Exhibit A(1)(a)
EXECUTION COPY
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NASDAQ-100 TRUST, SERIES 1
and
ANY SUBSEQUENT AND SIMILAR
SERIES OF THE
NASDAQ-100 TRUST
STANDARD TERMS
AND
CONDITIONS OF TRUST
DATED AS OF MARCH 1, 1999
between
NASDAQ-AMEX INVESTMENT PRODUCT SERVICES, INC.
as Sponsor
and
THE BANK OF NEW YORK
as Trustee
Effective MARCH 4, 1999
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TABLE OF CONTENTS
PAGE
INTRODUCTION....................................................................................2
ARTICLE I
Definitions................................................................................3
Section 1.01.......................................................................3
Section 1.02.......................................................................8
ARTICLE II
Declaration of Trust; Deposit of Securities; The Portfolio; Creation
and Issuance of Nasdaq-100 Shares in Creation Unit Size Aggregations.......................9
Section 2.01 Declaration of Trust..................................................9
Section 2.02 Deposit of Securities.................................................9
Section 2.03 Creation and Issuance of Creation Units. ............................11
Section 2.04 Portfolio and Portfolio Deposit Adjustments..........................17
Section 2.05 Bank Accounts........................................................26
ARTICLE III
Administration of Trust...................................................................27
Section 3.01 Collection of Income. ..............................................27
Section 3.02 Collection of Other Moneys...........................................27
Section 3.03 Establishment of Reserves............................................28
Section 3.04 Certain Deductions and Distributions.................................28
Section 3.05 Statements and Reports...............................................33
Section 3.06 Purchase and Sale of Securities......................................34
Section 3.07 Substitute Securities................................................36
Section 3.08 Counsel..............................................................36
Section 3.09 Dividend Reinvestment................................................37
Section 3.10 Action by Trustee Regarding Voting...................................38
Section 3.11 Book-Entry-Only System. ............................................38
ARTICLE IV
Evaluation of Securities and Trust Fund...................................................42
Section 4.01 Evaluation of Securities.............................................42
Section 4.02 Trust Fund Evaluation................................................43
Section 4.03 Responsibility of the Trustee........................................43
ARTICLE V
Redemption of Creation Units..............................................................44
Section 5.01 Redemption of Nasdaq-100 Shares in Creation Unit Size
Aggregations..............................................................44
i
ARTICLE VI
Transfer of Nasdaq-100 Shares in
Creation Unit Size Aggregations...........................................................48
Section 6.01 Transfer of Nasdaq-100 Shares in Creation Unit Size
Aggregations..............................................................48
ARTICLE VII
Sponsor...................................................................................49
Section 7.01 Responsibilities and Duties..........................................49
Section 7.02 Certain Matters Regarding Successor Sponsor..........................50
Section 7.03 Resignation, Discharge or Removal of Sponsor; Successors.............50
Section 7.04 Liability of Sponsor and Indemnification.............................52
ARTICLE VIII
Trustee...................................................................................54
Section 8.01 General Definition of Trustee's Rights, Duties and
Responsibilities..........................................................54
Section 8.02 Books, Records, and Reports..........................................58
Section 8.03 Indenture and List of Securities on File.............................59
Section 8.04 Compensation of Trustee..............................................59
Section 8.05 Indemnification of Trustee...........................................61
Section 8.06 Resignation, Discharge or Removal of Trustee; Successors.............62
Section 8.07 Qualifications of Trustee............................................64
Section 8.08 Trustee's Duties Expressly Provided for Herein.......................65
ARTICLE IX
Termination...............................................................................65
Section 9.01 Procedure Upon Termination...........................................65
Section 9.02 Moneys to Be Held Without Interest to Beneficial Owners..............69
Section 9.03 Dissolution of Sponsor Not to Terminate Trust........................69
ARTICLE X
Miscellaneous Provisions...................................................................70
Section 10.01 Amendment and Waiver.................................................70
Section 10.02 Registration (Initial and Continuing) of Nasdaq-100 Shares...........71
Section 10.03 License Agreement with Nasdaq........................................72
Section 10.04 Certain Matters Relating to Beneficial Owners........................72
Section 10.05 New York Law to Govern...............................................73
Section 10.06 Notices..............................................................73
Section 10.07 Severability.........................................................74
Section 10.08 Separate and Distinct Series.........................................74
Section 10.09 Counterparts.........................................................75
Section 10.10 Exclusive Benefit of Parties and Holders of Nasdaq-100 Shares........75
Section 10.11 Headings.............................................................75
Exhibit A - Form of Nasdaq-100 Participant Agreement
ii
NASDAQ-100 TRUST, SERIES 1
and
ANY SUBSEQUENT AND SIMILAR SERIES OF
THE NASDAQ-100 TRUST
STANDARD TERMS AND CONDITIONS OF TRUST
for all or similar Series formed on
or subsequent to the effective date specified below
Effective March 4, 1999
This Standard Terms and Conditions of Trust (this "Agreement")
dated as of March 1, 1999 and effective March 4, 1999 is executed between
Nasdaq-Amex Investment Product Services, Inc., a Delaware corporation, as
Sponsor, and The Bank of New York, a New York corporation with trust powers, as
Trustee.
W I T N E S S E T H :
WHEREAS, the Sponsor desires to establish one or more unit
investment trusts pursuant to the provisions of the Investment Company Act of
1940, as amended, and the laws of the State of New York and each such trust may
issue a Series (as hereinafter defined) of redeemable securities, each Series
representing undivided interests in a Trust or Trust Fund (as hereinafter
defined) that will be composed primarily of Securities (as hereinafter defined)
included from time to time in the Nasdaq-100 Index-Registered Trademark-
(the "Index");
WHEREAS, the Sponsor desires to provide for the adjustment by
the Trustee of the Securities of each Trust to reflect the composition and
weighting of securities in the Index, the collection by the Trustee of the
dividends and other income and capital gains on such Securities held in the
Trust, and the distribution by the Trustee to the Depository (as hereinafter
defined), as the record owner of the Trust, of such dividends, capital gains,
and other Trust income to the extent that dividends, capital gains, and other
Trust income exceed fees and expenses of the
Trust, and to provide for other terms and conditions upon which such Trusts
shall be established and administered as hereinafter provided; and
WHEREAS, in order to facilitate the creation of various Series
of unit investment trusts as aforesaid, the terms and conditions of
establishment and administration of which will be in many respects substantially
similar, it is desirable to set forth standard terms and conditions of trust
upon which such Trusts will be established and administered, subject to the
terms and provisions of this Agreement and the terms and conditions of an
Indenture (as hereinafter defined) into which this Agreement will be, as to each
Series, incorporated;
NOW, THEREFORE, in consideration of the premises and of the
mutual agreements herein contained, the Sponsor and the Trustee hereby agree as
follows:
INTRODUCTION
This Agreement, effective as of the day and year first above
written, shall be applicable to the Nasdaq-100 Trust, Series 1 (a unit
investment trust) and to all Series of the Nasdaq-100 Trust formed on or
subsequent to the date hereof for which this Agreement's applicability and its
incorporation by reference is specified in the applicable Indenture relating to
such Series. For each Series of the Nasdaq-100 Trust to which this Agreement is
to be applicable, the Sponsor and the Trustee shall execute an Indenture (or
supplement or amendment to such Indenture) incorporating by reference this
Agreement and designating any exclusion from or exception to such incorporation
by reference for the purposes of that Series or variation of the terms hereof
for the purposes of that Series, and specifying for that Series (each of the
following terms as defined herein): (i) the Initial Portfolio Deposit to be
deposited in trust pursuant to Section 2.02 hereof and the number of Creation
Unit size aggregations of Nasdaq-100 Shares to be delivered by the
2
Trustee in exchange for the Initial Portfolio Deposit, (ii) the initial
undivided interest represented by each Creation Unit size aggregation of
Nasdaq-100 Shares, (iii) the number of Nasdaq-100 Shares which, when aggregated,
constitute one Creation Unit, (iv) the Mandatory Termination Date, (v) the
Initial Date of Deposit and the Series name of the Trust, (vi) the fiscal year
of the Trust, and (vii) any other terms specific to any Series of the Nasdaq-100
Trust.
ARTICLE I
DEFINITIONS
Section 1.01 DEFINED TERMS. Whenever used in this Agreement,
the following words and phrases, unless the context otherwise requires, shall
have the following meanings:
"ACCUMULATION PERIOD" shall mean a period during which Securities held by the
Trust earn their respective dividends, such period being measured from the
most recent Ex-Dividend Date to and including the current Business Day;
provided, however, that the initial Accumulation Period shall begin on the
Business Day following the Initial Date of Deposit.
"AGREEMENT" the Standard Terms and Conditions of Trust embodied in this
instrument and all amendments and supplements hereto.
"AMEX" is the American Stock Exchange LLC
"AUTHORIZED OFFICER" shall mean the President, any Vice President, any Secretary
and any other person or category of persons named in the resolution(s)
authorizing the Sponsor to establish the Trust or authorizing the Trustee to act
as such, and in the case of the Trustee shall also include any Assistant Vice
President, Treasurer and Assistant Treasurer.
"BENEFICIAL OWNER" shall mean an owner of beneficial interests in Nasdaq-100
Shares held through the Depository.
3
"BUSINESS DAY" any day that the Nasdaq Stock Market is open for business.
"CNS SYSTEM" the continuous net settlement system of NSCC.
"COMMISSION" the Securities and Exchange Commission.
"CPI-U" the National Consumer Price Index for All Urban Consumers, as published
by the United States Department for Labor, or any successor index.
"CREATION UNIT" the minimum number of Nasdaq-100 Shares that may be created at
any one time as described below in Section 2.03, which is 50,000 Nasdaq-100
Shares, unless (1) a different aggregate number of Nasdaq-100 Shares necessary
to constitute a Creation Unit is set forth in the Indenture for a particular
Series, (2) a different aggregate number for an existing Series is effectuated
by means of an amendment to the Indenture and current Prospectus for such
Series, or (3) a different aggregate number of Nasdaq-100 Shares necessary to
constitute a Creation Unit is utilized by the Trustee in connection with the
implementation of a dividend reinvestment plan or service pursuant to the
provisions of Section 3.09.
"DEPOSITOR" each person or organization that has entered into a Nasdaq-100
Participant Agreement with the Trustee and that may from time to time deposit
Portfolio Deposits with the Trustee, including, without limitation, the
Depositor making the Initial Portfolio Deposit(s) on the Initial Date of
Deposit.
"DEPOSITORY OR DTC" shall mean The Depository Trust Company, New York, New York,
or such other depository as may be selected by the Trustee as specified herein.
"DEPOSITORY AGREEMENT" the agreement or Letter of Representations among the
Trustee, the Sponsor and the Depository, dated as March 4, 1999, as the same may
be from time to time amended in accordance with its terms.
4
"DISTRIBUTOR" ALPS Mutual Funds Services, Inc., any successor corporation
thereto and any other corporation appointed by the Sponsor and the Trustee to
act as the Distributor hereunder, provided that such corporation is identified
as the Distributor in the current version of the Trust Prospectus.
"EVALUATION TIME" closing time of the regular trading session on the Nasdaq
Stock Market (currently 4:00 p.m. New York time) unless another meaning is
assigned to such term in the Indenture.
"INCOME" any income or cash or other dividend distribution by an issuer of a
Security, whether or not such payment or distribution is taxable to the
recipient thereof.
"INCOME NET OF EXPENSE AMOUNT" the cash amount required to be paid by either the
Trustee on behalf of the Trust or the Depositor in connection with a deposit of
securities into the Trust as specified in Section 2.03(b).
"INDENTURE" the Indenture into which this Agreement will be, as to each Series,
incorporated and all amendments and supplemental indentures thereto.
"INDEX" the Nasdaq-100 Index-Registered Trademark-.
"INDEX SECURITIES" the securities that constitute the Index.
"INITIAL DATE OF DEPOSIT" the date so designated in the Indenture.
"INITIAL PORTFOLIO DEPOSIT" the Portfolio Deposit(s) deposited into the Trust on
the Initial Date of Deposit.
"INTERNAL REVENUE CODE" the Internal Revenue Code of 1986, as amended, or any
successor provisions.
5
"LICENSE AGREEMENT" the License Agreement dated as of August 7, 1998 between
Nasdaq and the Sponsor pursuant to which the Sponsor has been granted the
license to use certain trademarks and service marks of Nasdaq.
"MANDATORY TERMINATION DATE" the date specified in the Indenture.
"NASDAQ" shall mean The Nasdaq Stock Market, Inc.
"NASDAQ-100 SHARES" shall mean a unit of fractional undivided interest in and
ownership of the Trust Fund.
"NASDAQ-100 CLEARING PROCESS" the CNS System of NSCC, as such processes have
been enhanced to effect creations and redemptions of Creation Unit size
aggregations of Nasdaq-100 Shares.
"NASDAQ-100 PARTICIPANT AGREEMENT" an agreement among the Distributor, the
Trustee and either (1) a Participating Party or (2) a DTC Participant,
substantially in the form set forth in Exhibit A hereto, as the same may be from
time to time amended in accordance with its terms.
"NSCC" the National Securities Clearing Corporation.
"NSCC BUSINESS DAY" a day NSCC is open for business.
"ORDER" the exemptive order granted by the Commission with respect to the Trust
in Release IC - 23702 dated February 22, 1999.
"PARTICIPATING PARTY" a participant in the Nasdaq-100 Clearing Process.
"PORTFOLIO" the Securities held by the Trust consisting of a portfolio of equity
securities or, in the case of securities not yet delivered on the Initial Date
of Deposit (or, subsequently, securities not yet delivered in connection with
purchases made by the Trust or subsequent Portfolio Deposits), confirmations of
contracts to purchase such securities.
"PROSPECTUS" the Prospectus relating to a particular Trust filed with the
Commission pursuant to Rule 424 of the Securities Act of 1933, as amended.
6
"REGULATED INVESTMENT COMPANY" a trust which qualifies as a "regulated
investment company" under the current provisions of the Internal Revenue Code.
"SECURITIES" publicly traded common stocks and other securities convertible into
or representing equity securities of issuers, including contracts to purchase
securities, (a) that are listed or referred to as securities in Schedule A to
the Indenture, (b) that have been received by the Trust in subsequent Portfolio
Deposits pursuant to Section 2.02, (c) that have been acquired by the Trust as a
result of the reinvestment of proceeds from any sale of securities or as a
result of purchases and sales of securities to conform the Portfolio to the
composition and weighting of the securities in the Index, all pursuant to
Section 2.04, (d) that have been received by the Trust as a distribution or
dividend in respect of any of the securities held by the Trust, or (e) that have
been received by the Trust in exchange or substitution pursuant to Section 3.07,
1each as may from time to time continue to be held as part of the Trust.
"SERIES" any series of the Trust.
"SPONSOR" shall mean Nasdaq-Amex Investment Product Services, Inc., or any
corporation into which it may be merged or with which it may be consolidated, or
any corporation resulting from any merger or consolidation to which it shall be
a party, or any corporation succeeding to all or substantially all of its
business as sponsor of unit investment trusts, or any successor sponsor
designated as such by operation of law or any successor sponsor appointed as
herein provided.
"TRUST OR TRUST FUND" shall mean the individual trust fund created by a
particular Indenture which shall consist of the Portfolio and all undistributed
income or other amounts received or receivable thereon and any undistributed
cash held or realized from the sale or liquidation of the Securities, or from
the deposit of Portfolio Deposits.
7
"TRUSTEE" (a) The Bank of New York or its successor or (b) any successor trustee
designated by operation of law or appointed as herein provided or (c) any other
bank, trust company, corporation or national banking association designated as
trustee in the Indenture for the applicable Trust Series, which bank, trust
company, corporation or national banking association shall be a party to such
Indenture and whose execution thereof shall subject such bank, trust company,
corporation or national banking association to all rights, duties and
liabilities hereunder and thereunder, in each case acting as trustee and not
individually, unless otherwise indicated.
