TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the 23rd day of April, 2003, by and between the
Rydex ETF Trust, a Delaware statutory trust, having its principal office and
place of business at 0000 Xxxxxxxxx Xxxx, Xxxxx 000, Xxxxxxxxx, Xxxxxxxx 00000
(the "Trust") and THE BANK OF NEW YORK, a New York banking company having its
principal office and place of business at Xxx Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000 (the "Bank").
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, the Trust and designated agents will issue for purchase and
redeem shares of one or more series of the Trust (each a "Fund" and together,
"Funds") only in aggregations of shares known as "Creation Units" (currently
50,000 shares) (each a "Creation Unit") principally in kind;
WHEREAS, The Depository Trust Company, a limited purpose trust company
organized under the laws of the State of New York ("DTC"), or its nominee (Cede
& Co.), will be the initial record or registered owner (the "Shareholder") of
all shares;
WHEREAS, the Trust on behalf of the Funds desires to appoint the Bank
as its transfer agent, dividend disbursing agent, and agent in connection with
certain other activities, and the Bank desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
1. Terms of Appointment; Duties of the Bank
1.1 Subject to the terms and conditions set forth in this Agreement,
the Trust, on behalf of the Funds, hereby employs and appoints the Bank to act
as, and the Bank agrees to act as its transfer agent for the authorized and
issued shares of beneficial interest, no par value per share of the Trust
("Shares"), and as the Trust's dividend disbursing agent.
1.2 The Bank agrees that it will perform the following services:
(a) In accordance with the terms and conditions of the form of
Participant Agreement, attached hereto as Exhibit A, the Bank shall:
(i) Perform and facilitate the performance of
purchases and redemption of Creation Units;
(ii) Prepare and transmit by means of DTC's
book-entry system payments for dividends and
distributions declared by the Trust on behalf of the applicable Fund;
(iii) Maintain the record of the name and address of
the Shareholder and the number of Shares
issued by the Trust and held by the Shareholder;
(iv) Record the issuance of Shares of the Trust and
maintain a record of the total number of Shares of the Trust, and, which are
authorized, based upon data provided to it by the Trust. The Bank shall have no
obligation, when recording the issuance of Shares, to
monitor the issuance of such Shares or to take cognizance of any laws relating
to the issue or sale of such Shares, which functions shall be the sole
responsibility of the trust.
(v) Prepare and transmit to the Trust and the
Administrator and to any applicable securities exchange (as specified to the
Bank by the Administrator or by the Trust) information with respect to purchases
and redemptions of Shares;
(vi) On days that the Trust may accept orders for
purchases or redemptions, calculate and transmit to the Bank and the Trust's
administrator the number of outstanding Shares for each Fund;
(vii) On days that the Trust may accept orders for
purchases or redemptions (pursuant to the Participant Agreement), transmit to
the Bank, the Trust and DTC the amount of Shares purchased on such day;
(viii) Confirm to DTC the number of Shares issued to
the Shareholder, as DTC may reasonably request;
(ix) Prepare and deliver other reports, information
and documents to DTC as DTC may reasonably request;
(x) Extend the voting rights to the Shareholder
and/or beneficial owners of Shares in accordance with the policies and
procedures of DTC for book-entry only securities;
(xi) Maintain those books and records of the Trust
specified by the Trust in Schedule A attached hereto
(xii) Prepare a monthly report of all purchases and
redemptions during such month on a gross transaction basis. The monthly report
shall show the counterpart and amount of each purchase on a daily basis net
number of shares either redeemed or created for such Business Day.
(b) In addition to and neither in lieu nor in contravention of
the services set forth in the above paragraph (a), the Bank shall: perform the
customary services of a transfer agent and dividend disbursing agent including
but not limited to: maintaining the account of the Shareholder, obtaining a list
of DTC participants holding interests in the Global Certificate at the request
of the Trust, mailing proxy materials, shareholder reports and prospectuses to
the Shareholder or DTC participants or beneficial owners of Shares at the
request of the Trust and those services set forth on Schedule A attached hereto.
(c) The following shall be delivered to DTC for delivery to
beneficial owners in accordance with the procedures for book-entry only
securities of DTC:
(i) Annual and semi-annual reports of the Trust;
(ii) Proxies, proxy statements and other proxy
soliciting materials;
(iii) Prospectus and amendments and supplements to
the Prospectus, including stickers; and
(iv) Other communications as may be required by law
or reasonably requested by the Trust.
