AGENCY SERVICES AGREEMENT
Exhibit
(h)(2)
ETF
Agency Services Agreement – March 2010 version
THIS AGENCY SERVICES AGREEMENT made as of the made
as of the ___ day of ____________, 2010 by and between FOCUSSHARES TRUST, a Delaware
trust and a registered investment company under the Investment Company Act of
1940, whose principal place of business is at 000 Xxxxxx Xxxxxx, Xxxxx X00,
Xxxxxxxx, XX 00000 (the “Trust") and JPMORGAN CHASE BANK, N.A. a national banking
association with a place of business at 0 Xxx Xxxx Xxxxx, Xxx Xxxx, Xxx Xxxx
00000 (“Bank”).
PREMISE
Bank, in its capacity as custodian of
the Trust has been engaged to provide U.S. domestic custody services to the
Trust and its various portfolios pursuant to the terms of a Domestic Custody
Agreement dated as __________, 2010 (the “Custody Agreement”). The
Trust intends to issue in respect of its portfolios listed on Exhibit A hereto
(each a “Fund” or an “ETF Series”) an
exchange-traded class of shares known as "ETF1 Shares” for each ETF Series. The
ETF Shares shall be
issued in bundles called “Creation Units.” The Trust, on behalf of
the ETF Series, shall
issue and redeem ETF
Shares of each ETF
Series only in Creation Units principally in kind for portfolio securities of
the particular ETF
Series (“Deposit Securities”), as more fully described in the current prospectus
and statement of additional information of the Trust, included in its
registration statement on Form N-1A, Securities Act File No. 333-146327,
Investment Company Act File No. 811-22128 (“Registration Statement”) and as
authorized under the Order of Exemption dated November 27, 2007 of the
Securities and Exchange Commission, Investment Company Act Release No. 28066
(“Order of Exemption”). Only brokers or dealers that are “Authorized
Participants” and that have entered into an Authorized Participant Agreement
with the Distributor, acting on behalf of the Trust, shall be authorized to
issue and redeem ETF
Shares in Creation Units from the Trust. The Trust wishes to engage
Bank to perform certain services on behalf of the Trust with respect to the
issuance and redemption of ETF Shares, as the Trust’s
agent, namely: to provide transfer agent services for ETF Shares of each ETF Series; to act as Index
Receipt Agent (as such term is defined in the rules of the National Securities
Clearing Corporation) with respect to the settlement of trade orders with
Authorized Participants; and to provide custody services under the terms of the
Custody Agreement, as supplemented hereby, for the settlement of issuances of
Creation Units against Deposit Securities that shall be delivered by Authorized
Participants in exchange for ETF Shares and the redemption
of ETF Shares in
Creation Unit size against the delivery of Redemption Securities of each ETF Series.
1 “ETF” is being shown in this document until the Trust has identified a tradename for its exchange traded fund product.
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Agency Services Agreement – March 2010 version
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NOW THEREFORE, in
consideration of the premise and other good and valuable consideration the
receipt and sufficiency of which is hereby acknowledged, the Trust and Bank
agree as follows:
1. DEFINITIONS. The
following terms as used in this Agreement shall have the meanings as set forth
below:
Agreement: means
this Agency Services Agreement.
Authorized
Participant: a broker or dealer that is a DTC member and that
has executed an Authorized Participant Agreement with the Distributor for the
issuance and redemption of Creation Units.
Authorized Participant
Agreement: the agreement between the Distributor, on behalf of
the Trust, and a broker or dealer that is a DTC member governing the issuance
and redemption of Creation Units.
Authorized Person: means any
person who has been designated by written notice from the Trust (or by any agent
designated by the Trust, including, without limitation, an investment manager),
to act on behalf of Trust hereunder. Such persons will continue to be
Authorized Persons until such time as Bank receives Instructions from the Trust
(or its agent) that any such person is no longer an Authorized
Person.
Balancing
Amount: means an amount of cash equal to the difference
between the net asset value of a Creation Unit and the market value of the
Deposit Securities (in the case of an issuance) or the market value of the
Redemption Securities (in the case of a redemption). For issuances of
Creation Units, if the Balancing Amount is a positive number, then it will be an
amount that is payable to the ETF Series by the Authorized
Participant and if the Balancing Amount is a negative number, then it will be an
amount that is payable by the ETF Series to the Authorized
Participant. For redemptions of Creation Units, if the Balancing
Amount is a positive number, then it will be an amount that is payable by the
ETF Series to the
Authorized Participant and if the Balancing Amount is a negative number, then it
will be an amount that is payable to the ETF Series by the Authorized
Participant.
Bank: as the
context requires means JPMorgan Chase Bank, N.A. in its capacity as Transfer
Agent, Index Receipt Agent or Custodian for the Trust.
Bank
Indemnitee means the Bank
and its nominees, directors, officers, employees and agents.
Cash
Component: means an amount of cash consisting of the Balancing
Amount and a Transaction Fee.
Clearing
Process: means CNS, the NSCC clearing and settlement process
for the issuance and redemption of Creation Units for securities in
kind.
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CNS: means the
Continuous Net Settlement System of NSCC.
Creation
Deposit: means the consideration for the issuance of a
Creation Unit consisting of Deposit Securities and the Balancing
Amount.
Creation Unit: means a large
block of a specified number of ETF Shares at a given net asset value
that makes up one unit of the ETF Series, as specified in the ETF Series’
prospectus. A Creation Unit is the minimum number of ETF Shares that may be created
or redeemed at any one time.
Custodian: means
Bank acting in the capacity as securities custodian for the Trust.
Custody
Agreement: means the custody agreement entitled “Domestic
Custody Agreement” between the Trust and Bank and dated ________, 2010 as it may
be amended.
Deposit
Securities: means the designated basket of securities that
must be tendered to an ETF Series by an Authorized
Participant to issue one or more Creation Units of that Fund's ETF Shares.
Distributor: means
the party identified as distributor in the Trust prospectus, that signs the
Authorized Participant Agreement on behalf of the Trust.
DTC: means The
Depository Trust Company, a limited purpose trust company organized under the
law of the State of New York.
