Exhibit (h)(5)
PARTICIPATION AGREEMENT
THIS AGREEMENT, dated as of , 2007, between , a [business trust
/corporation] organized under the laws of the [Commonwealth/State] of , on
behalf of itself or its separate series listed on Schedule A, severally and not
jointly (each, a "Fund of Funds"), and XShares Advisors LLC, a limited liability
company organized under the laws of the State of Maryland, and each exchange
traded fund that is advised or sponsored by XShares Advisors LLC listed on
Schedule B, each on behalf of itself or its respective series, severally and not
jointly (each an "XShares Fund" and collectively the "XShares Funds").
WHEREAS, the Fund of Funds and the XShares Funds each are registered
with the U.S. Securities and Exchange Commission ("SEC") as open-end management
investment companies under the Investment Company Act of 1940 (the "1940 Act");
WHEREAS, section 12(d)(l)(A) and (B) of the 1940 Act limits the ability
of an investment company to invest in shares of another investment company, and
therefore limits the ability of a Fund of Funds to invest in shares of an
XShares Fund;
WHEREAS, XShares Advisors LLC and HealthShares(TM), Inc., on behalf of
each Fund, have obtained an order from the SEC dated June 21, 2007 (the "XShares
Order"), that permits registered investment companies to invest in the XShares
Funds in excess of the limits set forth in section 12(d)(1)(A) and (B) in
accordance with the conditions of the XShares Order and the representations in
the application filed to obtain such Order (the "XShares Application"); and
WHEREAS, the Fund of Funds may, from time to time, invest in shares of
one or more XShares Funds in excess of the limitations of section 12(d)(1)(A)
and (B) in reliance on the XShares Order;
NOW THEREFORE, in consideration of the potential benefits to the Fund
of Funds and the XShares Funds arising out of the Fund of Funds' investment in
XShares Funds, the parties agree as follows.
1. Representations and Obligations of the XShares Funds.
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(a) The XShares Funds have provided to the Fund of Funds a copy of
the Order and the related SEC Notice of Application for such Order
(attached hereto as Schedule C). The XShares Funds will promptly
provide the Fund of Funds with (i) a copy of any amendments to the
XShares Order, and (ii) a copy of the XShares Application upon
request.
(b) In connection with any investment by a Fund of Funds in an
XShares Fund, the XShares Fund agrees (i) to comply with the terms
and conditions of the XShares Order and this Agreement, and (ii) to
promptly notify the Fund of Funds if such XShares Fund fails to
comply with the terms and conditions of the XShares Order or this
Agreement.
(c) Each registered trademark indicated in the name of the XShares
Fund(s) on Schedule B is a registered trademark of XShares Advisors
LLC, which has licensed the trademark to the respective XShares
Fund.
2. Representations and Obligations of the Investing Funds.
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(a) Pursuant to Condition 8 of the XShares Order, each Fund of
Funds represents that the board of directors/trustees of the Fund
of Funds and the Fund of Funds' advisor understand the terms and
conditions of the XShares Order and that each agrees to fulfill its
responsibilities under the XShares Order.
(b) Pursuant to Condition 8 of the XShares Order, each Fund of
Funds will promptly notify the XShares Funds in writing at the time
of any investment by such Fund in an XShares Fund in excess of the
3% limit in Section 12(d)(1)(A)(i). Upon such investment, each Fund
of Funds shall also provide to the XShares Funds in writing a list
of the names of each Fund of Funds Affiliate and Underwriting
Affiliate (as such terms are defined in the Order) and shall
promptly notify the XShares Funds of any changes to such list.
(c) Each Fund of Funds will promptly notify the XShares Funds in
writing of any purchase or acquisition of shares of an XShares Fund
that causes such Fund of Funds to hold (i) 5% or more of such
XShares Fund's total outstanding voting securities, and (ii) 10% or
more of such XShares Fund's total outstanding voting securities.
(d) To the extent a Fund of Funds holds 25% or more of the total
outstanding voting securities of an XShares Fund, the Fund of Funds
agrees to vote its shares in the same proportion as the vote of all
other holders of shares of such XShares Fund.
(e) If a Fund of Funds exceeds the 5% or 10% limitation in Section
12(d)(l)(A)(ii) or (iii), the Fund of Funds, as required by the
XShares Application, will disclose in its prospectus in "Plain
English":
(1) That it may invest in exchange-traded funds; and
(2) The unique characteristics of the Fund of Funds investing
in exchange-traded funds, including but not limited to, the
expense structure and any additional expenses of investing in
exchange-traded funds.
(f) Each Fund of Funds: (i) acknowledges that it has received a
copy of the XShares Order and the related SEC Notice of Application
for such Order; (ii) agrees to adhere to the terms and conditions
of the XShares Order and this Agreement and to participate in the
proposed transactions in a manner that addresses the concerns
underlying the XShares Order; (iii) represents that investments in
the XShares Funds will be accomplished in compliance with its
investment restrictions and will be consistent with the investment
policies set forth in its registration statement; (iv) acknowledges
that it may rely on the
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XShares Order only to invest in XShares Funds and not in any other
registered investment company; and (v) agrees to promptly notify
the XShares Funds if it fails to comply with the XShares Order or
this Agreement.
