EXHIBIT (e)(2)
EXHIBIT A
FORM OF
PARTICIPANT AGREEMENT
This Participant Agreement (this "Agreement") is entered into between Rydex
Distributors, Inc. (the "Distributor") and ____________________ (the
"Participant") and is subject to acceptance by The Bank of New York (the
"Bank"). The Bank serves as the transfer agent of the Rydex ETF Trust (the
"Trust") pursuant to certain to a Transfer Agency and Service Agreement dated as
of ____________________ (the "Transfer Agency Agreement") and is an Index
Receipt Agent as that term is defined in the rules of the National Securities
Clearing Corporation ("NSCC"). The Distributor has been retained to provide
certain services with respect to acting as principal underwriter of the Trust in
connection with the creation and distribution of Trust Shares. As specified in
the Trust's prospectus and the Transfer Agency Agreement, Trust Shares may be
created or redeemed only in aggregations of 50,000 shares, referred to therein
and herein as a "Creation Unit". The Transfer Agency Agreement provides that
Creation Units be issued in exchange for a Portfolio Deposit delivered by the
Participant to the Bank. Capitalized terms not otherwise defined herein are used
herein as defined in the Trust's prospectus or the Transfer Agency Agreement.
This Agreement is intended to set forth certain premises and the procedures
by which the Participant may create and/or redeem Creation Units (i) through the
Continuous Net Settlement ("CNS") clearing processes of NSCC as such processes
have been enhanced to effect creations and redemptions of Creation Units, such
processes being referred to herein as the "Trust's Clearing Process", or (ii)
outside the Trust's Clearing Process (i.e., through the facilities of the
Depository Trust Company ("DTC" )). The parties hereto in consideration of the
premises and of the agreements contained herein agree as follows:
1. STATUS OF PARTICIPANT. The Participant hereby represents, covenants and
warrants that (i) with respect to orders for the creation or redemption of
Creation Units by means of the Trust's Clearing Process, it is a member of NSCC
and a participant in the CNS System of NSCC (as defined in the Trust's
prospectus, a "Participating Party"); and (ii) with respect to orders for the
creation or redemption of Creation Units outside the Trust's Clearing Process,
it is a DTC Participant (as defined in the Trust's prospectus, a "DTC
Participant"). The Participant may place orders for the creation or redemption
of Creation Units either through the Trust's Clearing Process or outside the
Trust's Clearing Process, subject to the procedures for creation and redemption
referred to in paragraph 2 of this Agreement ("Execution of Orders") and the
procedures described in Attachment A hereto. Any change in the foregoing status
of the Participant shall terminate this Agreement, and the Participant shall
give immediate notice to the Distributor and the Bank of such change.
The Participant further represents that it is a broker-dealer registered
with the Securities and Exchange Commission and a member of the National
Association of Securities Dealers, Inc. (the "NASD") or is exempt from or
otherwise not required to be licensed as a broker-dealer or a member of the
NASD. The Participant is qualified as a broker or dealer, or otherwise, under
all applicable state laws where it is required to do so in order that Trust
Shares may be sold in such states where the Participant intends to sell Trust
Shares. The Participant agrees to conform to the rules of the NASD (if it is a
member of NASD) and the securities laws of any jurisdiction in which it sells,
directly or indirectly, Trust Shares.
2. EXECUTION OF ORDERS. All orders for the creation or redemption of
Creation Units shall be handled in accordance with the terms of the Trust's
prospectus, the Transfer Agency Agreement and the procedures described in
Attachment A to this Agreement. Each party hereto agrees to comply with the
provisions of such documents to the extent applicable to it. In the event the
procedures include the use of recorded telephone lines, the Participant hereby
consents to such use. The Bank reserves the right to issue additional or other
procedures relating to the manner of creating or redeeming Creation Units, and
the Participant and the Distributor agree to comply with such procedures as may
be issued from time to time.