Section 1.02 TERMS DEFINED ELSEWHERE. Whenever used in this
Agreement, the following words and phrases, unless the context otherwise
requires, have the meanings set forth in the section identified below:
TERM DEFINED IN SECTION
"Adjustment Day"........................................................2.04(g)
"Available Cash"...........................................................3.09
"Balancing Amount"......................................................2.04(h)
"Cash Component"........................................................2.03(c)
"Cash Redemption Amount"...................................................5.01
"Discretionary Termination Amount"......................................9.01(a)
"Dividend Payment Date".................................................3.04(g)
"Dividend Reinvestment Service"............................................3.09
"DTC Participant".......................................................3.11(c)
"Ex-Dividend Date"......................................................3.04(g)
"Indirect Participant"..................................................3.11(c)
"Misweighting"..........................................................2.04(a)
"Misweighting Amount"...................................................2.04(a)
"NAV Amount"............................................................2.04(g)
"Portfolio Deposit".....................................................2.03(c)
"Portfolio Deposit Amount"..............................................2.04(h)
"Record Date"...........................................................3.04(g)
"Reinvesting Beneficial Owners"............................................3.09
"Request Day"...........................................................2.04(g)
"Share Register"........................................................3.11(a)
"Sponsor Indemnified Party".............................................7.04(b)
"Transaction Fee".......................................................2.03(i)
"Trust Fund Evaluation"....................................................4.02
"Trustee Indemnified Party"................................................8.05
8
ARTICLE II
DECLARATION OF TRUST; DEPOSIT OF SECURITIES; THE PORTFOLIO; CREATION AND
ISSUANCE OF NASDAQ-100 SHARES IN CREATION UNIT SIZE AGGREGATIONS
Section 2.01 DECLARATION OF TRUST. The Trustee declares that it
holds and will hold the Trust Fund as Trustee for the use and benefit of all
present and future Beneficial Owners and subject to the terms and conditions of
the Indenture and this Agreement. The Trustee hereby declares on behalf of the
Trust that it elects the treatment for tax purposes as a Regulated Investment
Company and covenants to comply with the provisions of Section 8.02(b) hereof to
continue the qualification of the Trust as a Regulated Investment Company. The
Trustee is hereby directed to make such elections, including any appropriate
election to be taxed as a corporation, as shall be necessary to effect such
qualification.
Section 2.02 DEPOSIT OF SECURITIES.
(a) Concurrently with the execution and delivery of the Indenture, a
Depositor will deposit the Initial Portfolio Deposit with the Trustee, and from
time to time thereafter Depositors may make, as provided below in this Section
2.02, additional deposits of Portfolio Deposits with the Trustee, and in each
case the Trustee will be granted and conveyed all right, title and interest in
and to, and there will be conveyed and deposited with the Trustee in an
irrevocable trust, all cash and securities so deposited in connection with each
such Portfolio Deposit. With respect to the Initial Portfolio Deposit made by a
Depositor concurrently with the execution and delivery of the Indenture, the
securities portion of the Initial Portfolio Deposit will be comprised of the
securities listed in Schedule A to the Indenture, and each of such securities
will be duly endorsed in blank or accompanied by all necessary instruments of
assignment and transfer in proper form or delivered through the Depository, to
be held and applied by the Trustee as herein provided. There
9
also will be a Cash Component (as hereinafter defined in Section 2.03(c))
included in the Initial Portfolio Deposit which shall also be listed in Schedule
A to the Indenture. The first accrual period for dividends payable on the first
Dividend Payment Date will commence on the Business Day following the Initial
Date of Deposit. Upon the delivery of the Initial Portfolio Deposit, the
Depositor will also deliver to the Trustee one of the following: a certified
check or checks, cash or cash equivalent or an irrevocable letter or letters of
credit issued by a commercial bank or banks rated A or better (or other
equivalent rating) by a nationally recognized rating agency in an amount
necessary to satisfy applicable regulatory requirements.
(b) From time to time following the Initial Date of Deposit, the
Trustee is authorized to accept on behalf of the Trust additional deposits of
Portfolio Deposits, and all Index Securities deposited in connection therewith
shall be duly endorsed in blank or accompanied by all necessary instruments of
assignment and transfer in proper form or delivered through the Depository, to
be held and applied by the Trustee as herein provided. To permit the Trustee to
ensure that the process of settlement is working satisfactorily, there shall be
no further Portfolio Deposits accepted by the Trustee for a period of three (3)
Business Days following the Initial Date of Deposit, and the Sponsor and the
Trustee shall jointly announce the day thereafter on which further Portfolio
Deposits will be accepted. The Trustee shall ensure that the securities portion
of each Portfolio Deposit shall be comprised of such Index Securities and in
such numbers as are specified in accordance with Section 2.04. The Trustee shall
also ensure that, in the event certain Securities held by the Trust Fund are
removed from the Index or the composition or weighting of the Index Securities
changes, or certain corporate actions relating to the Index Securities occur as
specified in Section 2.04, the Trustee shall recalculate the composition of the
Portfolio Deposit
10
and adjust the composition of the Portfolio, in each case as required by the
provisions of Section 2.04.
(c) The Trustee is hereby irrevocably authorized to effect registration
or transfer of the Securities in fully registered form to the name of the
Trustee or to the name of its nominee or the nominee of its agent or to hold the
Securities in its account at the Depository.
Section 2.03 CREATION AND ISSUANCE OF CREATION UNITS.
(a) The Trustee acknowledges that the Initial Portfolio Deposit(s)
specified in the Indenture (which include the Securities and Cash Component
listed in Schedule A to the Indenture) have been deposited with it by the
Depositor on the Initial Date of Deposit. The Trustee shall accept such Initial
Portfolio Deposit(s) and issue an appropriate corresponding number of Nasdaq-100
Shares in Creation Unit size aggregations in exchange therefor.
(b) The Portfolio Deposits accepted by the Trustee from time to time
thereafter shall include a portfolio of Securities (initially the Securities
listed in Exhibit A to the Indenture and, thereafter, such Securities as the
composition and number of shares thereof may be adjusted as required by Section
2.04) together, in certain cases to the extent applicable as specified below,
with a cash payment equal to the Income Net of Expense Amount (as defined
below), plus or minus, as the case may be, the Balancing Amount (as hereinafter
defined - see Section 2.04). The "Income Net of Expense Amount" is an amount
equal, on a per Creation Unit basis, to the dividends accrued on all the
Securities with ex-dividend dates within the applicable Accumulation Period as
if all of the Securities had been held for such period, net of accrued expenses
and liabilities for such period not previously deducted (including, without
limitation, (x) taxes or other governmental charges against the Trust not
previously deducted, if any, and (y) accrued fees of
11
the Trustee and other expenses of the Trust (including legal and auditing
expenses) and other expenses not previously deducted).
(c) The Income Net of Expense Amount and the Balancing Amount are
collectively referred to herein as the "Cash Component" and the deposit of such
a portfolio of Securities and the Cash Component are collectively referred to
herein as a "Portfolio Deposit." In connection with an order to create
Nasdaq-100 Shares on any given day, the Cash Component of the Portfolio Deposit
may be payable by either the Trustee on behalf of the Trust to the creator of
Nasdaq-100 Shares or by the creator of Nasdaq-100 Shares to the Trustee on
behalf of the Trust, depending upon the respective amounts of the Income Net of
Expense Amount and the Balancing Amount. If the Cash Component has a positive
value (i.e., the sum of dividends on all Securities with ex-dividend dates
within the Accumulation Period, plus or minus the Balancing Amount, exceeds the
accrued expenses and liabilities of the Trust for such period), then the creator
of Nasdaq-100 Shares will be obligated to pay such amount to the Trustee on
behalf of the Trust in connection with an order to create Nasdaq-100 Shares.
Conversely, if the Cash Component has a negative value (i.e., the sum of
dividends on all Securities with ex-dividend dates within the Accumulation
Period, plus or minus the Balancing Amount, is less than the accrued expenses
and liabilities of the Trust for such period), then such Cash Component will be
paid to the entity placing an order to create Nasdaq-100 Shares by the Trustee
on behalf of the Trust.
(d) Requests to create Nasdaq-100 Shares in Creation Unit size
aggregations through the Distributor must be made by or through a Participating
Party or a DTC Participant who has executed a Nasdaq-100 Participant Agreement.
A Participating Party, pursuant to the Nasdaq- 100 Participant Agreement, agrees
to transfer the requisite Index Securities (or contracts to purchase such Index
Securities which are expected to be delivered through NSCC in a "regular
12
way" manner in three (3) NSCC Business Days) and the Cash Component, if
required, to the Trustee by means of the Nasdaq-100 Clearing Process, together
with such additional information as may be required by the Trustee. The
Nasdaq-100 Participant Agreement shall set forth the procedures for requesting
the creation of Creation Units and delivering Portfolio Deposits, making payment
of the Cash Component (either by the entity placing the order to create Nasdaq-
100 Shares or by the Trustee on behalf of the Trust), confirming requests for
creations, and for delivering Nasdaq-100 Shares in Creation Unit size
aggregations. The Trustee shall maintain, and make available for inspection
during normal business hours, a list of the entities that are parties to the
Nasdaq-100 Participant Agreement at its office at 000 Xxxxxxx Xxxxxx, Xxx Xxxx,
Xxx Xxxx 00000 or at such other address as may be specified to the Sponsor in
writing.
(e) Under certain circumstances, Nasdaq-100 Shares in Creation Unit
size aggregations may be created by or through a DTC Participant through the
Distributor outside the Nasdaq-100 Clearing Process. In such cases, the DTC
Participant, pursuant to the Nasdaq-100 Participant Agreement, shall effectuate
the transfer of the requisite Index Securities and the Cash Component, if
required, to the Trustee directly through DTC on the Business Day immediately
following the day on which the order is accepted by the Distributor, in exchange
for Nasdaq-100 Share delivery to the creating party directly through DTC not
later than on the third (3rd) Business Day following the day on which the order
is accepted by the Distributor. The Nasdaq- 100 Participant Agreement shall set
forth the procedures for requesting the creation of Creation Unit size
aggregations of Nasdaq-100 Shares outside the Nasdaq-100 Clearing Process.
(f) Upon receipt of a Portfolio Deposit or Deposits following
acceptance by the Distributor of an order to create Nasdaq-100 Shares, the
Trustee will (i) transfer Nasdaq-100 Shares thereby created in Creation Unit
size aggregations to the Depository in the name of Cede
13
& Co. for the account of such Depositor, if such Depositor is a DTC Participant,
or for the account of the DTC Participant acting on behalf of such Depositor,
and (ii) when required, deliver the Cash Component to the account of such
Depositor, if such Depositor is a DTC Participant, or for the account of the DTC
Participant acting on behalf of such Depositor, in each case in accordance with
the procedures set forth in the Nasdaq-100 Participant Agreement. The Trustee
shall acknowledge the deposit of such Portfolio Deposit(s) by recording on its
books the name of the Depositor and the aggregate number of Creation Unit(s)
created in respect of the Portfolio Deposit(s) so deposited. The Trustee shall
also debit or credit to the Trust, as applicable, (a) the Income Net of Expense
Amount, if any, made in connection with such Portfolio Deposit(s) and (b) the
Balancing Amount, if any. Any such amounts received by the Trust shall be
applied or distributed as provided in this Agreement.
(g) The identity and number of shares of the Index Securities required
for a Portfolio Deposit, which will change as the composition and weighting of
the Index Securities change, shall be determined in the manner specified in
Section 2.04. The Trustee shall, as set forth in this Agreement, determine the
number of shares of each of the Index Securities and the Cash Component for each
Portfolio Deposit. Such determination by the Trustee shall be final and binding
in connection with all Portfolio Deposits.
(h) The Trustee may reject an order to create Nasdaq-100 Shares in
Creation Unit size aggregations transmitted to it if the Depositor or group of
Depositors on obtaining the Nasdaq- 100 Shares ordered would own or appear to
own eighty percent (80%) or more of the outstanding Nasdaq-100 Shares and if,
pursuant to Section 351 of the Internal Revenue Code, such circumstance would
result in the Trust having a basis in the Index Securities deposited different
from the market value of such Index Securities on the date of such deposit. The
Trustee
14
shall have the right to require information regarding Nasdaq-100 Share ownership
pursuant to the Nasdaq-100 Participant Agreement and from the Depository, and to
rely thereon to the extent necessary to make the foregoing determination, as a
condition to the acceptance of an order to create Nasdaq-100 Shares. The Trustee
further reserves the absolute right to reject any Portfolio Deposit or any
component thereof (a) determined by it not to be in proper form; (b) that the
Trustee believes would have adverse tax consequences to the Trust or to
Beneficial Owners; (c) the acceptance for deposit of which would, in the opinion
of counsel, be unlawful; (d) that would otherwise, in the discretion of the
Trustee, have an adverse effect on the Trust or the rights of Beneficial Owners;
or (e) in the event of the inability of the creator to deliver or cause to be
delivered the Portfolio Deposit through the Depository or otherwise in the event
that circumstances outside the control of the Trustee make it for all practical
purposes not feasible to process creations of Nasdaq-100 Shares. The Trustee
will provide notice to the Depositor of its reasons for rejection of a creation
order in respect of a Portfolio Deposit or any component thereof. The Trustee
and the Sponsor 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 the creation
order itself.
(i) A transaction fee will be payable to the Trustee for its own
account in connection with each creation and each redemption of Creation Unit
size aggregations of Nasdaq-100 Shares (the "Transaction Fee"). The Transaction
Fee charged in connection with the creation of Creation Units through the
Nasdaq-100 Clearing Process shall be $1,000 per Participating Party per day,
regardless of the number of Creation Units created on such day by such
Participating Party. The Transaction Fee charged in connection with redemptions
through the Nasdaq-100 Clearing
15
Process shall be $1,000 per Participating Party per day, regardless of the
number of Creation Units redeemed on such day by such Participating Party.
(j) If one or more Creation Units are created or redeemed outside the
Nasdaq-100 Clearing Process by a Depositor on any one day, an additional amount
not to exceed three (3) times the Transaction Fee applicable for a Creation Unit
will be charged to the creator or redeemer, in part due to the increased expense
associated with settlement outside the Nasdaq-100 Clearing Process.
(k) The Transaction Fee may subsequently be waived, modified, reduced,
increased or otherwise changed by the Trustee, upon the consent of the Sponsor,
but will not in any event exceed 1/10th of one percent of the value of a
Creation Unit at the time of creation or redemption, as the case may be. From
time to time, and for such periods as the Sponsor and the Trustee together may
determine, the Transaction Fee (as well as any additional amounts charged in
connection with creations and/or redemptions outside the Nasdaq-100 Clearing
Process) may be increased, decreased, or otherwise modified or waived in its
entirety for certain numbers of Creation Units of Nasdaq-100 Shares created or
redeemed, or for creations and/or redemptions made under certain specified
circumstances, in each case without the consent of Beneficial Owners, but will
not in any event exceed 1/10 of one percent of the value of a Creation Unit at
the time of creation or redemption, as the case may be. The Sponsor also
reserves the right, from time to time, to vary the number of Nasdaq-100 Shares
per Creation Unit and such change may or may not be made in conjunction with a
change to the Transaction Fee. Prior to implementing such change, the Sponsor
shall cause the current Prospectus for the Trust to be amended to reflect any
such changes in the Transaction Fee. The Trustee shall make available upon
request the amount of the Transaction Fee in effect at any given time.
16
(l) So long as the Depository Agreement is in effect, Nasdaq-100 Shares
will be transferable solely through the book-entry system of the Depository as
provided in Section 3.11. The Depository may determine to discontinue providing
its service with respect to Nasdaq-100 Shares by giving notice to the Trustee
and the Sponsor pursuant to and in conformity with the provisions of the
Depository Agreement and discharging its responsibilities with respect thereto
under applicable law. Under such circumstances, the Trustee and the Sponsor
shall take action either to find a replacement for the Depository to perform its
functions at a comparable cost or, if such a replacement is unavailable, to
terminate the Trust.
Section 2.04 PORTFOLIO AND PORTFOLIO DEPOSIT ADJUSTMENTS.