3. Indemnification.
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Each Fund of Funds agrees to hold harmless and indemnify the
XShares Funds, including any principals, directors or trustees,
officers, employees and agents, against and from any and all
losses, expenses or liabilities incurred by or claims or actions
("Claims") asserted against the XShares Funds, including any
principals, directors or trustees, officers, employees and agents,
to the extent such Claims result from (i) a violation or alleged
violation by the Fund of Funds of any provision of this Agreement
or (ii) a violation or alleged violation by the Fund of Funds of
the terms and conditions of the XShares Order, such indemnification
to include any reasonable counsel fees and expenses incurred in
connection with investigating and/or defending such Claims.
The XShares Funds agree to hold harmless and indemnify a Fund of
Funds, including any directors or trustees, officers, employees and
agents, against and from any Claims asserted against the Fund of
Funds, including any directors or trustees, officers, employees and
agents, to the extent such Claims result from (i) a violation or
alleged violation by the XShares Fund of any provision of this
Agreement or (ii) a violation or alleged violation by the XShares
Fund of the terms and conditions of the XShares Order, such
indemnification to include any reasonable counsel fees and expenses
incurred in connection with investigating and/or defending such
Claims; provided, however, that the XShares Fund shall not be
liable for indemnifying any Fund of Funds for any Claims resulting
from violations that occur as a result of incomplete or inaccurate
information provided by the Fund of Funds to the XShares Fund
pursuant to terms and conditions of the Order or this Agreement.
4. Web Sites.
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For purposes of determining whether the Fund of Funds has exceeded
the investment thresholds in XShares Funds for purposes of Section
2(b), (c), (d), and (e) of this Agreement, the Fund of Funds may
use the information contained on the particular XShares Funds'
public Internet web site regarding such XShares Fund's total
outstanding shares, however, any such use shall be subject to the
terms and conditions of such web site. The XShares Fund's web sites
are listed on Schedule C hereto.
5. Materials.
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To the extent a Fund of Funds refers to one or more XShares Funds
in any prospectus, statement of additional information or
otherwise, each Fund of Funds agrees to:
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(a) For those XShares Funds included on Schedule B with names that
are registered trademarks, (i) include the trademark symbol in all
references to the XShares Fund or series thereof (for example, the
"HealthShares(TM) [Index] Fund"); (ii) include the following notice
within reasonable proximity to the reference to the XShares Fund or
series thereof:
[Name of XShares Fund](TM) is a registered trademark of XShares
Advisors LLC.
(b) For all XShares Funds, include the following notice within
reasonable proximity to the reference to the XShares Fund:
Neither XShares Advisors LLC nor the [Name of XShares Fund] Funds
make any representations regarding the advisability of investing in
[Name of Fund of Funds].
6. Notices.
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All notices, including all information that either party is
required to provide under the terms of this Agreement and the terms
and conditions of the XShares Order, shall be in writing and shall
be delivered by registered or overnight mail, facsimile, or
electronic mail to the address for each party specified below
(which address may be changed from time to time by written notice
to the other party).
If to the Fund of Funds:
[Name]
x/x [Xxxxxxx]
[Xxxxxxx]
[Xxxx, Xxxxx, ZIP]
Fax:
Email:
If to the XShares Funds:
Xxxxxxx X. Xxxxxxxxx
XShares Advisors LLC
000 Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Fax: [ ]
Email: xxxxxxxxxx@XXxxxxxxxxxxxxx.xxx
With a copy to:
Xxxxxxx Xxxxxxxx
XShares Advisors LLC
000 Xxxxxxxxx
Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Fax: [ ]
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Email: xxxxxxxxx@XXxxxxxxxxxxxxx.xxx
Xxxxxxxx Xxxxxxxx
Paul, Hastings, Xxxxxxxx & Xxxxxx LLP
Park Avenue Tower
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Fax: (000) 000-0000
Email: xxxxxxxxxxxxxxxx@xxxxxxxxxxxx.xxx
7. Termination; Governing Law.
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(a) This Agreement will continue until terminated in writing by
either party upon sixty (60) days' notice to the other party,
provided, however, that the obligation of a Fund of Funds in
Section 2(d) above shall survive the termination of this Agreement.
This Agreement may not be assigned by either party without the
prior written consent of the other.
(b) This Agreement will be governed by New York law without regard
to choice of law principles.
(c) In any action involving the XShares Funds under this Agreement,
each Fund of Funds agrees to look solely to the individual XShares
Fund(s) listed on Schedule B that is/are involved in the matter in
controversy and not to any other series of XShares Advisors LLC.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
Each of the Fund of Funds listed on Schedule A, severally and not jointly, on
behalf of itself or each of its series
__________________________
Name:
Title:
XSHARES FUNDS, on
behalf of each of its series
__________________________
Name: Xxxxxxx X. Xxxxxxxxx
Title: Chief Executive Officer and President
XSHARES ADVISORS LLC, on
behalf of each of its series
__________________________
Name: Xxxxxxx X. Xxxxxxxxx
Title: President of XShares Group LLC,
the sole managing member
SCHEDULE A
List of Fund of Funds
SCHEDULE B
List of XShares Funds
XShares Fund Sub-Adviser Distributor
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HealthShares(TM), Inc.
Realty Funds, Inc.
TDAX Funds, Inc.
StateShares(TM), Inc.
SCHEDULE C
List of XShares Fund's Websites