DTC
Participant: means a “participant” as such term is defined in
the rules of DTC.
DTC Participant
Account: means an “account” as such term is defined in the
rules of DTC.
ETF Series: means
the series of the Trust that are listed on Exhibit A hereto, as amended from
time to time.
ETF Shares: means
the shares of each ETF
Series.
Fund
Administrator: means X.X.Xxxxxx Investors Services Co. or such
other entity appointed to provide fund administration services to the Funds, as
notified by the Trust to Bank in writing.
Index Receipt
Agent: means Bank acting in the capacity as “index receipt
agent,” as such term is defined in the rules of NSCC, for the
Trust.
Instructions: means
instructions to the Bank which: (i) contain all necessary information required
by Bank to enable Bank to carry out the Instructions; (ii) are received by Bank
in accordance with the prevailing Security Procedures; and (iii) Bank believes
in good faith have been given by an Authorized Person or are transmitted with
proper testing or authentication pursuant to terms and conditions which Bank may
specify.
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Investment Adviser: means any
person or entity appointed as investment adviser or manager of any of the Funds,
in accordance with the Registration Statement.
Liabilities: means any
liabilities, losses, claims, costs, damages, penalties, fines, obligations, or
expenses of any kind whatsoever (including, without limitation, reasonable
attorneys’, accountants’, consultants’ or experts’ fees and disbursements).
NSCC: National
Securities Clearing Corporation, a clearing agency that is registered with the
SEC.
Outside the Clearing
Process: means processing issuance and redemption orders
concerning Creation Units and Deposit Securities and Redemption Securities for
settlement exclusively through DTC or, when the settlement is not DTC eligible,
as a window delivery to the offices of the Custodian.
Redemption
Securities: means the designated basket of securities provided
by the Trust to an Authorized Participant redeeming a Creation
Unit. On any given day, the Redemption Securities may or may not be
identical to the Deposit Securities.
SEC: means the Securities and Exchange
Commission
Security Procedure: means any
security procedure to be followed by Trust upon the issuance of an Instruction
and/or by Bank upon the receipt of an Instruction, so as to enable Bank to
verify that such Instruction is authorized, as set forth in operating procedures
documentation in effect from time to time between the parties with respect to
the services set forth in this Agreement, or as otherwise agreed in writing by
the parties. A Security Procedure may, without limitation, involve
the use of algorithms, codes, passwords, encryption or telephone call backs and
may be updated by Bank from time to time upon notice to the Trust. Trust
acknowledges that Security Procedures are designed to verify the authenticity
of, and not detect errors in, Instructions. For the avoidance of doubt, the
parties agree that a SWIFT message issued in the name of Trust through any third
party utility agreed upon by the parties as being a method for providing
Instructions and authenticated in accordance with that utility’s customary
procedures, shall be deemed to be an authorized Instruction.
Shareholder: means
DTC or its nominee. A single global certificate for each ETF Series will be issued in
the name of DTC or its nominee. DTC or its nominee shall be the sole
registered holder of ETF
Shares of each ETF
Series.
Transaction
Fee: means a transaction fee imposed by the Trust and payable
by the Authorized Participant in connection with the issuance or redemption of
Creation Units.
Transfer
Agent: means Bank acting in the capacity as transfer agent for
the ETF Shares of each
ETF Series of the
Trust.
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2. APPOINTMENT. The
Trust hereby appoints Bank to provide services for the Trust, as described
hereinafter, subject to the supervision of the Board of Trustees of the Trust
(the "Board"), on the terms set forth in this Agreement. Bank accepts
such appointment and agrees to furnish the services herein set forth in return
for the compensation as provided in Section 6 of this Agreement.
3. REPRESENTATIONS
AND WARRANTIES.
(a) Bank
represents and warrants to the Trust that:
(i)
Bank is a national bank duly organized and existing as a banking
association under the laws of the United States;
(ii)
Bank is
duly qualified to carry on its business in the State of New
York;
(iii)
Bank is
empowered under applicable laws and by its charter and by-laws to enter into and
perform the services described in this Agreement;
(iv)
Bank is a
transfer agent registered with the SEC;
(v)
all requisite corporate action has been taken to authorize Bank to enter into
and perform this Agreement;
(vi)
Bank has,
and shall continue to have, access to the facilities, personnel and equipment
required to fully perform its duties and obligations
hereunder;
(vii)
no legal
or administrative proceedings have been instituted or threatened against Bank
which would impair Bank’s ability to perform its duties and obligations under
this Agreement; and
(viii)
Bank’s
entrance into this Agreement shall not cause a material breach or be in material
conflict with any other agreement or obligation of Bank or any law or regulation
applicable to Bank.
(b) The
Trust represents and warrants to Bank that:
(i)
the Trust
is duly organized and existing and in good standing under the laws of the State
of Delaware;
(ii)
the Trust
is empowered under applicable laws and by its charter document and by-laws to
enter into and perform this Agreement;
(iii)
all
requisite proceedings have been taken to authorize the Trust to enter into and
perform this Agreement;
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(iv)
the Trust
is an open-end management investment company properly registered under the
Investment Company Act of 1940, as amended (“1940 Act”);
(v)
a
registration statement under the Securities Act of 1933, as amended ("1933 Act")
and the 1940 Act on Form N-1A has been filed and shall be effective and shall
remain effective during the term of this Agreement, and all necessary filings
under the laws of the states shall have been made and shall be current during
the term of this Agreement;
(vi)
no legal
or administrative proceedings have been instituted or threatened which would
impair the Trust's ability to perform its duties and obligations under this
Agreement, other than as described in the Trust's registration
statement;
(vii)
the
Trust’s registration statement complies in all material respects with the 1933
Act and the 1940 Act (including the rules and regulations thereunder) and none
of the Trust’s prospectuses and/or statements of additional information contain
any untrue statement of material fact or omit to state a material fact necessary
to make the statements therein not misleading; and
(viii)
the
Trust's entrance into this Agreement shall not cause a material breach or be in
material conflict with any other agreement or obligation of the Trust or any law
or regulation applicable to it.