3. NSCC. Solely with respect to orders for the creation or redemption of
Creation Units through the Trust's Clearing Process, the Participant as a
Participating Party hereby authorizes the Bank to transmit to NSCC on behalf of
the Participant such instructions, including share and cash amounts as are
necessary with respect to the creation and redemption of Creation Units
consistent with the instructions issued by the Participant to the Trust
telephone representative identified in Attachment A hereto (the "Trust
Representative"). The Participant agrees to be bound by the terms of such
instructions issued by the Bank and reported to NSCC as though such instructions
were issued by the Participant directly to NSCC.
4. ROLE OF PARTICIPANT. The Participant shall have no authority in any
transaction to act as agent of the Distributor, the Bank or the Trust.
5. FEES. In connection with the creation or redemption of Creation Units,
the Bank shall charge, and the Participant agrees to pay to the Bank, the
Transaction Fee prescribed in the Trust's prospectus applicable to creations or
redemptions through the Trust's Clearing Process, or the Transaction Fee and
such additional amounts as may be prescribed pursuant to the Trust's prospectus
applicable to (i) creations or redemptions outside the Trust's Clearing Process
and (ii) creations within the Trust's Clearing Process where the cash equivalent
value of one or more Index Securities is being deposited in lieu of the
inclusion of such Index Security in the securities portion of the Portfolio
Deposit because the Participant is restricted by regulation or otherwise from
investing or engaging in a transaction in such security. The Transaction Fee may
be waived or otherwise adjusted from time to time subject to the provisions
relating thereto and any limitations as prescribed in the Trust's prospectus and
the Transfer Agency Agreement.
6. AUTHORIZED PERSONS. Concurrently with the execution of this Agreement
and from time to time thereafter, the Participant shall deliver to the
Distributor and the Bank, duly certified as appropriate by its secretary or
other duly authorized official, a certificate setting forth the names and
signatures of all persons authorized to give instructions relating to activity
contemplated hereby or any other notice, request or instruction on behalf of the
Participant (each, an "Authorized Person"). Such certificate may be accepted and
relied upon by the Distributor and the Bank as conclusive evidence of the facts
set forth therein and shall be considered to be in full force and effect until
delivery to the Distributor and the Bank of a superseding certificate bearing a
subsequent date. The Bank shall issue to each Authorized Person a unique
personal identification number ("PIN Number") by which such Authorized Person
and the Participant shall be identified and instructions issued by the
Participant hereunder shall be authenticated. Upon the termination or revocation
of authority of such Authorized Person by the Participant, the Participant shall
give immediate written notice of such fact to the Distributor and the Bank and
such notice shall be effective upon receipt by both the Distributor and the
Bank.
7. REDEMPTION. The Participant represents and warrants that it will not
obtain a Submission Number (as defined in Attachment A) from the Bank for the
purpose of redeeming a Creation Unit unless it first ascertains that (a) it or
its customer, as the case may be, owns outright
the requisite number of Trust Shares to be redeemed and (b) such Trust Shares
have not been loaned or pledged to another party nor are the subject of a
repurchase agreement, securities lending agreement or such other arrangement
which would preclude the delivery of such shares to the Bank on a "regular way"
basis.
8. BENEFICIAL OWNERSHIP. The Participant represents and warrants to the
Distributor and the Bank that either (i) it does not hold for the account of any
single Beneficial Owner of Trust Shares, 80 percent (80%) or more of outstanding
Trust Shares or (ii) if it does hold for the account of any single Beneficial
Owner of Trust Shares, 80 percent (80%) or more of outstanding Trust Shares,
that such a circumstance would not cause the Trust to have a basis in the Index
Securities deposited with the Trust different from the market value of such
Index Securities on the date of such deposit, pursuant to Section 351 of the
Internal Revenue Code of 1986, as amended. The Bank shall have the right to
require information from the Participant regarding Trust Share ownership and to
rely thereon to the extent necessary to make a determination regarding ownership
of 80 percent (80%) or more of outstanding Trust Shares by a Beneficial Owner as
a condition to the acceptance of a Portfolio Deposit.
