DISTRIBUTION AGREEMENT
FIRST TRUST EXCHANGE-TRADED FUND III
February 1, 2013
First Trust Portfolios L.P.
000 Xxxx Xxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, XX 00000
To Whom It May Concern:
This is to confirm that, in consideration of the agreements hereinafter
contained, the above-named investment company (the "Trust") has agreed that you
shall be, during the term of this agreement, the distributor of shares of each
Index Series of the Trust set forth on Exhibit A hereto, as such Exhibit may be
revised from time to time (each, an "Index Series"). For purposes of this
agreement the term "Shares" shall mean the authorized shares of the relevant
Index Series.
1. SERVICES AS DISTRIBUTOR
1.1. You will act as an agent of the Trust for the distribution of Shares
in Creation Units (as defined herein) covered by, and in accordance with, the
registration statement and prospectus then in effect under the Securities Act of
1933, as amended (the "1933 Act"), and will transmit promptly any orders
received by you for purchase or redemption of Shares in Creation Units to the
transfer agent for the Trust as identified in the Trust's prospectus. You shall
deliver or cause the delivery of a prospectus to persons purchasing Shares in
Creation Units and shall maintain records of both orders placed with you and
confirmations of acceptance furnished by you. You represent and warrant that you
are a broker-dealer registered under the Securities Exchange Act of 1934 (the
"1934 Act") and a member of the National Association of Securities Dealers, Inc.
You agree to comply with all of the applicable terms and provisions of the 1934
Act.
1.2. You agree to use your best efforts to perform the services
contemplated herein on a continuous basis. It is contemplated that you may enter
into "Participant Agreements" with broker-dealers who agree to solicit orders
for Xxxxxx. In addition, you may enter into sales or servicing agreements with
securities dealers, financial institutions and other industry professionals,
such as investment advisers, accountants and estate planning firms. In entering
into sales or servicing agreements, you will act only on your own behalf as
principal.
1.3. You shall act as distributor of Shares in Creation Units in compliance
in all material respects with all applicable laws, rules and regulations,
including, without limitations, all rules and regulations made or adopted
pursuant to the Investment Company Act of 1940, as amended (the "1940 Act"), by
the Securities and Exchange Commission or any securities association registered
under the 1934 Act.
1.4. Whenever the parties hereto, in their collective judgment, mutually
agree that such action is warranted by unusual market, economic or political
conditions, or by abnormal circumstances of any kind deemed by them to render
sales of a Trust's Shares in Creation Units not in the best interest of the
Trust, the parties hereto may agree to decline to accept any orders for, or make
any sales of, any Shares in Creation Units until such time as the parties deem
it advisable to accept such orders and to make such sales.
1.5. The Trust agrees to pay all appropriate costs and expenses, including
but not limited to, all expenses in connection with the registration of Shares
under the 1933 Act and all expenses in connection with maintaining facilities
for the issue and transfer of Shares in Creation Units and for supplying
information, prices and other data to be furnished by the Trust hereunder, and
all expenses in connection with the preparation and printing of the Trust's
prospectuses and statements of additional information for regulatory purposes
and for distribution to shareholders; provided, however, that the Trust shall
not pay any of the costs of advertising or promotion for the sale of Shares,
except as such payments may be made pursuant to Rule 12b-1 of the 1940 Act.
1.6. The Trust agrees to execute any and all documents and to furnish any
and all information and otherwise to take all actions which may be reasonably
necessary in the discretion of the Trust's officers in connection with the
qualification of Shares for sale in Creation Units in such states as you may
designate to the Trust and the Trust may approve, and the Trust agrees to pay
all expenses which may be incurred in connection with such qualification. You
shall pay all expenses connected with your own qualification as a dealer under
state or Federal laws and, except as otherwise specifically provided in this
agreement, all other expenses incurred by you in connection with the sale of
Shares in Creation Units as contemplated in this agreement.
1.7. The Trust shall furnish you from time to time, for use in connection
with the sale of Shares in Creation Units, such information with respect to the
Trust or any relevant Index Series and the Shares as you may reasonably request,
all of which shall be signed by one or more of the Trust's duly authorized
officers; and the Trust warrants that the statements contained in any such
information, when so signed by the Trust's officers, shall be true and correct.