(d) If the Shares are represented by individual Certificates,
the Bank shall perform the services agreed to in writing by the Bank and the
Trust.
(e) The Bank shall provide additional services (if any) on
behalf of the Trust (i.e., escheatment services) which may be agreed upon in
writing between the Trust and the Bank.
2. Fees and Expenses
2.1 The Bank shall receive from the Trust such compensation for the
Transfer Agent's services provided pursuant to this Agreement as may be agreed
to from time to time in a written fee schedule approved by the parties. The fees
are accrued daily and billed monthly and shall be due and payable upon receipt
of the invoice. Upon the termination of 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 termination of this Agreement.
2.2 In addition to the fee paid under Section 2.1 above, the Trust
agrees to reimburse the Bank for out-of-pocket expenses, including but not
limited to confirmation production, postage, forms, telephone, microfilm,
microfiche, tabulating proxies, records storage, or advances incurred by the
Bank for the items set out in the fee schedule attached hereto or relating to
dividend distributions and reports (whereas all expenses related to creations
and redemptions of Fund securities shall be borne by the relevant authorized
participant in such creations and redemptions). In addition, any other expenses
incurred by the Bank at the request or with the consent of the Trust, will be
reimbursed by the Trust on behalf of the applicable Fund.
2.3 The Trust agrees to pay all fees and reimbursable expenses within
ten business days following the receipt of the respective billing notice
accompanied by supporting documentation, as appropriate. Postage for mailing of
dividends, proxies, Trust reports and other mailings to all shareholder accounts
shall be advanced to the Bank by the Trust at least seven (7) days prior to the
mailing date of such materials.
3. Representations and Warranties of the Bank
3.1 The Bank represents and warrants to the Trust that:
It is a banking company duly organized and existing and in
good standing under the laws of the State of New York.
It is duly qualified to carry on its business in the State of
New York.
It is empowered under applicable laws and by its Charter and
By-Laws to act as transfer agent and dividend disbursing agent and to enter
into and perform this Agreement.
All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement.
It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and obligations under
this Agreement.
4. Representations and Warranties of the Trust
4.1 The Trust represents and warrants to the Bank that:
It is a business trust duly organized and existing and in good
standing under the laws of Delaware.
It is empowered under applicable laws and by its Declaration
of Trust and By-Laws to enter into and perform this Agreement.
All corporate proceedings required by said Declaration of
Trust and By-Laws have been taken to authorize it to enter into and perform this
Agreement.
It is an open-end management investment company registered
under the Investment Company Act of 1940, as amended.
A registration statement under the Securities Act of 1933, as
amended, on behalf of each of the Funds is currently effective and will remain
effective, and appropriate state securities law filings have been made and will
continue to be made, with respect to all Shares of the Trust being offered for
sale.
5. [Section Reserved]
6. Indemnification
6.1 The Bank shall not be responsible for, and the Trust shall
indemnify and hold the Bank harmless from and against, any and all losses,
damages, costs, charges, counsel fees, payments, expenses and liability
("Losses") arising out of or attributable to:
(a) All actions of the Bank or its agents or subcontractors
required to be taken pursuant to this Agreement, provided that such actions are
taken without negligence, or willful misconduct.
(b) The Trust's negligence or willful misconduct.
(c) The breach of any representation or warranty of the Trust
hereunder.
(d) The conclusive reliance on or use by the Bank or its
agents or subcontractors of information, records, documents or services which
(i) are received by the Bank or its agents or subcontractors, and (ii) have been
prepared, maintained or performed by the Trust or any other person or firm on
behalf of the Trust including but not limited to any previous transfer agent or
registrar.
(e) The conclusive reliance on, or the carrying out by the
Bank or its agents or subcontractors of any instructions or requests of the
Trust on behalf of the Trust.
(f) The offer or sale of Shares in violation of any
requirement under the federal securities laws or regulations or the securities
laws or regulations of any state that such Shares be registered in such state or
in violation of any stop order or other determination or ruling by any federal
agency or any state with respect to the offer or sale of such Shares in such
state.