9. INDEMNIFICATION. The Participant hereby agrees to indemnify and hold
harmless the Distributor, the Bank, the Trust, their respective subsidiaries,
affiliates, directors, officers, employees and agents (each, an "Indemnified
Party") from and against any loss, liability, cost and expense incurred by such
Indemnified Party as a result of (i) any breach by the Participant of its
representations and warranties contained herein or of any provision of this
Agreement; or (ii) any actions of such Indemnified Party in reliance upon any
instructions issued in accordance with Attachment A (as may be amended from time
to time) believed by the Distributor and/or the Bank to be genuine and to have
been given by the Participant. This paragraph shall survive the termination of
this Agreement.
10. BANK'S CAPACITY. The parties acknowledge that the Bank is acting in its
capacity hereunder as transfer agent in accordance with and pursuant to the
Transfer Agency Agreement and not in its general corporate capacity.
11. ACKNOWLEDGMENT. The Participant acknowledges receipt of the Trust's
prospectus and represents it has reviewed such document and understands the
terms thereof.
12. NOTICES. Except as otherwise specifically provided in this Agreement,
all notices required or permitted to be given pursuant to this Agreement shall
be given in writing and delivered by personal delivery or by postage prepaid
registered or certified United States first class mail, return receipt
requested, or by telex, telegram or facsimile or similar means of same day
delivery (with a confirming copy by mail as provided herein). Unless otherwise
notified in writing, all notices to the Bank shall be given or sent as follows:
The Bank of New York, 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attn:
_____________________. All notices to the Participant and the Distributor shall
be directed to the address or telephone, facsimile or telex numbers indicated
below the signature line of such party.
13. TERMINATION AND AMENDMENT. This Agreement shall become effective in
this form as of the date accepted by the Bank and may be terminated at any time
by any party upon thirty (30) day prior notice to the other parties (i) unless
earlier terminated by the Bank in the event of a breach of this Agreement or the
procedures described herein by the Participant or (ii) in the event that the
Trust is terminated pursuant to the Transfer Agency Agreement. This Agreement
supersedes any prior agreement between the parties. This Agreement may be
amended by the Bank without consent of any Beneficial Owner from time to time by
the
following procedure. The Bank will mail a copy of the amendment to the
Distributor and the Participant. For the purposes of this Agreement, mail will
be deemed received by the recipient thereof on the third (3rd) day following the
deposit of such mail into the U.S. postal system. If neither the Distributor nor
the Participant objects in writing to the amendment within ten (10) days after
its receipt, the amendment will become part of this Agreement in accordance with
its terms.
14. REPRESENTATIONS REGARDING TRUST SHARES. The Participant shall not make,
or permit any representative to make, in connection with any sale or
solicitation of a sale of Trust Shares, any representations concerning Trust
Shares except those contained in the then current prospectus and in printed
information approved by the Distributor and the Trust as information
supplemental to such prospectus. Copies of the then current prospectus and any
such printed supplemental information will be supplied by the Distributor to the
Participant in reasonable quantities upon request.
15. COUNTERPARTS. This Agreement may be simultaneously executed in several
counterparts, each of which shall be an original and all shall constitute but
one and the same instrument.
16. TRUST AS THIRD PARTY BENEFICIARY. The Trust shall be a third-party
beneficiary of this Agreement and is entitled to enforce directly against the
Participant the obligations owed to the Trust by the Participant (including,
without limitation, bringing proceedings against the Participant in the Trust's
name).
17. GOVERNING LAW. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York without regard to the
conflicts of laws thereof.
