Exhibit (e)(2)
AUTHORIZED PARTICIPANT AGREEMENT
FOR
TDAX FUNDS, INC.
This Authorized Participant Agreement (the "Agreement") is entered into
by and between ALPS Distributor, Inc. (the "Distributor") and
__________________________________ (the "Authorized Participant" or "AP") and is
subject to acceptance by The Bank of New York ("BNY ETF Administrator" or the
"Transfer Agent"). The Transfer Agent serves as the transfer agent for the TDAX
Funds, Inc. (the "Company" ) and is an Index Receipt Agent as that term is
defined in the rules of the National Securities Clearing Corporation ("NSCC").
The Distributor, the Transfer Agent and the Authorized Participant acknowledge
and agree that the Company shall be a third party beneficiary of this Agreement,
and shall receive the benefits contemplated by this Agreement, to the extent
specified herein. The Distributor has been retained to provide services as
principal underwriter of the Company acting on an agency basis in connection
with the sale and distribution of shares of beneficial interest, par value
$.0001 per share (sometimes referred to as "Shares"), of each of the separate
investment portfolios of the Company (each such portfolio a "Fund" and
collectively, the "Funds") named on Annex I to this Agreement.
As specified in the Company's prospectus and statement of additional
information incorporated therein (collectively, the "Prospectus") included as
part of its registration statement, as amended, on Form N-1A (No. 811-22001)
("Registration Statement"), the Shares of any Fund offered thereby may be
purchased or redeemed only in aggregations of a specified number of Shares
referred to therein and herein as a "Creation Unit." All references to "cash"
shall refer to US Dollars ("USD"). The number of Shares constituting a Creation
Unit of each Fund is set forth in the Prospectus. Creation Units of Shares may
be purchased only by or through an Authorized Participant that has entered into
an Authorized Participant Agreement with the Company and the Distributor. The
Prospectus provides that Creation Units generally will be sold in exchange for
an in-kind deposit of a designated portfolio of equity securities (the "Deposit
Securities") and an amount of cash computed as described in the Prospectus (the
"Cash Component"), plus a purchase "Transaction Fee" as described in the
Prospectus, delivered to the Company by the Authorized Participant for its own
account or acting on behalf of another party. Together, the Deposit Securities
and the Cash Requirement constitute the "Creation Deposit," which represents the
minimum initial and subsequent investment amount for Shares of any Fund of the
Company. References to the Prospectus are to the then current Prospectus as it
may be supplemented or amended from time to time. Capitalized terms not
otherwise defined herein are used herein as defined in the Prospectus.
This Agreement is intended to set forth certain premises and the
procedures by which the Authorized Participant may purchase and/or redeem
Creation Units of Shares (i) through the Continuous Net Settlement ("CNS")
clearing processes of NSCC as such processes have been enhanced to effect
purchases and redemptions of Creation Units, such processes being referred to
herein as the "CNS Clearing Process," or (ii) outside the CNS Clearing Process
(i.e., through the manual process of The Depository Trust Company ("DTC") (the
"DTC Process"). The procedures for processing an order to purchase Shares (each
a "Purchase Order") and an order to redeem Shares (each a "Redemption Order")
are described in the Company's Prospectus and in Annex II to this Agreement. All
Purchase and Redemption Orders must be made pursuant to the procedures set forth
in the Prospectus and Annex II hereto, as each may be amended by the Company
from time to time. An Authorized Participant may not place a
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Exhibit (e)(2)
Purchase Order before the fifth (5th) Business Day (as defined below) following
execution and delivery to the Distributor of this Agreement and notification by
the Distributor of the Authorized Participant's status. An Authorized
Participant may not cancel a Purchase Order or a Redemption Order after an order
is placed by the Authorized Participant.
The parties hereto in consideration of the premises and of the mutual
agreements contained herein agree as follows:
1. STATUS OF AUTHORIZED PARTICIPANT.
(a) The Authorized Participant hereby represents, covenants and
warrants that with respect to Purchase Orders or Redemption Orders of Creation
Units of Shares of any Fund (i) through the CNS Clearing Process, it is a member
of NSCC and an Authorized Participant in the CNS System of NSCC (as defined in
the Fund's Prospectus, a "Participating Party"), and/or (ii) outside the CNS
Clearing Process, it is a DTC Participant (as defined in the Fund's Prospectus,
a "DTC Participant"). The Authorized Participant may place Purchase Orders or
Redemption Orders for Creation Units either through the CNS Clearing Process or
outside the CNS Clearing Process, subject to the procedures for purchase and
redemption set forth in this Agreement, the Prospectus and Annex II hereto
("Execution of Orders"). Any change in the foregoing status of the Authorized
Participant shall terminate this Agreement and the Authorized Participant shall
give prompt written notice to the Distributor, the Company and the Transfer
Agent of such change.
(b) The Authorized Participant hereby represents and warrants that it,
unless Section 1(c) is applicable, (i) is registered as a broker-dealer under
the Securities Exchange Act of 1934, as amended, (ii) is qualified to act as a
broker or dealer in the states or other jurisdictions where it transacts
business, and (iii) is a member in good standing of the National Association of
Securities Dealers, Inc. (the "NASD"), and the Authorized Participant agrees
that it will maintain such registrations, qualifications, and membership in good
standing and in full force and effect throughout the term of this Agreement. The
Authorized Participant agrees to comply with all applicable United States
federal laws, the laws of the states or other jurisdictions concerned, and the
rules and regulations promulgated thereunder and with the Constitution, By-Laws
and Conduct Rules of the NASD, and that it will not offer or sell Shares of any
Fund of the Company in any state or jurisdiction where they may not lawfully be
offered and/or sold.
(c) If the Authorized Participant is offering or selling Shares of any
Fund of the Company in jurisdictions outside the several states, territories and
possessions of the United States ("US") and is not otherwise required to be
registered, qualified, or a member of the NASD as set forth above, the
Authorized Participant nevertheless agrees (i) to observe the applicable laws of
the jurisdiction in which such offer and/or sale is made, (ii) to comply with
the full disclosure requirements of the Securities Act of 1933, as amended (the
"1933 Act") and the regulations promulgated thereunder and (iii) to conduct its
business in accordance with the spirit of the NASD Conduct Rules.
(d) The Authorized Participant represents, covenants and warrants that
it has established and presently maintains an anti-money laundering program (the
"Program") reasonably designed to prevent the Authorized Participant from being
used as a conduit for money laundering or other illicit purposes or the
financing of terrorist activities, and is in compliance with the Program and all
anti-money laundering laws, regulations and rules now or
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Exhibit (e)(2)
hereafter in effect that are applicable to it, including, without limitation,
the Uniting and Strengthening America by Providing Appropriate Tools Required to
Intercept and Obstruct Terrorism Act of 2001 (the "USA PATRIOT ACT").
(e) The Authorized Participant understands and acknowledges that the
method by which Creation Units of Shares will be created and traded may raise
certain issues under applicable securities laws. For example, because new
Creation Units of Shares may be issued and sold by the Company on an ongoing
basis, at any point a "distribution," as such term is used in the 1933 Act, may
be occurring. The Authorized Participant understands and acknowledges that some
activities on its part, depending on the circumstances, may result in its being
deemed a participant in a distribution in a manner which could render it a
statutory underwriter and subject it to the prospectus delivery and liability
provisions of the 1933 Act. The Authorized Participant should review the
"Continuous Offering" section of the SAI and consult with its own counsel in
connection with entering into this Agreement and placing an Order (defined
below). The Authorized Participant also understands and acknowledges that
dealers who are not "underwriters" but are effecting transactions in Shares,
whether or not participating in the distribution of Shares, are generally
required to deliver a prospectus.
