reports, as the Fund may reasonably request from time to time, on the
internal accounting controls and procedures for safeguarding Securities, which
are employed by the Custodian or any Sub-Custodian appointed pursuant to Section
3.3 above.
3.13 PROXIES AND OTHER MATERIALS. The Custodian shall cause all proxies
relating to Securities which are not registered in the name of the Fund, to be
promptly executed by the registered holder of such Securities, without
indication of the manner in which such proxies are to be voted, and shall
promptly deliver to the Fund such proxies, all proxy soliciting materials and
all notices relating to such Securities.
3.14 INFORMATION ON CORPORATE ACTIONS. The Custodian shall promptly
deliver to the Fund all information received by the Custodian and pertaining to
Securities being held by the Fund with respect to optional tender or exchange
offers, calls for redemption or purchase, or expiration of rights as described
in the Standards of Service Guide attached as Exhibit B. If the Fund desires to
take action with respect to any tender offer, exchange offer or other similar
transaction, the Fund shall notify the Custodian at least five Business Days
prior to the date on which the Custodian is to take such action. The Fund will
provide or cause to be provided to the Custodian all relevant information for
any Security which has unique put/option provisions at least five Business Days
prior to the beginning date of the tender period.
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ARTICLE IV
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
4.1 PURCHASE OF SECURITIES. Promptly upon each purchase of Securities
for the Fund, Written Instructions shall be delivered to the Custodian,
specifying (a) the name of the issuer or writer of such Securities, and the
title or other description thereof, (b) the number of shares, principal amount
(and accrued interest, if any) or other units purchased, (c) the date of
purchase and settlement, (d) the purchase price per unit, (e) the total amount
payable upon such purchase, and (f) the name of the person to whom such amount
is payable. The Custodian shall upon receipt of such Securities purchased by the
Fund pay out of the moneys held for the account of the Fund the total amount
specified in such Written Instructions to the person named therein. The
Custodian shall not be under any obligation to pay out moneys to cover the cost
of a purchase of Securities for the Fund, if in the Fund Custody Account there
is insufficient cash available to the Fund for which such purchase was made.
4.2 LIABILITY FOR PAYMENT IN ADVANCE OF RECEIPT OF SECURITIES
PURCHASED. In any and every case where payment for the purchase of Securities
for the Fund is made by the Custodian in advance of receipt of the Securities
purchased but in the absence of specified Written Instructions to so pay in
advance, the Custodian shall be liable to the Fund for such Securities to the
same extent as if the Securities had been received by the Custodian.
4.3 SALE OF SECURITIES. Promptly upon each sale of Securities by the
Fund, Written Instructions shall be delivered to the Custodian, specifying (a)
the name of the issuer or writer of such Securities, and the title or other
description thereof, (b) the number of shares, principal amount (and accrued
interest, if any), or other units sold, (c) the date of sale and
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settlement, (d) the sale price per unit, (e) the total amount payable upon such
sale, and (f) the person to whom such Securities are to be delivered. Upon
receipt of the total amount payable to the Fund as specified in such Written
Instructions, the Custodian shall deliver such Securities to the person
specified in such Written Instructions. Subject to the foregoing, the Custodian
may accept payment in such form as shall be satisfactory to it, and may deliver
Securities and arrange for payment in accordance with the customs prevailing
among dealers in Securities.
4.4 DELIVERY OF SECURITIES SOLD. Notwithstanding Section 4.3 above or
any other provision of this Agreement, the Custodian, when instructed to deliver
Securities against payment, shall be entitled, if in accordance with generally
accepted market practice, to deliver such Securities prior to actual receipt of
final payment therefor. In any such case, the Fund shall bear the risk that
final payment for such Securities may not be made or that such Securities may be
returned or otherwise held or disposed of by or through the person to whom they
were delivered, and the Custodian shall have no liability for any for the
foregoing.