4. DELIVERY OF
DOCUMENTS.
The Trust
shall promptly furnish to Bank such copies, properly certified or authenticated,
of contracts, documents and other related information that Bank may request or
require to properly discharge its duties. Such documents may include
but are not limited to the following:
(i)
Resolutions
of the Board of Trustees of the Trust authorizing the appointment of Bank to
provide certain services to the Trust;
(ii)
the
Trust's charter documents;
(iii)
the
Trust's by-laws;
(iv)
the
Trust's Notification of Registration on Form N-8A under the 1940 Act as filed
with the SEC;
(v) the
Trust's Registration Statement including exhibits, as amended;
(vi) the
Trust’s application for the Order of Exemption with respect to the ETF Series and ETF Shares, and the Order of
Exemption of the SEC granting the relief requested in the
application.
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(vii)
opinions
of counsel regarding the Trust’s securities issuances and auditors’
reports;
(viii) the
Trust's prospectuses and statement of additional information relating to all
funds, series, portfolios and classes, as applicable, and all amendments and
supplements thereto (such Prospectuses and Statement of Additional Information
and supplements thereto, as presently in effect and as from time to time
hereafter amended and supplemented (herein called the
"Prospectuses");
(ix) the
Trust’s current and ongoing annual and semi-annual reports; and
(x)
such other agreements as the Trust may enter into from time to
time including securities lending agreements, futures and commodities account
agreements, brokerage agreements and options agreements.
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5.
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SERVICES
PROVIDED.
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Bank shall provide the following
services subject to the control, direction and supervision of the Trust’s board
and its designated agents and in compliance with the objectives, policies and
limitations set forth in the Trust’s Registration Statement, charter document
and by-laws; applicable laws and regulations; and all resolutions and policies
implemented by the Board:
(i)
Transfer Agency Services described in Schedule A to this
Agreement;
(ii) Index
Receipt Agent Services and Related Custody Services described in Schedule B to
this Agreement, and
(iii) such
other services in connection with ETF Shares as the parties may
mutually agree upon in writing.
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6.
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FEES
AND EXPENSES.
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(a) As
compensation for the services rendered to the Trust pursuant to this Agreement
the Trust shall pay or cause to be paid to the Bank the fees as may be agreed
upon in writing from time to time, together with Bank's reasonable out-of-pocket
expenses, including, but not limited to, legal fees. All fees and
expenses are to be billed monthly (unless another period is agreed upon) and
shall be due and payable upon receipt of the invoice. Upon any
termination of the provision of services under this Agreement before the end of
any month, the fee for the part of the month before such termination shall be
prorated according to the proportion which such part bears to the full monthly
period and shall be payable upon the date of such termination.
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(b) Bank
shall render, after the close of each month in which services have been
furnished, a statement reflecting all of the fees and expenses for such month
(or other agreed upon billing period). Undisputed fees and expenses remaining
unpaid after thirty (30) days from the date of receipt of the statement shall
bear interest, from the date of the statement to the date of repayment to Bank
by the Trust, at the Federal Funds Rate + 200 basis points and all costs and
expenses of effecting collection of any such sums, including reasonable
attorney's fees, shall be paid by the Trust to Bank.
(c) In
the event that the Trust is more than sixty (60) days delinquent in payments of
monthly xxxxxxxx in connection with this Agreement (with the exception of
specific amounts which may be contested in good faith by the Trust), this
Agreement may be terminated by Bank upon ninety (90)
days' written notice to the Trust. The Trust must notify Bank in
writing of any disputed amounts within thirty (30) days of its receipt of the
billing for such amounts. Amounts disputed in good faith are not due
and payable while they are being investigated.
7. INSTRUCTIONS.
(a) The
Trust authorizes Bank to accept and act upon any Instructions received by it
without inquiry. The Trust will indemnify Bank Indemnitees against,
and hold each of them harmless from, any Liabilities that may be imposed on,
incurred by, or asserted against Bank Indemnitees as a result of any action or
omission taken in good faith and in
accordance with any Instructions or other directions upon which Bank is
authorized to rely under the terms of this Agreement.
(b) Unless
otherwise expressly provided, all Instructions shall continue in full force and
effect until canceled or suspended.
(c) Bank
may (in its sole discretion and without affecting any part of this Section 7)
seek clarification or confirmation of an Instruction from an Authorized Person
and may decline to act upon the Instruction if it does not receive clarification
or confirmation satisfactory to it. Bank shall not be liable for any
loss arising from any delay while it seeks such clarification or
confirmation.
8. LIMITATIONS
OF LIABILITY AND INDEMNIFICATION.
(a) Bank
shall use reasonable care in performing its duties under this
Agreement. Bank shall not be in violation of this Agreement with
respect to any matter as to which it has satisfied its duty of reasonable
care.
(b) Bank
shall be liable to the Trust for its direct damages, excluding attorneys’ fees,
to the extent they result from Bank's negligence, bad faith or
willful misconduct in performing its duties as set out in this
Agreement. Nevertheless, under no circumstances shall Bank be liable
for any indirect, special or consequential damages (including, without
limitation, lost profits) of any form, whether or not foreseeable and regardless
of the type of action in which such a claim may be brought.
