DISTRIBUTION AGREEMENT
Exhibit 99.A3
DISTRIBUTION AGREEMENT (the “Agreement”) made as of November 1st, 2011, by and among PDR
Services LLC, a Delaware limited liability company (the “Sponsor”); SPDR Dow Xxxxx Industrial
Average ETF Trust (formerly, DIAMONDS Trust, Series 1), a unit investment trust organized under the
laws of the State of New York (the “Trust”); and ALPS Distributors, Inc., a Colorado corporation
(the “Distributor”).
WITNESSETH:
WHEREAS, the Trust is governed by a trust agreement (the “Trust Agreement”) between the
Sponsor and State Street Bank and Trust Company, as trustee (the “Trustee”) pursuant to which there
will be created units of fractional undivided interest in the Trust (“Trust Units” or “Units”)”)
and representing proportionate interests in the portfolio of securities and assets held by the
Trust;
WHEREAS, the Sponsor and the Trust have filed with the Securities and Exchange Commission (the
“Commission”) a registration statement on Form S-6 (Registration No. 333-31247), including as part
thereof a prospectus (the “Prospectus”), under the Securities Act of 1933, as amended (the “1933
Act”), and a registration statement on Form N-8B-2 (Registration No. 811-9170) under the Investment
Company Act of 1940, as amended (the “1940 Act”), the forms of which have heretofore been delivered
to the Distributor; and
WHEREAS, the Trust will create and redeem Units only in aggregations constituting a Creation
Unit as such term is used in the Registration Statement (as defined herein), in accordance with the
terms and conditions set forth therein; and
WHEREAS, the Distributor is a registered broker-dealer under the Securities Exchange Act of
1934, as amended (the “1934 Act”); and
WHEREAS, the Trust and the Sponsor desire to retain the Distributor to act as distributor with
respect to the creation and distribution of Units in Creation Unit aggregations as set forth in the
Trust’s Registration Statement, hold itself available to receive and process orders for Units in
the manner set forth in the Trust’s then-current prospectus and to enter into arrangements with
dealers; and
WHEREAS, the Distributor desires to render these services to the Trust;
NOW, THEREFORE, in consideration of the mutual covenants contained in this Agreement, the
Sponsor, the Trust and the Distributor hereby agree as follows:
Section 1
Distribution and Beneficial Owners
Distribution and Beneficial Owners
1.1 Appointment. The Trust and the Sponsor hereby appoint the Distributor as the
exclusive distributor for Units in Creation Unit aggregations on the terms and for the periods set
forth in this Agreement, and the Distributor hereby accepts such appointment and agrees to act in
such capacity hereunder.
1.2 Definitions.
(a) The term “Registration Statement” shall mean the registration statement most recently
filed from time to time by the Trust with the Securities and Exchange Commission (the “Commission”)
and effective under the 1933 Act, and the 1940 Act, as such registration statement is amended by
any amendments thereto at the time in effect.
(b) The term “Prospectus” shall mean the prospectus included as part of the Trust’s
Registration Statement, as such prospectus may be amended or supplemented from time to time.
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(d) All capitalized terms used but not defined in this Agreement shall have the meanings
ascribed to such terms in the Registration Statement.
1.3 Distributor’s Duties. The Distributor shall have the following duties:
(a) The Distributor agrees, as agent for the Trust, that all orders to create Units in
Creation Unit size aggregations must be placed with the Distributor by an Authorized Participant
and it is the responsibility of the Distributor to transmit such orders to the Trustee, as
described in the Registration Statement and in accordance with the provisions thereof.
(b) The right granted to the Distributor to receive all orders to create Units in Creation
Unit size aggregations and to transmit such orders to the Trustee shall be exclusive, and no other
principal underwriter or distributor shall be granted such right; provided, however, that nothing
herein shall affect or limit the right and ability of the Trustee to accept Portfolio Deposits and
related Cash Components (each as defined in the Prospectus) through or outside of the Units
Clearing Process, and as provided in and in accordance with the then-current Prospectus. The
exclusive right to place creation orders for Units granted to the Distributor may be waived by the
Distributor by notice to the Trust and the Sponsor in writing, either unconditionally or subject to
such conditions and limitations as may be set forth in such notice to the Trust and the Sponsor.