(f) The Authorized Participant has the capability to send and receive
communications via authenticated telecommunication facility to and from the
Distributor, the Custodian, and the Authorized Participant's custodian. The
Authorized Participant shall confirm such capability to the satisfaction of the
Distributor and the Custodian prior to placing its first Order with the BNY ETF
Administrator (whether it is a Purchase Order or a Redemption Order).
2. EXECUTION OF PURCHASE ORDERS AND REDEMPTION ORDERS.
(a) All Purchase Orders or Redemption Orders shall be made in
accordance with the terms of the Prospectus and the procedures described in
Annex II hereto. Each party hereto agrees to comply with the provisions of such
documents to the extent applicable to it. It is contemplated that the telephone
lines used by the BNY ETF Administrator of the Transfer Agent will be recorded,
and the Authorized Participant hereby consents to the recording of all calls
with the BNY ETF Administrator. The Company reserves the right to issue
additional or other procedures relating to the manner of purchasing or redeeming
Creation Units and the Authorized Participant agrees to comply with such
procedures as may be issued from time to time, including but not limited to the
Cash Collateral Settlement Procedures that are referenced in Annex II hereto.
(b) The Authorized Participant acknowledges and agrees on behalf of
itself and any party for which it is acting (whether as a customer or otherwise)
that delivery of a Purchase Order or Redemption Order shall be irrevocable,
provided that the Company and the Distributor on behalf of the Company reserves
the right to reject any Purchase Order until the trade is released as "good" as
described in Annex II hereto and any Redemption Order that is not in "proper
form" as defined in the Prospectus.
(c) With respect to any Redemption Order, the Authorized Participant
also acknowledges and agrees on behalf of itself and any party for which it is
acting (whether as a customer or otherwise) to return to the Company any
dividend, distribution or other corporate action paid to it or to the party for
which it is acting in respect of any Deposit Security that is transferred to the
Authorized Participant or any party for which it is acting that, based on the
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Exhibit (e)(2)
valuation of such Deposit Security at the time of transfer, should have been
paid to the Company. With respect to any Redemption Order, the Authorized
Participant also acknowledges and agrees on behalf of itself and any party for
which it is acting (whether as a customer or otherwise) that the Company is
entitled to reduce the amount of money or other proceeds due to the Authorized
Participant or any party for which it is acting by an amount equal to any
dividend, distribution or other corporate action to be paid to it or to the
party for which it is acting in respect of any Deposit Security that is
transferred to the Authorized Participant or any party for which it is acting
that, based on the valuation of such Deposit Security at the time of transfer,
should be paid to the Fund. With respect to any Purchase Order, the Transfer
Agent, on behalf of the Company, acknowledges and agrees to return to the
Authorized Participant or any party for which it is acting any dividend,
distribution or other corporate action paid to the Company in respect of any
Deposit Security that is transferred to the Company that, based on the valuation
of such Deposit Security at the time of transfer, should have been paid to the
Authorized Participant or any party for which it is acting.
3. NSCC.
Solely with respect to Purchase Orders or Redemption Orders effected
through the CNS Clearing Process, the Authorized Participant, as a Participating
Party, hereby authorizes the Transfer Agent to transmit to the NSCC on behalf of
the Authorized Participant such instructions, including amounts of the Deposit
Securities and Cash Component as are necessary, consistent with the instructions
issued by the Authorized Participant to a BNY ETF Administrator. The Authorized
Participant agrees to be bound by the terms of such instructions issued by the
Transfer Agent and reported to NSCC as though such instructions were issued by
the Authorized Participant directly to NSCC.
4. PROSPECTUS, MARKETING MATERIALS AND REPRESENTATIONS.
(a) The Distributor will provide to the Authorized Participant copies
of the then current Prospectus and any printed supplemental information in
reasonable quantities upon request. The Distributor represents, warrants and
agrees that it will notify the Authorized Participant when a revised,
supplemented or amended Prospectus for any Fund is available and deliver or
otherwise make available to the Authorized Participant copies of such revised,
supplemented or amended Prospectus at such time and in such numbers as to enable
the Authorized Participant to comply with any obligation it may have to deliver
such Prospectus to customers. The Distributor will make such revised,
supplemented or amended Prospectus available to the Authorized Participant no
later than its effective date. The Distributor shall be deemed to have complied
with this Section 4 when the Authorized Participant has received such revised,
supplemented or amended prospectus by email at [insert e-mail address], in
printable form, with such number of hard copies as may be agreed from time to
time by the parties promptly thereafter.
(b) The Distributor represents and warrants that (i) the Registration
Statement and the Prospectus contained therein conforms in all material respects
to the requirements of the Securities Act of 1933 ("xxx 0000 Xxx"), as amended,
and the rules and regulations of the Securities and Exchange Commission ("the
SEC") thereunder and do not and will not, as of the applicable effective date as
to the Registration Statement and any amendment thereto and as of the applicable
filing date as to the Prospectus and any amendment or supplement thereto,
contain an untrue statement of a material fact or omit to state a material fact
required to be
4
Exhibit (e)(2)
stated therein or necessary to make the statements therein not misleading; (ii)
the sale and distribution of the Shares as contemplated herein will not conflict
with or result in a breach or violation of any statute or any order, rule or
regulation of any court or governmental agency or body having jurisdiction over
the Company, any Fund or the Distributor; and (iii) no consent, approval,
authorization, order, registration or qualification of or with any such court or
governmental agency or body is required for the issuance and sale of the Shares,
except the registration under the 1933 Act of the Shares.
(c) The Authorized Participant represents, warrants and agrees that it
will not make any representations concerning Shares other than those contained
in the Company's then current Prospectus or in any promotional materials or
sales literature furnished to the Authorized Participant by the Distributor. The
Authorized Participant agrees not to furnish or cause to be furnished to any
person or display or publish any information or materials relating to Shares
(including, without limitation, promotional materials and sales literature,
advertisements, press releases, announcements, statements, posters, signs or
other similar materials), except such information and materials as may be
furnished to the Authorized Participant by the Distributor and such other
information and materials as may be approved in writing by the Distributor. The
Authorized Participant understands that neither the Company nor any of its Funds
will be advertised or marketed as an open-end investment company, (i.e., as a
mutual fund), which offers redeemable securities, and that any advertising
materials will prominently disclose that the Shares are not redeemable shares of
the Company. In addition, the Authorized Participant understands that any
advertising material that addresses redemptions of Shares, including the
Prospectus, will disclose that the owners of Shares may acquire Shares and
tender Shares for redemption to the Company in whole Creation Units only.
(d) Notwithstanding the foregoing, the Authorized Participant may
without the written approval of the Distributor prepare and circulate in the
regular course of its business research reports that include information,
opinions or recommendations relating to Shares (i) for public dissemination,
provided that such research reports compare the relative merits and benefits of
Shares with other products and are not used for purposes of marketing Shares and
(ii) for internal use by the Authorized Participant.
5. TITLE TO SECURITIES; RESTRICTED SHARES.
The Authorized Participant represents on behalf of itself and any party
for which it acts that upon delivery of a portfolio of Deposit Securities to the
Custodian in accordance with the terms of the Prospectus, the Company will
acquire good and unencumbered title to such securities, free and clear of all
liens, restrictions, charges and encumbrances and not subject to any adverse
claims, including, without limitation, any restriction upon the sale or transfer
of such securities imposed by (i) any agreement or arrangement entered into by
the Authorized Participant or any party for which it is acting in connection
with a Purchase Order or (ii) any provision of the 1933 Act, and any regulations
thereunder (except that portfolio securities of issuers other than U.S. issuers
shall not be required to have been registered under the 1933 Act if exempt from
such registration), or of the applicable laws or regulations of any other
applicable jurisdiction and (iii) no such securities are "restricted securities"
as such term is used in Rule 144(a)(3)(i) promulgated under the 1933 Act.