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(c) Without
limiting subsections (a) and (b) above, Bank shall not be responsible for, and
the Trust shall indemnify and hold Bank, its officers, employees and agents
harmless from and against, any and all Liabilities, incurred by Bank, any of its
officers, employees or agents, or the Trust’s agents in the performance of
its/their duties hereunder, including but not limited to those arising out of or
attributable to:
(i)
any and all actions of Bank or its officers, employees
or agents required to be taken pursuant to this Agreement;
(ii)
the reasonable reliance on or use by Bank or its
officers, employees or agents of information, records, or documents which are
received by Bank or its officers, employees or agents and furnished to it or
them by or on behalf of the Trust, and which have been prepared or maintained by
the Trust or any third party on behalf of the Trust;
(iii) the
Trust’s refusal or failure to comply with the terms of this Agreement or the
Trust's lack of good faith, or its actions, or lack thereof, involving
negligence or willful misconduct;
(iv) the
breach of any representation or warranty of the Trust hereunder;
(v)
the taping or other form of recording of
telephone conversations or other forms of electronic communications with the
Trust, its agents or any investor or reliance by Bank on telephone or other
electronic Instructions of any person acting on behalf of the Trust or an
investor for which telephone or other electronic services have been
authorized;
(vi) the
reliance by Bank, its officers, employees or agents on any share certificates
which are reasonably believed to bear the proper manual or facsimile signature
of an officer or agent of the Trust;
(vii) any
delays, inaccuracies, errors in or omissions from information or data provided
to Bank by data, corporate action or pricing services, depositories or clearing
systems, or securities brokers or dealers;
(viii) the
offer or sale of shares by the Trust in violation of any requirement under the
Federal securities laws or regulations or the securities laws or regulations of
any state, or in violation of any stop order or other determination or ruling by
any Federal agency or any state agency with respect to the offer or sale of such
shares in such state (1) resulting from activities, actions, or omissions by the
Trust or its other service providers and agents, or (2) existing or arising out
of activities, actions or omissions by or on behalf of the Trust prior to the
effective date of this Agreement;
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(ix) any
failure of the Trust’s registration statement to comply with the 1933 Act and
the 1940 Act (including the rules and regulations thereunder) and any other
applicable laws, or any untrue statement of a material fact or omission of a
material fact necessary to make any statement therein not misleading in the
Trust’s Prospectuses;
(x)
the actions taken by the Trust, the Distributor or
by the Trust’s investment advisers in compliance with applicable securities,
tax, commodities and other laws, rules and regulations, or the failure to so
comply; and
(xi) all
actions, omissions, or errors caused by third parties to whom Bank or the Trust
have assigned any rights and/or delegated any duties under this Agreement at the
request of or as required by the Trust or the Distributor, or by the Trust’s
investment advisers, administrator or sponsor.
Notwithstanding subsections (a) and (b)
above, Bank shall have no duty or obligation of reasonable care with respect to
any of the activities described in clauses (viii), (ix) (x) or (xi) of this
subsection (c).
(d) The
Trust shall defend Bank or, at Trust’s option, settle any claim, demand or cause
of action, whether groundless or otherwise, that ETF Shares or any of the services provided herein
for the Trust infringes on, violates or misappropriates any patent, copyright,
trademark, trade secret or any other proprietary right, and shall indemnify and
hold harmless Bank, its officers, employees and agents against all Liabilities,
including court and
settlement costs incurred by Bank or any of them as a result of or relating to
such claim, demand or cause of action (“Third Party Claim”). Bank
shall notify the Trust in writing of any such Third Party Claim, and give the
Trust all reasonably necessary information and assistance to defend or settle
such Third Party Claim. Bank may participate in the defense or
settlement of the Third Party Claim.
(e) THIS
AGREEMENT HAS BEEN ENTERED INTO BY THE TRUST AND WAS EXECUTED AND DELIVERED BY
AN OFFICER THEREOF, WHICH OFFICER WAS ACTING SOLELY IN HIS CAPACITY AS AN
OFFICER OF THE TRUST AND NOT IN HIS INDIVIDUAL CAPACITY. THE
OBLIGATIONS OF THIS AGREEMENT ARE BINDING NEITHER ON SUCH OFFICER NOR ON ANY
SHAREHOLDER OF THE SERIES OR CLASSES OF THE TRUST INDIVIDUALLY, BUT ARE BINDING
ONLY UPON THE ASSETS AND PROPERTY OF THE TRUST OR BELONGING OR ATTRIBUTABLE TO
AN SERIES OR CLASS THEREOF. THE PARTIES ACKNOWLEDGE AND AGREE THAT
THE ASSETS AND LIABILITIES OF EACH SERIES OR CLASS OF THE TRUST ARE SEGREGATED
PURSUANT TO THE DELAWARE STATUTORY TRUST ACT AND THE 3RD AMENDED AND RESTATED
TRUST AGREEMENT OF THE TRUST AND THAT EACH SERIES OR CLASS IS NOT RESPONSIBLE
FOR THE OBLIGATIONS OF EACH OTHER SERIES OR CLASS. ANY PARTY
EXTENDING CREDIT TO, CONTRACTING WITH OR HAVING ANY CLAIM AGAINST ANY SERIES OR
CLASS OF THE TRUST MAY LOOK ONLY TO THE ASSETS OF SUCH SERIES TO SATISFY OR
ENFORCE ANY DEBT WITH RESPECT TO THAT SERIES. IN ACCORDANCE WITH THE
FORGOING, UPON REQUEST OF THE BANK, THE TRUST SHALL PROMPTLY INFORM BANK OF THE
PROPER ATTRIBUTION AMONGST THE SERIES OF ANY OUTSTANDING OBLIGATIONS DUE
HEREUNDER. BANK MAY RELY ON SUCH ALLOCATION STIPULATED BY THE TRUST
WITHOUT FURTHER INQUIRY OR LIABILITY.
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(f)
This Section 8 shall
survive the termination of this Agreement, regardless of the party that
terminated the Agreement or the reason therefor.
9.
TERM AND TERMINATION. This
Agreement shall become effective on the date first herein-above
written. The Agreement may be modified or amended from time to time
by mutual agreement between the parties hereto. In the event of the
termination of the domestic custody agreement between Bank and the Trust, Bank
may terminate this Agreement in whole or in part simultaneously with the
transition of the assets to a successor custodian. Subject to the
foregoing, this Agreement shall continue in effect until terminated by either
party on at least 90 days prior written notice to the other
party. The terminating party in its notice to the other party shall
specify the date of termination. Upon termination of this Agreement,
the Trust shall pay to Bank such compensation and any reasonable
out-of-pocket expenses which may become due or payable under the terms of
this Agreement as of the date of termination or after the date that the
provision of services ceases, whichever is later.
