TRANSFER AGENT AGREEMENT
THIS AGREEMENT is made and entered into on this ________ day of September
1997, by and between the Potomac Funds, a Massachusetts business trust
(hereinafter referred to as the "Fund"), and Firstar Trust Company, a
corporation organized under the laws of the State of Wisconsin (hereinafter
referred to as the "Agent").
WHEREAS, the Fund is an open-end management investment company that is
registered under the Investment Company Act of 1940 ("1940 Act"), and
WHEREAS, the Agent is a trust company and, among other things, is in the
business of administering transfer and dividend disbursing agent functions for
the benefit of its customers,
NOW, THEREFORE, the Fund and the Agent do mutually promise and agree as
follows:
1. TERMS OF APPOINTMENT; DUTIES OF THE AGENT
Subject to the terms and conditions set forth in this Agreement, the Fund
hereby employs and appoints the Agent to act as transfer agent and dividend
disbursing agent.
The Fund is authorized to issue separate series of shares of beneficial
interest representing interests in separate investment portfolios (each, a
"Portfolio"). The parties intend that each Portfolio, as set forth in Appendix
A, established by the Fund, now or in the future, be covered by the terms and
conditions of this Agreement.
The Agent shall perform all of the customary services of a transfer agent
and dividend disbursing agent, and as relevant, agent in connection with
accumulation, open account or similar plans (including without limitation any
periodic investment plan or periodic withdrawal program), including but not
limited to:
A. Receive orders for the purchase of shares, with prompt delivery,
where appropriate, of payment and supporting documentation to the
Fund's custodian;
B. Process purchase orders and issue the appropriate number of
certificated or uncertificated shares with such uncertificated
shares being held in the appropriate shareholder account;
C. Process redemption requests received in good order and, where
relevant, deliver appropriate documentation to the Fund's
custodian;
D. Pay monies (upon receipt from the Fund's custodian, where
relevant) in accordance with the instructions of redeeming
shareholders;
E. Process transfers of shares in accordance with the shareholder's
instructions;
F. Process exchanges between any Portfolio;
G. Prepare and transmit payments for dividends and distributions
declared by the Fund;
H. Make changes to shareholder records, including, but not limited
to, address changes in plans (i.e., systematic withdrawal,
automatic investment, dividend reinvestment, etc.);
I. Record the issuance of shares of the Fund and maintain, pursuant to
Rule 17Ad-10(e) under the Securities Exchange Act of 1934 ("1934
Act"), a record of the total number of shares of the Fund which are
authorized, issued and outstanding and such other records as are
required to be maintained by a transfer agent for open-end
registered investment companies by the rules under the 1934 Act;
J. Prepare shareholder meeting lists and, if applicable, mail,
receive and tabulate proxies;
K. Mail shareholder reports and the Fund's most current prospectus
and statement of additional information to current shareholders;
L. Prepare and file U.S. Treasury Department forms 1099 and other
appropriate information returns required with respect to
dividends and distributions for all shareholders;
M. Provide shareholder account information upon request of the Fund
and prepare and mail confirmations and statements of account to
shareholders for all purchases, redemptions and other confirmable
transactions as agreed upon by the Fund and the Agent; and
N. Provide a Blue Sky System which will enable the Fund to monitor
the total number of shares sold in each state. In addition, the
Fund shall identify to the Agent in writing those transactions
and assets to be treated as exempt from any Blue Sky reporting
requirements applicable to the Fund for each state. The
responsibility of the Agent for the Fund's Blue Sky state
registration status is solely limited to the initial compliance
by the Fund and the reporting of such transactions to the Fund.
The foregoing services shall be provided in a manner consistent with
the policies of the Fund as communicated to the Agent.
2. COMPENSATION
The Fund agrees to pay the Agent such fees as set forth in Appendix A for
performance of the duties listed in this Agreement in addition to any
out-of-pocket expenses incurred by the Agent. Such out-of-pocket expenses may
include the following: printing, postage, forms, stationery, record retention,
mailing, insertion, programming, labels, shareholder lists and proxy expenses.
These fees and out-of-pocket expenses may be modified from time to time subject
to mutual written agreement between the Fund and the Agent.
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The Fund agrees to pay all fees and out-of-pocket expenses within ten (10)
business days following receipt of the billing notice.