6.2 At any time the Bank may apply to any officer of the Trust for
instructions, and may consult with legal counsel of their choosing with respect
to any matter arising in connection with the services to be performed by the
Bank under this Agreement, and the Bank and its agents or subcontractors shall
not be liable and shall be indemnified by the Trust for any action taken or
omitted by it in reasonable reliance upon such instructions or upon the advice
or opinion of such counsel and shall promptly advise the Trust of such advice or
opinion (except for actions or omissions by Bank taken with negligence or
willful misconduct). The Bank, its agents and subcontractors shall be protected
and indemnified in acting upon any paper or document, reasonably believed to be
genuine and to have been signed by the proper person or persons, or upon any
instruction, information, data, records or documents provided the Bank or its
agents or subcontractors by machine readable input, telex, CRT data entry or
other similar means authorized by the Trust, and shall not be held to have
notice of any change of authority of any person, until receipt of written notice
thereof from the Trust.
6.3 The Trust shall not be responsible for, and the Bank shall
indemnify and hold the Trust harmless from and against, any and all Losses
arising out of or attributable to:
(a) The Bank's negligence or willful misconduct.
(b) The breach of any representation or warranty of the Bank
hereunder.
7. Standard of Care
7.1 The Bank shall have no responsibility and shall not be liable for
any loss or damage unless such loss or damage is caused by its own negligence or
willful misconduct or that of its employees, agents or subcontractors, or its
breach of any of its representations.
7.2 Except for the Trust's obligation to indemnify the Bank for Losses
as set forth in Section 6.1 hereof, including Losses constituting special,
indirect or consequential damages to third parties, neither the Bank nor the
Trust shall otherwise be liable for special, indirect or consequential damages,
or lost profits or loss of business, regardless of the form of action and even
if the same were foreseeable.
8. Concerning the Bank
8.1 Bank may enter into subcontracts, agreements and understandings
with any Bank affiliate, whenever and on such terms and conditions as it deems
necessary or appropriate, to perform its services hereunder. No such
subcontract, agreement or understanding shall discharge Bank from its
obligations hereunder.
8.2 Bank shall be entitled to conclusively rely upon any written or
oral instruction actually received by Bank and reasonably believed by Bank to be
duly authorized and delivered. Trust agrees to forward to Bank written
instructions confirming oral instructions by the close of business of the same
day that such oral instructions are given to Bank. Trust agrees that the fact
that such confirming written instructions are not received or that contrary
written instructions are received by Bank shall in no way affect the validity or
enforceability of transactions authorized by such oral instructions and effected
by Bank. If Trust elects to transmit written instructions through an on-line
communication system offered by Bank, Trust's use thereof shall be subject to
the terms and conditions attached hereto as Appendix A.
8.3 Bank shall establish and maintain a disaster recovery plan and
back-up system at all times satisfying the requirements of all applicable law,
rules, and regulations and which is reasonable under the circumstances (the
"Disaster Recovery Plan and Back-Up System"). Bank shall not be responsible or
liable for any failure or delay in the performance of its obligations under this
Agreement arising out of or caused, directly or indirectly, by circumstances
beyond its control which are not a result of its negligence, including without
limitation, acts of God; earthquakes; fires; floods; wars; civil or military
disturbances; sabotage; epidemics; riots; interruptions, loss or malfunctions of
utilities, transportation, computer (hardware or software) or communications
service; accidents; labor disputes; acts of civil or military authority;
governmental actions; or inability to obtain labor, material, equipment or
transportation, provided that the Bank has established and is maintaining the
Disaster Recovery Plan and Back-Up System, or if not, that such delay or failure
would have occurred even if Bank had established and was maintaining the
Disaster Recovery Plan and Back-Up System. Upon the occurrence of any such delay
or failure Bank shall use commercially reasonable best efforts to resume
performance as soon as practicable under the circumstances.
8.4 Bank shall have no duties or responsibilities whatsoever except
such duties and responsibilities as are specifically set forth in this
Agreement, and no covenant or obligation shall be implied against Bank in
connection with this Agreement.