The Trust and the Sponsor hereby acknowledge that the Distributor may render principal
underwriting, distribution and other services to other parties, including other unit investment
trusts.
(c) At the request of the Trust and/or the Sponsor, the Distributor shall enter into
Participant Agreements between and among Authorized Participants, the Distributor and the Trustee,
in accordance with the provisions of the Registration Statement and current Prospectus and in such
form as agreed to by the parties from time to time.
(d) Except as otherwise noted in the Registration Statement and current Prospectus, the
offering price for all Creation Units sold to investors by the Distributor will be the net asset
value per Creation Unit calculated in the manner described in the Registration Statement and
current Prospectus.
(e) In performing its duties hereunder, the Distributor shall act in conformity with the Trust
Agreement, Registration Statement and the then-current Prospectus relating to Units and the Trust
and with the instructions and directions of the Sponsor and Trustee of the Trust, and will comply
with and conform in all material respects to the requirements of the 1933 Act, the 1934 Act and the
1940 Act and all other applicable federal and state laws, regulations and rulings, and the rules
and regulations of the Financial Regulatory Authority (“FINRA”).
(f) The Distributor shall not be obligated to accept any certain number of orders for Creation
Unit size aggregations of Units, and nothing herein contained shall prevent the Distributor from
entering into like distribution arrangements with other investment companies.
(g) The Distributor shall clear and file all advertising, sales, marketing and promotional
materials of the Trust provided to the Distributor, or in the preparation of which it has
participated, with FINRA as required by the 1933 Act and the 1940 Act, and the rules promulgated
thereunder, and by the rules of FINRA. The Distributor is not authorized to give any information or
to make any representations other than those contained in the Registration Statement or current
Prospectus, as amended from time to time, or contained in reports to Beneficial Owners or other
materials that may be prepared by the Trustee or Sponsor on behalf of the Trust for the
Distributor.
(h) The Distributor shall consult with the Sponsor and the Trust with respect to the
production and printing of prospectuses to be used in connection with creations by new creators of
Creation Unit aggregations of Units.
(i) In performing its duties hereunder the Distributor shall be entitled to rely on and shall
not be
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responsible in any way for information provided to it by the Trustee, the Sponsor or the
Trust and their respective service providers and shall not be liable or responsible for the errors
and omissions of such service providers, provided that the foregoing shall not be construed to
protect the Distributor against any liability to the Trustee, the Sponsor, the Trust or the Trust’s
Beneficial Owners to which the Distributor would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of its duties or by reason of its
reckless disregard of its obligations and duties under this Agreement.
1.4 The Trust’s and Sponsor’s Duties. The Trust and Sponsor shall have the following
duties:
(a) The Trust and Sponsor agree to create Creation Unit size aggregations of Units, subject to
paragraph (e) of this Section 1.4, and to request the Depository to record on its books the
ownership of such Units in accordance with the book-entry system procedures described in the
Prospectus in such amounts as the Distributor has requested in writing or other means of data
transmission, as promptly as practicable after receipt by the Trustee on behalf of the Trust of the
requisite Portfolio Deposit and Cash Component (together with any fees) for such creations and
acceptance by the Trustee or by the Distributor on behalf of the Trust of a creation order for such
Units, upon the terms described in the Registration Statement.
(b) The Trust and Sponsor shall furnish to the Distributor copies of all information,
financial statements and other papers which the Distributor may reasonably request for use in
connection with the distribution of Creation Units. The Trust and the Sponsor shall make available
to the Distributor such number of copies of the current Prospectus as the Distributor may
reasonably request. The Trust and the Sponsor authorize the Distributor to use the Prospectus, but
the Trust and the Sponsor shall not be responsible in any way for any information, statements or
representations given or made by the Distributor or its representatives or agents other than such
information, statements or representations as are contained in the Prospectus or financial reports
filed on behalf of the Trust or in any sales literature or advertisements specifically approved by
the Trust and the Sponsor in writing.