------------------------------
BY:
NAME:
TITLE:
ADDRESS:
TELEPHONE:
FACSIMILE:
{NAME OF PARTICIPANT}
BY:
NAME:
TITLE:
ADDRESS:
TELEPHONE:
FACSIMILE:
ACCEPTED BY:
THE BANK OF NEW YORK,
AS TRANSFER AGENT
BY:
NAME: Xxxxxx Xxxxxx
TITLE: Vice President
ADDRESS: 000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
TELEPHONE: (000) 000-0000
FACSIMILE: (000) 000-0000
DATED:
ATTACHMENT A
This document supplements the Trust's prospectus and the Transfer Agency
Agreement, and is an attachment to the Trust Participant Agreement with respect
to the procedures to be used by (i) the Distributor and the Bank in processing
an order for the creation of Trust Shares and (ii) the Bank in processing a
request for the redemption of Trust Shares, and (iii) the Participants and the
Bank in delivering or arranging for the delivery of requisite cash payments,
Portfolio Deposits or Trust Shares, as the case may be, in connection with the
submission of orders for creation or requests for redemption.
A Participant is first required to have signed the Trust Participant
Agreement. Upon acceptance of the Trust Participant Agreement by the Bank, the
Bank will assign a personal identification number to each Authorized Person
authorized to act for the Participant. This will allow a Participant through its
Authorized Person(s) to place an order with respect to Trust Shares.
I. TO PLACE AN ORDER FOR CREATION OR REDEMPTION OF TRUST SHARES
1. CALL TO RECEIVE A SUBMISSION NUMBER. An Authorized Person for the
Participant will call the Trust Telephone Representative at (000) 000-0000 not
later than the closing time of the regular trading session on the American Stock
Exchange LLC (the "Exchange Closing Time") (ordinarily 4:00 p.m. New York time)
to receive a Submission Number. Upon verifying the authenticity of the caller
(as determined by the use of the appropriate PIN Number) and the terms of the
order for creation or request for redemption, the Trust Telephone Representative
will issue a unique Submission Number. All orders with respect to the creation
or redemption of Trust Shares are required to be in writing and accompanied by
the designated Submission Number. Incoming telephone calls are queued and will
be handled in the sequence received. Calls placed before the Exchange Closing
Time will be processed even if the call is taken after this cut-off time.
ACCORDINGLY, DO NOT HANG UP AND REDIAL. INCOMING CALLS THAT ARE ATTEMPTED LATER
THAN THE EXCHANGE CLOSING TIME WILL NOT BE ACCEPTED.
2. ASSEMBLE THE SUBMISSION. The Authorized Person submitting an order to
create or a request to redeem shall assemble (a) written instructions regarding
such creation order or redemption request, (b) the designated Submission Number
and (c) the PIN Number in one document and transmit such document by facsimile
or telex to the Trust Telephone Representative and the Distributor, as
applicable, according to the procedures set forth below in subsection 3. The
document so transmitted is hereinafter referred to as the "Submission", and the
Business Day on which a Submission is made is hereinafter referred to as the
"Transmittal Date". NOTE THAT THE TELEPHONE CALL IN WHICH THE SUBMISSION NUMBER
IS ISSUED INITIATES THE ORDER PROCESS BUT DOES NOT ALONE CONSTITUTE THE ORDER.
AN ORDER OR REQUEST IS ONLY COMPLETED AND PROCESSED UPON RECEIPT OF THE
SUBMISSION.
3. TRANSMIT THE SUBMISSION. A Submission Number is only valid for a limited
time. The Submission for either creations or redemptions of Trust Shares must be
sent by facsimile or telex to the Trust Telephone Representative and the
Distributor, as applicable, within 15 minutes of the issuance of the Submission
Number. In the event that the Submission is not received within such time
period, the Trust Telephone Representative will attempt to contact the
Participant to request immediate transmission of the Submission.
(a) In the case of a Submission for creation, unless the Submission is
received by the Trust Telephone Representative with a copy to the Distributor
upon the earlier of within (i) 15 minutes of contact with the Participant or
(ii) 45 minutes after the Exchange Closing Time, the Submission will be deemed
invalid.
(b) In the case of a Submission for redemption, unless such Submission
is received by the Trust Telephone Representative within (i) 15 minutes of
contact with the Participant or (ii) 45 minutes after the Exchange Closing Time,
whichever is earlier, such order for redemption contained therein shall be
Deemed Received (as hereinafter defined in Section IV) by the Bank on the
Business Day following such Transmittal Date in accordance with the procedures
set forth in Section IV(2) and (4) hereof.