(a) The Trustee will adjust the composition of the Portfolio from time
to time to conform, to the extent practicable, to changes in the composition
and/or weighting of the Index Securities. The Trustee will aggregate certain of
these adjustments and make conforming changes to the Portfolio; however,
adjustments will be made more frequently in the case of changes to the Index
that are significant as described below. To further the investment objective of
the Trust, minor misweightings will generally be permitted within the guidelines
set forth below. Specifically, the Trustee will be required to adjust the
composition of the Portfolio at any time that there is a change in the identity
of any Index Security (i.e., a substitution of one security in replacement of
another), which adjustment shall be made within three (3) Business Days before
or after the date on which the change in the identity of such Index Security is
scheduled to take effect at the close of the market. In addition, the Trustee
shall adjust the composition of the Portfolio at any time that the weighting of
any Security in the Portfolio varies in excess of one hundred and fifty percent
(150%) of the Misweighting Amount (set forth in the table below) from the
weighting of such Security in the Index (a "Misweighting"):
17
NET ASSET VALUE MISWEIGHTING
OF THE TRUST AMOUNT
Less than $25,000,000 0.25%
$25,000,000 - $99,999,999 0.20%
$100,000,000 - $499,999,999 0.10%
$500,000,000 - $999,999,999 0.05%
$1,000,000,000 and over 0.02%
The Trustee shall examine each Security in the Portfolio on each
Business Day, comparing the weighting of each such Security in the Portfolio to
the weighting of the corresponding Index Security in the Index, based on prices
at the close of the market on the preceding Business Day (a "Weighting
Analysis"). In the event that there is a Misweighting in any Security in excess
of one hundred and fifty percent (150%) of the applicable Misweighting Amount,
the Trustee shall calculate an adjustment to the Portfolio in order to bring the
Misweighting of such Security within the Misweighting Amount, based on prices at
the close of the market on the day on which such Misweighting occurs. Also, on a
monthly basis, the Trustee shall perform a Weighting Analysis for each Security
in the Portfolio, and in any case where there exists a Misweighting exceeding
one hundred percent (100%) of the applicable Misweighting Amount, the Trustee
shall calculate an adjustment to the Portfolio in order to bring the
Misweighting of such Security within the applicable Misweighting Amount, based
on prices at the close of the market on the day on which such Misweighting
occurs. In the case of any adjustment to the Portfolio due to a Misweighting as
described herein, the purchase or sale of securities necessitated by such
adjustment shall be made within three (3) Business Days of the day on which such
Misweighting occurs. In addition to the foregoing adjustments, the Trustee
reserves the right to make additional adjustments
18
periodically to Securities that may be misweighted by an amount within the
applicable Misweighting Amount in order to reduce the overall Misweighting of
the Portfolio.
(b) From time to time Nasdaq may make adjustments to the composition of
the Index as a result of a merger or acquisition involving one or more of the
Index Securities. In such cases, the Trust, as shareholder of securities of an
issuer that is the object of such merger or acquisition activity, may receive
various offers from would-be acquirors of the issuer. The Trustee will not be
permitted to accept any such offers until such time as it has been determined
that the securities of the issuer will be removed from the Index. In selling the
securities of such issuer after it has been determined that the security will be
removed from the Index, the Trust may receive, to the extent that market prices
do not provide a more attractive alternative, whatever consideration is being
offered to the shareholders of such issuer that have not tendered their shares
prior to such time. Any cash received in such transactions will be reinvested in
Index Securities in accordance with the criteria set forth in subparagraph (a)
above. Any securities received as a part of the consideration that are not Index
Securities will be sold as soon as practicable and the cash proceeds of such
sale will be reinvested in Index Securities in accordance with the criteria set
forth in subparagraph (a) above.
(c) Purchases and sales of securities resulting from the adjustments
described herein will be made in the share amounts dictated by the
specifications set forth herein, whether round lot or odd lot. All Portfolio
adjustments will be made as described herein unless such adjustments would cause
the Trust to lose its status as a Regulated Investment Company.
(d) Pursuant to these guidelines the Trustee will calculate the
required adjustments and will purchase and sell the appropriate securities. As a
result of the purchase and sale of securities in accordance with these
requirements, or the creation or redemption of Creation Units, the Trust
19
may hold some amount of residual cash (other than cash held temporarily due to
timing differences between the sale and purchase of securities or cash delivered
in lieu of Index Securities or undistributed income (including but not limited
to any Income Net of Expense Amount payments to the Trust) or undistributed
capital gains) as a result of such transactions, which amount shall not exceed
for more than five (5) consecutive Business Days 5/l0ths of 1 percent of the
aggregate value of the Securities. In the event that the Trustee has made all
required adjustments and is left with cash in excess of 5/l0ths of 1 percent of
the value of the Securities, the Trustee shall use such cash to purchase
additional Index Securities applying such cash first to purchase Index
Securities that are under-weighted in the Portfolio as compared to their
relative weightings in the Index, although the Misweighting of such Index
Securities may not be in excess of the applicable Misweighting Amount.
(e) All adjustments to the Portfolio held by the Trustee will be made
by the Trustee pursuant to the foregoing specifications and will be
non-discretionary. In addition, the Trustee shall have the power and shall be
required to adjust the composition of the Portfolio at any time if it determines
that such action is necessary to insure the continued qualification of the Trust
as a Regulated Investment Company, even if such adjustment will cause the
composition Portfolio to deviate from that of the Index. The adjustments
provided herein are intended to conform the composition and weighting of
securities in the Portfolio, to the extent practicable, to the composition and
weighting of the Index Securities. Such adjustments are based upon the Index as
it is determined by Nasdaq. To the extent that the method of determining the
Index is changed by Nasdaq in a manner that would affect the adjustments
provided for herein, the Trustee and the Sponsor shall have the right to amend
the Indenture and this Agreement, without the consent of
20
the Depository or Beneficial Owners, to conform the adjustments provided herein
to such changes so that the objective of tracking the Index is maintained.
(f) The Trustee will direct its securities transactions only to brokers
or dealers, which may include affiliates of the Trustee, from whom it expects to
obtain the most favorable prices for execution of orders. The net proceeds of
any sales of Securities shall either be reinvested in accordance with this
Section 2.04 or distributed in accordance with Section 3.07.
(g) On each Business Day after the Initial Date of Deposit (each such
day an "Adjustment Day"), the number of shares and/or identity of each of the
Index Securities in a Portfolio Deposit will be adjusted in accordance with the
following procedure. At the Evaluation Time on each Adjustment Day, the Trustee
will calculate the net asset value of the Trust as provided in Section 4.02. The
net asset value will be divided by the number of outstanding Nasdaq-100 Shares,
then multiplied by the number of Nasdaq-100 Shares in one Creation Unit size
aggregation, resulting in a net asset value per Creation Unit (the "NAV
Amount"). The Trustee will then calculate the number of shares (without
rounding) of each of the component stocks of the Index in a Portfolio Deposit
for the following Business Day ("Request Day"), such that (1) the market value
at the Evaluation Time on an Adjustment Day of the securities to be included in
the Portfolio Deposit on Request Day, together with the Income Net of Expense
Amount effective for requests to create or redeem on Adjustment Day, will equal
the NAV Amount and (2) the identity and weighting of each of the securities in a
Portfolio Deposit will mirror proportionately, to the extent practicable, the
identity and weighting of the securities in the Index, each as in effect on
Request Day. For each security, the number resulting from such calculation will
be rounded to the nearest whole share, with a fraction of 0.50 being rounded up.
The identities and number of shares of the securities so calculated will
constitute the securities
21
portion of the Portfolio Deposit effective on Request Day and thereafter until
the next subsequent Adjustment Day, as well as the Securities to be delivered by
the Trustee in the event of request for redemption of Nasdaq-100 Shares in
Creation Unit size aggregations on Request Day and thereafter until the
following Adjustment Day pursuant to Section 5.01. In addition to the foregoing
adjustments, in the event that there shall occur a stock split, stock dividend,
or reverse stock split with respect to any Index Security, the Portfolio Deposit
shall be adjusted to take account of such stock split, stock dividend, or
reverse stock split by applying the stock split, stock dividend or reverse stock
split multiple (e.g., in the event of a two-for-one stock split of an Index
Security, by doubling the number of shares of such Index Security in the
prescribed Portfolio Deposit); in each such case each Index Security will be
rounded to the nearest whole share, with a fraction of 0.50 being rounded up.
(h) On Request Day and on each day that a request for the creation or
redemption of Nasdaq-100 Shares in Creation Unit size aggregations is made, the
Trustee will calculate the market value of the securities portion of the
Portfolio Deposit as in effect on Request Day as of the Evaluation Time and add
or subtract to that amount, as applicable, the Income Net of Expense Amount
effective for requests to create or redeem on Request Day (such market value and
Income Net of Expense Amount are collectively referred to herein as the
"Portfolio Deposit Amount"). The Trustee will then calculate the NAV Amount,
based on the Evaluation Time on Request Day. The difference between the NAV
Amount so calculated and the Portfolio Deposit Amount shall be the "Balancing
Amount." The Balancing Amount serves the function of compensating for any
differences between the value of the Portfolio Deposit Amount and the NAV Amount
at the Evaluation Time on Request Day due to, for example, (1) differences in
the
22
market value of the securities in the Portfolio Deposit and the market value of
the Securities on Request Day and (2) any variances from the proper composition
of the Portfolio Deposit.
(i) Notwithstanding the foregoing, on any Adjustment Day on which (a)
no change in the identity and/or share weighting of any Index Security is
scheduled to take effect that would cause the Index divisor to be adjusted after
the close of the market on such Business Day,* and (b) no stock split, stock
dividend, or reverse stock split with respect to any Index Security has been
declared to take effect on the corresponding Request Day, the Trustee reserves
the right to forego making any adjustment to the securities portion of the
Portfolio Deposit and to use the composition and weighting of the Index
Securities for the most recently effective Portfolio Deposit for the Request Day
following such Adjustment Day. In addition, the Trustee further reserves the
right to calculate the adjustment to the number of shares and/or identity of the
Index Securities in a Portfolio Deposit as described above except that such
calculation would be employed for two (2) Business Days rather than one (1)
Business Day prior to Request Day. Notwithstanding the foregoing, the amount of
the Cash Component shall at all times be determined in accordance with the
procedures set forth above.
(j) In making the adjustments described in this Section 2.04, the
Trustee shall rely on information made publicly available by Nasdaq to third
parties as to the composition and weighting of the Index Securities. If the
Trustee becomes incapable of obtaining or processing such information or NSCC is
unable to receive such information from the Trustee on any Business Day, then
the Trustee shall use the composition and weighting of the Index Securities for
the most recently effective Portfolio Deposit for the purposes of all
adjustments and determinations described herein (including, without limitation,
determination of the securities portion of the
-----------------------------------
* Nasdaq normally publicly announces changes in identity and/or
weighting of the Index Securities in advance of the actual changes.
23
Portfolio Deposit) until the earlier of (a) such time as current information
with respect to the Index Securities is available or (b) three (3) consecutive
Business Days have elapsed. If such current information is not available and
three (3) consecutive Business Days have elapsed, the composition and weightings
of the Securities (as opposed to the Index Securities) shall be used for the
purposes of all adjustments and determinations herein (including, without
limitation, determination of the securities portion of the Portfolio Deposit)
until current information with respect to the Index Securities is available.
(k) The Trustee shall make available to NSCC prior to the commencement
of trading on each Business Day a list of the names and required number of
shares of each of the Index Securities in the current Portfolio Deposit as well
as the amount of the Income Net of Expense Amount effective through and
including the previous Business Day. Under certain extraordinary circumstances
which may make it impossible for the Trustee to provide such information to NSCC
on a given Business Day, NSCC shall use the information regarding the identity
and share amounts of the Index Securities of the Portfolio Deposit on the
previous Business Day.
(l) At such time as the Trustee gives written notice of the termination
of the Trust as provided in Section 9.01, from and after the date of such notice
the Trustee shall use the composition and weightings of the Securities held in
the Trust as of such date for the purpose and determination of all redemptions
or other required uses of the securities portion of the Portfolio Deposit.
(m) If the Trustee shall determine, in its discretion, that an Index
Security is likely to be unavailable or available in insufficient quantity for
delivery upon the creation of Nasdaq-100 Shares in Creation Unit size
aggregations for the following Business Day or for any period thereafter, the
Trustee shall have the right to include the cash equivalent value of such Index
24
Security (determined in accordance with the protocols listed in Section 4.01
hereof) in the Portfolio Deposit in the calculation of the Cash Component in
lieu of the inclusion of the Index Security in the securities portion of the
Portfolio Deposit. In the event that such a determination is made, the Portfolio
Deposit so constituted shall dictate the Index Securities to be delivered in
connection with the creation of Nasdaq-100 Shares in Creation Unit size
aggregations for all purposes hereunder until such time as the securities
portion of the Portfolio Deposit is subsequently adjusted. The amount of such
equivalent payment shall be used by the Trustee in accordance with the foregoing
guidelines regarding allowable Misweightings and permissible amounts of cash. In
such cases, the Trustee, to effectuate the policy described above, may purchase
the appropriate number of shares of the Index Security at the time such security
is available for purchase.
(n) In connection with the creation of Nasdaq-100 Shares, if an
investor states its belief that it is restricted by regulation or otherwise from
investing or engaging in a transaction in one or more Index Securities, the
Trustee, in its discretion, shall have the right to include the cash equivalent
value of such Index Security or Index Securities (determined in accordance with
the protocols listed in Section 4.01 hereof) in the Portfolio Deposit in the
calculation of the Cash Component in lieu of the inclusion of such Index
Security or Index Securities in the securities portion of the Portfolio Deposit
for the affected investor. The amount of such equivalent payment shall be used
by the Trustee in accordance with the foregoing guidelines regarding allowable
Misweightings and permissible amounts of cash. In such cases, the Trustee, to
effectuate the policy described above, may purchase the appropriate number of
shares of the Index Security that the investor was unable to purchase. In any
such case the creator shall pay the
25
Trustee the standard Transaction Fee plus an additional amount not to exceed
three (3) times the standard Transaction Fee.
(o) By the fifth Business Day of each month the Trustee shall furnish
the Sponsor a report showing, as of each day of the prior calendar month on
which trading in any one or more of the Index Securities occurred on the Nasdaq
Stock Market, the investment performance of the Trust in relation to that of the
Index, measured by way of tracking error in a reasonable and meaningful manner
and with an explanation as to the source(s) of any unusually large values of
such tracking error on any day or days in the month. Among such sources, the
Trustee will identify, but not otherwise be responsible for, the portion of
tracking error, if any, attributable to differences between (i) the closing
value of the Index available to the Trustee at the time it ordinarily calculates
the Trust's net asset value following its usual daily procedures and (ii)
subsequently reported changes to such closing Index value. The Trustee shall
also be available to explain the tracking error of the Trust upon request of the
Sponsor from time to time.
Section 2.05 BANK ACCOUNTS. The Trustee shall open and maintain
a separate bank account or accounts in the banking department of the Trustee in
the name, and for the benefit of, the Trust, subject only to draft or order by
the Trustee acting pursuant to the terms of this Agreement, and shall hold in
such account or accounts uninvested all cash received by it from or for the
account of the Trust. Each Series of the Trust shall be separately identified
and shall have an account or accounts unique to it. Except as provided for in
Section 3.04(f), neither the Trust, any Series of the Trust, the Depository or
any Beneficial Owner shall derive any benefit or receive any income or interest,
directly or indirectly, from this bank account or accounts or any balance
therein from time to time. Except as provided for in Section 3.04(f), all
benefit from such
26
bank account or accounts or any balance therein from time to time shall be the
property of the Trustee.
ARTICLE III
ADMINISTRATION OF TRUST
Section 3.01 COLLECTION OF INCOME.
(a) The Trustee shall collect, or claim on, any Income on the
Securities as it becomes payable (including the Income Net of Expense Amount
(when such amount is paid to the Trustee on behalf of the Trust by a creator of
Nasdaq-100 Shares) and that part of the proceeds of the sale or liquidation of
any of the Securities which represents accrued dividends or distributions and
capital gains thereon). Income so collected shall be held uninvested until
distributed pursuant to the provisions of this Agreement. The Trustee shall
accrue all Income to the Trust as of the date on which the Trust is entitled to
such Income as a holder of record of the Securities.
Section 3.02 COLLECTION OF OTHER MONEYS. All moneys other than
amounts received by the Trustee in respect of the Securities under this
Agreement as described in Section 3.01 or reinvested in the purchase of Index
Securities as provided in Section 2.04 (including, but not limited to, the
Balancing Amount, all moneys realized by the Trustee from the sale of options,
warrants or other similar rights received in respect of the Securities
representing dividends or distributions thereon and any capital gains
dividends), shall be credited to the Trust in accordance with generally accepted
accounting principles; provided, however, that moneys which are required to
cover the price of securities purchased by the Trust but not yet delivered shall
be held for such purchase. Moneys so collected shall be held uninvested. Any
moneys collected other than amounts collected pursuant to Section 3.01 in
respect of the Securities may be reinvested in
27
additional Securities in lieu of distributions of dividend payments and other
income, if necessary, as provided in Section 3.04.