(c) The Sponsor agrees that it will take all necessary action to register an indefinite number
of Units under the 1933 Act. The Sponsor shall take, from time to time, such steps, including
payment of the related filing fees, as may be necessary to register Units under the 1933 Act and
the 1940 Act to the end that all Creation Unit size aggregations of Units will be properly
registered under the 1933 Act and the 1940 Act. The Trust and the Sponsor agree to file from time
to time such amendments, supplements, reports and other documents as may be necessary in order that
there may be in a Registration Statement or Prospectus no (i) untrue statement of a material fact
or (ii) omission to state a material fact necessary in order to make the statements therein, in the
case of the Prospectus; in light of the circumstances in which made, not misleading. The
Distributor shall furnish such information and other material relating to its affairs and
activities as may be required by the Trust and the Sponsor for inclusion in the Registration
Statement or Prospectus.
(d) The Trust and the Sponsor shall keep the Distributor informed of the states and other
foreign and domestic jurisdictions in which the Trust has effected notice filings of shares of
Units for sale under the securities laws thereof. The Distributor shall furnish such information
and other material relating to its affairs and activities as may be required by the Trust and the
Sponsor in connection with such filings.
(e) In accordance with the provisions of the then-current prospectus, the Trust may reject any
creation order for Creation Unit aggregations of Units or stop all receipts of creation orders for
Units at any time or from time to time upon reasonable notice to the Distributor.
1.5 Representations.
(a) The Distributor represents and warrants to the Trust and the Sponsor that (i) it is duly
organized as a Colorado corporation and is and at all times will remain duly authorized and
licensed to carry out its services as contemplated herein; (ii) the execution, delivery and
performance of this Agreement are within its power and have been duly authorized by all necessary
action; (iii) its entering into this Agreement or providing the services contemplated hereby does
not conflict with or constitute a default or require a consent under or breach of any provision of
any agreement or document to which the Distributor is a party or by which it is bound (except for
any consent in writing which shall have been obtained by the date hereof); and (iv) it is
registered as a broker-dealer under the 1934 Act and is a member of the FINRA.
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(b) The Sponsor represents and warrants to the Distributor that (i) the Registration Statement
and the Prospectus have been prepared in conformity in all material respects with the 1933 Act, the
1940 Act and the rules and regulations of the Commission (the “Rules and Regulations”); (ii)
contain all statements required to be stated therein in accordance with the 1933 Act, the 1940 Act
and the Rules and Regulations; and (iii) all statements of fact contained therein are true and
correct in all material respects at the time indicated or the effective date, as the case may be,
and neither the Registration Statement nor the Prospectus shall include an untrue statement of a
material fact or omit to state a material fact required to be stated therein or necessary to make
the statements therein, in the case of the Prospectus in light of the circumstances in which made,
not misleading. The Trust and the Sponsor shall from time to time file such amendment or amendments
to the Registration Statement and the Prospectus as, in the light of future developments, shall, in
the opinion of the Trust’s counsel, be necessary in order to have the Registration Statement and
the Prospectus at all times contain all material facts required to be stated therein or necessary
to make the statements therein, in the case of the Prospectus in light of the circumstances in
which made, not misleading to a purchaser of shares. The Trust shall not file any amendment to the
Registration Statement or the Prospectus without giving the Distributor reasonable notice thereof
in advance, provided that nothing in this Agreement shall in any way limit the Trust’s right to
file at any time such amendments to the Registration Statement or the Prospectus as the Trust may
deem advisable. Notwithstanding the foregoing, the Trust and the Sponsor shall not be deemed to
make any representation or warranty as to any information or statement provided by the Distributor
for inclusion in the Registration Statement or the Prospectus.