4.5 PAYMENT FOR SECURITIES SOLD, ETC. In its sole discretion and from
time to time, the Custodian may credit the Fund Custody Account, prior to actual
receipt of final payment thereof, with (i) proceeds from the sale of Securities
which it has been instructed to deliver against payment, (ii) proceeds from the
redemption of Securities or other assets of the Fund, and (iii) income from
cash, Securities or other assets of the Fund. Any such credit shall be
conditional upon actual receipt by Custodian of final payment and may be
reversed if final payment is not actually received in full. The Custodian may,
in its sole discretion and from
21
time to time, permit the Fund to use funds so credited to the Fund Custody
Account in anticipation of actual receipt of final payment. Any such funds shall
be repayable immediately upon demand made by the Custodian at any time prior to
the actual receipt of all final payments in anticipation of which funds were
credited to the Fund Custody Account.
4.6 ADVANCES BY CUSTODIAN FOR SETTLEMENT. The Custodian may, in its
sole discretion and from time to time, advance funds to the Fund to facilitate
the settlement of the Fund's transactions in the Fund Custody Account. Any such
advance shall be repayable immediately upon demand made by Custodian.
ARTICLE V
REDEMPTION OF FUND SHARES
5.1 TRANSFER OF FUNDS. From such funds as may be available for the
purpose in the Fund Custody Account, and upon receipt of Proper Instructions
specifying that the funds are required to redeem Shares of the Fund, the
Custodian shall wire each amount specified in such Proper Instructions to or
through such bank as the Fund may designate with respect to such amount in such
Proper Instructions.
5.2 NO DUTY REGARDING PAYING BANKS. The Custodian shall not be under
any obligation to effect payment or distribution by any bank designated in
Proper Instructions given pursuant to Section 5.1 above of any amount paid by
the Custodian to such bank in accordance with such Proper Instructions.
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ARTICLE VI
SEGREGATED ACCOUNTS
Upon receipt of Proper Instructions, the Custodian shall establish and
maintain a segregated account or accounts for and on behalf of the Fund, into
which account or accounts may be transferred cash and/or Securities, including
Securities maintained in a Depository Account,
(a) in accordance with the provisions of any agreement among the Fund,
the Custodian and a broker-dealer registered under the 1934 Act and a member of
the NASD (or any futures commission merchant registered under the Commodity
Exchange Act), relating to compliance with the rules of The Options Clearing
Corporation and of any registered national securities exchange (or the Commodity
Futures Trading Commission or any registered contract market), or of any similar
organization or organizations, regarding escrow or other arrangements in
connection with transactions by the Fund,
(b) for purposes of segregating cash or Securities in connection with
securities options purchased or written by the Fund or in connection with
financial futures contracts (or options thereon) purchased or sold by the Fund,
(c) which constitute collateral for loans of Securities made by the
Fund,
(d) for purposes of compliance by the Fund with requirements under the
1940 Act
for the maintenance of segregated accounts by registered investment companies in
connection with reverse repurchase agreements and when-issued, delayed delivery
and firm commitment transactions, and
23
(e) for other proper corporate purposes, but only upon receipt of, in
addition to Proper Instructions, a certified copy of a resolution of the Board
Of Directors, certified by an Officer, setting forth the purpose or purposes of
such segregated account and declaring such purposes to be proper corporate
purposes.
ARTICLE VII
CONCERNING THE CUSTODIAN
7.1 STANDARD OF CARE. The Custodian shall be held to the exercise of
reasonable care in carrying out its obligations under this Agreement, and shall
be without liability to the Fund or the Fund for any loss, damage, cost, expense
(including attorneys' fees and disbursements), liability or claim unless such
loss, damage, cost, expense, liability or claim arises from negligence, bad
faith or willful misconduct on its part or on the part of any Sub-Custodian
appointed pursuant to Section 3.3 above. The Custodian shall be entitled to rely
on and may act upon advice of counsel on all matters, and shall be without
liability for any action reasonably taken or omitted pursuant to such advice.
The Custodian shall promptly notify the Fund of any action taken or omitted by
the Custodian pursuant to advice of counsel. The Custodian shall not be under
any obligation at any time to ascertain whether the Fund is in compliance with
the 1940 Act, the regulations thereunder, the provisions of the Fund's charter
documents or by-laws, or its investment objectives and policies as then in
effect.