Section 3.03 ESTABLISHMENT OF RESERVES. From time to time the
Trustee may, as required by generally accepted accounting principles, establish
reserves for any applicable taxes or other governmental charges that may be
payable out of the Trust Fund. The Trustee shall not be required to transmit to
the Depository for distribution to Beneficial Owners as described in Section
3.11 any amounts held in such reserves; provided, however, that if the Trustee,
in its sole discretion, determines that such amounts are no longer necessary for
payment of applicable taxes or other governmental charges, then such amounts
shall no longer be considered to be held in such reserves. If the Trust Fund has
been terminated or is in the process of termination, the Trustee shall transmit
to the Depository for distribution to Beneficial Owners as described in Section
3.11 such Beneficial Owners' interest in the amounts previously reserved in
accordance with Section 9.01.
Section 3.04 CERTAIN DEDUCTIONS AND DISTRIBUTIONS.
(a) On each Business Day, to the extent applicable, the Trustee shall
deduct from moneys held as described above and pay to itself individually the
amounts that it is on such day entitled to receive pursuant to Sections 8.01 and
8.04 on account of its services performed. Expenses of the Trust will be
annualized and accrued on each Business Day.
(b) The following charges are or may be accrued and paid by the Trust:
The (1) Trustee's fees as set forth below; (2) fees payable to
transfer agents for the provision of transfer agency services, if any; (3)
fees of the Trustee for extraordinary services performed under this
Agreement; (4) various governmental charges; (5) any taxes, fees and charges
payable by the Trustee with respect to Nasdaq-100 Shares (whether in Creation
Unit size
28
aggregations or otherwise); (6) expenses and costs of an action taken by a
Trustee Indemnified Party or a Sponsor Indemnified Party to protect the Trust
and the rights and interests of Beneficial Owners of Nasdaq-100 Shares (whether
in Creation Unit size aggregations or otherwise); (7) indemnification of the
Trustee or the Sponsor for any losses, liabilities or expenses incurred by them
in the administration of the Trust without gross negligence, bad faith, wilful
misconduct, wilful malfeasance on their part or reckless disregard of their
obligations and duties; (8) expenses incurred in contacting Beneficial Owners of
Nasdaq-100 Shares both during the life of the Trust and upon termination of the
Trust; (9) brokerage commissions incurred by the Trustee when acquiring or
selling Index Securities pursuant to the provisions hereof; and (10) other
out-of-pocket expenses of the Trust not otherwise stated above incurred pursuant
to actions permitted or required under this Agreement or the Indenture.
(c) In addition to those discussed above, the following expenses will
be charged to the Trust: (i) reimbursement to the Sponsor of amounts paid by it
to Nasdaq for all periods after September 30, 1999 in respect of annual
licensing fees due under the License Agreement pursuant to Section 10.03, (ii)
federal and state annual registration fees in keeping the registration of
Nasdaq-100 Shares on a current basis pursuant to Section 10.02 for the issuance
of Nasdaq-100 Shares, and (iii) expenses of the Sponsor relating to the printing
and distribution of marketing materials describing Nasdaq-100 Shares and the
Trust (including, but not limited to, associated legal, consulting, advertising,
and marketing costs and other out-of-pocket expenses such as printing).*
--------------------------------
* In accordance with the provisions of the Order, the expenses listed in
clauses (i), (ii), and (iii) above may only be charged by the Trustee
to the Trust in an amount equal to their actual costs, but in no case
may exceed 20 basis points (20/100 of 1%) of the net asset value of the
Trust per year. Further, if in any one year such costs exceed such 20
basis point limit, the Sponsor agrees to absorb such excess costs and
shall authorize the Trustee
(continued...)
29
(d) The Sponsor reserves the right to charge the Trust a special
sponsor fee from time to time, pursuant to the provisions of Section 8.01(j), in
reimbursement for certain services it may provide to the Trust which would
otherwise be provided by the Trustee in an amount not to exceed the actual cost
of providing such services.
(e) The Sponsor or the Trustee from time to time may voluntarily assume
some expenses or reimburse the Trust so that total expenses of the Trust are
reduced in order to assure that the Trust remains economically attractive to
current as well as prospective investors. Neither the Sponsor nor the Trustee is
obligated to do so and either one or both parties may discontinue such voluntary
assumption of expenses or reimbursement at any time without notice.
(f) If the income received by the Trust in the form of dividends and
other distributions on the Securities is insufficient to cover these
above-mentioned expenses, the Trustee may make advances to the Trust to cover
the expenses discussed above; otherwise the Trustee may sell Securities in an
amount sufficient to pay such expenses as provided in Section 3.06. The Trustee
may also, in its discretion, make advances to the Trust out of its own funds in
such amounts as may be necessary to permit (i) distributions to Beneficial
Owners via the Depository pursuant to this Section 3.04, (ii) payment of the
Cash Component to creators of Nasdaq-100 Shares pursuant to Section 2.03 (when
such Cash Component is payable by the Trustee on behalf of the Trust), and (iii)
payments in respect of redemptions of Nasdaq-100 Shares pursuant to Section
5.01. The Trustee will reimburse itself in the amount of any such advance,
together with interest thereon at a percentage rate equal to the then current
overnight federal funds rate plus Federal Reserve Board
--------------------------------
(...continued)
* not to carry such excess forward into the following calendar year. In
the event the Sponsor absorbs such excess costs during the year, the
Sponsor shall have the right to be repaid the amount of any expenses
absorbed to the extent that subsequently during the year such expenses
fall below the 20 basis point level per year.
30
requirements, by deducting such amounts from (1) dividend payments or other
income of the Trust when such payments or other income is received, (2) the
amounts earned or benefits derived by the Trustee on cash held by the Trustee
for the benefit of the Trust, and (3) the sale of Securities. Notwithstanding
the foregoing, in the event that any advance remains outstanding for more than
forty-five (45) Business Days, the Trustee shall sell Securities to reimburse
itself for the amount of such advance and any accrued interest thereon, unless
the Trustee, in its discretion, determines not to sell Securities because future
anticipated dividend payments on the Securities and other income of the Trust
are expected to be sufficient to reimburse the Trustee for such advance and
accrued interest thereon or because the Trustee otherwise determines that a sale
of Securities to reimburse itself for such advance is not advisable at such
time. At the time the Trustee sells Securities to reimburse itself for the
amount of an advance and accrued interest thereon, the Trustee shall first sell
Securities that are overweighted in the Portfolio as compared to their relative
weighting in the Index. The Trustee shall have a lien against and a security
interest in the assets of the Trust for the payment of such advances plus
interest as provided in Section 8.04.
(g) The Trustee shall compute on a daily basis the dividends
accumulated and declared for the Securities within each Accumulation Period. The
regular quarterly ex-dividend date for Nasdaq-100 Shares will be the third
Friday in each of March, June, September and December, unless such day is not a
Business Day, in which case the ex-dividend date will be the immediately
preceding Business Day (the "Ex-Dividend Date"). Beneficial Owners as reflected
on the records of the Depository and the DTC Participants on the second (2nd)
Business Day following the Ex-Dividend Date (the "Record Date") will be entitled
to receive an amount (if any) representing dividends accumulated on the
Securities through the quarterly Accumulation Period which ends
31
on the Business Day preceding such Ex-Dividend Date (including securities with
ex-dividend dates falling within such quarterly divided period) and other
income, if any, received by the Trust, net of fees and expenses of the Trust,
accrued daily for such period. In the event that Trust fees and expenses exceed
dividends accumulated on the Securities for such period, no distributions to
Beneficial Owners shall be made. In addition, no dividend distribution shall be
made for any given quarter, and such amount shall be rolled over into the next
quarterly Accumulation Period, if the aggregate dividend distribution so
determined would be in an amount less than 5/100 of one percent (0.05%) of the
net asset value of the Trust as of the Friday in the week immediately preceding
the Ex-Dividend Date, unless the Trustee determines that such dividend
distribution is required to be made to maintain the Trust's status as a
Regulated Investment Company or to avoid the imposition of income or excise
taxes on undistributed income. For the purposes of all dividend distributions,
dividends per Nasdaq-100 Share will be calculated at least to the nearest
1/100th of $0.01. On each Record Date, the Trustee shall compute the aggregate
amount of funds (if any) to be distributed through the Depository to Beneficial
Owners as described in Section 3.11 which shall be paid on the last Business Day
in the calendar month following each Ex-Dividend Date (the "Dividend Payment
Date"). On each Dividend Payment Date, the Trustee shall distribute to the
Depository (i) the aggregate amount of funds to be distributed to each
Beneficial Owner pursuant to this Section 3.04 and (ii) the aggregate amount of
Nasdaq-100 Shares and cash, if any, to Beneficial Owners participating in a
dividend reinvestment plan or service pursuant to Section 3.09, if and when
established. All such distributions shall be made in accordance with the
provisions of Section 3.11.
(h) The Trustee shall make additional distributions to Beneficial
Owners via the Depository as described in Section 3.11 at least annually with
respect to moneys received by the
32
Trust other than Income to the minimum extent necessary (i) to distribute the
entire annual investment company taxable income of the Trust, plus any net
capital gains (e.g., from sales of Securities in connection with adjustments to
the Portfolio, to generate cash for such distributions or to pay the fees and
expenses of the Trust), and (ii) to avoid imposition of the excise tax imposed
by Section 4982 of the Internal Revenue Code or any successor provision or any
similarly imposed tax on income or gains.
(i) The Trustee further reserves the right to declare special dividends
if, in its reasonable discretion, such action is necessary or advisable to
preserve the status of the Trust as a Regulated Investment Company or to avoid
imposition of income or excise taxes on undistributed income.
(j) The Trustee further reserves the right without the consent of the
Depository or the Beneficial Owners to vary the frequency with which periodic
distributions, if any, are made (e.g., from quarterly to semi-annually) if it is
determined by the Sponsor and the Trustee, in their discretion, that such a
variance would be advisable to facilitate compliance with the rules and
regulations applicable to Regulated Investment Companies or would otherwise be
advantageous to the Trust. In addition, the Trustee reserves the right to change
the regular Ex-Dividend Date for Nasdaq-100 Shares to another date if it is
reasonably determined jointly by the Sponsor and the Trustee, in their
discretion, that such change would be advantageous to the Trust. Notice of any
such variance or change (which notice shall include changes to the Record Date,
the Ex-Dividend Date, the Dividend Payment Date and the Accumulation Period
resulting from such variance) shall be provided to Beneficial Owners via the
Depository and the DTC Participants.
Section 3.05 STATEMENTS AND REPORTS. After the end of each
fiscal year and within the time period required by applicable laws, rules and
regulations, the Trustee will furnish
33
to the DTC Participants for distribution to each person who was a Beneficial
Owner of Nasdaq- 100 Shares at the end of such fiscal year, an annual report of
the Trust containing financial statements audited by independent accountants of
nationally recognized standing and such other information as may be required by
such laws, rules and regulations. With each distribution, the Trustee will
furnish to the DTC Participants for distribution to Beneficial Owners a
statement setting forth the amount being distributed expressed as a dollar
amount per Nasdaq-100 Share.
Section 3.06 PURCHASE AND SALE OF SECURITIES.
(a) The Trustee shall be required to purchase or sell Index Securities
to conform the Portfolio to changes in the Index as described in Section 2.04.
The Trustee shall calculate the adjustments to the Portfolio and place the
appropriate buy or sell orders at such times and in the manner so prescribed in
Section 2.04.
(b) The Trustee is empowered, in its discretion, to sell the requisite
amount of Securities held in the Trust Fund to permit the payment of
distributions pursuant to Section 3.04 in the event that the Trustee has
insufficient amounts available in the Trust Fund to make such distributions. The
Trustee is also empowered, in its discretion, to sell the requisite amount of
Securities held in the Trust Fund to permit (i) payments of the Cash Component
to creators of Nasdaq-100 Shares pursuant to Section 2.03 (when such Cash
Component is payable by the Trustee on behalf of the Trust to creators of
Nasdaq-100 Shares), (ii) payment of Trust fees and expenses, (iii) payments in
respect of the redemption of Nasdaq-100 Shares pursuant to Section 5.01, and
(iv) payment of advances made by the Trustee. In the case of any advance, the
Trustee will reimburse itself for such advance plus interest in accordance with
Section 3.04(f) and shall have a lien against and a security interest in the
assets of the Trust for the payment of such advance plus interest as provided in
Section 8.04.
34
(c) The Trustee shall also sell Securities whenever it determines that
projected annualized fees and expenses accrued on a daily basis exceed projected
annualized dividends and other Trust income accrued on a daily basis by more
than 1/100 of one percent (0.01%) of the net asset value of the Trust. Whenever
the 0.01% threshold is exceeded, the Trustee shall sell sufficient Securities to
cover such excess no later than the next occasion it is required to make
adjustments to the Portfolio due to a Misweighting pursuant to Section 2.04,
unless the Trustee determines, in its discretion, that such a sale is
unnecessary because the cash to be generated is not needed by the Trust at that
time for the payment of expenses then due or because the Trustee otherwise
determines that such sale is not warranted or advisable.
(d) At the time the Trustee sells Securities pursuant to this Section,
the Trustee shall first sell Securities that are overweighted in the Portfolio
as compared to their relative weighting in the Index. Notwithstanding any
provision contained in this Agreement, the Trustee shall not sell any Securities
in the Portfolio unless such sale is required as a Portfolio adjustment pursuant
to and in accordance with Section 2.04 or is otherwise permitted in accordance
with the provisions of this Section and Sections 3.04, 3.07, 5.01 or 8.04. In
the case of each and every sale required hereunder, the Trustee shall not be
responsible for (i) any depreciation or loss incurred by reason of such sale,
(ii) underperformance of the Trust in relation to that of the Index by reason of
such sale, and (iii) any out of the ordinary costs as a result of such sale.
(e) If at any time the issuer of any Security fails to pay or declare
an anticipated dividend or interest and provision for such payment has not been
duly made, or there has been a material event affecting an issuer's Security or
the price of an Index Security, the Trustee may not sell such Securities unless
and until such Securities are removed from the Index or as otherwise permitted
in accordance with this Section and Section 3.07. The Trustee shall not be
liable or
35
responsible in an way for depreciation or loss incurred by reason of the failure
to make a sale when not required by the terms of this Agreement.
Section 3.07 SUBSTITUTE SECURITIES. In the event that an offer
by the issuer of any of the Securities held in the Portfolio shall be made to
issue new securities in exchange or substitution for any issue of Securities,
the Trustee shall not accept such offer or take any other action with respect
thereto until such time as it has been determined that the securities of the
issuer will be removed from the Index. In the event that a security of an issuer
is removed from the Index as a result of the consummation of merger or
acquisition activity of such issuer and the Trust receives cash in exchange for
the Security of such issuer held in the Portfolio, the Trustee shall reinvest
such cash in Index Securities as provided in Section 2.04. If the Trust receives
any securities in exchange for the Security of the issuer held in the Portfolio
and removed from the Index, and such securities received in exchange are not
included in the Index, the Trustee shall sell such securities as soon as
practicable and reinvest the proceeds of the sale in Index Securities as
provided in Section 2.04.
Section 3.08 COUNSEL. The Trustee may employ from time to time
counsel to act on behalf of the Trust and perform any legal services in
connection with the Securities and the Trust, including, among others, any legal
matters relating to (i) the possible disposition or acquisition of any
Securities pursuant to any provision hereof and (ii) the administration of the
Trust. The fees and expenses of such counsel shall be paid by the Trustee from
the assets of the Trust.
36
Section 3.09 DIVIDEND REINVESTMENT.
(a) The Sponsor reserves the right to make a dividend reinvestment plan
or service available to Beneficial Owners of one or more Series of the Trust for
reinvestment of their cash proceeds, including but not limited to the Dividend
Reinvestment Service as provided for in subsection (b) below, and this Agreement
may be amended to the extent necessary to implement such plan or service without
the consent of any Beneficial Owner. The Sponsor shall cause the Prospectus for
the affected Series to be amended to include disclosure concerning such plan or
service and the Trustee, upon the direction of the Sponsor, shall give notice to
all Beneficial Owners via the Depository of such plan or service, in accordance
with the provisions of Section 3.11.