3. REPRESENTATIONS OF AGENT
The Agent represents and warrants to the Fund that:
A. It is a trust company duly organized, existing and in good
standing under the laws of Wisconsin;
B. It is a registered transfer agent under the 1934 Act;
C. It is duly qualified to carry on its business in the state of
Wisconsin;
D. It is empowered under applicable laws and by its charter and
bylaws to enter into and perform this Agreement;
E. All requisite corporate proceedings have been taken to authorize
it to enter and perform this Agreement;
F. It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and
obligations under this Agreement; and
G. It will comply with all applicable requirements of the Securities
Act of 1933, as amended, the 1934 Act, the 1940 Act and any laws,
rules, and regulations of governmental authorities having
jurisdiction over its operations.
4. REPRESENTATIONS OF THE FUND
The Fund represent and warrants to the Agent that:
A. The Fund is an open-end management investment company under the
1940 Act;
B. The Fund is a Massachusetts business trust organized, existing,
and in good standing under the laws of Massachusetts;
C. The Fund is empowered under applicable laws and by its
Declaration of Trust and By-Laws to enter into and perform this
Agreement;
D. All necessary proceedings required by the Declaration of Trust
have been taken to authorize the Fund to enter into and perform
this Agreement;
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E. The Fund will comply with all applicable requirements of the 1933
Act, the 1934 Act, the 1940 Act, and any laws, rules and
regulations of governmental authorities having jurisdiction overt
its operations; and
F. A registration statement under the 1933 Act is currently effective
or will become effective before any public offering commences and
will remain effective, and appropriate state securities law filings
have been made or will become effective before any public offering
commences and will continue to be made, with respect to all shares
of the Fund being offered for sale.
5. COVENANTS OF THE FUND AND AGENT
The Fund shall furnish the Agent a certified copy of the resolution of the
Board of Trustees of the Fund ("Board") authorizing the appointment of the Agent
and the execution of this Agreement. The Fund shall provide to the Agent a copy
of the Declaration of Trust, By-Laws of the Fund, and all amendments.
The Agent shall keep records relating to the services to be performed
hereunder, in the form and manner as it may deem advisable. To the extent
required by Section 31 of the 1940 Act, and the rules thereunder, the Agent
agrees that all such records prepared or maintained by the Agent relating to the
services to be performed by the Agent hereunder are the property of the Fund and
will be preserved, maintained and made available in accordance with such section
and rules and will be surrendered to the Fund on and in accordance with its
request.
6. INDEMNIFICATION; REMEDIES UPON BREACH
The Agent shall exercise reasonable care and act in good faith in the
performance of its duties under this Agreement. The Agent shall not be liable
for any error of judgment or mistake of law or for any loss suffered by the Fund
in connection with matters to which this Agreement relates, including losses
resulting from mechanical breakdowns or the failure of communication or power
supplies beyond the Agent's control, except a loss resulting from the Agent's
refusal or failure to comply with the terms of this Agreement or from bad faith,
negligence, or willful misconduct on its part in the performance of its duties
under this Agreement. Notwithstanding any other provision of this Agreement, the
Fund shall indemnify and hold harmless the Agent from and against any and all
claims, demands, losses, expenses, and liabilities (whether with or without
basis in fact or law) of any and every nature (including reasonable attorneys'
fees) which the Agent may sustain or incur or which may be asserted against the
Agent by any person arising out of or attributed to any action taken or omitted
to be taken by it in performing the services hereunder (i) in accordance with
the foregoing standards, or (ii) in reliance upon any written or oral
instruction for a proper corporate purpose provided to the Agent by any duly
authorized officer of the Fund, such duly authorized officer to be included in a
list of authorized officers furnished to the Agent and as amended from time to
time in writing by resolution of the Board of Trustees of the Fund.
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Further, the Fund will indemnify and hold the Agent harmless against any
and all losses, claims, damages, liabilities or expenses (including reasonable
counsel fees and expenses) resulting from any claim, demand, action, or suit as
a result of the negligence of the Fund (unless contributed to by the Agent's
breach of this Agreement or other agreements between the Fund and the Agent, or
the Agent's own negligence or bad faith); or as a result of the Agent acting
upon telephone instructions relating to the exchange or redemption of shares
received by the Agent and reasonably believed by the Agent under a standard of
care customarily used in the investment company industry to have originated from
the record owner of the subject shares; or as a result of acting in reliance
upon any genuine instrument or stock certificate signed, countersigned, or
executed by any person or persons authorized to sign, countersign, or execute
the same.
In the event of a mechanical breakdown or failure of communication or
power supplies beyond its control, the Agent shall take all reasonable steps to
minimize service interruptions for any period that such interruption continues
beyond the Agent's control. The Agent will make every reasonable effort to
restore any lost or damaged data and correct any errors resulting from such a
breakdown at the expense of the Agent. The Agent agrees that it shall, at all
times, have reasonable contingency plans with appropriate parties, making
reasonable provision for emergency use of electrical data processing equipment
to the extent appropriate equipment is available. Representatives of the Fund
shall be entitled to inspect the Agent's premises and operating capabilities at
any time during regular business hours of the Agent, upon reasonable notice to
the Agent.