7.2 ACTUAL COLLECTION REQUIRED. The Custodian shall not be liable for,
or considered to be the custodian of, any cash belonging to the Fund or any
money represented
24
by a check, draft or other instrument for the payment of money, until the
Custodian or its agents actually receive such cash or collect on such
instrument.
7.3 NO RESPONSIBILITY FOR TITLE, ETC. So long as and to the extent that
it is in the exercise of reasonable care, the Custodian shall not be responsible
for the title, validity or genuineness of any property or evidence of title
thereto received or delivered by it pursuant to this Agreement.
7.4 LIMITATION ON DUTY TO COLLECT. Custodian shall not be required to
enforce collection, by legal means or otherwise, of any money or property due
and payable with respect to Securities held for the Fund if such Securities are
in default or payment is not made after due demand or presentation.
7.5 RELIANCE UPON DOCUMENTS AND INSTRUCTIONS. The Custodian shall be
entitled to rely upon any certificate, notice or other instrument in writing
received by it and reasonably believed by it to be genuine. The Custodian shall
be entitled to rely upon any Oral Instructions and any Written Instructions
actually received by it pursuant to this Agreement.
7.6 EXPRESS DUTIES ONLY. The Custodian shall have no duties or
obligations whatsoever except such duties and obligations as are specifically
set forth in this Agreement, and no covenant or obligation shall be implied in
this Agreement against the Custodian.
7.7 CO-OPERATION. The Custodian shall cooperate with and supply
necessary information to the entity or entities appointed by the Fund to keep
the books of account of the Fund and/or compute the value of the assets of the
Fund. The Custodian shall take all such reasonable actions as the Fund may from
time to time request to enable the Fund to
25
obtain, from year to year, favorable opinions from the Fund's independent
accountants with respect to the Custodian's activities hereunder in connection
with (a) the preparation of the Fund's reports on Form N-1A and Form N-SAR and
any other reports required by the Securities and Exchange Commission, and (b)
the fulfillment by the Fund of any other requirements of the Securities and
Exchange Commission.
ARTICLE VIII
INDEMNIFICATION
8.1 INDEMNIFICATION BY FUND. The Fund shall indemnify and hold harmless
the Custodian and any Sub-Custodian appointed pursuant to Section 3.3 above, and
any nominee of the Custodian or of such Sub-Custodian, from and against any
loss, damage, cost, expense (including attorneys' fees and disbursements),
liability (including, without limitation, liability arising under the Securities
Act of 1933, the 1934 Act, the 1940 Act, and any state or foreign securities
and/or banking laws) or claim arising directly or indirectly (a) from the fact
that Securities are registered in the name of any such nominee, or (b) from any
action or inaction by the Custodian or such Sub-Custodian (i) at the request or
direction of or in reliance on the advice of the Fund, or (ii) upon Proper
Instructions, or (c) generally, from the performance of its obligations under
this Agreement or any sub-custody agreement with a Sub-Custodian appointed
pursuant to Section 3.3 above, provided that neither the Custodian nor any such
Sub-Custodian shall be indemnified and held harmless from and against any such
loss, damage, cost, expense, liability or claim arising from the Custodian's or
such Sub-Custodian's negligence, bad faith or willful misconduct.
26
8.2 INDEMNIFICATION BY CUSTODIAN. The Custodian shall indemnify and
hold harmless the Fund from and against any loss, damage, cost, expense
(including attorneys' fees and disbursements), liability (including without
limitation, liability arising under the Securities Act of 1933, the 1934 Act,
the 1940 Act, and any state or foreign securities and/or banking laws) or claim
arising from the negligence, bad faith or willful misconduct of the Custodian or
any Sub-Custodian appointed pursuant to Section 3.3 above, or any nominee of the
Custodian or of such Sub-Custodian.