8.5 At any time the Bank may apply to an officer of the Trust written
instructions with respect to any matter arising in connection with the Bank's
duties and obligations under this Agreement, and the Bank shall not be liable
for any action taken or omitted to be taken by the Bank in good faith in
accordance with such instructions. Such application by the Bank for instructions
from an officer of the Trust may, at the option of the Bank, set forth in
writing any action proposed to be taken or omitted to be taken by the Bank with
respect to its duties or obligations under this Agreement and the date on and/or
after which such action shall be taken, and the Bank shall not be liable for any
action taken or omitted to be taken in accordance with a proposal included in
any such application on or after the date specified therein unless, prior to
taking or omitting to take any such action, the Bank has received written
instructions in response to such application specifying the action to be taken
or omitted. The Bank may consult counsel to the Trust or its own counsel, at the
expense of the Trust, and shall be fully protected with respect to anything done
or omitted by it in good faith in accordance with the advice or opinion of such
counsel.
8.6 Notwithstanding any provisions of this Agreement to the contrary,
the Bank shall be under no duty or obligation to inquire into, and shall not be
liable for:
(a) The legality of the issue, sale or transfer of any Shares,
the sufficiency of the amount to be received in connection therewith, or the
authority of the Trust to request such issuance, sale or transfer;
(b) The legality of the purchase of any Shares, the
sufficiency of the amount to be paid in connection therewith, or the authority
of the Trust to request such purchase;
(c) The legality of the declaration of any dividend by the
Trust, or the legality of the issue of any Shares in payment of any stock
dividend; or
(d) The legality of any recapitalization or readjustment of
the Shares.
9. Covenants of the Trust and the Bank
9.1 The Trust shall promptly furnish to the Bank the following:
(a) A certified copy of the resolution of the Board of
Trustees of the Trust authorizing the appointment of the Bank and the execution
and delivery of this Agreement.
(b) A copy of the Declaration of Trust and By-Laws of the
Trust and all amendments thereto.
(c) Shares will be transferred upon presentation to the Bank
of Shares to its electronic account at DTC, accompanied by such documents as the
Bank deems necessary to evidence the authority of the person making such
transfer, and bearing satisfactory evidence of the payment of applicable stock
transfer taxes, if any. In the case of small estates where no administration is
contemplated, the Bank may, when furnished with an appropriate surety bond, and
without further approval of the Trust, transfer Shares registered in the name of
the decedent where the current market value of the Shares being transferred does
not exceed such amount as may from time to time be prescribed by the various
states. The Bank reserves the right to refuse to transfer Shares until it is
satisfied that the endorsements on documents submitted to it are valid and
genuine, and for that purpose it may require, unless otherwise instructed by an
Officer of the Trust, a guaranty of signature by an "eligible guarantor
institution" meeting the requirements of the Bank, which requirements include
membership or participation in STAMP or such other "signature guarantee program"
as may be determined by the Bank in addition to, or in substitution for, STAMP,
all in accordance with the Securities Exchange Act of 1934, as amended. The Bank
also reserves the right to refuse to transfer Shares until it is satisfied that
the requested transfer is legally authorized, and it shall incur no liability
for the refusal in good faith to make transfers which the Bank, in its judgment,
deems improper or unauthorized, or until it is satisfied that there is no basis
to any claims adverse to such transfer. The Bank may, in effecting transfers of
Shares, rely upon those provisions of the Uniform Act for the Simplification of
Fiduciary Security Transfers or the Uniform Commercial Code, as the same may be
amended from time to time, applicable to the transfer of securities, and the
Trust shall indemnify the Bank for any act done or omitted by it in good faith
in reliance upon such laws.
(d) The Bank assumes no responsibility with respect to the
transfer of restricted securities where counsel for the Trust advises that such
transfer may be properly effected.
9.2 The Bank agrees that all records prepared or maintained by the Bank
relating to the services to be performed by the Bank hereunder are the property
of the Trust and will be preserved, maintained and made available upon
reasonable request, and will be surrendered promptly to the Trust on and in
accordance with its request.
9.3 The Bank and the Trust agree that all books, records, information
and data pertaining to the business of the other party which are exchanged or
received pursuant to the negotiation or the carrying out of this Agreement shall
remain confidential, and shall not be voluntarily disclosed to any other person,
except as may be, or may become required by law, by administrative or judicial
order or by rule.
9.4 In case of any requests or demands for the inspection of the
Shareholder records of the Trust, the Bank will endeavor to notify the Trust and
to secure instructions from an authorized officer of the Trust as to such
inspection. The Bank reserves the right, however, to
exhibit the Shareholder records to any person whenever it is advised by its
counsel that it may be held liable for the failure to exhibit the Shareholder
records to such person.