(c) Notification Provisions. The Trust and the Sponsor shall notify the Distributor promptly
of:
| 1. | any request by the Commission for amendments to the Trust’s Registration Statement or Prospectus or for additional information; | ||
| 2. | any stop order suspending the effectiveness of the Trust’s Registration Statement or the initiation of any proceeding for that purpose; | ||
| 3. | all significant actions of the Commission having a material impact with respect to any amendment to the Trust’s Registration Statement or Prospectus. |
Section 2
Fees and Expenses
Fees and Expenses
2.1 Compensation of the Distributor. The Sponsor shall pay to the Distributor, for its
services described in this Agreement, an annual distribution fee of $35,000 such fee to be paid
monthly in advance on the first day of each calendar month.
2.2 Expenses.
(a) Each party hereto will bear its own expenses in connection with this Agreement unless
otherwise agreed by the parties hereto in writing. In addition, the expenses of the Trust shall be
borne by the Trust as described under the caption “Expenses of the Trust” in the Prospectus.
(b) The Distributor shall bear the following costs and expenses relating to the distribution
of Units: (i) the costs (other than those payable pursuant to the Trust’s agreement with the
Depository) of processing and maintaining records of creations of Creation Units; (ii) all costs of
maintaining the records required of a broker/dealer registered under the 1934 Act; (iii) the
expenses of maintaining its registration or qualification as a dealer or broker under federal or
state laws; (iv) the expenses incurred by the Distributor in connection with normal (non-expedited)
FINRA filing fees; and (v) all other expenses incurred in connection with the distribution services
as contemplated herein, except as otherwise specifically provided in this Agreement.
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Section 3
Indemnification
Indemnification
3.1 Indemnification of Distributor. The Sponsor agrees to indemnify, defend and hold
the Distributor,
its officers and directors and any person who controls the Distributor within the
meaning of Section 15 of the 1933 Act (any of the Distributor, its officers and directors or such
control persons, for purposes of this Section 3.1, an “Indemnitee”), free and harmless from and
against any and all claims, demands, liabilities, and expenses (including costs reasonably incurred
in connection with investigating or defending such claims, demands or liabilities and any counsel
fees reasonably incurred in connection therewith) which the Indemnitee may incur, under the 1933
Act or under common law or otherwise, arising out of or based upon any untrue statement or alleged
untrue statement of a material fact contained in the Trust’s Registration Statement, or the
omission or alleged omission to state in such document a material fact required to be stated
therein or necessary to make the statements therein not misleading or, with respect to the
Prospectus or any amendment or supplement thereto, any untrue statement or alleged untrue statement
of a material fact or omission or alleged omission to state in such document a material fact
required to be stated therein or necessary to make the statements therein in the light of the
circumstances under which they were made, not misleading; provided, however, that
nothing in this Section 3.1 shall protect the Indemnitee against any liability to the Trust or its
Beneficial Owners that the Indemnitee would otherwise be subject to (i) by reason of willful
malfeasance, bad faith, or gross negligence in the performance of its duties, (ii) by reason of the
Indemnitee’s reckless disregard of its obligations and duties under this Agreement, or (iii) where
such liability arises out of or is based upon any untrue statement or omission or alleged untrue
statement or omission in the Trust’s Registration Statement or Prospectus that was made in reliance
upon and in conformity with written information furnished by the Distributor to the Trust and the
Sponsor; and provided, further, that the Trust will not be liable in any such case
to the Indemnitee with respect to any untrue statement or omission or alleged untrue statement or
omission made in the Registration Statement or the Prospectus that is subsequently corrected in
such document (or an amendment thereof or supplement thereto), if a copy of the Prospectus (or such
amendment thereof or supplement thereto) was not sent or given to the person asserting any such
claim, demand, liability or expense at or before the written confirmation of the sale to such
person in any case where such delivery is required by the 1933 Act and the Trust had notified the
Distributor of the amendment or supplement prior to the sending of the written confirmation of
sale. The Sponsor’s obligation to indemnify the Indemnitee is expressly conditioned upon the
Indemnitee’s notification of the Sponsor of the commencement of any action against the Indemnitee,