(b) The Sponsor may direct the Trustee to make the book-entry dividend
reinvestment service of the Depository available for use by Beneficial Owners
(the "Dividend Reinvestment Service"). The Trustee shall, as of each Record
Date, establish the number of Beneficial Owners currently participating in the
Dividend Reinvestment Service ("Reinvesting Beneficial Owners"). On or before
each Dividend Payment Date following each such Record Date, the Trustee shall
deduct from the available cash as of the close of business on such Dividend
Payment Date the sum of all amounts due and owing all such Reinvesting
Beneficial Owners (the "Available Cash"). The Trustee may then utilize such
Available Cash to obtain Index Securities in an amount necessary to create the
requisite number of Nasdaq-100 Shares valued at the Evaluation Time on the
Dividend Payment Date. The Trustee is authorized to (1) deposit additional
Portfolio Deposits in accordance with the provisions of Section 2.02, (2)
deposit one or more Index Securities as is necessary to adjust for a
Misweighting in accordance with the provisions of Section 2.04 or (3) utilize a
combination of deposits in accordance with clauses (1) and (2) above in
connection with
37
the issuance of the appropriate amount and number of corresponding Nasdaq-100
Shares to be distributed to all Reinvesting Beneficial Owners via the
Depository. Alternatively, the Trustee, in its discretion, may utilize such
Available Cash to purchase the requisite number of Nasdaq-100 Shares on the open
market, valued at the Evaluation Time on the Dividend Payment Date, to be
distributed to all Reinvesting Beneficial Owners via the Depository. The Trustee
is authorized to create whole Nasdaq-100 Shares only in this manner; no
fractional Nasdaq-100 Shares shall be created or distributed. Cash balances, if
any, remaining after the requisite number of whole Nasdaq-100 Shares have been
created or purchased on the open market shall be distributed, on a PRO RATA
basis, to all Reinvesting Beneficial Owners in the manner provided in Section
3.04(g). The Trustee is authorized to pay all brokerage commissions, if any,
necessary to acquire Index Securities for the creation of Nasdaq-100 Shares, or
in purchasing Nasdaq-100 Shares on the open market, in connection with the
Dividend Reinvestment Service and such commissions shall be treated as an
expense of the Trust pursuant to the provisions of Section 3.04.
Section 3.10 ACTION BY TRUSTEE REGARDING VOTING. The Trustee
shall have the exclusive right to vote all of the voting Securities of the
Trust, and shall vote each of the Securities in the same proportion as all
shares of each such Security are voted by all the shareholders of each such
Security to the extent permissible, but if not permitted, shall abstain from
voting. The Trustee shall not be liable to any person for any action or failure
to take action with respect to this Section 3.10.
Section 3.11 BOOK-ENTRY-ONLY SYSTEM.
(a) The Trustee shall keep or cause to be kept a share register (the
"Share Register") in which, subject to such reasonable regulations as it may
prescribe, the Trustee shall provide for the registration of ownership of
Nasdaq-100 Shares. Nasdaq-100 Shares will be issued in book-
38
entry form only, and the Trustee shall cause the Share Register to reflect such
issuance of Nasdaq-100 Shares in such amounts as have been issued, and such
Nasdaq-100 Shares shall be registered on the Share Register in the name of the
owner thereof. After the Initial Date of Deposit, Nasdaq-100 Shares shall only
be registered in the name of the Depository or its agent or nominee. Upon such
issuance and registration on the Share Register, Nasdaq-100 Shares shall be
validly issued and entitled to the benefits of this Agreement and the Indenture.
Certificates will not be issued for Nasdaq-100 Shares in Creation Unit size
aggregations or otherwise.
(b) On the Initial Date of Deposit, the Trustee shall record in the
Share Register the number of Creation Unit size aggregations of Nasdaq-100
Shares delivered in exchange for the Initial Portfolio Deposit as set forth in
the Indenture, which Nasdaq-100 Shares shall be registered in the name of the
Depositor, and such Depositor shall receive a confirmation of such registration
from the Trustee. The Depository will act as securities depository for
Nasdaq-100 Shares prior to the day that the Sponsor and the Trustee shall
jointly announce that further Portfolio Deposits will be accepted in accordance
with Section 2.02(b). On such day, the Nasdaq-100 Shares issued on the Initial
Date of Deposit shall be re-registered by the Trustee on the Share Register in
the name of Cede & Co., as nominee for the Depository, for the account of the
initial Depositor, if such Depositor is a DTC Participant, or for the account of
the DTC Participant through which the initial Depositor maintains a custodial
relationship, if the initial Depositor is not a DTC Participant. Thereafter,
Cede & Co. will be the registered owner in the Share Register of the aggregate
amount of Nasdaq-100 Shares outstanding at all times. The Trustee shall further
record on the Share Register any change in the number of Nasdaq-100 Shares
outstanding and registered in the name of Cede & Co. in order to reflect
creations or redemptions of Nasdaq-100 Shares.
39
(c) Upon the settlement date of any creation or redemption of
Nasdaq-100 Shares, the Trustee will notify the Depository or NSCC, as the case
may be, of the DTC Participant the accounts of which the Depository will credit
or debit, on its book-entry registration and transfer system, the number of
Nasdaq-100 Shares so created or redeemed. Beneficial ownership of Nasdaq-100
Shares will be limited to participants of the Depository (the "DTC
Participants"), others that maintain a custodial relationship with a DTC
Participant, either directly or indirectly (the "Indirect Participant"), and
persons holding interests through DTC Participants and Indirect Participants.
Ownership of beneficial interests in Nasdaq-100 Shares (owners of such
beneficial interests are referred to herein as "Beneficial Owners") will be
shown on, and the transfer of ownership will be effected only through, records
maintained by the Depository (with respect to DTC Participants) and on the
records of DTC Participants (with respect to Indirect Participants and
Beneficial Owners that are not DTC Participants).
(d) So long as Cede & Co., as nominee of the Depository, is the
registered owner of Nasdaq-100 Shares, references herein to the registered or
record owners of Nasdaq-100 Shares shall mean Cede & Co. and shall not mean the
Beneficial Owners of Nasdaq-100 Shares. Beneficial Owners of Nasdaq-100 Shares
will not be entitled to have Nasdaq-100 Shares registered in their names, will
not receive or be entitled to receive physical delivery of certificates in
definitive form, and will not be considered the record or registered holder
thereof under this Agreement.
(e) As described above, the Trustee will recognize the Depository or
its nominee as the owner of all Nasdaq-100 Shares for all purposes except as
expressly set forth in this Agreement. Where notices, statements, and other
communications are to be conveyed to Beneficial Owners, the Trustee shall first
request from the Depository, at the expense of the Trust,
40
a listing of the Nasdaq-100 Share holdings of each DTC Participant. The Trustee
shall inquire of each such DTC Participant of which it has notice from the
Depository that it is a holder of Nasdaq-100 Shares, as to the number of
Beneficial Owners holding Nasdaq-100 Shares, directly or indirectly, through
such DTC Participant. The Trustee shall provide each such DTC Participant with
sufficient copies of such notice, statement, or other communication, in such
form, number, and at such place as such DTC Participant may reasonably request,
in order that such notice, statement, or communication may be transmitted by
such DTC Participant, directly or indirectly, to such Beneficial Owners. In
addition, the Trust shall pay to each such DTC Participant an amount as
reimbursement for the expenses attendant to such transmittal, all subject to
applicable statutory and regulatory requirements. The Trustee and the Sponsor
may rely and shall be fully protected in relying upon information furnished by
the Depository and its DTC Participants and Indirect Participants with respect
to the Beneficial Owners.
(f) Nasdaq-100 Share distributions shall be made to the Depository or
its nominee, Cede & Co., as the registered owner of all Nasdaq-100 Shares.
Neither the Trustee nor the Sponsor will have any responsibility or liability
for any aspects of the records of the Depository, DTC Participants or Indirect
Participants relating to or notices to Beneficial Owners, or payments by the
Depository, DTC Participants or Indirect Participants made on account of
beneficial ownership interests in Nasdaq-100 Shares, or for maintaining,
supervising, or reviewing any records relating to such beneficial ownership
interests or for any other aspect of the relationship between the Depository and
the DTC Participants or the relationship between such DTC Participants and the
Indirect Participants and Beneficial Owners owning through such DTC
Participants.
41
(g) The Depository may determine to discontinue providing its services
with respect to Nasdaq-100 Shares at any time by giving notice to the Trustee
and the Sponsor pursuant to and in conformity with the provisions of the
Depository Agreement and discharging its responsibilities with respect thereto
under applicable law. Under such circumstances, the Trustee and the Sponsor
shall take action jointly either to find a replacement for the Depository to
perform its functions at a comparable cost or, if such a replacement is
unavailable, to terminate the Trust as provided in Article IX.
ARTICLE IV
EVALUATION OF SECURITIES AND TRUST FUND
Section 4.01 EVALUATION OF SECURITIES. The evaluation with
respect to the aggregate value of the Securities as used in calculating the net
asset value of the Trust shall be made as follows: the value of a Security shall
generally be based on the closing sale price for the Security on that day
(unless the Trustee deems such price inappropriate as a basis for evaluation) on
the Nasdaq Stock Market or, if there is no such appropriate closing sale price
on the Nasdaq Stock Market, at the closing bid price (unless the Trustee deems
such price inappropriate as a basis for evaluation). If a Security is not so
quoted on the Nasdaq Stock Market or, if so quoted and the principal market
therefor is other than on the Nasdaq Stock Market or there is no such closing
bid price available, such evaluation shall generally be made by the Trustee in
good faith based (a) on the closing price for the Security on another market on
which the security is traded (unless the Trustee deems such price inappropriate
as a basis for evaluation) or if there is no such appropriate closing price, at
the closing bid price on such other market, (b) on current bid prices on the
Nasdaq Stock Market or such other markets, (c) if bid prices are not available,
on the basis
42
of current bid prices for comparable securities, (d) by the Trustee's appraising
the value of the Securities in good faith on the bid side of the market, or (e)
by any combination thereof.
Section 4.02 TRUST FUND EVALUATION. As of the Evaluation Time
(l) on each Business Day and (2) upon termination of the Trust, the Trustee
shall, in determining the net asset value of the Trust: (a) subtract all
liabilities of the Trust (including accrued expenses and dividends payable) from
the total value of the Trust's investments and other assets and (b) divide the
resulting figure by the total number of outstanding Nasdaq-100 Shares. The
resulting figure is herein called a "Trust Fund Evaluation." The amount of cash
held by the Trust (including dividends receivable on stocks trading ex-dividend)
is computed as of such Evaluation Time on each Business Day.
Section 4.03 RESPONSIBILITY OF THE TRUSTEE. The Sponsor and the
Beneficial Owners may rely on an evaluation furnished by the Trustee, and the
Sponsor shall have no responsibility for the accuracy thereof. The
determinations made by the Trustee hereunder shall be made in good faith upon
the basis of, and the Trustee shall not be liable for any errors contained in,
information reasonably available to it. The Trustee shall be under no liability
to the Sponsor, or to Beneficial Owners, for errors in judgment; provided,
however, that this provision shall not protect the Trustee against any liability
to which it would otherwise be subject by reason of wilful misfeasance, wilful
misconduct, bad faith or gross negligence in the performance of its duties or by
reason of its reckless disregard of its obligations and duties hereunder.
43
ARTICLE V
REDEMPTION OF CREATION UNITS
Section 5.01 REDEMPTION OF NASDAQ-100 SHARES IN CREATION UNIT
SIZE AGGREGATIONS.
(a) Nasdaq-100 Shares in Creation Unit size aggregations will be
redeemable in kind only when Creation Unit size aggregations are owned by a
Beneficial Owner and held in the account of a single Participating Party (with
respect to redemptions through the Nasdaq-100 Clearing Process) or a single DTC
Participant (with respect to redemptions outside the Nasdaq- 100 Clearing
Process), in each case by submitting a request for redemption to the Trustee in
the manner specified below and in accordance with the Nasdaq-100 Participant
Agreement.
(b) Requests for redemptions of Creation Units may be made on any
Business Day to the Trustee through the Nasdaq-100 Clearing Process. Requests
for redemptions of Creation Units may also be made directly to the Trustee
outside the Nasdaq-100 Clearing Process on any Business Day. Requests for
redemptions shall not be made to the Distributor. In the case of redemptions
made through the Nasdaq-100 Clearing Process, the Transaction Fee will be
deducted from the amount delivered to the redeemer or added to the amount owed
by the redeemer to the Trustee, as described below. In case of redemptions
tendered directly to the Trustee outside the Nasdaq-100 Clearing Process, the
Transaction Fee plus an additional amount not to exceed three (3) times the
Transaction Fee applicable for a Creation Unit will also be deducted from the
amount delivered to the redeemer or added to the amount owed by the redeemer to
the Trustee, as described below. In all cases, both the tender of Nasdaq-100
Shares for redemption and distributions to the redeemer (or payments to the
Trustee, as applicable) in respect of Nasdaq-100 Shares redeemed will be
effected through the Depository, the relevant
44
DTC Participant(s), and the Beneficial Owner thereof or the relevant DTC
Participant, as the case may be.
(c) The Trustee will transfer to the DTC Participant acting for the
redeeming Beneficial Owner via the Depository a portfolio of Securities for each
Creation Unit size aggregation of Nasdaq-100 Shares delivered, in most cases
(other than as provided in the next sentence and in subsections (f), (g) and (h)
hereof) identical in composition and weighting to the securities portion of a
Portfolio Deposit as in effect on the date a request for redemption is deemed
received by the Trustee. At and after such time as notice of the termination of
the Trust has been given, the portfolio of securities so delivered shall be
identical in composition and weighting to the Securities in the Trust on the
date of such notice. Each redemption also includes a cash amount, the "Cash
Redemption Amount," which will either be paid to the Trustee on behalf of the
Trust by or for the redeemer or paid to or for the redeemer by the Trustee on
behalf of the Trust as described below. On any given Business Day the Cash
Redemption Amount is an amount in most cases (other than as provided in
subsections (f), (g) and (h) hereof) identical to the amount of the Cash
Component and is equal to the Income Net of Expense Amount plus or minus the
Balancing Amount. To the extent the Cash Redemption Amount has a positive value,
then the Trustee on behalf of the Trust will transfer payment thereof via the
relevant DTC Participant(s) for the redeeming Beneficial Owner. Conversely, to
the extent the Cash Redemption Amount has a negative value, then such Beneficial
Owner is required to deliver payment of such amount to the Trustee on behalf of
the Trust. In the case of redemptions made through the Nasdaq-100 Clearing
Process, the Trustee on behalf of the Trust will effect a transfer of the Cash
Redemption Amount (if required) and the securities for the redeeming Beneficial
Owner by the third (3rd) NSCC Business Day following the date on which request
for redemption
45
is deemed received in accordance with the procedures in the Nasdaq-100
Participant Agreement. In the case of redemptions made outside the Nasdaq-100
Clearing Process, the Trustee on behalf of the Trust will transfer the Cash
Redemption Amount (if required) and the securities for the redeeming Beneficial
Owner by the third (3rd) Business Day following the date on which the request
for redemption is deemed received in accordance with the procedures in the
Nasdaq-100 Participant Agreement. Where the Cash Redemption Amount is payable by
the redeemer to the Trustee, the redeeming Beneficial Owner (via the Depository
and the relevant DTC Participants(s)) is required to make payment of such cash
amount by the third (3rd) NSCC Business Day, for redemptions made through the
Nasdaq-100 Clearing Process, or the first (1st) Business Day, for redemptions
outside the Nasdaq-100 Clearing Process, following the date on which the request
for redemption is deemed received, in each case in accordance with the
Nasdaq-100 Participant Agreement. The Trustee will cancel all Nasdaq-100 Shares
delivered upon redemption.
(d) If the income received by the Trust in the form of dividends and
other distributions on the Securities is insufficient to allow distribution of
the Cash Redemption Amount to a redeemer of Nasdaq-100 Shares, the Trustee may
advance out of its own funds any amounts necessary in respect of redemptions of
Nasdaq-100 Shares; otherwise, the Trustee may sell Securities in an amount
sufficient to effect such redemptions in accordance with Section 3.06. The
Trustee will reimburse itself for such advance plus interest in accordance with
Section 3.04(f) and shall have a security interest for the payment of such
monies pursuant to Section 8.04.