6. CASH COMPONENT AND FEES.
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Exhibit (e)(2)
The Authorized Participant hereby agrees that as between the Company
and itself or any party for which it acts in connection with a Purchase Order
for any Fund, it will make available in same day funds for each purchase of
Shares an amount of cash sufficient to pay the Cash Component and any other
amounts of cash due to the Company in connection with the purchase of any
Creation Unit of Shares (including the purchase Transaction Fee for in-kind and
cash purchases and the additional variable charge for cash purchases (when, in
the sole discretion of the Company, cash purchases are available or specified as
described in the Prospectus)) (the "Cash Amount") which shall be made through
DTC to an account maintained by the Custodian and shall be provided in same day
or immediately available funds on or before the settlement date in accordance
with the Company's Prospectus ("Contractual Settlement Date"). The Authorized
Participant hereby agrees to ensure that the Cash Amount will be received by the
Company on or before the Contractual Settlement Date, and in the event payment
of such Cash Amount has not been made by such Contractual Settlement Date, the
Authorized Participant agrees on behalf of itself or any party for which it acts
in connection with a Purchase Order to pay the full cash amount, plus interest,
computed at such reasonable rate as may be specified by the Company from time to
time. The Authorized Participant may require its customer to enter into a
written agreement with the Authorized Participant with respect to such matters.
7. ROLE OF AUTHORIZED PARTICIPANT.
(a) The Authorized Participant acknowledges and agrees that for all
purposes of this Agreement, the Authorized Participant will be deemed to be an
independent contractor, and will have no authority to act as agent for the
Company, any Fund, the Distributor, the Custodian, in any matter or in any
respect. The Authorized Participant agrees to make itself and its employees
available, upon request, during normal business hours to consult with the
Company, the Distributor, the Custodian, or the Authorized Participant's
custodian or their designees concerning the performance of the Authorized
Participant's responsibilities under this Agreement.
(b) In executing this Agreement, the Authorized Participant agrees in
connection with any purchase or redemption transactions in which it acts for a
customer or for any other Authorized Participant or indirect participant, or any
other shareholder in an underlying shares account ("Beneficial Owner"), that it
shall extend to any such party all of the rights, and shall be bound by all of
the obligations, of a DTC Participant in addition to any obligations that it
undertakes hereunder or in accordance with the Prospectus.
(c) The Authorized Participant agrees to maintain records of all sales
of Shares made by or through it and to furnish copies of such records to the
Company or the Distributor upon the request of the Company or the Distributor.
8. AUTHORIZED PERSONS OF THE AUTHORIZED PARTICIPANT.
Concurrently with the execution of this Agreement and from time to time
thereafter as may be requested by the Company or the Distributor, the Authorized
Participant shall deliver to the Distributor and the Company, with copies to the
Transfer Agent at the address specified below, duly certified as appropriate by
its Secretary or other duly authorized official, a certificate in a form
approved by the Company (see Annex III to this Agreement) setting forth the
names and signatures of all persons authorized to give instructions relating to
any activity
6
Exhibit (e)(2)
contemplated hereby or any other notice, request or instruction on behalf of the
Authorized Participant (each such person an "Authorized Person"). Such
certificate may be accepted and relied upon by the Distributor and the Company
as conclusive evidence of the facts set forth therein and shall be considered to
be in full force and effect until delivery to the Distributor and the Company of
a superseding certificate in a form approved by the Company bearing a subsequent
date. Upon the termination or revocation of authority of such Authorized Person
by the Authorized Participant, the Authorized Participant shall give immediate
written notice of such fact to the Distributor and the Company and such notice
shall be effective upon receipt by both the Distributor and the Company. The
Distributor shall issue to each Authorized Participant a unique personal
identification number ("PIN Number") by which such Authorized Participant shall
be identified and instructions issued by the Authorized Participant hereunder
shall be authenticated. The PIN Number shall be kept confidential and only
provided to Authorized Persons. If after issuance, an Authorized Participant's
PIN Number is changed, the new PIN Number will become effective on a date
mutually agreed upon by the Authorized Participant and the Distributor.
9. REDEMPTION.
The Authorized Participant understands and agrees that Redemption
Orders may be submitted only on days that the US stock exchange where the Shares
are principally listed (as specified in the Prospectus) (the "Listing Exchange")
is open for trading or business.
(a) The Authorized Participant represents and warrants that it will not
attempt to place a Redemption Order for the purpose of redeeming any Creation
Unit of Shares of any Fund unless it first ascertains that it or its customer,
as the case may be, owns outright or has full legal authority and legal and
beneficial right to tender for redemption the requisite number of Creation Units
of Shares of the relevant Fund to be redeemed and to the entire proceeds of the
redemption and that such Shares have not been loaned or pledged to another party
and are not the subject of a repurchase agreement, securities lending agreement
or any other arrangement that would preclude the delivery of such Shares to the
Transfer Agent in accordance with the Prospectus or as otherwise required by the
Company. The Authorized Participant understands that Shares of any Fund may be
redeemed only when one or more Creation Units of Shares of a Beneficial Owner
are held in the account of a single Authorized Participant.
(b) In the case of a resident Australian or New Zealand holder
notwithstanding the foregoing, the Authorized Participant understands and agrees
that such holder is only entitled to receive cash upon its redemption of
Creation Units of Shares. In the Redemption Order the Authorized Participant
will be required to confirm that an in-kind redemption request has not been
submitted on behalf of a beneficial owner who is an Australian resident.
10. BENEFICIAL OWNERSHIP.
(a) The Authorized Participant represents and warrants to the
Distributor and the Company that (based upon the number of outstanding Shares of
each such Fund made publicly available by the Company) it does not, and will not
in the future, hold for the account of any single Beneficial Owner of Shares of
the relevant Fund, eighty percent (80%) or more of the currently outstanding
Shares of such relevant Fund, so as to cause the Fund to have a basis in the
portfolio securities deposited with the Fund with respect to such Fund different
from the market value of such portfolio securities on the date of such deposit,
pursuant to section 351 of the Internal Revenue Code of 1986, as amended. The
Authorized Participant agrees that the
7
Exhibit (e)(2)
confirmation relating to any order for one or more Creation Units of Shares of
any Fund shall state as follows:
"Purchaser represents and warrants that, after giving effect
to the purchase of Shares to which this confirmation relates,
it will not hold 80% or more of the outstanding Shares of the
relevant Fund of the Company and that it will not treat such
purchase as eligible for tax-free treatment under Section 351
of the Internal Revenue Code of 1986, as amended. If purchaser
is a dealer, it agrees to deliver similar written confirmations
to any person purchasing any of the Shares to which this
confirmation relates from it."
(b) The Company and its Transfer Agent and Distributor shall have the
right to require information from the Authorized Participant regarding Shares'
ownership of each Fund, and to rely thereon to the extent necessary to make a
determination regarding ownership of 80% or more of the currently outstanding
Shares of any Fund by a Beneficial Owner as a condition to the acceptance of a
deposit of Deposit Securities.
11. INDEMNIFICATION.
This section 11 shall survive the termination of this Agreement.