10. NOTICES. Any notice
required or permitted hereunder shall be in writing and shall be deemed
effective on the date of personal delivery (by private messenger, courier
service or otherwise) or upon confirmed receipt of telex or facsimile, whichever
occurs first, or upon receipt if by mail to the parties at the following address
(or such other address as a party may specify by notice to the
other):
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If
to the Trust:
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000 Xxxxxx Xxxxxx, Xxxxx
X00
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Xxxxxxxx, XX 00000
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Attention: Xxxx
Xxxx
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Telephone:
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Fax:
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With a copy to:
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Xxxxxx X. Small c/o Scottrade,
Inc.
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[Address]
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If
to Bank in its capacity as Transfer Agent
to:
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JPMorgan
Chase Bank
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000
Xxxxxxxx, Xxxxx 00
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Xxxxxxxxxx,
XX 00000-0000
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Attention: Xxxxx
Xxxxxx
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Telephone: 000-000-0000
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Fax: 000-000-0000
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| If to Bank in its capacity as Index Receipt Agent to: | |
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JPMorgan
Chase Bank
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0
Xxx Xxxx Xxxxx, 00xx Xxxxx
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Xxx
Xxxx, Xxx Xxxx 00000
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Attention:
Xxxxxx Xxxxxxxxx
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Telephone: 000-000-0000
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Fax: 000-000-0000
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If to Bank in its capacity as Custodian, as
provided for in the Custody Agreement.
11. WAIVER. The
failure of a party to insist upon strict adherence to any term of this Agreement
on any occasion shall not be considered a waiver nor shall it deprive such party
of the right thereafter to insist upon strict adherence to that term or any term
of this Agreement. Any waiver must be in writing signed by the
waiving party.
12. FORCE
MAJEURE. Bank shall
maintain and update from time to time business continuation and disaster
recovery procedures with respect to its Transfer Agent, Index Receipt Agent and
domestic custody business that it determines from time to time meet reasonable
commercial standards. Bank shall have no liability, however, for any
damage, loss or expense of any nature that the Trust may suffer or incur, caused
by an act of God, fire, flood, civil or labor disturbance, war, act of any
governmental authority or other act or threat of any authority (de jure or de
facto), legal constraint, fraud or forgery (except to the extent that such fraud
or forgery is attributed to Bank or to Bank's employees), malfunction of
equipment or software (except to the extent such malfunction is primarily
attributable to Bank’s failure to adequately
maintain the equipment or software), failure of or the effect of rules or
operations of any external funds transfer system, inability to obtain or
interruption of external communications facilities, or any cause beyond the
reasonable control of Bank (including without limitation, the non-availability
of appropriate foreign exchange).
13. AMENDMENTS. This
Agreement may be modified or amended from time to time by mutual written
agreement between the parties. No provision of this Agreement may be
changed, discharged, or terminated orally, but only by an instrument in writing
signed by the party against which enforcement of the change, discharge or
termination is sought.
14. ASSIGNMENT. Bank
may not assign and delegate this Agreement and its rights and obligations
hereunder without the prior written consent of the other party, except that any
corporation or banking association into which Bank may be merged or with which
Bank may be consolidated, or any corporation or banking association resulting
from any merger or consolidation to which Bank shall be a party, or any
corporation or banking association succeeding to Bank’s corporate custody
business, shall succeed to all Bank’s rights, obligations and immunities
hereunder without the execution or filing of any paper or further act on the
part of any of the parties hereto, anything herein to the contrary
notwithstanding.
15. SEVERABILITY. If
any provision of this Agreement is invalid or unenforceable, the balance of the
Agreement shall remain in effect, and if any provision is inapplicable to any
person or circumstance it shall nevertheless remain applicable to all other
persons and circumstances.
ETF
Agency Services Agreement – March 2010 version
13
16. GOVERNING LAW AND
JURISDICTION. This Agreement shall be construed, regulated,
and administered under the laws of the United States or State of New York, as
applicable, without regard to New York’s principles regarding conflict of
laws. The United States District Court for the Southern District of
New York shall have the sole and exclusive jurisdiction over any lawsuit or
other judicial proceeding relating to or arising from this
Agreement. If that court lacks federal subject matter jurisdiction,
the Supreme Court of the State of New York, NY shall have sole and exclusive
jurisdiction. Either of these courts shall have proper venue for any
such lawsuit or judicial proceeding, and the parties waive any objection to
venue or their convenience as a forum. The parties agree to submit to
the jurisdiction of either of the courts specified and to accept service of
process to vest personal jurisdiction over them in such courts. The
parties further hereby knowingly, voluntarily and intentionally waive, to the
fullest extent permitted by applicable law, any right to a trial by jury with
respect to any such lawsuit or judicial proceeding arising or relating to this
Agreement or the transactions contemplated hereby.
17. USE OF BANK
NAME. The Trust shall not use Bank's name in any offering
material, shareholder report, advertisement or other material relating to the
Trust, other than for the purpose of merely identifying and describing the
functions of Bank hereunder, in a manner not approved by Bank in writing prior
to such use; provided, however, that Bank shall consent to all uses of its name
required by the SEC, any state securities commission, or any federal or state
regulatory authority; and provided, further, that in no case shall such approval
be unreasonably withheld.
18. COUNTERPARTS. This
Agreement may be executed in counterparts each of which shall be an original and
together shall constitute one and the same agreement.
19. HEADINGS. Headings
are for convenience only and are not intended to affect
interpretation. References to sections are to sections of this
Agreement and references to sub-sections and paragraphs are to sub-sections of
the sections and paragraphs of the sub-sections in which they
appear.
20. ENTIRE
AGREEMENT. This Agreement, including the Schedules and
Exhibits, and also including the Custody Agreement to the extent custody
services are provided in conjunction with Index Receipt Agent services for ETF
Shares, sets out the entire Agreement between the parties in connection with the
subject matter, and this Agreement supersedes any other agreement, statement, or
representation relating to the services provided herein for ETF Shares, whether
oral or written.
ETF
Agency Services Agreement – March 2010 version
14
N WITNESS WHEREOF, the parties
hereto have caused this Agreement to be executed by their officers designated
below as of the date first written above.
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By:
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Name:
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Title:
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JPMORGAN
CHASE BANK, N.A.