8.3 INDEMNITY TO BE PROVIDED. If the Fund requests the Custodian to
take any action with respect to Securities, which may, in the opinion of the
Custodian, result in the Custodian or its nominee becoming liable for the
payment of money or incurring liability of some other form, the Custodian shall
not be required to take such action until the Fund shall have provided indemnity
therefor to the Custodian in an amount and form satisfactory to the Custodian.
8.4 SECURITY. If the Custodian advances cash or Securities to the Fund
for any purpose, either at the Fund's request or as otherwise contemplated in
this Agreement, or in the event that the Custodian or its nominee incurs, in
connection with its performance under this Agreement, any loss, damage, cost,
expense (including attorneys' fees and disbursements), liability or claim
(except such as may arise from its or its nominee's negligence, bad faith or
willful misconduct), then, in any such event, any property at any time held for
the account of the Fund shall be security therefor, and should the Fund fail
promptly to repay or indemnify the Custodian, the Custodian shall be entitled to
utilize
27
available cash of such Fund and to dispose of other assets of such Fund to the
extent necessary to obtain reimbursement or indemnification.
ARTICLE IX
FORCE MAJEURE
Neither the Custodian nor the Fund shall be liable for any failure or
delay in performance of its obligations under this Agreement arising out of or
caused, directly or indirectly, by circumstances beyond its reasonable control,
including, without limitation, acts of God; earthquakes; fires; floods; wars;
civil or military disturbances; sabotage; strikes; epidemics; riots; power
failures; computer failure and any such circumstances beyond its reasonable
control as may cause interruption, loss or malfunction of utility,
transportation, computer (hardware or software) or telephone communication
service; accidents; labor disputes; acts of civil or military authority;
governmental actions; or inability to obtain labor, material, equipment or
transportation; provided, however, that the Custodian in the event of a failure
or delay (i) shall not discriminate against the Fund in favor of any other
customer of the Custodian in making computer time and personnel available to
input or process the transactions contemplated by this Agreement and (ii) shall
use its best efforts to ameliorate the effects of any such failure or delay.
ARTICLE X
EFFECTIVE PERIOD; TERMINATION
10.1 EFFECTIVE PERIOD. This Agreement shall become effective as of its
execution and shall continue in full force and effect until terminated as
hereinafter provided.
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10.2 TERMINATION. Either party hereto may terminate this Agreement by
giving to the other party a notice in writing specifying the date of such
termination, which shall be not less than sixty (60) days after the date of the
giving of such notice. If a successor custodian shall have been appointed by the
Board of Directors, the Custodian shall, upon receipt of a notice of acceptance
by the successor custodian, on such specified date of termination (a) deliver
directly to the successor custodian all Securities (other than Securities held
in a Book-Entry System or Securities Depository) and cash then owned by the Fund
and held by the Custodian as custodian, and (b) transfer any Securities held in
a Book-Entry System or Securities Depository to an account of or for the benefit
of the Fund at the successor custodian, provided that the Fund shall have paid
to the Custodian all fees, expenses and other amounts to the payment or
reimbursement of which it shall then be entitled. Upon such delivery and
transfer, the Custodian shall be relieved of all obligations under this
Agreement. The Fund may at any time immediately terminate this Agreement in the
event of the appointment of a conservator or receiver for the Custodian by
regulatory authorities or upon the happening of a like event at the direction of
an appropriate regulatory agency or court of competent jurisdiction.
10.3 FAILURE TO APPOINT SUCCESSOR CUSTODIAN. If a successor custodian
is not designated by the Fund on or before the date of termination specified
pursuant to Section 10.1 above, then the Custodian shall have the right to
deliver to a bank or corporation company of its own selection, which (a) is a
"bank" as defined in the 1940 Act and (b) has aggregate capital, surplus and
undivided profits as shown on its then most recent published report of not less
than $25 million, all Securities, cash and other property held by Custodian
29
under this Agreement and to transfer to an account of or for the Fund at such
bank or trust company all Securities of the Fund held in a Book-Entry System or
Securities Depository. Upon such delivery and transfer, such bank or trust
company shall be the successor custodian under this Agreement and the Custodian
shall be relieved of all obligations under this Agreement.