(a) The Authorized Participant hereby agrees to indemnify and hold
harmless the Distributor, the Company, the Transfer Agent, their respective
subsidiaries, affiliates, directors, officers, employees and agents, and each
person, if any, who controls such persons within the meaning of Section 15 of
the 1933 Act (each an "AP Indemnified Party") from and against any loss,
liability, cost and expense (including attorneys' fees) incurred by such AP
Indemnified Party as a result of (i) any breach by the Authorized Participant of
any provision of this Agreement that relates to such Authorized Participant;
(ii) any failure on the part of the Authorized Participant to perform any of its
obligations set forth in the Agreement; (iii) any failure by the Authorized
Participant to comply with applicable laws, including rules and regulations of
self-regulatory organizations; (iv) actions of such AP Indemnified Party in
reliance upon any instructions issued in accordance with Annex II, III or IV
hereto (as each may be amended from time to time) reasonably believed by the
Distributor and/or the Transfer Agent to be genuine and to have been given by
the Authorized Participant, or (v)(1) any representation by the Authorized
Participant, its employees or its agents or other representatives about the
Shares, any AP Indemnified Party or the Company that is not consistent with the
Company's then-current Prospectus made in connection with the offer or the
solicitation of an offer to buy or sell Shares and (2) any untrue statement or
alleged untrue statement of a material fact contained in any research reports,
marketing material and sales literature described in Section 4 hereof or any
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading to the extent that
such statement or omission relates to the Shares, any AP Indemnified Party or
the Company, unless, in either case, such representation, statement or omission
was made or included by the Authorized Participant at the written direction of
the Company or tthe Distributor or is based upon any omission or alleged
omission by the Company or the Distributor to state a material fact in
connection with such representation, statement or omission necessary to make
such representation, statement or omission not misleading. The Authorized
Participant and the Distributor understand and agree that the Company as a third
party beneficiary to this Agreement is entitled and intends to proceed directly
against the
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Exhibit (e)(2)
Authorized Participant in the event that the Authorized Participant fails to
honor any of its obligations pursuant to this Agreement that benefit the
Company. The Authorized Participant shall not be liable to the AP Indemnified
Party for any damages arising out of mistakes or errors in data provided to the
Authorized Participant, or mistakes or errors by, or out of interruptions or
delays of communications with the AP Indemnified Parties due to any action of a
service provider to the Company.
(b) The Distributor hereby agrees to indemnify and hold harmless the
Authorized Participant, its respective subsidiaries, affiliates, directors,
officers, employees and agents, and each person, if any, who controls such
persons within the meaning of Section 15 of the 1933 Act (each a "Distributor
Indemnified Party") from and against any loss, liability, cost and expense
(including attorneys' fees) incurred by such Distributor Indemnified Party as a
result of (i) any breach by the Distributor of any provision of this Agreement
that relates to the Distributor; (ii) any failure on the part of the Distributor
to perform any of its obligations set forth in this Agreement; (iii) any failure
by the Distributor to comply with applicable laws, including rules and
regulations of self-regulatory organizations; (iv) actions of such Distributor
Indemnified Party in reliance upon any instructions issued or representations
made in accordance with Annex II, III and IV hereto (as each may be amended from
time to time) reasonably believed by the Authorized Participant to be genuine
and to have been given by the Distributor, or (v) any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement of the Company as originally filed with the SEC or in any amendment
thereof, or in any prospectus or any statement of additional information, or any
amendment thereof or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, in
connection with the Authorized Participant's acting in its capacity as an
Authorized Participant. The Distributor shall not be liable to any Distribuor
Indemnified Party for any damages arising out of mistakes or errors in data
provided to the Distributor, or mistakes or errors by, or out of interruptions
or delays of communications with the Distributor Indemnified Parties, due to any
action of a service provider to the Company.
(c) This Section 11 shall not apply to the extent any such losses,
liabilities, damages, costs and expenses are incurred as a result or in
connection with any gross negligence, bad faith or willful misconduct on the
part of the AP Indemnified Party or the Distributor Indemnified Party, as the
case may be. The term "affiliate" in this Section 11 shall include, with respect
to any person, entity or organization, any other person, entity or organization
which directly, or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with such person, entity or
organization.
12. LIMITATION OF LIABILITY.
(a) The Distributor and the Transfer Agent undertake to perform such
duties and only such duties as are expressly set forth herein, or expressly
incorporated herein by reference, and no implied covenants or obligations shall
be read into this Agreement against the Distributor or the Transfer Agent.
(b) In the absence of bad faith, negligence or willful misconduct on
its part, neither the Distributor, nor the Transfer Agent, whether acting
directly or through agents or attorneys as
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Exhibit (e)(2)
provided in paragraph (d) below, shall be liable for any action taken, suffered
or omitted or for any error of judgment made by any of them in the performance
of their duties hereunder. Neither the Distributor nor the Transfer Agent shall
be liable for any error of judgment made in good faith unless the party
exercising such shall have been negligent in ascertaining the pertinent facts
necessary to make such judgment. In no event shall the Distributor or the
Transfer Agent be liable for special, indirect or consequential loss or damage
of any kind whatsoever (including but not limited to lost profit), even if such
parties have been advised of the likelihood of such loss or damage and
regardless of the form of action. In no event shall the Distributor or the
Transfer Agent be liable for the acts or omissions of DTC, NSCC or any other
securities depository or clearing corporation.
(c) Neither the Distributor nor the Transfer Agent shall be responsible
or liable for any failure or delay in the performance of their obligations under
this Agreement arising out of or caused, directly or indirectly, by
circumstances beyond its reasonable control, including without limitation, acts
of God; earthquakes; fires; floods; wars; civil or military disturbances;
terrorism; sabotage; epidemics; riots; interruptions; loss or malfunction of
utilities, computer (hardware or software) or communications service; accidents;
labor disputes; acts of civil or military authority or governmental actions.
(d) The Distributor and the Transfer Agent may conclusively rely upon,
and shall be fully protected in acting or refraining from acting upon, any
communication authorized hereby and upon any written or oral instruction,
notice, request, direction or consent reasonably believed by them to be genuine.
(e) The Transfer Agent shall not be required to advance, expend or risk
its own funds or otherwise incur or become exposed to financial liability in the
performance of its duties hereunder, except as may be required as a result of
its own gross negligence, willful misconduct or bad faith.
(f) Tax Liability. To the extent any payment of any transfer tax, sales
or use tax, stamp tax, recording tax, value added tax or any other similar tax
or government charge applicable to the creation or redemption of any Creation
Unit of Shares of any Fund made pursuant to this Agreement is imposed, the
Authorized Participant shall be responsible for the payment of such tax or
government charge regardless of whether or not such tax or charge is imposed
directly on the Authorized Participant. To the extent the Company or the
Distributor is required by law to pay any such tax or charge, the Authorized
Participant agrees to promptly indemnify such party for any such payment,
together with any applicable penalties, additions to tax or interest thereon.
13. INFORMATION ABOUT CREATION DEPOSITS.
The Authorized Participant understands that the number and names of the
designated portfolio of Deposit Securities to be included in the current
Creation Deposit for each Fund will be made available by NSCC on each day that
the Listing Exchange is open for trading and will also be made available on each
such day through the facilities of the NSCC.
14. ACKNOWLEDGMENT.
10
Exhibit (e)(2)
The Authorized Participant acknowledges receipt of the Prospectus and
represents that it has reviewed and understands such documents .