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By:
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Name:
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Title:
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ETF
Agency Services Agreement – March 2010 version
15
AGENCY
SERVICES AGREEMENT
SCHEDULE
A
TRANSFER
AGENCY SERVICES
FOR
ETF SERIES
Following are the transfer agent
services that shall be provided by Bank for the Trust in its capacity as
Transfer Agent for each ETF Series.
A. Issuance and Redemption of
ETF Shares of each
ETF Series.
1. Pursuant
to such issuance orders that Index Receipt Agent shall receive from the Trust or
its agent, Transfer Agent shall register the appropriate number of book entry
only ETF Shares in the
name of DTC or its nominee as the sole shareholder (the “Shareholder”) for each
ETF Series and deliver
the shares of the applicable ETF Series in Creation Units
on the business day next following the trade date (T+1) to the DTC Participant
Account of the Custodian for settlement. It is understood and agreed
that Bank, in its capacity as Transfer Agent, Index Receipt Agent or Custodian,
shall not be responsible for determining whether any order, if accepted, shall
result in the depositor of the Creation Deposit owning or appearing to own
eighty percent (80%) or more of the outstanding ETF Shares of such ETF Series.
2. Pursuant
to such redemption orders that Index Receipt Agent shall receive from the
Distributor on behalf of the Trust or other designated agent of the Trust,
Transfer Agent shall redeem the appropriate number of ETF Shares of the applicable
ETF Series in Creation
Units that are delivered to the designated DTC Participant Account of Custodian
for redemption and debit such shares from the account of the Shareholder on the
register of the applicable ETF Series.
3. Transfer
Agent shall issue ETF
Shares of the applicable ETF
Series in Creation Units for settlement with purchasers through DTC as
the purchaser is authorized to receive. Beneficial ownership of ETF Shares shall be shown on
the records of DTC and DTC Participants and not on any records maintained by the
Transfer Agent. In issuing ETF Shares of the applicable
ETF Series through DTC
to a purchaser, Transfer Agent shall be entitled to rely upon the latest
Instructions that are received from the Trust or its agent by the Index Receipt
Agent (as set forth in Schedule B, Section A. Subsection 3(b) of this Agreement)
concerning the issuance and delivery of such shares for settlement.
4. Transfer
Agent shall not issue any ETF Shares for a particular
ETF Series where it has
received an Instruction from the Trust or written notification from any federal
or state authority that the sale of the ETF Shares of such ETF Series has been suspended
or discontinued, and Transfer Agent shall be entitled to rely upon such
Instructions or written notification.
ETF
Agency Services Agreement – March 2010 version
16
5. Upon
the issuance of ETF
Shares of any ETF Series
as provided herein, Transfer Agent shall not be responsible for the payment of
any original issue or other taxes, if any, required to be paid by the Trust in
connection with such issuance.
6. ETF Shares of any ETF Series may be redeemed in
accordance with the procedures set forth in the Prospectus of the Trust and in
the Authorized Participant Agreement and Bank shall duly process all redemption
requests.
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B.
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Payment of Dividends
and Distributions on ETF Shares of each
ETF
Series.
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1. Bank
shall prepare and
make payments for dividends and distributions declared by the Trust on behalf of
the ETF
Series.
2. The
Trust or its designated agent shall promptly notify both the Custodian and the
Transfer Agent of the declaration of any dividend or distribution in respect of
each ETF
Series. The Trust shall furnish to Bank a statement signed by an
Authorized Person: (i) indicating that dividends have been declared
on a specific periodic basis and Instructions specifying the date of the
declaration of such dividend or distribution, the date of payment thereof, the
record date as of which the Shareholder shall be entitled to payment, the total
amount payable to the Shareholder and the total amount payable to Bank as
Transfer Agent on the payment date; or (ii) setting forth the date of the
declaration of any dividend or distribution by ETF Series, the date of
payment thereof, the record date as of which the Shareholder is entitled to
payment, and the amount payable per share to the Shareholder as of that date and
the total amount payable to Transfer Agent on the payment date. The
Trust’s Board of Trustees shall approve the Authorized Persons to provide such
information to Bank.
3. Upon
its receipt from the Trust of the information set forth in Subsection 2
immediately above, the Fund Administrator, based upon the amount of ETF Shares outstanding on its
books and records, shall calculate the total dollar amount of the dividend or
distribution on each ETF
Series and notify the Trust of this amount. The Trust shall verify
this total dollar amount as calculated by the Fund
Administrator. Provided the Trust is in agreement with the Fund
Administrator, the Trust shall instruct the Custodian to place in a dividend
disbursing account maintained by the Transfer Agent funds equal to the total
cash amount of the dividend or distribution to be paid out in respect of each
ETF
Series. Should Custodian determine that it does not have sufficient
cash in the Custody Account to pay the total amount of the dividend or
distribution to the Transfer Agent, Custodian shall advise the Trust and the
Trust shall either adjust the rate of the dividend or distribution or provide
additional cash to Custodian for credit to the dividend disbursing account
maintained by Transfer Agent. The Transfer Agent shall credit such
dividend or distribution to the account of the Shareholder.
ETF
Agency Services Agreement – March 2010 version
17
4. Should
Transfer Agent not receive from Custodian sufficient cash to make payment as
provided in the immediately preceding Subsection, Transfer Agent or Custodian
shall notify the Trust, and Transfer Agent shall withhold payment to the
Shareholder until sufficient cash is provided to Bank and Bank shall not be
liable for any claim arising out of such withholding.
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C.
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Recordkeeping.
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1. Bank
shall create and maintain such records in accordance with laws, rules and
regulations applicable to Bank as a registered transfer agent. All
records shall be available for inspection and use by the Trust. Bank
shall maintain such records for at least six years or for such other period as
Bank and the Trust may mutually agree.
2. Upon
reasonable notice by the Trust, Bank shall make available during regular
business hours all records and other data created and maintained by Bank as
Transfer Agent for reasonable audit and inspection by the Trust, or any person
retained by the Trust.