(e) The Trustee may, in its discretion, and will when so directed by
the Sponsor, suspend the right of redemption, or postpone the date of payment of
the net asset value for more than five (5) Business Days following the date on
which the request for redemption is received by
46
the Trustee (1) for any period during which the New York Stock Exchange is
closed or trading is suspended; (2) for any period during which an emergency
exists as a result of which disposal or evaluation of the Securities is not
reasonably practicable; or (3) for such other period as the Commission may by
order permit for the protection of Beneficial Owners. Neither the Sponsor nor
the Trustee is liable to any person or in any way for any loss or damages which
may result from any such suspension or postponement.
(f) In the event that the Trustee determines, in its discretion, that
an Index Security is likely to be unavailable or available in insufficient
quantity for delivery by the Trust upon the redemption of Nasdaq-100 Shares in
Creation Unit size aggregations, the cash equivalent value, based on the market
value of such Index Security (determined in accordance with the protocols listed
in Section 4.01 hereof ) at the close of the market on the date the redemption
request is deemed received by the Trustee, may be included as a part of the Cash
Redemption Amount, in lieu of delivering such Index Security as part of the
portfolio of securities delivered to a redeemer.
(g) Upon the specific request of a redeemer, the Trustee may, in its
discretion, redeem Nasdaq-100 Shares in Creation Unit size aggregations
delivered by such redeemer, either in whole or in part, by providing such
redeemer with a portfolio of Securities then held by the Trust which (l) differs
in exact composition and/or weighting from the Index Securities at such time (2)
but does not differ in net asset value from the then-current Portfolio Deposit.
The Trustee may agree to such redemption if the Trustee were to determine that
such differing portfolio of Securities would be appropriate such as, among
others, in order to maintain the Portfolio's correlation to the composition and
weighting of the Index, for example, in connection with a replacement of one of
the Index Securities (e.g., due to a merger, acquisition, or bankruptcy). In
determining whether
47
to agree to such a redemption, the Trustee may consult with counsel as to the
tax consequences to the Trust from such a redemption or on such other matters as
it may deem appropriate.
(h) In connection with the redemption of Nasdaq-100 Shares, if an
investor states its belief that it is restricted by regulation or otherwise from
investing or engaging in a transaction in one or more Index Securities, the
Trustee, in its discretion, shall have the right to include the cash equivalent
value of such Index Security or Index Securities (determined in accordance with
the protocols listed in Section 4.01 hereof) in the calculation of the Cash
Redemption Amount, in lieu of delivering such Index Security as part of the
portfolio of securities delivered to such redeeming investor. In any such case,
the investor shall pay the Trustee the standard Transaction Fee plus an
additional amount not to exceed three (3) times the standard Transaction Fee,
regardless of whether the redemption is through the Nasdaq-100 Clearing Process
or outside of the Nasdaq- 100 Clearing Process.
ARTICLE VI
TRANSFER OF NASDAQ-100 SHARES IN
CREATION UNIT SIZE AGGREGATIONS
Section 6.01 TRANSFER OF NASDAQ-100 SHARES IN CREATION UNIT
SIZE AGGREGATIONS. Nasdaq-100 Shares in Creation Unit size aggregations may be
transferred only through the book- entry system of the Depository as provided in
Section 3.11. Beneficial Owners have the rights accorded to holders of a
securities entitlement as against their securities intermediary under applicable
law.
48
ARTICLE VII
SPONSOR
Section 7.01 RESPONSIBILITIES AND DUTIES.
In addition to and notwithstanding the other duties, rights, and
responsibilities of the Sponsor as otherwise set forth in this Agreement, the
duties, rights, and responsibilities of the Sponsor are further defined as
follows:
(a) The Sponsor presently intends, but is not obligated, to cause to be
announced, or may designate other persons to announce, on each Business Day, a
list of the names and the required number of shares for each of the Index
Securities in the current Portfolio Deposit as well as the Income Net of Expense
Amount effective through and including the previous Business Day per outstanding
Nasdaq-100 Share as shall be provided to it by the Trustee. The Sponsor may
choose within its discretion to determine and cause to be announced, frequently
throughout each Business Day, a number representing, on a per Nasdaq-100 Share
basis, the sum of the Income Net of Expense Amount effective through and
including the previous Business Day plus the current value of the securities
portion of a Portfolio Deposit as in effect on such day (which value will
occasionally include a cash- in-lieu amount to compensate for the omission of a
particular Index Security from such Portfolio Deposit). If the Sponsor elects to
make such information available, it will be calculated based upon the best
information available to the Sponsor and may be calculated by other persons
designated to do so by the Sponsor.
(b) The Sponsor reserves the right to direct the Trustee to declare a
split or reverse split in the number of Nasdaq-100 Shares outstanding in the
event that the per Nasdaq-100 Share price in the secondary market changes to an
amount that the Sponsor believes falls outside a desirable retail range. The
Sponsor also reserves the right, but is not obligated, to direct the
49
Trustee to make a corresponding change in the number of Nasdaq-100 Shares
constituting a Creation Unit. For example, if a 2-for-1 split were declared and
the Sponsor also determined to make a corresponding change in the number of
Nasdaq-100 Shares per Creation Unit, the number of Nasdaq-100 Shares in a
Creation Unit would double. Prior to implementing such change, the Sponsor shall
cause the current Prospectus for the Trust to be amended to reflect any such
change.
Section 7.02 CERTAIN MATTERS REGARDING SUCCESSOR SPONSOR. The
covenants, provisions, and agreements herein contained shall in every case be
binding upon any successor to the business of the Sponsor, except that no
successor Sponsor may be a partnership. In the event of an assignment by the
Sponsor to a successor corporation, limited liability company, or business trust
as permitted by the next following sentence, the Sponsor shall be relieved of
all further liability under this Agreement. The Sponsor may transfer all or
substantially all of its assets to a corporation, limited liability company, or
business trust which carries on the business of the Sponsor, if at the time of
such transfer such successor duly assumes all the obligations of the Sponsor
under this Agreement.
Section 7.03 RESIGNATION, DISCHARGE OR REMOVAL OF SPONSOR;
SUCCESSORS.
(a) If at any time the Sponsor desires to resign its position as
Sponsor hereunder, it may resign by delivering to the Trustee an instrument of
resignation executed by the Sponsor. Such resignation shall not become effective
until the earlier of (i) the appointment by the Trustee of a successor Sponsor
to assume, with such compensation from the Trust Fund as the Trustee may deem
reasonable under the circumstances but not exceeding the amounts prescribed by
the Commission in accordance with Section 26(a)(2)(C) of the Investment Company
Act of 1940, or any successor provision, the duties and obligations of the
resigning Sponsor hereunder by an
50
instrument of appointment and assumption executed by the Trustee and the
successor Sponsor; or (ii) the Trustee shall have agreed to act as Sponsor
hereunder succeeding to all the rights and duties of the resigning Sponsor
without appointing a successor Sponsor and without terminating this Agreement or
the Indenture. The Trustee shall terminate this Agreement and the Indenture and
liquidate the Trust pursuant to Section 9.01 if, within sixty (60) days
following the date on which a notice of resignation shall have been delivered by
the Sponsor, a successor Sponsor has not been appointed or the Trustee has not
agreed to act as Sponsor hereunder.
(b) If the Sponsor shall fail to undertake or perform or shall become
incapable of undertaking or performing any of the duties which by the terms of
this Agreement and the Indenture are required to be undertaken or performed by
it, and such failure shall not be cured within fifteen (15) Business Days
following receipt of notice from the Trustee of such failure, or if the Sponsor
shall be adjudged a bankrupt or insolvent, or a receiver of the Sponsor or of
its property shall be appointed, or a trustee or liquidator or any public
officer shall take charge or control of the Sponsor or of its property or
affairs for the purpose of rehabilitation, conservation, or liquidation, then in
any such case, the Trustee may do any one or more of the following: (i) appoint
a successor Sponsor to assume, with such compensation from the Trust Fund as the
Trustee may deem reasonable under the circumstances, but not exceeding the
reasonable amounts prescribed by the Commission in accordance with Section
26(a)(2)(C) of the Investment Company Act of 1940, or any successor provision,
the duties and obligations of the resigning Sponsor hereunder by an instrument
of appointment and assumption executed by the Trustee and the successor Sponsor;
or (ii) agree to act as Sponsor hereunder without appointing a successor Sponsor
and without terminating this Agreement or the Indenture; or (iii) terminate this
Agreement and the Indenture and liquidate the Trust pursuant to Section 9.01.
51
(c) Any resignation or removal of the Sponsor and appointment of a
successor Sponsor shall become effective upon such acceptance of appointment by
the successor Sponsor, and thereupon the resigning or removed Sponsor shall be
discharged and shall no longer be liable in any manner hereunder except as to
acts or omissions occurring prior to such resignation or removal, and the new
Sponsor shall thereupon undertake and perform all duties and be entitled to all
rights and compensation as Sponsor under this Agreement. The successor Sponsor
shall not be under any liability hereunder for occurrences or omissions
occurring prior to the execution of such instrument. The indemnification of the
resigning or removed Sponsor and any other Sponsor Indemnified Party provided
for in Section 7.04 shall survive any resignation, discharge, or removal of the
Sponsor hereunder.
Section 7.04 LIABILITY OF SPONSOR AND INDEMNIFICATION.
(a) The Sponsor shall not be under any liability to the Trust, the
Trustee, or any Beneficial Owner for any action taken or for refraining from the
taking of any action in good faith and believed by it to be authorized or within
its discretion, rights, or powers conferred upon it by this Agreement, or for
errors in judgment or for depreciation or loss incurred by reason of the
purchase or sale of any Securities; provided, however, that this provision shall
not protect the Sponsor against any liability to which it would otherwise be
subject by reason of its own gross negligence, bad faith, wilful misconduct, or
wilful malfeasance in the performance of its duties hereunder or the reckless
disregard of its obligations and duties hereunder. The Sponsor may rely in good
faith on any paper, order, notice, list, affidavit, receipt, evaluation,
opinion, endorsement, assignment, draft, or any other document of any kind prima
facie properly executed and submitted to it by the Trustee, the Trustee's
counsel, or by any other person for any matters arising hereunder. The Sponsor
shall in no event be deemed to have assumed or incurred any liability,
52
duty, or obligation, to any Beneficial Owner or to the Trustee other than as
expressly provided for herein.
(b) The Sponsor and its directors, subsidiaries, shareholders,
officers, employees, and affiliates (as such term is defined in the Commission's
Regulation S-X) (each a "Sponsor Indemnified Party") shall be indemnified from
the Trust Fund and held harmless against any loss, liability, or expense
incurred without (l) gross negligence, bad faith, wilful misconduct, or wilful
malfeasance on the part of such Sponsor Indemnified Party arising out of or in
connection with the performance of its obligations hereunder or any actions
taken in accordance with the provisions of this Agreement or the Indenture or
(2) reckless disregard on the part of such Sponsor Indemnified Party of its
obligations and duties under this Agreement or the Indenture. Such indemnity
shall include payment from the Trust Fund of the costs and expenses (including
counsel fees) incurred by such Sponsor Indemnified Party in defending itself
against any claim or liability in its capacity as Sponsor hereunder. Any amounts
payable to a Sponsor Indemnified Party under this Section 7.04 may be payable in
advance or shall be secured by a lien against and a security interest in the
Trust Fund. The Sponsor shall not be under any obligation to appear in,
prosecute, or defend any legal action which in its opinion may involve it in any
expense or liability; provided, however, that if in the Sponsor's opinion action
is required with respect to an event or condition which would have a material
adverse effect on the Trust, the Sponsor shall notify the Trustee of such event
or condition. If the Trustee does not act within ten days after receipt of such
notice, the Sponsor may undertake any such action it may deem necessary or
desirable in respect of this Agreement and the rights and duties of the parties
hereto and in the interests of the Beneficial Owners and, in such event, the
legal expenses and costs of any such
53
action shall be expenses and costs of the Trust Fund and the Sponsor shall be
entitled to be reimbursed therefor by the Trust.
ARTICLE VIII
TRUSTEE
Section 8.01 GENERAL DEFINITION OF TRUSTEE'S RIGHTS, DUTIES AND
RESPONSIBILITIES. In addition to and notwithstanding the other duties, rights,
privileges, and liabilities of the Trustee as otherwise set forth in this
Agreement, the duties, rights, privileges, and liabilities of the Trustee are
further defined as follows:
(a) All monies deposited with or received by the Trustee hereunder
shall be held by it, without interest other than as provided in Section 3.04, as
a deposit for the account of the Trust in accordance with the provisions of
Section 2.05, until required to be disbursed in accordance with the provisions
of this Agreement. Such monies shall be deemed segregated by maintaining such
monies in an account for the exclusive benefit of the Trust in accordance with
the provisions of Section 2.05.
(b) The Trustee shall not be under any liability for any action taken
in good faith reliance on any appraisal, paper, certification, order, list,
demand, request, consent, affidavit, notice, opinion, direction, valuation,
endorsement, assignment, resolution, draft, or other documents prima facie in
proper form and properly executed; provided, however that where a list of
authorized officials and their signatures are on file with the Trustee, the
Trustee shall be required to compare such manual signatures to the signature on
any such documents. (Such requirement shall not apply to "personal
identification numbers" or "PINS" or other forms of electronic security devices
which function as a proxy for a manual signature.)
54
(c) The Trustee shall not be under any liability for the disposition of
monies, or of any of the Securities, or in respect of any evaluation which it is
required to make under this Agreement or otherwise, except by reason of its own
gross negligence, bad faith, wilful misconduct or wilful malfeasance, or
reckless disregard of its duties and obligations hereunder, and the Trustee may
construe any of the provisions of this Agreement, insofar as the same may be
ambiguous or inconsistent with any other provisions hereof, and any reasonable
construction of any such provision hereof by the Trustee in good faith shall be
binding upon the parties hereto and all Beneficial Owners.
(d) The Trustee shall not be responsible for the due execution hereof
by the Sponsor or for the form, character, genuineness, sufficiency, value or
validity of any of the Securities, or for the due execution thereof by any
Depositor, and the Trustee shall in no event assume or incur any liability, duty
or obligation to any Beneficial Owner or the Sponsor, other than as expressly
provided for herein.
(e) The Trustee shall not be under any obligation to appear in,
prosecute, or defend any action which in its opinion may involve it in expense
or liability, unless it shall be furnished with reasonable security and
indemnity against such expense or liability. Any pecuniary cost of the Trustee
resulting from the Trustee's appearance in, prosecution of, or defense of any
such actions shall be deductible from and constitute a lien against and a
security interest in the assets of the Trust. Subject to the foregoing, the
Trustee shall, in its discretion, undertake such action as it may deem necessary
at any and all times to protect the Trust Fund and the rights and interest of
all Beneficial Owners pursuant to the terms of this Agreement; provided,
however, that the expenses and costs of such actions, undertakings, or
proceedings shall be deductible from the
55
assets of the Trust or otherwise reimbursable to the Trustee from, and shall
constitute a lien against and a security interest in, the assets of the Trust.
(f) The Trustee may employ agents, attorneys, accountants, auditors,
and other professionals and shall not be answerable for the default or
misconduct of any such agents, attorneys, accountants, auditors, and other
professionals if such agents, attorneys, accountants, auditors, or other
professionals shall have been selected by it in good faith. The Trustee shall
not be liable in respect of any action taken under this Agreement or the
Indenture, or suffered, in good faith by the Trustee, in accordance with the
opinion of its counsel. The accounts of the Trust Fund shall be audited, as
required by law, by independent certified public accountants designated from
time to time by the Trustee, and the report of such accountants shall be
furnished by the Trustee to Beneficial Owners via the Depository as described in
Section 3.11 in accordance with Section 3.05 and upon request. The fees and
expenses charged by such agents, attorneys, accountants, auditors, or other
professionals shall constitute an expense of the Trust.
(g) If the evaluation of the Trust Fund as shown by any Trust Fund
Evaluation shall be less than the Discretionary Termination Amount, the Trustee
shall give notice thereof to the Sponsor, and the Trustee shall, only when so
directed in writing by the Sponsor, terminate this Agreement and the applicable
Indenture and the Trust Fund created hereby and thereby and liquidate such Trust
Fund, all in the manner provided in Section 9.01.