Regardless of the above, the Agent reserves the right to reprocess and
correct administrative errors at its own expense.
In order that the indemnification provisions contained in this section
shall apply, it is understood that in any case in which the Fund may be asked to
indemnify or hold the Agent harmless, the Fund shall be fully and promptly
advised of all pertinent facts concerning the situation in question, and it is
further understood that the Agent will use all reasonable care to notify the
Fund promptly concerning any situation which presents or appears likely to
present the probability of such a claim for indemnification against the Fund.
The Fund shall have the option to defend the Agent against any claim which may
be the subject of this indemnification. In the event that the Fund so elect, the
Fund will so notify the Agent and thereupon the Fund shall take over complete
defense of the claim, and the Agent shall in such situation initiate no further
legal or other expenses for which it shall seek indemnification under this
section. The Agent shall in no case confess any claim or make any compromise in
any case in which the Fund may be asked to indemnify the Agent except with the
Fund prior written consent.
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The Agent shall indemnify and hold the Fund harmless from and against any
and all claims, demands, losses, expenses, and liabilities (whether with or
without basis in fact or law) of any and every nature (including reasonable
attorneys' fees) which the Fund may sustain or incur or which may be asserted
against the Fund by any person arising out of or attributed to any action taken
or omitted to be taken by the Agent as a result of the Agent's refusal or
failure to comply with the terms of this Agreement, or from its bad faith,
negligence, or willful misconduct of the Agent or any of its employees and
agents.
7. CONFIDENTIALITY
The Agent agrees on behalf of itself and its employees and agents to treat
confidentially all records and other information relative to the Fund and its
shareholders and shall not disclose to any other party, except after prior
notification to and approval in writing by the Fund, which approval shall not be
unreasonably withheld and may not be withheld where the Agent may be exposed to
civil or criminal contempt proceedings for failure to comply after being
requested to divulge such information by duly constituted authorities.
8. RECORDS
The Agent shall keep records relating to the services to be performed
hereunder, in the form and manner, and for such period as it may deem advisable
and is acceptable to the Fund but not inconsistent with the rules and
regulations of appropriate government authorities, in particular, Section 31 of
the 1940 Act, and the rules thereunder. The Agent agrees that all such records
prepared or maintained by the Agent relating to the services to be performed by
the Agent hereunder are the property of the Fund and will be preserved,
maintained, and made available with such section and rules of the 1940 Act and
will be promptly surrendered to the Fund on and in accordance with its request.
9. NOTICE
Any notice required to be given by the parties to each other under the
terms of this Agreement shall be in writing, addressed and delivered, or mailed
to the principal place of business of the other party. If to the Agent, such
notice should be sent to Firstar Trust Company/Mutual Fund Services, located at
000 Xxxx Xxxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxxx 00000. If to the Fund, such
notice should be sent to Potomac Funds, located at 000 Xxxxxxxxxx Xxxxxx,
Xxxxxxxx, XX 00000.
10. CHOICE OF LAW
This Agreement shall be construed and the provisions thereof interpreted
under and in accordance with the laws of the state of Wisconsin. Trustees and
shareholders of the Fund shall not be personally liable for obligations of the
Fund in connection with any matter arising from or in connection with this
Agreement.
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11. TERMS OF AGREEMENT
A. This Agreement shall become effective upon its execution and shall
continue until terminated by either party upon ninety (90) days'
written notice given by one party to the other party.
B. This Agreement may be amended by the mutual written consent of
both parties.
C. This Agreement and any right or obligation hereunder may not be
assigned by either party without the written consent of the other
party.
D. In the event that the Fund gives to the Agent its written intention
to terminate and appoint a successor transfer agent, the Agent
agrees to cooperate in the transfer of its duties and
responsibilities to the successor, including any and all relevant
books, records and other data established or maintained by the Agent
under this Agreement.
E. Should the Fund exercise its right to terminate this Agreement,
except where such termination follows a breach of this Agreement by
the Agent, all out-of-pocket expenses associated with the movement
of records and material will be paid by the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
POTOMAC FUNDS FIRSTAR TRUST COMPANY
By:____________________________ By:_____________________________
Print:_________________________ Print:___________________________
Title:_________________________ Title: First Vice President
Date:__________________________ Date:____________________________
Attest:________________________ Attest:__________________________
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