3. Bank
shall record the
issuance of ETF Shares
of each ETF Series and
maintain, pursuant to Rule 17Ad-10(e) under the Securities Exchange Act of 1934,
as amended, a record of the total number of ETF Shares of each ETF Series that are
authorized, based upon data provided to Bank by the Trust or
the ETF
Series, issued and outstanding. Also, Bank shall provide the Trust on
a regular basis with the total number of ETF Shares authorized, issued
and outstanding in respect of each ETF Series but shall not be
responsible for, when recording the issuance of ETF Shares, monitoring the
issuance of such shares or compliance with any laws relating to the validity of
the issuance or the legality of the sale of such shares.
D. Establish
Procedures.
Procedures
applicable to the transfer agent services to be performed hereunder may be
established from time to time by agreement between the Trust and
Bank. Bank shall have the right to utilize any shareholder accounting
and record-keeping systems that, in its opinion, enables it to perform any
services to be performed hereunder.
ETF
Agency Services Agreement – March 2010 version
18
AGENCY
SERVICES AGREEMENT
SCHEDULE
B
INDEX
RECEIPT AGENT SERVICES
AND
RELATED CUSTODY SERVICES FOR ETF SERIES
Following
are the Index Receipt Agent services that shall be provided by Bank for the
Trust in respect of each Fund and their respective ETF Series. Bank
shall perform these services as Index Receipt Agent in conjunction with the
custody services that are currently provided by Bank, as Custodian, to each Fund
under the terms of the Custody Agreement. Bank shall be entitled to
all the protective provisions in the Custody Agreement in respect of its duties
and its performance as Index Receipt Agent and Custodian for the settlement of
issuances and redemptions of Creation Units of each ETF Series. If
there are any inconsistencies between the terms of the Custody Agreement and the
terms herein with respect to processing, clearance and the settlement of
issuance and redemption orders for ETF Shares of each ETF Series the terms herein
shall govern.
A. Index Receipt Agent
Services.
1. Bank,
with the assistance of the Trust, shall make application to NSCC to be the Index
Receipt Agent on behalf of the Trust and each ETF Series for the processing,
clearance and the settlement of issuance and redemption orders for ETF Shares of each ETF Series and Creation
Deposits through the facilities of NSCC and DTC.
2. The
Distributor, on behalf of the Trust, shall enter into an Authorized Participant
Agreement with each Authorized Participant, which shall be delivered to the Bank
and which Bank, in its capacity as Index Receipt Agent, shall
acknowledge.
3. In
connection with the procedures that may be established from time to time between
Bank and the Trust on behalf of each ETF Series for the processing,
clearance and settlement of the issuance and redemption of Creation Units
through the Clearing Process, Bank shall:
(a) receive
from the Investment Adviser daily, a computer generated file that is in form and
substance acceptable to NSCC containing a list of the Deposit Securities (if
applicable) for each ETF Series, (ii) receive from the Order Taker daily, a
computer generated file that is in form and substance acceptable to NSCC
containing the Balancing Amount and the Transaction Fee for each ETF Series and
(iii) transmit both files as received from the Investment Adviser and Order
Taker to NSCC;
ETF
Agency Services Agreement – March 2010 version
(b) receive
from the Distributor on each trade date a computer generated file that is in
form and substance acceptable to NSCC and that contains issuance orders from
Authorized Participants that have been received and accepted by the Distributor
on behalf of the Trust and each ETF Series, for the issuance
of Creation Units against delivery of Deposit Securities and a Cash Component;
transmit the file of issuance orders as received from the Distributor to NSCC;
receive back from NSCC the file of issuance orders enhanced with NSCC generated
prices for the Deposit Securities contained in the file and deliver the enhanced
file to Custodian for settlement; and, pursuant to such issuance orders,
instruct the Transfer Agent to issue the appropriate number of ETF Shares of the applicable
ETF Series for deposit
to the Custodian’s DTC Participant Account;
(c) receive
from the Distributor on each trade date a computer generated file that is in
form and substance acceptable to NSCC and that contains redemption orders from
Authorized Participants that have been received and accepted by the Distributor
on behalf of the Trust for each Fund; transmit the file of redemption orders as
received from the Distributor to NSCC; receive back from NSCC the file of
redemption orders enhanced with NSCC generated prices for the Redemption
Securities that are in the file and deliver the enhanced file to Custodian for
settlement; and, pursuant to such redemption orders, instruct the Transfer Agent
to redeem the appropriate number of ETF Shares of the applicable
ETF Series in Creation
Units and reduce the account of the Shareholder accordingly; and
(d) at
the appropriate times, cause to be paid over to Authorized Participants
Balancing Amounts on the issuance or redemption of Creation Units, as instructed
by the Distributor or the Trust on behalf of each ETF Series.
4. The
Trust understands and agrees that all risk associated with the processing,
clearance and settlement of the issuance and redemption of ETF Shares, Deposit Securities
and Redemption Securities and cash through the Clearing Process shall be that of
the Trust and each ETF
Series irrespective of whether in effecting such issuances and redemptions for
the Trust on behalf of each ETF Series through the
Clearing Process, Bank, as a member of NSCC, is acting as principal or as agent;
and, in respect hereof, the Trust and each ETF Series, shall be bound by
all the rules and procedures of NSCC and DTC as though it were the member or
participant of such clearing and settlement systems.
B. Outside the Clearing
Process.
1. The
following transactions shall be handled Outside the Clearing
Process:
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(i)
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any
issuance or redemption of Creation Units that the Trust, its Distributor
or another authorized agent shall instruct Bank to settle Outside the
Clearing Process; and
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(ii)
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any
security issue that is part of a Creation Deposit or redemption of
Creation Units and that according to NSCC rules is deemed to be ineligible
for the Clearing Process, including securities that are not eligible to be
settled through DTC.
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ETF
Agency Services Agreement – March 2010 version
20
2. All
such transactions shall be effected by Bank on a delivery versus payment and
receive versus payment basis through DTC and according to DTC’s rules, and the
Trust or the ETF Series
shall provide to Bank the information and terms that are necessary to settle
each transaction, including the cash value of each security settlement, unless
the Trust or the ETF
Series Instruction is that delivery is to be made free of payment; provided,
however, that any security that is not DTC eligible shall be settled as a window
delivery pursuant to street practice. All such transactions shall be
effected by Bank as Custodian and subject to the terms of the Custody
Agreement.