4. AWAIT RECEIPT OF CONFIRMATION.
(a) TRUST'S CLEARING PROCESS-CREATION ORDERS. The Distributor shall
issue to both the Participating Party and the Bank a confirmation of acceptance
of an order to create Trust Shares in Creation Unit size aggregations through
the Trust's Clearing Process within 15 minutes of its receipt of a Submission
received in good form. In the event the Participating Party does not receive a
timely confirmation from the Distributor, it should contact the Distributor and
the Trust Telephone Representative at the business numbers indicated.
(b) TRUST'S CLEARING PROCESS-REQUESTS FOR REDEMPTIONS. The Bank shall
issue to the Participating Party a confirmation of acceptance of a request to
redeem Trust Shares in Creation Unit size aggregations through the Trust's
Clearing Process within 15 minutes of its receipt of a Submission received in
good form. In the event the Participating Party does not receive a timely
confirmation from the Bank, it should contact the Bank directly at the business
number indicated.
(c) OUTSIDE THE TRUST'S CLEARING PROCESS-CREATION ORDERS. The
Distributor shall issue to both the DTC Participant and the Bank an
acknowledgment of receipt of an order to create Trust Shares in Creation Unit
size aggregations outside the Trust's Clearing Process within 15 minutes of its
receipt of a Submission received in good form. In the event the DTC Participant
does not receive a timely acknowledgment from the Distributor, it should contact
the Distributor and the Trust Telephone Representative at the business numbers
indicated.
(d) OUTSIDE THE TRUST'S CLEARING PROCESS-REQUESTS FOR REDEMPTION. The
Bank shall issue to the DTC Participant an acknowledgment of receipt of an order
to redeem Trust Shares in Creation Unit size aggregations outside the Trust's
Clearing Process within 15 minutes of its receipt of a Submission received in
good form. In the event the DTC Participant does not receive a timely
acknowledgment from the Bank, it should contact the Bank directly at the
business number indicated.
II. PARTICIPANTS' RESPONSIBILITY FOR DELIVERING OR EFFECTING THE DELIVERY OF
REQUISITE PORTFOLIO DEPOSITS OR TRUST SHARES AND CASH PAYMENTS IN
CONNECTION WITH ORDERS FOR CREATION OR REQUESTS FOR REDEMPTION
1. TRUST'S CLEARING PROCESS-CREATION ORDERS. The Participating Party
notified of confirmation of an order to create Trust Shares through the Trust's
Clearing Process shall be required to transfer or arrange for the transfer of
(a) the requisite Index Securities (or contracts to purchase such Index
Securities expected to be delivered through NSCC by the "regular way" settlement
date) and (b) the Cash Component, if any, to the Bank by means of the Trust's
Clearing Process so as to be received no later than on the "regular way"
settlement date following the Business Day on which such order is Deemed
Received by the Distributor as set forth below in Section IV.
2. TRUST'S CLEARING PROCESS - REDEMPTION REQUESTS. The Participating Party
notified of confirmation of a request to redeem Trust Shares through the Trust's
Clearing Process shall be required to transfer or arrange for the transfer of
the requisite Trust Shares and the Cash Redemption Amount, if any, to the Bank
by means of the Trust's Clearing Process so as to be received no later than on
the "regular way" settlement date following the Business Day on which such order
is Deemed Received by the Bank as set forth below in Section IV.
3. OUTSIDE THE TRUST'S CLEARING PROCESS - CREATION ORDERS. The DTC
Participant notified of acknowledgment of an order to create Trust Shares
outside the Trust's Clearing Process shall be required to effect a transfer to
the Bank of (a) the requisite Index Securities through DTC so as to be received
by the Bank no later than 11:00 a.m. on the next Business Day immediately
following the Business Day on which such order is Deemed Received by the
Distributor as set forth below in Section IV, in such a way as to replicate the
Portfolio Deposit established on the Transmittal Date by the Bank and (b) the
Cash Component, if any, through the Federal Reserve Bank wire system so as to be
received by the Bank by 1:00 p.m. on the next Business Day immediately following
the day such order is Deemed Received. If the Bank does not receive the Index
Securities by 11:00 a.m. and the Cash Component, if any, by 1:00 p.m. on the
Business Day immediately following the day such order is Deemed Received, the
creation order contained in such Submission shall be canceled. Upon written
notice to the Distributor and the Trust Telephone Representative, the DTC
Participant may resubmit such canceled order on the following Business Day using
a Portfolio Deposit as newly constituted.