15. NOTICES.
Except as otherwise specifically provided in this Agreement, all
notices required or permitted to be given pursuant to this Agreement shall be
given in writing and delivered by personal delivery or by postage prepaid
registered or certified United States first class mail, return receipt
requested, or by telex, telegram or facsimile or similar means of same day
delivery (with a confirming copy by mail). Unless otherwise notified in writing,
all notices to the Company shall be at the address or telephone, facsimile or
telex numbers as follows:
Attn: TDAX Funds, Inc.
c/o XShares Advisors LLC
000 Xxxxxxxxx Xxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Attn: Xxxxxxx Xxxxxxxxx
P: (000)000-0000; F: (000)000-0000
All notices to the Authorized Participant, the Distributor and the
Transfer Agent shall be directed to the address or telephone, facsimile or telex
numbers indicated below the signature line of such party.
16. EFFECTIVENESS, TERMINATION AND AMENDMENT.
(a) This Agreement shall become effective five (5) Business Days after
execution and delivery to the Distributor upon notice by the Distributor to the
Authorized Participant. A "Business Day" shall mean each day the Listing
Exchange is open for regular trading. This Agreement may be terminated at any
time by any party upon sixty (60) days prior written notice to the other parties
and may be terminated earlier by the Company or the Distributor at any time in
the event of a breach by the Authorized Participant of any provision of this
Agreement or the procedures described or incorporated herein. This Agreement
supersedes any prior such agreement between or among the parties.
(b) This Agreement may be amended by the Company or the Distributor
from time to time without the consent of any Beneficial Owner by the following
procedure. The Company or the Distributor will mail a copy of the amendment to
the Authorized Participant and the Company or Distributor, as applicable. For
purposes of this Agreement, mail will be deemed received by the recipient
thereof on the fifth (5th) Business Day following the deposit of such mail into
the U.S. Postal system. If neither the Authorized Participant or the other party
objects in writing to the amendment within five (5) days after its receipt, the
amendment will become part of this Agreement in accordance with its terms.
17. GOVERNING LAW; CONSENT TO JURISDICTION.
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York (regardless of the laws that might otherwise
govern under applicable New York conflict of laws principles) as to all matters,
including matters of validity, construction,
11
Exhibit (e)(2)
effect, performance and remedies. Each party hereto irrevocably consents to the
jurisdiction of the courts of the State of New York and of any federal court
located in the Borough of Manhattan in such State in connection with any action,
suit or other proceeding arising out of or relating to this Agreement or any
action taken or omitted hereunder, and waives any claim of forum non conveniens
and any objections as to laying of venue. Each party further waives personal
service of any summons, complaint or other process and agrees that service
thereof may be made by certified or registered mail directed to such party at
such party's address for purposes of notices hereunder. Each party hereto each
hereby irrevocably waives any and all rights to trial by jury in any legal
proceeding arising out of or relating to this Agreement.
18. SUCCESSORS AND ASSIGNS.
This Agreement and all of the provisions hereof shall be binding upon
and inure to the benefit of the parties and their respective successors and
permitted assigns.
19. ASSIGNMENT.
Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any party without the prior written consent of
the other parties, except that any entity into which a party hereto may be
merged or converted or with which it may be consolidated or any entity resulting
from any merger, conversion, or consolidation to which such party hereunder
shall be a party, or any entity succeeding to all or substantially all of the
business of the party, shall be the successor of the party under this Agreement.
The party resulting from any such merger, conversion, consolidation or
succession shall notify the other parties hereto of the change. Any purported
assignment in violation of the provisions hereof shall be null and void.
20. INTERPRETATION.
The article and section headings contained in this Agreement are solely
for the purpose of reference, are not part of the agreement of the parties and
shall not in any way affect the meaning or interpretation of this Agreement.
21. ENTIRE AGREEMENT.
This Agreement, along with any other agreement or instrument delivered
pursuant to this Agreement, supersede all prior agreements and understandings
between the parties with respect to the subject matter hereof.
22. SEVERANCE.
If any provision of this Agreement is held by any court or any act,
regulation, rule or decision of any other governmental or supra national body or
authority or regulatory or self-regulatory organization to be invalid, illegal
or unenforceable for any reason, it shall be invalid, illegal or unenforceable
only to the extent so held and shall not affect the
12
Exhibit (e)(2)
validity, legality or enforceability of the other provisions of this Agreement
and this Agreement will be construed as if such invalid, illegal, or
unenforceable provision had never been contained herein, unless the Distributor
determines in its discretion, after consulting with the Company, that the
provision of this Agreement that was held invalid, illegal or unenforceable does
affect the validity, legality or enforceability of one or more other provisions
of this Agreement, and that this Agreement should not be continued without the
provision that was held invalid, illegal or unenforceable, and in that case,
upon the Distributor's notification of the Company of such a determination, this
Agreement shall immediately terminate and the Distributor will so notify the
Authorized Participant immediately.
23. NO STRICT CONSTRUCTION.
The language used in this Agreement will be deemed to be the language
chosen by the parties to express their mutual intent, and no rule of strict
construction will be applied against any party.
24. SURVIVAL.
Section 11 (Indemnification) hereof shall survive the termination of
this Agreement.
25. OTHER USAGES.
The following usages shall apply in interpreting this Agreement: (i)
references to a governmental or quasigovernmental agency, authority or
instrumentality shall also refer to a regulatory body that succeeds to the
functions of such agency, authority or instrumentality; and (ii) "including"
means "including, but not limited to."
26. COUNTERPARTS.
This Agreement may be executed in one or more counterparts, each of
which will be deemed to be an original copy of this Agreement and all of which,
when taken together, will be deemed to constitute one and the same agreement.
[Signature Page Follows]
13
Exhibit (e)(2)
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered as of the day and year written below.
DATED: ____________
ALPS DISTRIBUTORS, INC.
BY:___________________________________
TITLE:________________________________
ADDRESS: 0000 Xxxxxxxx, Xxxxx 0000, Xxxxxx XX 00000
TELEPHONE: 000.000.0000
FACSIMILE: 303.623.7850
[NAME OF AUTHORIZED PARTICIPANT]
BY:___________________________________
TITLE:________________________________
ADDRESS:______________________________
TELEPHONE:____________________________
FACSIMILE:___________________________________
ACCEPTED BY: THE BANK OF NEW YORK, AS TRANSFER AGENT
BY:__________________________________________
TITLE:_______________________________________
ADDRESS:_____________________________________
TELEPHONE:___________________________________
FACSIMILE:___________________________________
14
Exhibit (e)(2)
ANNEX I
TO
AUTHORIZED PARTICIPANT AGREEMENT
FOR TDAX FUNDS, INC.
TDAX Independence 2010 Exchange-Traded Fund
TDAX Independence 2020 Exchange-Traded Fund
TDAX Independence 2030 Exchange-Traded Fund
TDAX Independence 2040 Exchange-Traded Fund
TDAX Independence In-Target Exchange-Traded Fund
15
Exhibit (e)(2)
ANNEX II
TO
AUTHORIZED PARTICIPANT AGREEMENT
FOR TDAX FUNDS, INC.
PROCEDURES FOR PROCESSING
-------------------------
PURCHASE ORDERS AND REDEMPTION ORDERS
-------------------------------------
This Annex II to the Authorized Participant Agreement supplements the
Prospectus with respect to the procedures to be used in processing (1) a
Purchase Order for the purchase of Shares of TDAX Funds, Inc. in Creation Units
of each Fund and a (2)Redemption Order for the redemption of Shares of TDAX
Funds, Inc. in Creation Units of each Fund. Capitalized terms, unless otherwise
defined in this Annex II, have the meanings attributed to them in the Authorized
Participant Agreement or the Prospectus.