C. Settlement of Cash
Component.
Any Cash
Component to a particular transaction shall be handled over the funds transfer
wire (Fedwire) or as part of Bank’s overall daily net cash settlement at
DTC.
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D.
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Creation Deposits
through the Clearing Process: Allocation of Fails; Posting of
Accounts.
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1.
The
Trust recognizes that fails to receive (including partial fails) may occur from
time to time with respect to one or more of the security issues in a basket of
Deposit Securities settled through the Clearing Process. The Trust
acknowledges and agrees that, whenever a fail to receive shall occur on a
settlement date, Bank shall book to a single control account maintained for all
funds for which Bank provides Index Receipt Agent services (the “Control
Account”), the quantity of the security that it failed to receive (each such
fail a “short receive position”) and the cash value of that short position that
it receives from NSCC (and that NSCC, pursuant to its rules, marks to market
daily) pending settlement. Bank shall not post to any ETF Series account any cash
that it receives from NSCC on a short receive position pending
settlement.
2.
Bank
shall make available to the Trust a daily listing of all short receive positions
that are in the Control Account and that relate to any ETF Series. Bank
will allocate daily, on a pro-rata or other basis deemed by it to be fair and
equitable, short receive positions in the same security that is common to the
securities accounts of such ETF Series and to the
securities accounts of such other funds for which Bank is acting as Index
Receipt Agent. The Trust agrees that any such allocation shall be
conclusive on the Trust and the affected ETF Series. When
the Deposit Securities that are subject of the short receive positions are
received by Bank, they will be credited by Bank on a FIFO basis to the custody
accounts of the applicable funds. Bank shall not process a securities
transaction in a security having a short receive position in the Control Account
to the extent the Trust does not have a sufficient quantity of that security in
its ETF Series accounts
with Bank to settle the transaction. Custodian shall post Deposit
Securities to the applicable ETF Series custody accounts on
a contractual settlement basis pursuant to the terms of the Custody
Agreement.
ETF
Agency Services Agreement – March 2010 version
21
3. Should
a short receive position in a security remain in the Control Account for two (2)
or more NSCC business days, Bank may elect to exercise NSCC’s buy-in rules with
respect to that short position. If an ETF Series needs to sell a
short security in its account, the Trust may request that Bank exercise a buy-in
of the short security under applicable NSCC rules.
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E.
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Redemptions through
the Clearing Process: Delivery Fails; Posting of
Cash.
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1. The
Trust recognizes that on the redemption of Creation Units of an ETF Series through the
Clearing Process Bank, on behalf of the applicable ETF Series, is obligated to
deliver to NSCC on the settlement date the required type and amount of
Redemption Securities to redeem the Creation Units of the applicable ETF
Series. It shall be the responsibility of the Trust and each ETF Series to maintain in the
custody account the required type and amount of Redemption Securities for the
redemption of Creation Units of each ETF
Series. Should the custody account of an ETF Series for any reason
(for example,
through the Trust’s participation in a securities lending program on behalf of
the ETF Series) have a
short position in respect of any of the securities issues comprising the basket
of Redemption Securities (a “short delivery position”) with the result that, on
settlement date, Bank is unable to deliver a sufficient quantity of the
Redemption Securities to NSCC, the Trust acknowledges that Bank shall be
obligated under NSCC’s rules to fund the short delivery position with cash
pending delivery of the quantity of securities needed to cover the short
delivery position. Bank shall be entitled to charge to the account of the
applicable ETF Series
the amount of cash needed to cover the short delivery position. In
the event that Bank advances its own funds to cover an ETF Series short delivery
position, Bank, in its discretion, may charge the applicable EFT Series interest on the
amount of the advance at the rate that Bank charges for advances of a similar
nature to similar customers of Bank, unless Bank and the Trust have mutually
agreed in writing upon another rate.
2. In
the event that Bank shall have advanced its own funds to cover a short delivery
position at NSCC for an ETF Series, Bank shall have,
to the extent of the amount of the advance, a security interest in the
securities that remain in the ETF Series custody account and
Bank shall have all the rights and remedies of a secured party under the New
York Uniform Commercial Code. Nothing herein or in the Custody
Agreement shall be construed to mandate that Bank, acting as Index Receipt Agent
for the Trust and each ETF Series, effect redemptions
of Creation Units where Bank, acting in good faith, believes that it may not be
repaid an advance by the Trust or the ETF Series or otherwise not receive from
the ETF Series delivery
of the Redemption Securities that are the subject of a short delivery
position.
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F.
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Establish
Procedures.
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The Trust
and Bank, from time to time, may establish written procedures for the processing
and settlement and related activities effected for ETF Shares of each ETF Series through the
Clearing Process and Outside the Clearing Process.
ETF
Agency Services Agreement – March 2010 version
22
AGENCY
SERVICES AGREEMENT
EXHIBIT
A
LIST
OF ETF SERIES
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1.
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FOCUS
Morningstar US Market Index ETF
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2.
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FOCUS
Morningstar Large Cap Index ETF
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3.
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FOCUS
Morningstar Mid Cap Index ETF
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4.
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FOCUS
Morningstar Small Cap Index ETF
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5.
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FOCUS
Morningstar Basic Materials Index
ETF
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6.
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FOCUS
Morningstar Communications Services Index
ETF
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7.
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FOCUS
Morningstar Consumer Cyclical Index
ETF
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8.
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FOCUS
Morningstar Consumer Defensive Index
ETF
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9.
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FOCUS
Morningstar Energy Index ETF
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10.
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FOCUS
Morningstar Financial Services Index
ETF
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11.
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FOCUS
Morningstar Health Care Index ETF
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12.
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FOCUS
Morningstar Industrials Index ETF
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13.
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FOCUS
Morningstar Real Estate Index ETF
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14.
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FOCUS
Morningstar Technology Index ETF
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15.
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FOCUS
Morningstar Utilities Index ETF
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