(h) In no event shall the Trustee be personally liable for any taxes or
other governmental charges imposed upon or in respect of the Securities or upon
the Income thereon or upon it as Trustee hereunder (other than taxes based upon
the income of the Trustee) or upon or in respect of the Trust Fund which it may
be required to pay under any present or future law of the United States of
America or of any taxing authority having jurisdiction in the premises. For all
56
taxes and charges and for any expenses, including counsel's fees, which the
Trustee may sustain or incur with respect to such taxes or charges, the Trustee
shall be reimbursed and indemnified out of the assets of the Trust Fund and the
payment of such amounts shall be secured by a lien against and a security
interest in the Trust Fund.
(i) The Trustee shall not be liable except by reason of (i) its own
gross negligence, bad faith, wilful misconduct, or wilful malfeasance for any
action taken or suffered to be taken by it in good faith and believed by it to
be authorized or within the discretion, rights or powers conferred upon it by
this Agreement or (ii) reckless disregard of its obligations and duties
hereunder or under or under the Indenture.
(j) So long as required by Section 26(a)(2)(C) of the Investment
Company Act of 1940, or any successor provision, and the rules promulgated
thereunder, no payment to the Sponsor or to any affiliated person (as so
defined) or agent of the Sponsor shall be allowed as an expense of the Trust
except for payment not in excess of such reasonable amounts as the Commission
may prescribe as compensation for performing bookkeeping and other
administrative services of a character normally performed by the Trustee itself
and except as the Commission may permit by the Order, including the fees payable
under the License Agreement as provided in Section 10.03.
(k) The Trustee in its individual or any other capacity may become an
owner or pledgee of, or be an underwriter or dealer in respect of, bonds or
other obligations issued by the same issuer (or an affiliate of such issuer) of
any Securities at any time held as part of the Trust Fund or of Nasdaq-100
Shares and may deal in any manner with the same or with the issuer (or an
affiliate of the issuer) with the same rights and powers as if it were not the
Trustee hereunder,
57
including, but not limited to making loans or maintaining other banking
relationships with any such issuer.
(l) The Trustee is hereby authorized to acknowledge its acceptance of
Nasdaq-100 Participant Agreements entered into by the Distributor and Depositors
from time to time by executing such Nasdaq-100 Participant Agreements,
substantially in the form of Exhibit A hereto. The Trustee shall discharge all
of its obligations and perform all of its duties under the Nasdaq- 100
Participant Agreement.
Section 8.02 BOOKS, RECORDS, AND REPORTS.
(a) The Trustee shall keep proper books of record and account of all
the transactions under this Agreement at its office located at 000 Xxxxxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 or such office as it may subsequently designate
upon notice to the Sponsor. The books and records of the Trust Fund shall be
open to inspection by any Beneficial Owner, the Sponsor or the agents of the
Sponsor at all reasonable times during the usual business hours of the Trustee.
The Trustee shall keep proper record of the creation and redemption of Creation
Units at such office. Such records of the creation and redemption of Creation
Units shall be open to inspection at all reasonable times during the usual
business hours of the Trustee.
(b) The Trustee shall perform such reviews, file such reports or take
any and all such action as it is advised by counsel or accountants employed by
the Trustee as required in order to continue the qualification of the Trust as a
Regulated Investment Company. The Trustee shall also make, or cause to be made,
such annual or other reports and file such documents as it is advised by counsel
or accountants employed by it as are required of the Trust by the Securities Act
of 1933, the Securities Exchange Act of 1934 and the Investment Company Act of
1940, each as amended, and including, but not limited to, Form N-SAR and filings
pursuant to Rule 24f-
58
2 under the Investment Company Act of 1940, and shall make, or cause to be made,
such elections and file such tax returns as it is advised by counsel or
accountants employed by it as are from time to time required under any
applicable state or federal statute or rule or regulation thereunder. The
Trust's fiscal year shall be set forth in the Indenture and may be changed from
time to time by the Trustee and the Sponsor without consent of the Beneficial
Owners.
Section 8.03 INDENTURE AND LIST OF SECURITIES ON FILE. The
Trustee shall keep a certified copy or duplicate original of this Agreement on
file in its office and available for inspection at all reasonable times during
its usual business hours by any Beneficial Owner, together with the Indenture
for each Series then in effect, and the Trustee shall keep and so make available
for inspection a current list of the Securities in the Portfolio, including the
identity and number of shares of each of the Securities.
Section 8.04 COMPENSATION OF TRUSTEE.
(a) For services performed under this Agreement, the Trustee will be
paid by the Trust a fee at an annual rate of 6/100 of 1% to 10/100 of 1% of the
net asset value of the Trust, as shown below, such percentage amount to vary
depending on the net asset value of the Trust. Such compensation will be
computed on each Business Day on the basis of the net asset value of the Trust
on such day, and the amount thereof shall be accrued daily and paid in arrears
on the first Business Day of each month.
TRUSTEE FEE SCALE*
NET ASSET VALUE FEE AS A PERCENTAGE OF NET
OF THE TRUST ASSET VALUE OF THE TRUST
0 - $499,999,999 10/100 of 1% per annum
--------
* The fee indicated applies to that portion of the net asset value of the
Trust which falls in the size category indicated.
59
$500,000,000 - $2,499,999,999 8/100 of 1% per annum
$2,500,000,000 and above 6/100 of 1% per annum
(b) Notwithstanding the fee schedule set forth in the table above, the
Trustee's minimum fee shall be $180,000 per annum. To the extent that the
Trustee's annual fee as determined pursuant to the fee scale above is less than
$180,000, the Sponsor hereby agrees to pay to the Trustee the amount of the
shortfall.
(c) The Trustee shall also charge the Trust for those expenses and
disbursements incurred hereunder as contemplated by this Agreement, including,
but not limited to, legal, brokerage, and auditing expenses; provided, however,
that the amount of any such charge which has not been finally determined as of
any Dividend Payment Date may be estimated and any necessary adjustments shall
be made in the succeeding month. The Trustee may direct that all such expenses
and disbursements shall be paid directly from the assets of the Trust. If the
cash balances of the Trust shall be insufficient to provide for amounts payable
pursuant to this Section 8.04, the Trustee may, in its discretion, sell the
requisite amount of securities necessary to make payment of such amounts in
accordance with Section 3.06 or may advance out of its own funds such amounts as
are payable and reimburse itself for such advances as funds become available or
from the proceeds of Securities sold to reimburse such advances in accordance
with Section 3.04(f). The Trustee will reimburse itself in the amount of any
such advance in accordance with Section 3.04(f).
(d) During the term of the Trust, the Trustee and the Sponsor shall
undertake to ensure that the Trustee is adequately and reasonably compensated
for its services hereunder. In the event that the Trustee and the Sponsor
jointly agree that additional compensation to the Trustee is warranted and
appropriate, subject to the agreement of the Sponsor, the Trustee may
60
be paid additional compensation over and above the fees described above either
(i) directly from the Sponsor or (ii) from the Trust subject to approval by the
Beneficial Owners of 51% or more of the then outstanding Nasdaq-100 Shares.
(e) The Trustee shall have a lien upon and a security interest in all
assets of the Trust superior in right to any interest or claims of the
Depository and any and all Beneficial Owners, but equal in right to any claim,
lien upon or security interest in the assets of the Trust in right of the
Sponsor provided for in this Agreement, to secure payment of all monies,
compensation, reimbursement of expenses, repayment of advances, payment of
indemnification and all other debts made to or claims of the Trustee against the
Trust.
Section 8.05 INDEMNIFICATION OF TRUSTEE. The Trustee and its
directors, subsidiaries, shareholders, officers, employees, and affiliates (as
such term is defined in the Commission's Regulation S-X) (each a "Trustee
Indemnified Party") shall be indemnified from the Trust Fund and held harmless
against any loss, liability, or expense incurred without (l) gross negligence,
bad faith, wilful misconduct, or wilful malfeasance on the part of such Trustee
Indemnified Party arising out of or in connection with the acceptance or
administration of this Trust and any actions taken in accordance with the
provisions of this Agreement or the Indenture or arising out of the
administration of this Agreement or the Indenture or (2) reckless disregard on
the part of such Trustee Indemnified Party of its obligations and duties under
this Agreement, the Indenture or under applicable law. Such indemnity shall
include payment from the Trust Fund of the costs and expenses (including counsel
fees) incurred by such Trustee Indemnified Party in defending itself against any
claim or liability relating to this Agreement, the Indenture or the Trust Fund,
including any loss, liability or expense incurred in acting pursuant to written
directions or instructions to the Trustee given by the Sponsor or counsel to the
Trust from time to time in
61
accordance with the provisions of this Agreement, or in undertaking actions from
time to time which the Trustee deems necessary in its discretion to protect the
Trust Fund and the rights and interest of all Beneficial Owners pursuant to the
terms of this Agreement. Any amounts payable to a Trustee Indemnified Party
under this Section 8.05 may be payable in advance or shall be secured by a lien
against and a security interest in the Trust Fund.
Section 8.06 RESIGNATION, DISCHARGE OR REMOVAL OF TRUSTEE;
SUCCESSORS.
(a) The Trustee may resign and be discharged of the Trust
created by this Agreement and the Indenture by executing an instrument in
writing resigning as such Trustee, filing the same with the Sponsor, and mailing
a copy of a notice of resignation to all DTC Participants for distribution to
Beneficial Owners as provided in Section 3.11 not less than sixty (60) days
before the date specified in such instrument when, subject to Section 8.06(c),
such resignation is scheduled to take effect. In case at any time the Trustee
shall not meet the requirements set forth in Section 8.07 hereof, shall fail to
undertake or perform or shall become incapable of undertaking or performing any
of the duties which by the terms of this Agreement and the Indenture are
required to be undertaken or performed by it, and such failure shall not be
cured within fifteen (15) Business Days following receipt of notice of such
failure, or the Trustee shall be adjudged a bankrupt or insolvent, or a receiver
of the Trustee or of its property shall be appointed, or a trustee or liquidator
or any public officer shall take charge or control of such Trustee or of its
property or affairs for the purposes of rehabilitation, conservation or
liquidation, then in any such case, the Sponsor may, subject to the requirements
of Section 8.06 (b) and (c), remove such Trustee and appoint a successor Trustee
by written instrument or instruments delivered to the Trustee so removed and to
the successor Trustee. Upon receiving notice of resignation or removal of the
Trustee, the Sponsor shall use its best efforts promptly to appoint a successor
62
Trustee in the manner and meeting the qualifications hereinafter provided, by
written instrument or instruments delivered to such resigning Trustee and the
successor Trustee. Notice of such appointment of a successor Trustee shall be
mailed promptly after acceptance of such appointment by the successor Trustee to
all DTC Participants for distribution to Beneficial Owners as provided in
Section 3.11. Beneficial Owners of 51% of the Nasdaq-100 Shares then outstanding
may at any time also remove the Trustee by written instrument or instruments
delivered to the Trustee and Sponsor. The Sponsor shall thereupon use its best
efforts to appoint a successor Trustee in the manner provided herein. Upon
effective resignation hereunder, the resigning Trustee shall be discharged and
shall no longer be liable in any manner hereunder except as to acts or omissions
occurring prior to such resignation, and the new Trustee shall thereupon
undertake and perform all duties and be entitled to all rights and compensation
as Trustee under this Agreement. The successor Trustee shall not be under any
liability hereunder for occurrences or omissions occurring prior to the
execution of such instrument.
(b) In case at any time the Trustee shall be removed or shall resign
and no successor Trustee shall have been appointed within sixty (60) days after
the date notice of removal has been received by the Trustee or the Trustee has
issued its notice of resignation, the Trustee shall terminate this Agreement and
the Indenture and liquidate the Trust pursuant to Section 9.01.
(c) Any successor Trustee appointed hereunder shall execute and
acknowledge to the Sponsor and to the retiring Trustee an instrument accepting
such appointment hereunder, and such successor Trustee without any further act,
deed, or conveyance shall become vested with all the rights, powers, duties, and
obligations of its predecessor hereunder with like effect as if originally named
a Trustee herein and shall be bound by all the terms and conditions of this
Agreement and the Indenture. Upon the request of such successor Trustee, the
retiring Trustee
63
and the Sponsor shall, upon payment of all amounts due the retiring Trustee,
execute and deliver an instrument transferring to such successor Trustee all the
rights and powers of the retiring Trustee, and the retiring Trustee shall
transfer, deliver, and pay over to the successor Trustee all Securities and
monies at the time held by it hereunder, if any, together with all necessary
instruments of transfer and assignment or other documents properly executed
which are necessary to effect such transfer and such of the records or copies
thereof maintained by the retiring Trustee in the administration hereof as may
be requested by the successor Trustee, and the retiring Trustee shall thereupon
be discharged from all duties and responsibilities under this Agreement. Any
resignation or removal of a Trustee and appointment of a successor Trustee
pursuant to this Section 8.06 shall become effective only upon such acceptance
of appointment by the successor Trustee. The indemnification of such Trustee and
any other Trustee Indemnified Party provided for under Section 8.05 hereof shall
survive any resignation, discharge, or removal of the Trustee hereunder.
(d) Any bank, trust company, corporation or national banking
association into which a Trustee hereunder may be merged or with which it may be
consolidated, or any bank, trust company, corporation or national banking
association resulting from any merger or consolidation to which such Trustee
hereunder shall be a party, or any bank, trust company, corporation or national
banking association succeeding to all or substantially all of the business of
the Trustee, shall be the successor Trustee under this Agreement without the
execution or filing of any paper, instrument or further act to be done on the
part of the parties hereto.
Section 8.07 QUALIFICATIONS OF TRUSTEE. The Trustee or
successor Trustee shall be a bank, trust company, corporation or national
banking association organized and doing business under the laws of the United
States or any state thereof, and shall be authorized under
64
such laws to exercise corporate trust powers. The Trustee and any successor
Trustee shall have at all times an aggregate capital, surplus, and undivided
profits of not less than $50,000,000.
Section 8.08 TRUSTEE'S DUTIES EXPRESSLY PROVIDED FOR HEREIN.
Except as otherwise expressly provided for in this Agreement and the Indenture,
the Trustee shall have no duties or obligations hereunder.
ARTICLE IX
TERMINATION
Section 9.01 PROCEDURE UPON TERMINATION.
(a) If within 90 days from the Initial Date of Deposit, the net worth
of the Trust shall have fallen to less than $100,000, the Trustee shall, upon
the direction of the Sponsor, terminate the Trust and distribute to each
Beneficial Owner such Beneficial Owner's pro rata share of the assets of the
Trust. The Sponsor will also have the discretionary right to direct the Trustee
to terminate the Trust if at any time after six months following and prior to
three years following the Initial Date of Deposit the net asset value of the
Trust falls below $150,000,000 or if at any time on or after three years
following the Initial Date of Deposit such value is less than $350,000,000, as
such dollar amount shall be adjusted for inflation in accordance with the CPI-U,
such adjustment to take effect at the end of the fourth year following the
Initial Date of Deposit and at the end of each year thereafter and to be made so
as to reflect the percentage increase in consumer prices as set forth in the
CPI-U for the twelve month period ending in the last month of the preceding
fiscal year (the "Discretionary Termination Amount"). In such case, the Trustee
shall, upon receipt of instruction from the Sponsor, terminate this Agreement,
the Indenture and the Trust created hereby and thereby. Any termination pursuant
to the preceding sentences shall
65
be at the complete discretion of the Sponsor subject to the terms hereof, and
the Sponsor and the Trustee shall not be liable in any way for depreciation or
loss occurring as a result of any such termination. The Trustee shall have no
power to terminate this Agreement, the Indenture or the Trust because the value
of the Trust Fund is below the Discretionary Termination Amount. The Trustee
shall terminate this Agreement, the Indenture and the Trust Fund in the event
that Nasdaq-100 Shares are delisted from the Amex and are not subsequently
relisted on a national securities exchange or a quotation medium operated by a
national securities association. This Agreement, the Indenture and the Trust
Fund may also be terminated upon receipt by the Trustee of written notice of the
occurrence of any one or more of the following events: (a) by the agreement of
the Beneficial Owners of 66-2/3% of outstanding Nasdaq-100 Shares; (b) if the
Depository is unable or unwilling to continue to perform its functions as set
forth herein and a suitable replacement is unavailable; (c) if NSCC no longer
provides clearance services with respect to Nasdaq-100 Shares and a suitable
replacement is unavailable, or if the Trustee is no longer a participant in NSCC
or any successor to NSCC providing clearance services; (d) if Nasdaq ceases
publishing the Index; or (e) if the License Agreement is terminated. If at any
time the Sponsor shall fail to undertake or perform or become incapable of
undertaking or performing any of the duties which by the terms of this Agreement
are required to be undertaken or performed, or if the Sponsor resigns pursuant
to Section 7.03, the Trustee may, in its discretion, in lieu of appointing a
successor Sponsor pursuant to Section 8.01, terminate this Agreement, the
Indenture and the Trust and liquidate the Trust pursuant to the provisions
hereof. The Trustee shall also terminate this Agreement, the Indenture and the
Trust in the event that the Trustee shall be removed or shall resign and no
successor Trustee shall have been appointed pursuant to Section 8.06 within
sixty (60) days after the date notice of removal has been received by the
66
Trustee or the Trustee has issued its notice of resignation. Notwithstanding the
foregoing, this Agreement, the Indenture and the Trust Fund in any event shall
terminate by their terms on the Mandatory Termination Date. As soon as
practicable after notice of termination of the Trust, the Trustee will
distribute to redeemers tendering Nasdaq-100 Shares in Creation Unit size
aggregations prior to the termination date the Securities and cash, if any, as
provided in Section 5.01 and upon termination of the Trust, the Trustee will
sell the Securities held in the Trust as provided below.