An Authorized Participant is required to have signed the Authorized
Participant Agreement. Upon acceptance of the Agreement and execution thereof by
the Company and in connection with the initial Purchase Order submitted by the
Authorized Participant, the Distributor will assign a PIN Number to each
Authorized Person authorized to act for an Authorized Participant. This will
allow an Authorized Participant through its Authorized Person(s) to place a
Purchase Order or Redemption Order with respect to the purchase or redemption of
Creation Units of Shares of TDAX Funds, Inc.
16
Exhibit (e)(2)
ANNEX II -- PART A
TO
AUTHORIZED PARTICIPANT AGREEMENT
FOR TDAX FUNDS, INC.
TO PLACE A PURCHASE ORDER FOR
=============================
CREATION UNIT(S) OF SHARES OF ONE OR MORE FUNDS OF
==================================================
TDAX FUNDS, INC.
1. PLACING A PURCHASE ORDER.
Purchase Orders for Creation Units of Shares of TDAX Funds, Inc. may be
initiated only on days that the Listing Exchange is open for trading ("Business
Days"). Purchase Orders may only be made in whole Creation Units of Shares of
each Fund.
To begin a Purchase Order, the Authorized Participant ("AP"") must
telephone the BNY ETF Administrator at (000) 000-0000 or such other number as
the Distributor designates in writing to the AP. This telephone call must be
made by an Authorized Person of the AP not later than the closing time of the
regular trading session on the Listing Exchange which is ordinarily 4:00 p.m.
Eastern Time ("Listing Exchange Closing Time"). Upon verifying the authenticity
of the AP (as determined by the use of the appropriate PIN Number), BNY ETF
Administrator will request that the AP place the Purchase Order. To do so, the
AP must provide the appropriate ticker symbols when referring to each Fund .
After the AP has placed the Purchase Order, BNY ETF Administrator will read the
Purchase Order back to the AP. The AP then must affirm that the Purchase Order
has been taken correctly by BNY ETF Administrator. If the AP affirms that
Purchase Order has been taken correctly, BNY ETF Administrator will issue a
Confirmation Number to the AP.
PLEASE NOTE: A PURCHASE ORDER REQUEST IS NOT COMPLETE UNTIL THE CONFIRMATION
NUMBER IS ISSUED BY BNY ETF ADMINISTRATOR. AN ORDER MAY NOT BE CANCELED BY THE
AP AFTER THE CONFIRMATION NUMBER IS ISSUED. INCOMING TELEPHONE CALLS ARE QUEUED
AND WILL BE HANDLED IN THE SEQUENCE RECEIVED. CALLS PLACED BEFORE THE LISTING
EXCHANGE CLOSING TIME WILL BY PROCESSED EVEN IF THE CALL IS ANSWERED BY BNY ETF
ADMINISTRATOR AFTER THE LISTING EXCHANGE CLOSING TIME. ACCORDINGLY, THE AP
SHOULD NOT HANG UP AND REDIAL. INCOMING CALLS THAT ARE RECEIVED AFTER THE
LISTING EXCHANGE CLOSING TIME WILL NOT BE ANSWERED BY BNY ETF ADMINISTRATOR. ALL
TELEPHONE CALLS WILL BE RECORDED.
2. RECEIPT OF TRADE CONFIRMATION.
Subject to the conditions that a properly completed telephone Purchase
Order has been placed by the AP (either on its own or its customer's behalf) not
later than the Listing Exchange Closing Time, the Distributor will accept the
Purchase Order on behalf of Company and Distributor and will confirm in writing
to the AP that its Purchase Order has been accepted by 4:45 p.m. Eastern
Standard Time on the Business Day that the Purchase Order is received.
17
Exhibit (e)(2)
3. QUALITY ASSURANCE.
After a Confirmation Number is issued by BNY ETF Administrator to the
AP, BNY ETF Administrator will either fax or email a written version of the
Purchase Order to the AP. Upon receipt, the AP should immediately telephone
Distributor, if the Participant believes that the Purchase Order has not been
taken correctly by BNY ETF Administrator. In addition, BNY ETF Administrator
will telephone the AP within 15 minutes of the fax or e-mail to corroborate the
Purchase Order
4. PROCESSING A PURCHASE ORDER.
During the telephone call, BNY ETF Administrator will request that the
AP state that the AP will not own 80% or more of the Shares of any Fund upon
execution of the Purchase Order. If the AP is not able to so confirm, BNY ETF
Administrator has the right to not accept the Purchase Order.
5. REJECTING OR SUSPENDING PURCHASE ORDERS.
The Company or Distributor reserve the absolute right to reject or
revoke acceptance of a Purchase Order if (i) the order is not in proper form as
determined by the Company, BNY ETF Administrator or Distributor, (ii) the
portfolio of Deposit Securities delivered is not as specified by Distributor;
(iii) acceptance of the Deposit Securities would have certain adverse tax
consequences to the Company or any Fund; (iv) the acceptance of the Portfolio
Deposit would, in the opinion of counsel, be unlawful; (v) the acceptance of the
Portfolio Deposit would otherwise, in the discretion of Company or Adviser, have
an adverse effect on Company or the rights of beneficial owners of a Fund; or
(vi) circumstances outside the control of Company, Distributor, Transfer Agent
or Adviser make it for all practical purposes impossible to process a Purchase
Order. The Company or the Distributor shall notify the AP of a rejection or
revocation of any Purchase Order. The Company and Distributor are under no duty,
however, to give notification of any defects or irregularities in the delivery
of Portfolio Deposits nor shall either of them incur any liability for the
failure to give any such notification.
Except as provided herein, all Purchase Orders for Creation Units of
Shares of the Company are irrevocable by the AP. The Company acknowledges its
agreement to return to the AP or any party for which it is acting any dividend,
distribution or other corporate action paid to the Company in respect of any
Deposit Security that is transferred to Company that, based on the valuation of
such Deposit Security at the time of transfer, should have been paid to the AP
or any party for which it is acting.
6. CONTRACTUAL SETTLEMENT
(1)Except as provided below, Deposit Securities must be delivered
through the National Securities Clearing Corporation ("NSCC") to a Depository
Trust Company ("DTC") account maintained at the Custodian of the Company on or
before the Domestic Contractual Settlement Date (defined below). The AP must
also make available on or before the Contractual Settlement Date, by means
satisfactory to Company, immediately available or same day funds estimated by
Company to be sufficient to pay the Cash Component next determined after
18
Exhibit (e)(2)
acceptance of the Purchase Order, together with the applicable purchase
Transaction Fee. Any excess funds will be returned following settlement of the
issue of the Creation Unit of Shares of the Company. The "Domestic Contractual
Settlement Date" is the earlier of (i) date upon which all of the required
Deposit Securities, the Cash Component and any other cash amounts which may be
due are delivered to Company and (ii) trade date plus three (t +3) Business
Days. Except as provided in the next two paragraphs, a Creation Unit of Shares
of any Fund will be issued concurrently with the transfer of good title to
Company of the portfolio of Deposit Securities through the NSCC's Continuous Net
Settlement ("CNS") system and the payment of the Cash Component and the purchase
Transaction Fee through DTC.
(2) The Company reserves the right to permit or require the
substitution of an amount of cash (i.e., a "cash in lieu" amount ) to be added
to the Cash Component to replace any Deposit Security with respect to any
Domestic Fund which may not be available in sufficient quantity for delivery or
which may not be eligible for transfer through the CNS Clearing Process, or
which may not be eligible for transfer through the systems of DTC and hence not
eligible for transfer through the CNS Clearing Process (discussed below) and
will be at the expense of the Fund and will affect the value of all Shares of
such Fund; but the Company, subject to the approval of the Board, may adjust the
"Transaction Fee" within the parameters described below to protect ongoing
shareholders.