which notification shall be given by letter or by facsimile transmission addressed to the Sponsor
at its principal offices in New York, New York, and sent to the Sponsor by the person against whom
such action is brought within ten days after the summons or other first legal process shall have
been served. The Indemnitee’s failure to so notify the Sponsor shall not relieve the Sponsor of any
liability which it may have to the Indemnitee by reason of any such alleged untrue statement or
omission or alleged untrue statement or omission independent of this indemnification. The Sponsor
will be entitled to assume the defense of any suit brought to enforce any such claim, demand or
liability and to retain legal counsel of good standing chosen by the Sponsor and approved by the
Indemnitee (such approval not to be unreasonably withheld). If the Sponsor elects to assume the
defense of any such suit and retain counsel approved by the Indemnitee, the defendant or defendants
in such suit shall bear the fees and expenses of any additional counsel retained by any of them. In
the event the Sponsor does not elect to assume the defense of any such suit and retain counsel of
good standing approved by the Indemnitee or the Indemnitee does not approve of the counsel chosen
by the Sponsor (such approval not to be unreasonably withheld), the Sponsor shall bear the fees and
expenses of any counsel retained by it. The indemnification agreement contained in this Section 3.1
shall remain operative and in full force and effect regardless of any investigation made by or on
behalf of the Indemnitee and shall survive the sale of any Creation Units of shares made pursuant
to purchase orders obtained by the Indemnitee. This indemnification will inure exclusively to the
benefit of the Indemnitee and its successors, assigns and estate. The Trust and the Sponsor shall
promptly notify the Indemnitee of the commencement of any litigation or proceeding against the
Trust or the Sponsor in connection with the issue and sale of any Creation Units of shares.
3.2 Indemnification of the Sponsor. The Distributor agrees to indemnify, defend, and
hold the Sponsor, its several officers and directors and any person who controls the Sponsor
within the meaning of Section 15 of the 1933 Act (for purposes of this Section 3.2, the Sponsor,
its officers and directors, if any, and its controlling persons are collectively referred to as
the “Sponsor Affiliates”), free and harmless from and against any and all claims, demands,
liabilities, and expenses (including costs reasonably incurred in investigating or defending such
claims, demands or liabilities and any counsel fees reasonably incurred in connection therewith)
which the Sponsor Affiliates may incur under the 1933 Act or under common law or otherwise, but
only to the extent that such liability or expense shall arise out of or be based upon (i) any
untrue statement or alleged untrue statement of a material fact contained in information furnished
by the Distributor to the Sponsor for use in the Registration Statement or Prospectus in effect
from time to time under the 1933 Act, or (ii) any omission or alleged omission, on the part of the
Distributor, to state a material fact in connection with such information required to be stated in
the
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Registration Statement or Prospectus or necessary to make such information not misleading, it
being understood that the Sponsor will rely upon the information provided by the Distributor for
use in the preparation of the Registration Statement and the Prospectus, or (iii) any alleged act
or omission on the Distributor’s part as the Trust’s agent that has not been expressly authorized
by the Sponsor in writing. The Distributor’s obligation to indemnify the Sponsor Affiliates is
expressly conditioned upon the Distributor being notified of the commencement of any action
brought against the Sponsor Affiliates, which notification shall be given by letter or facsimile
transmission addressed to the Distributor at its principal offices in Denver, Colorado, and sent
to the Distributor by the person against whom such action is brought within ten days after the
summons or other first legal process shall have been served. The Sponsor Affiliates’ failure to
notify the Distributor of the commencement of any such action shall not relieve the Distributor
from any liability which it may have to the Sponsor Affiliates by reason of any such untrue
statement or omission or alleged untrue statement or omission on the part of the Distributor
independent of this indemnification. The Distributor shall have a right to control the defense of
such action, with counsel of its own choosing, satisfactory to the Sponsor Affiliates, if such
action is based solely upon such untrue statement or omission or alleged untrue statement or
omission on its part, and in any other event the Distributor and the Sponsor Affiliates shall each
have the right to participate in the defense or preparation of the defense of such action at their
own expense.