(b) If any of the events specified in Section 9.01 hereof shall occur
which give the Sponsor the right to terminate this Agreement and the Indenture,
the Sponsor shall exercise such right by giving written notice to the Trustee of
the event giving rise to the right and the Sponsor's exercise of the right to
terminate this Agreement and the Indenture. If (i) any of the events specified
in Section 9.01 shall occur which give the Trustee the right to terminate this
Agreement and the Indenture, (ii) the Trustee shall receive notice of the
occurrence of any of the events specified in Section 9.01 receipt of which gives
the Trustee the right to terminate this Agreement and the Indenture, or (iii)
any of the events specified in Section 9.01 requiring the Trustee to terminate
this Agreement and the Indenture shall occur and the Trust shall be given
written notice of such occurrence, then the Trustee shall exercise such right or
perform such required act by giving written notice to the Sponsor of the event
giving rise to the right or requirement to terminate this Agreement and the
Indenture and the Trustee's termination of this Agreement and the Indenture.
Promptly after giving or receipt of such notice, the Trustee shall give written
notice of termination, specifying (i) the date of termination, (ii) the period
during which the assets of the Trust will be liquidated and the date on which
Beneficial Owners of Nasdaq-100 Shares (whether in Creation Unit size
aggregations or otherwise) will receive in cash the net asset value
67
of the Nasdaq-100 Shares they hold, and (iii) the date determined by the Trustee
upon which the books of the Trustee, maintained pursuant to Section 6.01, shall
be closed, shall be given by the Trustee to each Beneficial Owner via the
Depository at least twenty (20) days prior to termination of the Trust. Such
notice shall further state that, as of the date thereof and thereafter, neither
requests to create additional Creation Units nor additional Portfolio Deposits
will be accepted, and that, as of the date thereof, the portfolio of Securities
delivered upon redemption shall be identical in composition and weighting to the
Securities held in the Trust as of such date (rather than the securities portion
of the Portfolio Deposit determined in accordance with Section 2.04). Within a
reasonable period of time after such termination the Trustee shall, subject to
any applicable provisions of law, sell all of the Securities not already
distributed to redeemers of Nasdaq-100 Shares in Creation Unit size
aggregations, as provided in Section 5.01, if any, in such a manner so as to
effectuate orderly sales and a minimal market impact. The Trustee shall not be
liable for or responsible in any way for depreciation or loss incurred by reason
of any sale or sales made in accordance with the provisions of this Section
9.01. The Trustee may suspend its sales of the Securities upon the occurrence of
unusual or unforeseen circumstances, including, but not limited to, a suspension
in trading of a Security, the closing or restriction of trading, the outbreak of
hostilities, or the collapse of the economy. Upon receipt of proceeds from the
sale of the last Security, the Trustee shall:
(i) pay to itself individually from the Trust Fund an amount
equal to the sum of (1) its accrued compensation for its ordinary
services, (2) any reimbursement due to it for its extraordinary
services, (3) any advances made but not yet repaid and (4) any other
services and disbursements as provided herein;
68
(ii) deduct any and all fees and expenses from the Trust Fund
in accordance with the provisions of Section 3.04 hereof; provided,
however, that no portion of such amount shall be deducted or paid
unless the payment thereof from the Trust is at that time lawful;
(iii) deduct from the Trust Fund any amounts which it, in its
sole discretion, shall deem requisite to be set aside as reserves for
any applicable taxes or other governmental charges that may be payable
out of the Trust Fund;
(iv) transmit to the Depository for distribution each
Beneficial Owner's interest in the remaining assets of the Trust; and
(v) disseminate to each Beneficial Owner via the Depository as
provided in Section 3.11 a final statement as of the date of the
computation of the gross amount distributable to the Beneficial Owners,
in substantially the form and manner provided for in Section 3.05
hereof.
(c) Dividends to be received by the Trust on Securities sold in
liquidation pursuant to this Section 9.01 shall be aggregated and distributed
ratably when all such dividends have been received.
Section 9.02 MONEYS TO BE HELD WITHOUT INTEREST TO BENEFICIAL
OWNERS. The Trustee shall be under no liability with respect to moneys held upon
termination, except to hold the same as a deposit without interest for the
benefit of the Beneficial Owners.
Section 9.03 DISSOLUTION OF SPONSOR NOT TO TERMINATE TRUST. The
dissolution of the Sponsor, or its ceasing to exist as a legal entity for any
cause, shall not operate to terminate this Agreement and the Indenture insofar
as the duties and obligations of the Trustee are concerned unless the Trustee
terminates the Trust pursuant to Section 9.01.
69
ARTICLE X
MISCELLANEOUS PROVISIONS
Section 10.01 AMENDMENT AND WAIVER.
(a) This Agreement and the Indenture may be amended from time to time
by the Trustee and the Sponsor without the consent of any Beneficial Owners (1)
to cure any ambiguity or to correct or supplement any provision thereof which
may be defective or inconsistent, or to make such other provisions in regard to
matters or questions arising thereunder as will not adversely affect the
interests of Beneficial Owners; (2) to change any provision thereof as may be
required by the Commission; (3) to add or change any provision as may be
necessary or advisable for the continuing qualification of the Trust as a
Regulated Investment Company under the Internal Revenue Code; (4) to add or
change any provision thereof as may be necessary or advisable in the event that
either NSCC or the Depository is unable or unwilling to continue to perform its
functions; (5) to add or change any provision thereof to conform the adjustments
to the Portfolio and the Portfolio Deposit to changes made by Nasdaq in its
method of determining the Index; (6) to add or change any provision thereof as
may be necessary to implement a dividend reinvestment plan; (7) to make changes
to the Transaction Fee and to other amounts charged in connection with creations
and redemptions of Nasdaq-100 Shares within the parameters set forth herein; (8)
to change the number of Nasdaq-100 Shares constituting a Creation Unit; and (9)
to make changes to the level of net dividends specified in Section 3.04(g) below
which dividends will not be paid in a given quarter but will instead be rolled
into the next Accumulation Period. This Agreement and the Indenture may also be
amended from time to time by the Sponsor and the Trustee with the consent of the
Beneficial Owners of 51% of the outstanding Nasdaq-100 Shares to add provisions
to or change or eliminate any of the provisions
70
of this Agreement and the Indenture or to modify the rights of Beneficial
Owners; provided, however, that this Agreement and the Indenture may not be
amended without the consent of the Beneficial Owners of all outstanding
Nasdaq-100 Shares if such amendment would (x) permit, except in accordance with
the terms and conditions of this Agreement, the acquisition of any securities
other than those acquired in accordance with the terms and conditions of this
Agreement; (y) reduce the interest of any Beneficial Owner in the Trust; or (z)
reduce the percentage of Beneficial Owners required to consent to any such
amendment.
(b) Promptly after the execution of any such amendment, the Trustee
shall receive from the Depository, pursuant to the terms of the Depository
Agreement, a list of all DTC Participants holding Nasdaq-100 Shares. The Trustee
shall inquire of each such DTC Participant as to the number of Beneficial Owners
for whom such DTC Participant holds Nasdaq-100 Shares, and provide each such DTC
Participant with sufficient copies of a written notice of the substance of such
amendment for transmittal by each such DTC Participation to such Beneficial
Owners.
(c) It shall not be necessary for the consent of Beneficial Owners
under this Section 10.01 or under Section 9.01 to approve the particular form of
any proposed amendment, but it shall be sufficient if such consent shall approve
the substance thereof. The manner of obtaining such consents and of evidencing
the authorization of the execution thereof by Beneficial Owners shall be subject
to such reasonable regulations as the Trustee may prescribe.
Section 10.02 REGISTRATION (INITIAL AND CONTINUING) OF
NASDAQ-100 SHARES. The Sponsor agrees and undertakes on its own part to register
or appoint an agent, which may include the Trustee, to register Nasdaq-100
Shares with the Commission and under the blue sky laws of such states as the
Sponsor may select and as may be required. If, and to the extent permitted by
the Order, the registration of Nasdaq-100 Shares with the Commission and under
the applicable
71
securities laws of such states shall be payable out of the Trust. Registration
charges, blue sky fees, printing costs, mailing costs, attorney's fees, and
other miscellaneous out-of-pocket expenses incurred pursuant to this Section and
related to all Nasdaq-100 Shares shall be borne by the Trust only to the extent
and in the manner provided for by Section 3.04 and pursuant to the Order.
Section 10.03 LICENSE AGREEMENT WITH NASDAQ. The Sponsor has
obtained a License Agreement with Nasdaq under which it may use the trademarks
and service marks "Nasdaq-Registered Trademark-", "The Nasdaq Stock
Market-Registered Trademark-", "Nasdaq-100 Index-Registered Trademark-
", "Nasdaq-100-Registered Trademark- ", "Nasdaq- 100 Trust-SM-" and "Nasdaq-100
Shares-SM-" to the extent deemed necessary by the Sponsor under federal and
state securities laws and to indicate the source of the Index as a basis for
determining the composition of the Trust. The Trust shall pay to Nasdaq or shall
reimburse the Sponsor for its payment to Nasdaq in accordance with Section 3.04,
a licensing fee as set forth in an exhibit to the License Agreement; provided,
however, that the Sponsor hereby commits not to seek reimbursement from the
Trust, nor shall the Trust pay to Nasdaq, licensing fees to Nasdaq pursuant to
the License Agreement for the period through September 30, 1999.
Section 10.04 CERTAIN MATTERS RELATING TO BENEFICIAL OWNERS.
(a) By the purchase and acceptance or other lawful delivery and
acceptance of Nasdaq-100 Shares (whether in Creation Unit size aggregations or
otherwise), each Beneficial Owner thereof shall be deemed to be a beneficiary of
the Trust created by this Agreement and the Indenture and to be bound by all of
the terms and conditions of this Agreement and the Indenture.
(b) The death or incapacity of any Beneficial Owner shall not operate
to terminate this Agreement and the Indenture, or the Trust Fund, nor entitle
such Beneficial Owner's legal representatives or heirs to claim an accounting or
to take any action or proceeding in any court for a partition or winding up of
the Trust Fund, nor otherwise affect the rights, obligations and
72
liabilities of the parties hereto or any of them. Each Beneficial Owner
expressly waives any right such Beneficial Owner may have under any rule of law,
or the provisions of any statute, or otherwise, to require the Trustee at any
time to account, in any manner other than as expressly provided in this
Agreement and the Indenture, for the Securities or moneys from time to time
received, held and applied by the Trustee hereunder.
(c) No Beneficial Owner shall have any right to vote except as provided
in Sections 9.01 and 10.01 or in any manner otherwise to control the operation
and management of the Trust Fund, or the obligations of the parties hereto.
Nothing set forth in this Agreement and the Indenture shall be construed so as
to constitute the Beneficial Owners from time to time as partners or members of
an association, nor shall any Beneficial Owner ever be liable to any third
person by reason of any action taken by the parties to this Agreement and the
Indenture, or for any other cause whatsoever.
Section 10.05 NEW YORK LAW TO GOVERN. This Agreement and the
Indenture shall be governed by and construed in accordance with the laws of the
State of New York, without regard to the conflicts of laws thereof, and all laws
or rules of construction of such State shall govern the rights of the parties
hereto and the Beneficial Owners and the interpretation of the provisions
hereof. This Agreement and the Indenture shall be deemed effective when executed
by the Sponsor and the Trustee.
Section 10.06 NOTICES. Any notice, demand, direction, or
instruction to be given to the Sponsor hereunder shall be in writing and shall
be duly given if mailed, by certified or registered mail, return receipt
requested, delivered to or sent by facsimile transmission (with confirmation of
receipt) to the Sponsor at the following address: Nasdaq-Amex Investment Product
Services, Inc., c/o The Nasdaq Stock Market, Inc., 0000 X Xxxxxx, X.X.,
Xxxxxxxxxx,
00
X.X. 00000, Attention: Xxxx X. Xxxxxx, facsimile number (000) 000-0000, or at
such other address as shall be specified by the Sponsor to the Trustee in
writing. Any notice, demand, direction, or instruction to be given to the
Trustee shall be in writing and shall be duly given if mailed, by certified or
registered mail, return receipt requested, delivered to or sent by facsimile
transmission (with confirmation of receipt) to the Trustee at the following
address: The Bank of New York, 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000,
Attention: Xxxxxx Xxxxxxxx, facsimile number 000-000-0000, or such other address
as shall be specified to the Sponsor by the Trustee in writing. Any notice to be
given to Beneficial Owners shall be duly given if mailed or delivered to DTC
Participants for delivery to Beneficial Owners in accordance with Section
3.11(f).
Section 10.07 SEVERABILITY. If any one or more of the
covenants, agreements, provisions or terms of this Agreement and the Indenture
shall be for any reason whatsoever held invalid, then such covenants,
agreements, provisions, or terms shall be deemed severable from the remaining
covenants, agreements, provisions or terms of this Agreement and the Indenture
and shall in no way affect the validity or enforceability of the other
provisions of this Agreement and the Indenture or the rights of the Beneficial
Owners.
Section 10.08 SEPARATE AND DISTINCT SERIES. Each Series of the
Nasdaq-100 Trust to which this Agreement shall be applicable shall, for all
financial and administrative purposes, be considered separate and distinct from
every other Series, and the assets of one Series shall not be commingled with
the assets of another Series nor shall the expenses of any one Series be charged
against any other Series.
74
Section 10.09 COUNTERPARTS. This Agreement may be
simultaneously executed in several counterparts, each of which shall be an
original and all of which shall constitute but one and the same instrument.
Section 10.10 EXCLUSIVE BENEFIT OF PARTIES AND HOLDERS OF
NASDAQ-100 SHARES. This Agreement and the Indenture is for the exclusive benefit
of the parties hereto, their respective successors hereunder, and the holders of
Nasdaq-100 Shares, and shall not be deemed to give any legal or equitable right,
remedy, or claim to any other person whatsoever.
Section 10.11 HEADINGS. The headings of Articles and Sections
in this Agreement and the Indenture have been inserted for convenience only and
are not to be regarded as part of this Agreement or the Indenture or to have any
bearing upon the meaning or interpretation of any provision contained herein or
therein.
75
IN WITNESS WHEREOF, the parties hereto have caused these Standard Terms
and Conditions of Trust dated as of March 1, 1999 to be duly executed and
attested.
NASDAQ-AMEX INVESTMENT PRODUCT
SERVICES, INC.
as Sponsor
By /s/ L. XXXXX XXXXXXX
-----------------------------
Name: L. Xxxxx Xxxxxxx
Title:President and Chief Executive Officer
ATTEST:
/s/ XXXX X. XXXXXX
-------------------------
Name: Xxxx X. Xxxxxx
Title:Executive Vice President
THE BANK OF NEW YORK
as Trustee
By /s/ XXXXXX X. XXXXXXXX
-----------------------------
Name: Xxxxxx X. Xxxxxxxx
Title:Vice President
ATTEST:
/s/ XXXXXX XXXXXXX
-------------------------
Name: Xxxxxx Xxxxxxx
Title: Vice President
Effective Date: March 4, 1999
76
EXHIBIT A
FORM OF NASDAQ-100 PARTICIPANT AGREEMENT
Included as Exhibit (A)(9)(c) to this Registration Statement
A-1