(3) Any settlement outside the CNS Clearing Process is subject to
additional requirements and fees as discussed in the Prospectus.
7. CASH PURCHASES
When, in the sole discretion of Company, cash purchases of Creation
Units of Shares are available or specified for a Fund, such purchases shall be
effected in essentially the same manner as in-kind purchases thereof. In the
case of a cash purchase, the AP must pay the cash equivalent of the Deposit
Securities it would otherwise be required to provide through an in-kind
purchase, plus the same Cash Component required to be paid by an in-kind
purchaser. In addition, to offset Company's brokerage and other transaction
costs associated with using the cash to purchase the requisite Deposit
Securities, the AP must pay a fixed purchase Transaction Fee, plus an additional
variable charge for cash purchases, which is expressed as a percentage of the
value of the Deposit Securities. The Transaction Fees for in-kind and cash
purchases of Creation Units of Shares are described in the Prospectus.
19
Exhibit (e)(2)
ANNEX II -- PART B
TO
AUTHORIZED PARTICIPANT AGREEMENT
FOR TDAX FUNDS, INC.
PROCEDURES TO PLACE A REDEMPTION ORDER FOR
==========================================
CREATION UNIT(S) OF SHARES OF ONE OR MORE FUNDS OF
==================================================
TDAX FUNDS, INC.
1. PLACING A REDEMPTION ORDER
Redemption Orders for Creation Units of Shares may be initiated only on
days that the Listing Exchange is open for trading. Redemption Orders may only
be made in whole Creation Units of shares of each Fund. To begin a Redemption
Order, the AP must telephone BNY ETF Administrator at (000) 000-0000. This
telephone call must be made by an Authorized Person of the AP not later than the
closing time of the regular trading session on the Listing Exchange which is
ordinarily 4:00 p.m. Eastern Standard Time ("Listing Exchange Closing Time").
Upon verifying the authenticity of the AP (as determined by the use of the
appropriate PIN Number), BNY ETF Administrator will request that the AP place
the Redemption Order. To do so, the AP must provide the appropriate ticker
symbols when referring to Fund. After the AP has placed the Redemption Order,
BNY ETF Administrator will read the Redemption Order back to the AP. The AP then
must affirm that the Redemption Order has been taken correctly by BNY ETF
Administrator. If the AP affirms that Redemption Order has been taken correctly,
BNY ETF Administrator will issue a Confirmation Number to the AP.
PLEASE NOTE: A REDEMPTION ORDER REQUEST IS NOT COMPLETE UNTIL THE CONFIRMATION
NUMBER IS ISSUED BY BNY ETF ADMINISTRATOR. AN ORDER MAY NOT BE CANCELED BY THE
AP AFTER THE CONFIRMATION NUMBER IS ISSUED. INCOMING TELEPHONE CALLS ARE QUEUED
AND WILL BE HANDLED IN THE SEQUENCE RECEIVED. CALLS PLACED BEFORE THE LISTING
EXCHANGE CLOSING TIME WILL BY PROCESSED EVEN IF THE CALL IS ANSWERED BY BNY ETF
ADMINISTRATOR AFTER THE LISTING EXCHANGE CLOSING TIME. ACCORDINGLY, THE AP
SHOULD NOT HANG UP AND REDIAL. INCOMING CALLS THAT ARE RECEIVED AFTER THE
LISTING EXCHANGE CLOSING TIME WILL NOT BE ANSWERED BY BNY ETF ADMINSTRATOR. ALL
TELEPHONE CALLS MAY BE RECORDED.
2. RECEIPT OF CONFIRMATION.
Subject to the conditions that a duly completed Redemption Order is
received by Distributor from the AP on behalf of itself or another redeeming
investor by the Listing Exchange Closing Time, the Distributor will accept the
Redemption Order on behalf of Company and Distributor and will confirm in
writing to the AP that its Redemption Order has been accepted by 4:45 p.m.
Eastern Standard Time on the Business Day the Redemption Order is received.
3. QUALITY ASSURANCE.
(a) After a Confirmation Number is issued by BNY ETF Administrator to
the AP, BNY ETF Administrator will either fax or email a copy of the Redemption
Order to the AP. Upon receipt, the AP should immediately telephone BNY ETF
Administrator, if the AP believes that
20
Exhibit (e)(2)
the Redemption Order has not been taken correctly by BNY ETF Administrator. In
addition, BNY ETF Administrator will telephone the AP within 15 minutes of the
fax or e- mail to corroborate the Redemption Order.
(b) In the Redemption Order, the AP will be required to acknowledge its
agreement on behalf of itself and any party for which it is acting (whether as a
customer or otherwise) to return to Company any dividend, distribution or other
corporate action paid to it or to the party for which it is acting in respect of
any Deposit Security that is transferred to the AP or any party for which it is
acting that, based on the valuation of such Deposit Security at the time of
transfer, should be paid to the Fund to which the Redemption Order relates. In
the Redemption Order, the AP will also be required to acknowledge its agreement
on behalf of itself and any party for which it is acting (whether as a customer
or otherwise) that Company is entitled to reduce the amount of money or other
proceeds due to the AP or any party for which it is acting by an amount equal to
any dividend, distribution or other corporate action to be paid to it or to the
party for which it is acting in respect of any Deposit Security that is
transferred to the AP or any party for which it is acting that, based on the
valuation of such Deposit Security at the time of transfer, should be paid to
the Fund to which the Redemption Order relates.
4. TAKING DELIVERY OF DEPOSIT SECURITIES.
The Deposit Securities constituting in-kind redemption proceeds will be
delivered to the appropriate account which must be indicated in the AP's
Standing Redemption Instructions. An Authorized Person of the AP may amend the
AP's Standing Redemption Instructions from time to time in writing to BNY ETF
Administrator and Company in a form approved by Company. A redeeming Beneficial
Owner or the AP acting on behalf of such Beneficial Owner must maintain
appropriate securities broker-dealer, bank or other custody arrangements to
which account such Deposit Securities will be delivered. Redemptions of Shares
for Deposit Securities will be subject to compliance with applicable United
States federal and state securities laws.
5. CONTRACTUAL SETTLEMENT.
(1) Except as provided below, the Shares of any Domestic Fund must be
delivered through the National Securities Clearing Corporation ("NSCC") to a
Depository Company Company ("DTC") account maintained at the applicable
custodian of any Domestic Fund on or before the Domestic Contractual Settlement
Date (defined below). The Company will make available on the Domestic
Contractual Settlement Date, the Cash Component next determined after acceptance
of the Redemption Order, less the applicable purchase Transaction Fee. The
"Domestic Contractual Settlement Date" is the date upon which all of the
required Shares must be delivered to the Company and, the Deposit Securities,
Cash Component less any fees are delivered by the Company to the AP (ordinarily
trade date plus three (t + 3) Business Days). Except as provided in the next two
paragraphs, the Deposit Securities representing Creation Units of Shares will be
issued concurrently with the transfer of good title to Company of the required
number of Shares through the NSCC's Continuous Net Settlement (CNS) system and
the delivery of the Cash Component less the purchase Transaction Fee through
DTC.
(2) The Company reserves the right to permit or require the
substitution of an amount of cash (i.e., a "cash in lieu" amount ) to be added
to the Cash Component to replace any Deposit Security with respect to a Fund
which may not be available in sufficient quantity for
21
Exhibit (e)(2)
delivery or which may not be eligible for transfer through the CNS Clearing
Process, or which may not be eligible for transfer through the systems of DTC
and hence not eligible for transfer through the CNS Clearing Process (discussed
below) and will be at the expense of the Fund and will affect the value of all
Shares of such Fund ; but the Company, subject to the approval of the Board, may
adjust the Transaction Fee within the parameters described below to protect
ongoing shareholders. Any settlement outside the CNS Clearing Process is subject
to additional requirements and fees as discussed in the Prospectus.