Section 4
Duration, Termination, and Amendment
Duration, Termination, and Amendment
4.1 Duration. This Agreement shall become effective as of the date set forth above,
and shall continue for one year and thereafter shall continue automatically for successive annual
periods, unless terminated as provided in Section 4.2 or until the termination of the Trust.
4.2 Termination. This Agreement may be terminated at any time, without penalty, upon
60 days’ prior written notice to the other party by the Trust and the Sponsor, or by the
Distributor.
4.3 Assignment. This Agreement shall automatically terminate in the event of its
“assignment.” As used in this Agreement, the term “assignment” shall have the meaning such term
has in the 1940 Act.
4.4 Amendment. This Agreement may be amended by mutual consent, provided that no
provision of this Agreement may be changed, waived, discharged or terminated except by an
instrument in writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought.
Section 5
Notice
Notice
5.1 Notification of Parties. Any notice or other communication required or permitted
to be given pursuant to this Agreement shall be deemed duly given if addressed and delivered, or
mailed by registered mail, postage prepaid, to (1) ALPS Distributors, Inc., 0000 Xxxxxxxx, Xxxxx
0000, Xxxxxx, XX 00000, Attention: General Counsel; (2) PDR Services LLC, 00 Xxxx Xx., Xxx Xxxx,
XX 00000, Attention: Xxxxx Xxxxxxxx, Vice President; and (3) State Street Bank and Trust Company,
X.X. Xxx 0000, Xxxxxx, XX 00000, Attn: SPDR S&P 500 ETF Trust.
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Section 6
Miscellaneous
Miscellaneous
6.1 Choice of Law. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York.
6.2 Captions. The caption in this Agreement are included for convenience only and in
no way define or limit any of the provisions hereof or otherwise affect their construction.
6.3 Severability. If any provisions of this Agreement shall be held or made invalid,
in whole or in part, then the other provisions of this Agreement shall remain in force. Invalid
provisions shall, in accordance with this Agreement’s intent and purpose, be amended, to the
extent legally possible, by valid provisions in order to effectuate the intended results of the
invalid provisions.
6.4 Insurance. The Distributor will maintain at its expense an errors and omissions
insurance policy which covers services by the Distributor hereunder
6.5 Force Majeure. In the event a party is hereto unable to perform its obligations
under the terms of this Agreement because of acts of God, strikes, equipment or transmission
failure or damage reasonably beyond its control, or other causes reasonably beyond its control,
such party shall not be liable to any other party for any damages resulting from such failure to
perform or otherwise from such causes.
6.6 Counterparts. This Agreement may be executed in counterparts, each of which shall
be an original and all of which shall constitute but one and the same instrument.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK].
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the day
and year first written above.
| SPDR DOW XXXXX INDUSTRIAL AVERAGE ETF TRUST | ||||||
| (formerly, DIAMONDS TRUST, Series 1) | ||||||
| BY: STATE STREET BANK AND TRUST COMPANY, | ||||||
| not in its general corporate capacity but solely as Trustee of the Trust | ||||||
| By: Name: |
/s/ Xxxxxxx Xxxxxxx
|
|||||
| Title: | Executive Vice President | |||||
| PDR SERVICES LLC | ||||||
| By: Name: |
/s/ Xxxxx Xxxxxxxx
|
|||||
| Title: | Vice President | |||||
| ALPS DISTRIBUTORS, INC. | ||||||
| By: Name: |
/s/ Xxxxxx X. Xxxxxx
|
|||||
| Title: | President | |||||
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