The Trust also shall furnish you upon request with: (a) semi-annual reports and
annual audited reports of the Trust's books and accounts made by independent
public accountants regularly retained by the Trust, (b) quarterly earnings
statements prepared by the Trust, (c) a monthly itemized list of the securities
in the Trust's or, if applicable, each Index Series' portfolio, (d) monthly
balance sheets as soon as practicable after the end of each month, and (e) from
time to time such additional information regarding the Trust's financial
condition as you may reasonably request.
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1.8. The Trust represents to you that all registration statements and
prospectuses filed by the Trust with the Securities and Exchange Commission
under the 1933 Act and the 1940 Act, with respect to the Shares have been
prepared in conformity with the requirements of said Acts and rules and
regulations of the Securities and Exchange Commission thereunder. As used in
this agreement the terms "registration statement" and "prospectus" shall mean
any registration statement and prospectus, including the statement of additional
information incorporated by reference therein, filed with the Securities and
Exchange Commission and any amendments and supplements thereto which at any time
shall have been filed with said Commission. The Trust represents and warrants to
you that any registration statement and prospectus, when such registration
statement becomes effective, will contain all statements required to be stated
therein in conformity with said Acts and the rules and regulations of said
Commission; that all statements of fact contained in any such registration
statement and prospectus will be true and correct when such registration
statement becomes effective; and that neither any registration statement nor any
prospectus when such registration statement becomes effective will include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading.
The Trust may, but shall not be obligated to, propose from time to time such
amendment or amendments to any registration statement and such supplement or
supplements to any prospectus as it may deem necessary or advisable. If the
Trust shall not propose such amendment or amendments and/or supplement or
supplements within fifteen days after receipt by the Trust of a written request
from you to do so, you may, at your option, terminate this agreement or decline
to make offers of the Trust's securities until such amendments are made. The
Trust will give you reasonable notice in advance of its filing of any amendment
to any registration statement or supplement to any prospectus; provided,
however, that nothing contained in this agreement shall in any way limit the
Trust's right to file at any time such amendments to any registration statement
and/or supplements to any prospectus, of whatever character, as the Trust may
deem advisable, such right being in all respects absolute and unconditional.
1.9. The Trust authorizes you and any dealers with whom you have entered
into Participant Agreements to use any prospectus in the form most recently
furnished by the Trust in connection with the sale of Shares in Creation Units.
The Trust agrees to indemnify, defend and hold you, your several officers and
directors, and any person who controls you within the meaning of Section 15 of
the 1933 Act, free and harmless from and against any and all claims, demands,
liabilities and expenses (including the cost of investigating or defending such
claims, demands or liabilities and any reasonable counsel fees incurred in
connection therewith) which you, your officers and directors, or any such
controlling persons, may incur under the 1933 Act, the 1940 Act or common law or
otherwise, (a) arising out of or on the basis of any untrue statement, or
alleged untrue statement, of a material fact required to be stated in either any
registration statement or any prospectus or any statement of additional
information, or (b) arising out of or based upon any omission, or alleged
omission, to state a material fact required to be stated in any registration
statement, any prospectus or any statement of additional information or
necessary to make the statements in any of them not misleading, or (c) arising
out of breach of any obligation, representation or warranty pursuant to this
Agreement by the Trust, or (d) the Trust's failure to comply with applicable
securities laws, except that the Trust's agreement to indemnify you, your
officers or directors, and any such controlling person will not be deemed to
cover any such claim, demand, liability or expense to the extent that it arises
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out of or is based upon any such untrue statement, alleged untrue statement,
omission or alleged omission made in any registration statement, any prospectus
or any statement of additional information in reliance upon information
furnished by you, your officers, directors or any such controlling person to the
Trust or its representatives for use in the preparation thereof, and except that
the Trust's agreement to indemnify you and the Trust's representations and
warranties set out in paragraph 1.8 of this Agreement will not be deemed to
cover any liability to the Trusts or their shareholders to which you would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of your duties, or by reason of your reckless
disregard of your obligations and duties under this Agreement ("Disqualifying
Conduct"). The Trust's agreement to indemnify you, your officers and directors,
and any such controlling person, as aforesaid, is expressly conditioned upon the
Trust's being notified of any action brought against you, your officers or
directors, or any such controlling person, such notification to be given by