4. OUTSIDE THE TRUST'S CLEARING PROCESS - REDEMPTION REQUESTS. The DTC
Participant notified of acknowledgment of a request to redeem Trust Shares
outside the Trust's Clearing Process shall be required to effect a transfer to
the Bank of (a) the requisite number of Trust Shares through DTC no later than
the Exchange Closing Time on the Business Day on which such order is Deemed
Received by the Bank and (b) the Cash Redemption Amount, if any, through the
Federal Reserve Bank wire system by no later than 1:00 p.m. on the next Business
Day immediately following the Business Day on which such order is Deemed
Received by the Bank.
5. TRANSACTION FEE. In connection with the creation or redemption of
Creation Units, the Bank shall charge, and the Participant agrees to pay to the
Bank, the Transaction Fee prescribed in the Trust's prospectus applicable to (i)
creations or redemptions through the Trust's Clearing Process, or the
Transaction Fee and such additional amounts as may be prescribed pursuant to the
Trust's prospectus applicable to creations or redemptions outside the Trust's
Clearing Process and (ii) creations within the Trust's Clearing Process where
the cash equivalent value of one or more Index Securities is being deposited in
lieu of the inclusion of such Index Security in the securities portion of the
Portfolio Deposit because the Participant is restricted by regulation or
otherwise from investing or engaging in a transaction in such security. Such
Transaction Fee and additional amounts, if any, shall be included in the
calculation of the Cash Component or Cash Redemption Amount payable or to be
received, as the case may be, by the Participant in connection with the creation
or redemption order.
III. BANK'S RESPONSIBILITY FOR EFFECTING DELIVERY OF REQUISITE TRUST SHARES OR
SECURITIES AND CASH PAYMENTS IN CONNECTION WITH ORDERS FOR CREATION OR
REQUESTS FOR REDEMPTION.
1. TRUST'S CLEARING PROCESS - CREATION ORDER. After the Bank has received
notification of a Submission from the Distributor for a creation order for Trust
Shares through the Trust's Clearing Process which has been Deemed Received by
the Distributor as set forth below in Section IV, the Bank shall initiate
procedures to transfer the requisite Trust Shares and the Cash Component, if
any, through the Trust's Clearing Process so as to be received by the creator no
later than on the "regular way" settlement date following the Business Day on
which the Submission is Deemed Received by the Distributor.
2. TRUST'S CLEARING PROCESS - REDEMPTION REQUESTS. After the Bank has
received a Submission for a redemption request for Trust Shares through the
Trust's Clearing Process and Deemed Received such submission as set forth below
in Section IV, the Bank shall initiate procedures to transfer the requisite
securities (or contracts to purchase such securities expected to be delivered
through NSCC by the "regular way" settlement date) and the Cash Redemption
Amount, if any, through the Trust's Clearing Process so as to be received by the
Beneficial Owner no later than on the "regular way" settlement date following
the Business Day on which the Submission is Deemed Received by the Bank.
3. OUTSIDE THE TRUST'S CLEARING PROCESS-CREATION ORDERS. After the Bank has
received notification of a Submission from the Distributor for a creation order
for Trust Shares outside the Trust's Clearing Process which has been Deemed
Received by the Distributor as set forth below in Section IV, the Bank shall
initiate procedures to transfer the requisite Trust Shares through DTC and the
DTC Participants and the Cash Component, if any, through the Federal Reserve
Bank wire system so as to be received by the creator no later than on the third
(3rd) Business Day following the Business Day on which the Submission is Deemed
Received by the Distributor.