(3) In the event that the number of Shares is insufficient on the
settlement date for Creation Unit(s) of Shares, the Company may deliver the
Deposit Securities notwithstanding such deficiency in reliance on the
undertaking of the AP to deliver the missing Shares as soon as possible, which
undertaking shall be secured by such the AP's delivery and maintenance of
collateral consisting of cash having a value at least equal to 105% of the value
of the missing Shares. The parties hereto agree that the delivery of such
collateral shall be made in accordance with the Cash Collateral Settlement
Procedures, which such procedures shall be provided to the AP by Distributor
upon request. The parties hereto further agree that Company may purchase the
missing Shares at any time and the AP agrees to accept liability for any
shortfall between the cost to the Company of purchasing such securities and the
value of the collateral, which may be sold by Company at such time, and in such
manner, as Company may determine in its sole discretion.
6. CASH REDEMPTIONS.
In the event that, in the sole discretion of Company, cash redemptions are
permitted or required by Company, proceeds will be paid to the AP redeeming
Shares on behalf of the redeeming investor as soon as practicable after the date
of redemption.
7. STANDING REDEMPTION INSTRUCTIONS.
Annex V hereto contains the AP's Standing Redemption Instructions,
which includes information identifying the account(s) into which Deposit
Securities of each Fund and any other redemption proceeds should be delivered by
Company pursuant to a Redemption Order.
22
Exhibit (e)(2)
ANNEX II -- PART C
TO
AUTHORIZED PARTICIPANT AGREEMENT
FOR TDAX FUNDS, INC.
TDAX FUNDS FLOW PROCESS
--------------------------------------------------------------------------------
This Annex II-Part C supplements the Fund's Prospectus with respect to the
procedures to be used by the Distributor and Transfer Agent in processing an
order for the creation or redemption of Shares of any Fund of the Company.
A. The AP is required to have (i) signed an Authorized Participant Agreement for
Fund and (ii) assigned a personal identification number to each Authorized
Person that the AP has authorized to act for such AP. This will allow an AP
through its Authorized Person(s) to place a creation or redemption order with
respect to Shares of any Fund of the Company.
B. The AP and Distributor shall implement the "Funds Flow Process" as agreed to
by the parties from time to time.
C. Note that trades placed through the NSCC/DTC may only occur on any day that
NSCC/DTC is open for business ("NSCC/DTC Business Day") .
FUNDS FLOW PROCESS
------------------------------------------------------------------------------------------------------------------------------------
ORIGINATOR ACTIVITY
------------------------------------------------------------------------------------------------------------------------------------
1. The AP calls on BNY's ETF Administrator recorded number to place a Share 1. The BNY - ETF Administrator greets
Creation and/or Redemption order. These trades are to be placed by 4:00 PM EST caller.
on any Listing Exchange Business Day.
------------------------------------------------------------------------------------------------------------------------------------
2. AP identifies his/her name, the Institution he/she represents, and PIN #. 2 BNY - ETF Administrator will confirm the
AP's PIN #.
The AP states the Fund name(s) and relevant ticker symbol(s). The BNY - ETF Administrator records the PIN
# and the order, and provides the AP with
AP will identify and list any securities that will not be delivered or an order confirmation number.
received in kind.
AP will make alternate arrangements with the ETF Administrator to deliver or The order confirmation constitutes a binding
receive the value for those securities that cannot be delivered. AP and ETF order, which may only be reversed by the
Administrator will exchange delivery or receive instructions for any security ETF Administrator, the Distributor or the
being delivered outside of the CNS system. Fund.
AP will make alternate arrangements
------------------------------------------------------------------------------------------------------------------------------------
23
Exhibit (e)(2)
------------------------------------------------------------------------------------------------------------------------------------
with the ETF Administrator to deliver or
receive the value for those securities that
cannot be delivered. AP and ETF Administrator
will exchange delivery or receive instructions
for any security being delivered outside of
the CNS system.
------------------------------------------------------------------------------------------------------------------------------------
3.AP will Fax a copy of the order form to the BNY ETF Administrator within 3. The BNY - ETF Administrator will receive
15 minutes from the time the call is made. a copy of the completed order form from the
AP Faxed within within 15 minutes from the
time the order is placed.
The AP will provide, as a part of the order form, a statement confirming that All orders received from the AP's are time
the AP will not be placing trades that would raise the AP's total holdings to stamped by the BNY - ETF Administrator at
80% or more of any Fund the time the order is placed
The signed Order Form will be sent as the physical receipt for the AP that The Distributor will verify that the
the order is confirmed. appropriate disclaimers have been made by
the AP and validate the disclaimer by
calculating the AP's position, including the
subscriptions requested, to the total fund
shares outstanding
The above procedures will be repeated until all orders have been placed by the The Distributor will sign the Order Form and
AP. the signed Order Form will be sent as the
physical receipt for the AP that the order
is confirmed.
------------------------------------------------------------------------------------------------------------------------------------
4. The AP receives the fax 4. The AP will assume responsibility for an
incorrect trade and contact the ETF
The AP will assume responsibility for an incorrect trade Administrator if necessary.
If trades are corrected, the BNY - ETF
Administrator will delete the first trade
and reenter the corrected trade. A second
affirmation will be faxed to the AP with all
trades placed that day. The corrected trade
will be coded on the affirmation so that the
AP can see the correction.
No corrections will be permitted
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24
Exhibit (e)(2)
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after 4p.m.
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5. EXCEPTION - International Settlements
AP's must deliver units for redemption orders no later than Trade Date Plus 1 in
order to meet the affirmed order requirements placed the previous day.
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* Times may vary depending on the trade volume from APs.
25
Exhibit (e)(2)
ANNEX III
TO
AUTHORIZED PARTICIPANT AGREEMENT
FOR TDAX FUNDS, INC.
FORM OF CERTIFIED AUTHORIZED PERSONS OF THE AP
==============================================
The following are the names, titles and signatures of all persons (each
an"Authorized Person") authorized to give instructions relating to any activity
contemplated by this Agreement or any other notice, request or instruction on
behalf of the AP pursuant to this Agreement.
Name: __________________
Title: __________________
Signature: __________________
Name: __________________
Title: __________________
Signature: __________________
Name: __________________
Title: __________________
Signature: __________________
The undersigned, [name], [title], [company], does hereby certify that the
persons listed above have been duly elected to the offices set forth beneath
their names, that they presently hold such offices, that they have been duly
authorized to act as Authorized Persons of this Institution in its capacity as
an AP pursuant to the Agreement by and among _____________ Company,
--------------, as Distributor and [name of the AP], dated [date] and that their
signatures set forth above are their own true and genuine signatures.
In Witness Whereof, the undersigned has hereby set his/her hand and the seal of
[company].
Date: _________________ ___________________
[name, title]
26
Exhibit (e)(2)
ANNEX IV
TO
AUTHORIZED PARTICIPANT AGREEMENT
FOR TDAX FUNDS, INC.
THE AP ACCOUNTS
===============
FOR DELIVERY OF DEPOSIT SECURITIES
==================================
The accounts into which the TDAX Funds, Inc. should deposit the securities
constituting the Deposit Securities of each Fund upon redemption by the AP are
set forth below:
Name of AP: __________________
Account Name: __________________
Account Number: __________________
Other Reference Number: __________________
27