ARTICLE XI
COMPENSATION OF CUSTODIAN
The Custodian shall be entitled to compensation as agreed upon from
time to time by the Fund and the Custodian. The fees and other charges in effect
on the date hereof and applicable to the Fund are set forth in Exhibit C
attached hereto.
ARTICLE XII
LIMITATION OF LIABILITY
It is expressly agreed that the obligations of the Fund hereunder shall
not be binding upon any of the Directors, shareholders, nominees, officers,
agents or employees of the Fund personally, but shall bind only the property of
the Fund as provided in the Fund's Agreement and Articles of Incorporation, as
from time to time amended. The execution and delivery of this Agreement have
been authorized by the Trustees, and this Agreement has been signed and
delivered by an authorized officer of the Fund, acting as such, and neither such
authorization by the Directors nor such execution and delivery by such officer
shall be deemed to have been made by any of them individually or to impose any
liability on any of them personally, but shall bind only the corporation
property of the Fund as provided in the above-mentioned Agreement and Articles
of Incorporation.
30
ARTICLE XIII
NOTICES
Unless otherwise specified herein, all demands, notices, instructions,
and other communications to be given hereunder shall be in writing and shall be
sent or delivered to the recipient at the address set forth after its name
hereinbelow:
TO THE FUND:
Southwest Small Cap Equity Fund, Inc.
C/O MGF Service Corp.
Attn; Xx. Xxxx Xxxxxx
000 Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
TO CUSTODIAN:
Star Bank, N.A.
000 Xxxxxx Xxxxxx, X.X. 0000
Xxxxxxxxxx, Xxxx 00000
Attention: Mutual Fund Custody Services
Telephone: (513) 632-
Facsimile: (000) 000-0000
or at such other address as either party shall have provided to the other by
notice given in accordance with this Article XIII. Writing shall include
transmissions by or through teletype, facsimile, central processing unit
connection, on-line terminal and magnetic tape.
31
ARTICLE XIV
MISCELLANEOUS
14.1 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Ohio.
14.2 REFERENCES TO CUSTODIAN. The Fund shall not circulate any printed
matter which contains any reference to Custodian without the prior written
approval of Custodian, excepting printed matter contained in the prospectus or
statement of additional information for the Fund and such other printed matter
as merely identifies Custodian as custodian for the Fund. The Fund shall submit
printed matter requiring approval to Custodian in draft form, allowing
sufficient time for review by Custodian and its counsel prior to any deadline
for printing.
14.3 NO WAIVER. No failure by either party hereto to exercise, and no
delay by such party in exercising, any right hereunder shall operate as a waiver
thereof. The exercise by either party hereto of any right hereunder shall not
preclude the exercise of any other right, and the remedies provided herein are
cumulative and not exclusive of any remedies provided at law or in equity.
14.4 AMENDMENTS. This Agreement cannot be changed orally and no
amendment to this Agreement shall be effective unless evidenced by an instrument
in writing executed by the parties hereto.
14.5 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by the parties hereto on separate counterparts, each of which
shall be deemed an original but all of which together shall constitute but one
and the same instrument.
32
14.6 SEVERABILITY. If any provision of this Agreement shall be invalid,
illegal or unenforceable in any respect under any applicable law, the validity,
legality and enforceability of the remaining provisions shall not be affected or
impaired thereby.
14.7 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns; PROVIDED, HOWEVER, that this Agreement shall not be assignable by
either party hereto without the written consent of the other party hereto.
14.8 HEADINGS. The headings of sections in this Agreement are for
convenience of reference only and shall not affect the meaning or construction
of any provision of this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed and delivered in its name and on its behalf by its
representatives thereunto duly authorized, all as of the day and year first
above written.
ATTEST: SOUTHWEST SMALL
CAP EQUITY FUND, INC.
_________________________ By:_________________________________
ATTEST: STAR BANK, N.A.
_________________________ By:_________________________________
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EXHIBIT A
AUTHORIZED PERSONS
Set forth below are the names and specimen signatures of the persons
authorized by the Fund to administer the Fund Custody Account.
NAME SIGNATURE
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34