4. OUTSIDE THE TRUST'S CLEARING PROCESS-REDEMPTION REQUESTS. After the Bank
has received a Submission for a redemption request for Trust Shares outside the
Trust's Clearing Process and Deemed Received such submission as set forth below
in Section IV, the Bank shall initiate procedures to transfer the requisite
securities (or contracts to purchase such securities expected to be delivered
within three Business Days) through DTC and the DTC Participants and the Cash
Redemption Amount, if any, through the Federal Reserve Bank wire system so as to
be received by the Beneficial Owner no later than on the third (3rd) Business
Day following the Business Day on which the Submission is Deemed Received by the
Bank.
IV. PROCEDURES BY WHICH AN ORDER TO CREATE OR A REQUEST TO REDEEM SHALL BE
"DEEMED RECEIVED."
1. TRUST'S CLEARING PROCESS-CREATION ORDERS. An order to create Trust
Shares through the Trust's Clearing Process shall be "Deemed Received" by the
Distributor on the Transmittal Date only if (a) the Submission containing such
order is in proper form and (b) such Submission is received by the Distributor
no later than the time on such Transmittal Date as set forth in Section I(3)(a)
hereof. Orders to create Trust Shares contained in Submissions transmitted after
such time on a Transmittal Date shall be deemed invalid.
2. TRUST'S CLEARING PROCESS-REDEMPTION REQUESTS. A request to redeem Trust
Shares through the Trust's Clearing Process shall be Deemed Received by the Bank
on the Transmittal Date only if (a) the Submission containing such request is in
proper order and (b) such
Submission is received by the Bank no later than the time on such Transmittal
Date as set forth in Section I(3)(b) hereof. Requests to redeem Trust Shares
contained in Submissions transmitted after such time on a Transmittal Date shall
be "Deemed Received" by the Bank on the next Business Day immediately following
such Transmittal Date.
3. OUTSIDE THE TRUST'S CLEARING PROCESS-CREATION ORDERS. An order to create
Trust Shares outside the Trust's Clearing Process shall be Deemed Received by
the Distributor on the Transmittal Date only if: (a) the Submission containing
such order is in proper form, (b) such Submission is received by the Distributor
no later than the time on such Transmittal Date as set forth in Section I(3)(a)
hereof, (c) the requisite number of Index Securities is transferred through DTC
to the account of the Bank by no later than 11:00 a.m. on the Business Day next
following the Transmittal Date and (d) the cash equal to the Cash Component, if
any, is transferred via the Federal Reserve Bank wire system to the account of
the Bank by no later than 1:00 p.m. on the Business Day next following the
Transmittal Date. If either the Submission, the requisite Index Securities or
the cash equal to the Cash Component is not received by the Bank within the time
periods set forth above, such order shall be deemed invalid.
4. OUTSIDE THE TRUST'S CLEARING PROCESS - REDEMPTION REQUESTS. A request to
redeem Trust Shares outside the Trust's Clearing Process shall be Deemed
Received by the Bank on the Transmittal Date only if (a) the Submission
containing such request is in proper form, (b) such Submission is received by
the Bank no later than the time as set forth in Section I(3)(b) hereof, (c) the
requisite number of Trust Shares is transferred via DTC to the account of the
Bank by the Exchange Closing Time on such Transmittal Date and (d) the Cash
Redemption Amount owed to the Bank, if any, is received by the Bank no later
than 1:00 p.m. of the Business Day next following such Transmittal Date. If
either the Submission, the Trust Shares or cash equal to the Cash Redemption
Amount, if any, is not received by the Bank within the time periods set forth
above, such redemption request shall be Deemed Received by the Bank on the
Business Day on which both the Submission and the requisite number of Trust
Shares are delivered to the Bank within the proper time periods as set forth
above; provided that the Cash Redemption Amount, if any, is then paid on the
next Business Day within the time period set forth above.