letter, by facsimile or by telegram addressed to the Trust at its address set
forth above within a reasonable period of time after the summons or other first
legal process shall have been served. The failure so to notify the Trust of any
such action shall not relieve the Trust from any liability which the Trust may
have to the person against whom such action is brought by reason of any such
untrue, or alleged untrue, statement or omission, or alleged omission, otherwise
than on account of the Trust's indemnity agreement contained in this paragraph
1.9. The Trust will be entitled to assume the defense of any suit brought to
enforce any such claim, demand or liability, but, in such case, such defense
shall be conducted by counsel of good standing chosen by the Trust and approved
by you. In the event the Trust elects to assume the defense of any such suit and
retain counsel of good standing approved by you, the defendant or defendants in
such suit shall bear the fees and expenses of any additional counsel retained by
any of them; but in case the Trust does not elect to assume the defense of any
such suit, the Trust will reimburse you, your officers and directors, or the
controlling person or persons named as defendant or defendants in such suit, for
the reasonable fees and expenses of any counsel retained by you or them. The
Trust's indemnification agreement contained in this paragraph 1.9 and the
Trust's representations and warranties in this Agreement shall remain operative
and in full force and effect regardless of any investigation made by or on
behalf of you, your officers and directors, or any controlling person, and shall
survive the delivery of any Shares. This agreement of indemnity will inure
exclusively to your benefit, to the benefit of your several officers and
directors, and their respective estates, and to the benefit of any controlling
persons or other affiliates, and their successors. The Trust agrees promptly to
notify you of the commencement of any litigation or proceedings against the
Trust or any of its officers or Board members in connection with the issue and
sale of Shares.
1.10. You agree to indemnify, defend and hold the Trust, its several
officers and Board members, and any person who controls the Trust within the
meaning of Section 15 of the 1933 Act, free and harmless from and against any
and all claims, demands, liabilities and expenses (including the cost of
investigating or defending such claims, demands or liabilities and any counsel
fees incurred in connection therewith) which the Trust, its officers or Board
members, or any such controlling person, may incur under the 1933 Act, the 1940
Act, or under common law or otherwise, but only to the extent that such
liability or expense incurred by the Trust, its officers or Board members, or
such controlling person resulting from such claims or demands, (a) shall arise
out of or be based upon any information, statements or representations made or
provided by you in any sales literature or advertisements, or any Disqualifying
Conduct by you in connection with the offering and sale of any Shares, (b) shall
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arise out of or be based upon any untrue, or alleged untrue, statement of a
material fact contained in information furnished in writing by you to the Trust
specifically for use in the Trust's registration statement and used in the
answers to any of the items of the registration statement or in the
corresponding statements made in the prospectus or statement of additional
information, or shall arise out of or be based upon any omission, or alleged
omission, to state a material fact in connection with such information furnished
in writing by you to the Trust and required to be stated in such answers or
necessary to make such information not misleading, (c) arising out of your
breach of any obligation, representation or warranty pursuant to this Agreement,
or (d) your failure to comply with applicable securities laws. Your agreement to
indemnify the Trust, its officers and Board members, and any such controlling
person, as aforesaid, is expressly conditioned upon your being notified of any
action brought against the Trust, its officers or Board members, or any such
controlling person, such notification to be given by letter, by facsimile or by
telegram addressed to you at your address set forth above within a reasonable
period of time after the summons or other first legal process shall have been
served. The failure so to notify you of any such action shall not relieve you
from any liability which you may have to the Trust, its officers or Board
members, or to such controlling person by reason of any such untrue, or alleged
untrue, statement or omission, or alleged omission, otherwise than on account of
your indemnity agreement contained in this paragraph. You will be entitled to
assume the defense of such action, but, in such case, such defense shall be
conducted by counsel of good standing chosen by you and approved by an executive
officer of the Trust, if such action is based solely upon such alleged
misstatement or omission on your part, and in any other event Trust, its
officers or Board members, or such controlling person shall each have the right
to participate in the defense or preparation of the defense of any such action.
This agreement of indemnity will inure exclusively to the Trust's benefit, to
the benefit of the Trust's officers and Board members, and their respective
estates, and to the benefit of any controlling persons and their successors. You
agree promptly to notify the Trust of the commencement of any litigation or
proceedings against you or any of your officers or directors in connection with
the issue and sale of Shares.