5. AMBIGUOUS INSTRUCTIONS. In the event that a Submission contains terms
that differ from the information provided in the telephone call at the time of
issuance of the Submission Number, the Trust Telephone Representative will
attempt to contact the Participant to request confirmation of the terms of the
order. If an Authorized Person confirms the terms as they appear in the
Submission then the Submission will be accepted and processed. If an Authorized
Person contradicts its terms, the Submission will be deemed invalid, and a
corrected Submission must be received by the Trust Telephone Representative and
the Distributor, as applicable, not later than the earlier of (i) within 15
minutes of such contact with the Participant or (ii) 45 minutes after the
Exchange Closing Time. If the Trust Telephone Representative is not able to
contact an Authorized Person, then the Submission shall be accepted and
processed in accordance with its terms notwithstanding any inconsistency from
the terms of the telephone information. In the event that a Submission contains
terms that are illegible, the Submission will be deemed invalid and the Trust
Telephone Representative will attempt to contact the Participant to request
retransmission of the Submission. A corrected Submission must be received by the
Trust Telephone Representative, and the Distributor, as applicable, not later
than the earlier of (i) within 15 minutes of such contact with the Participant
or (ii) 45 minutes after the Exchange Closing Time.
6. SUSPENSION OR REJECTION OF AN ORDER. The Distributor or Bank reserves
the right to suspend a Submission in the event that its acceptance would appear
to result in the Participant or
a Beneficial Owner owning 80 percent (80%) or more of all outstanding Trust
Shares and if pursuant to Section 351 of the Internal Revenue Code of 1986, as
amended, such a circumstance would result in the Trust having a basis in the
securities deposited different from the market value of such securities on the
date of deposit. In such event, the Distributor or the Trust Telephone
Representative will attempt to contact an Authorized Person for purposes of
confirmation of the fact that with respect to such Participant no Beneficial
Owner would own 80 percent (80%) or more of all outstanding Trust Shares upon
execution of the Submission or that such a circumstance would not result in the
Trust having a basis in the securities deposited different from the market value
of such securities on the date of deposit. In the event that (i) the Distributor
or the Trust Telephone Representative is unable to contact an Authorized Person
or (ii) the Participant fails to transmit an identical Submission containing a
representation and warranty as to such fact, then the Submission shall be deemed
invalid.
The Bank further reserves the absolute right to reject a creation order
transmitted to it by the Distributor in respect of any Portfolio Deposit or any
component thereof if (a) the Portfolio Deposit is not in proper form; (b)
acceptance of the Portfolio Deposit would have certain adverse tax consequences;
(c) the acceptance of the Portfolio Deposit would, in the opinion of counsel, be
unlawful; (d) the acceptance of the Portfolio Deposit would otherwise, in the
discretion of the Bank, have an adverse affect on the Trust or the rights of
Beneficial Owners; or (e) in the event that circumstances outside the control of
the Bank make it for all practical purposes impossible to process creations of
Trust Shares. The Bank will provide notice of its reasons for rejection of a
creation order in respect of a Portfolio Deposit or any component thereof. The
Bank, the Distributor and the Trust shall not incur any liability in connection
with any notification of defects or irregularities in the delivery of Portfolio
Deposits or any component thereof or in connection with the rejection of a
creation order.
V. TELEPHONE, FACSIMILE, AND TELEX NUMBERS
TELEPHONE:
-------------------------- -------------------
FACSIMILE:
-------------------
TRUST TELEPHONE REPRESENTATIVE: TELEPHONE:
-------------------
FACSIMILE:
-------------------
BANK: TELEPHONE:
-------------------
FACSIMILE:
-------------------
PARTICIPANT: TELEPHONE:
-------------------
FACSIMILE:
-------------------
----------------------------
BY:
----------------------
TITLE:
----------------------
{NAME OF PARTICIPANT}
----------------------------
BY:
----------------------
TITLE:
----------------------
ACCEPTED BY:
THE BANK OF NEW YORK, AS TRANSFER AGENT
BY:
----------------------
TITLE:
----------------------
DATED:
----------------------