1.11. No Shares shall be offered by either you or the Trust under any of
the provisions of this agreement and no orders for the purchase or sale of such
Shares hereunder shall be accepted by the Trust if and so long as the
effectiveness of the registration statement then in effect or any necessary
amendments thereto shall be suspended under any of the provisions of the 1933
Act or if and so long as a current prospectus as required by Section 10 of said
1933 Act is not on file with the Securities and Exchange Commission; provided,
however, that nothing contained in this paragraph 1.11 shall in any way restrict
or have any application to or bearing upon the Trust's obligation to redeem or
repurchase any Shares from any shareholder in accordance with the provisions of
the Trust's prospectus or charter documents.
1.12. The Trust agrees to advise you immediately in writing of the
occurrence of any of the following events, as soon as any such event comes to
the attention of the Trust:
(a) any request by the Securities and Exchange Commission for
amendments to the registration statement or prospectus then in effect or
for additional information;
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(b) the event of the issuance by the Securities and Exchange
Commission of any stop order suspending the effectiveness of the
registration statement or prospectus then in effect or the initiation of
any proceeding for that purpose;
I the happening of any event which makes untrue any statement of
a material fact made in the registration statement or prospectus then in
effect or which requires the making of a change in such registration
statement or prospectus in order to make the statements therein not
misleading; and
(d) all actions of the Securities and Exchange Commission with
respect to any amendments to any registration statement or prospectus
which may from time to time be filed with the Securities and Exchange
Commission.
2. OFFERING CREATION UNITS
Shares in Creation Units of each Index Series will be offered for sale by
you at a price per Creation Unit in the manner set forth in the then-current
prospectus, based on a net asset value determined in accordance with the Trust's
prospectus and charter documents. Any payments to dealers shall be governed by a
separate agreement between you and such dealer and the Trust's then-current
prospectus.
You will accept as compensation for the performance of your obligations
hereunder such compensation, if any, as may be provided for in any plan of
distribution adopted by the Trust with respect to the Trust or any Index Series
pursuant to Rule 12b-1 under the 1940 Act.
3. TERM
This Agreement shall become effective with respect to each Index Series of
the Trust as of the date set forth in Exhibit A attached hereto and will
continue for an initial two-year term from the date of effectiveness and is
renewable annually thereafter so long as such continuance is specifically
approved (a) by the Trust's Board on behalf of each Index Series or (b) by a
vote of a majority (as defined in the 1940 Act) of the Shares of the Trust or
the relevant Index Series, as the case may be, provided that in either event its
continuance also is approved by a majority of the Board members who are not
"interested persons" (as defined in the 1940 Act) of any party to this
Agreement, by vote cast in person at a meeting called for the purpose of voting
on such approval. This agreement may be terminated in respect of an Index Series
at any time, without the payment of any penalty, (i) by vote of a majority of
the Trustees who are not interested persons of the Trust (as defined under the
1940 Act) or (ii) by vote of a majority (as defined under the 1940 Act) of the
outstanding voting securities of the relevant Index Series, on at least 60 days'
written notice to you. This agreement may also be terminated at any time by you,
without the payment of any penalty, upon 60 days' notice by you and will
terminate automatically in the event of its assignment (as defined under the
1940 Act).
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4. MISCELLANEOUS
4.1. The Trust recognizes that your directors, officers and employees may
from time to time serve as directors, trustees, officers and employees of
corporations and business trusts (including other investment companies), and
that you or your affiliates may enter into distribution or other agreements with
such other corporations and trusts.
4.2. No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which an enforcement of the change, waiver, discharge or termination is
sought.
4.3. This Agreement shall be governed by the laws of the State of New York,
without regard to principles of conflicts of laws.
4.4. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule, or otherwise, the remainder of this Agreement
shall not be affected thereby. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors.
Please confirm that the foregoing is in accordance with your understanding
and indicate your acceptance hereof by signing below, whereupon it shall become
a binding agreement between us.
Very truly yours,
FIRST TRUST EXCHANGE-TRADED FUND III
By ________________________________________
Xxxxx X. Xxxxx, Chairman of the Board
ACCEPTED:
FIRST TRUST PORTFOLIOS L.P.
By_________________________________________________
Xxxxx X. Xxxxx, Controller
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EXHIBIT A
(AS OF FEBRUARY 1, 2013)
SERIES OF THE TRUST
SERIES EFFECTIVE DATE
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First Trust Preferred Securities and Income ETF February 1, 2013