9.5 Bank shall file such appropriate information returns concerning the
payment and composition of dividends and capital gain distributions and tax
withholding with the proper Federal, State and local authorities as are required
by law to be filed by the Trust and shall withhold such sums as are required to
be withheld by applicable law.
9.6 During the term of this Agreement, Bank shall maintain an Errors
and Omissions policy having such coverage and such deductibles as Bank may
reasonably determine to insure against its liability hereunder.
10. Termination of Agreement
10.1 The term of this Agreement shall be one year commencing upon the
date hereof (the "Initial Term") and shall automatically renew for additional
one year terms unless either party provides written notice of termination at
least ninety (90) days prior to the end of any one year term or, unless earlier
terminated as provided below:
(a) Either party hereto may terminate this Agreement prior to the
expiration of the Initial Term in the event the other party breaches any
material provision of this Agreement, including, without limitation in the case
of the Trust, its obligations under Section 2.1, provided that the non-breaching
party gives written notice of such breach to the breaching party and the
breaching party does not cure such violation within 90 days of receipt of such
notice.
(b) The Trust may terminate this Agreement prior to the expiration of
the Initial Term upon ninety (90) days' prior written notice in the event that
the Board of the Trust votes to liquidate the Trust and terminate its
registration with the Securities and exchange Commission other than in
connection with a merger or acquisition of the Trust or the Trust's investment
Trust.
10.2 Should the Trust exercise its right to terminate, all ordinary and
reasonable out-of-pocket expenses associated with the movement of records and
material will be borne by the Trust. Additionally, the Bank reserves the right
to charge for any other reasonable expenses associated with such termination.
10.3 The terms of Article 2 and Article 6 shall survive the termination
of this Agreement.
11. Additional Series
In the event that the Trust establishes one or more additional Funds
with respect to which it desires to have the Bank render services as transfer
agent under the terms hereof, it shall so notify the Bank in writing, and if the
Bank agrees in writing to provide such services, such additional issuance shall
become Shares hereunder.
12. Assignment
12.1 Neither this Agreement nor any rights or obligations hereunder may
be assigned by either party without the written consent of the other party, and
any purported assignment in violation of this provision shall be void.
12.2 This Agreement shall inure to the benefit of and be binding upon
the parties and their respective permitted successors and assigns.
13. Severability and Beneficiaries
13.1 In case any provision in or obligation under this Agreement shall
be invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
thereby.
13.2 This Agreement is intended solely for the benefit of the Trust and
the Bank and their permitted successors and assigns, and no third party shall
have any rights or interest in any provision of this Agreement. Nothing
contained in this Agreement shall be deemed or construed to create an obligation
on the part of either the Trust or Custodian to any third party.
14. Amendment
This Agreement may be amended or modified by a written agreement
executed by both parties and authorized or approved by a resolution of the Board
of Trustees of the Trust.
15. New York Law to Apply
This Agreement shall be construed in accordance with the substantive
laws of the State of New York, without regard to conflicts of laws principles
thereof. Trust and Bank hereby consent to the jurisdiction of a state or federal
court situated in New York City, New York in connection with any dispute arising
hereunder. Trust hereby irrevocably waives, to the fullest extent permitted by
applicable law, any objection which it may now or hereafter have to the laying
of venue of any such proceeding brought in such a court and any claim that such
proceeding brought in such a court has been brought in an inconvenient forum.
Trust and Bank each hereby irrevocably waives any and all rights to trial by
jury in any legal proceeding arising out of or relating to this Agreement.
16. Merger of Agreement
This Agreement constitutes the entire agreement between the parties
hereto and supersedes any prior agreement with respect to the subject matter
hereof whether oral or written.
17. Limitations of Liability of the Trustees and Shareholders
It is expressly acknowledged and agreed that the obligations of the
Trust hereunder shall not be binding upon any of the shareholders, Trustees,
officers, employees or agents of the Trust, personally, but shall bind only the
trust property of the Trust, as provided in its Declaration of Trust. The
execution and delivery of this Agreement have been authorized by the Trustees of
the Trust and signed by an officer of the Trust, acting as such, and neither
such authorization by such Trustees nor such execution and delivery by such
officer shall be deemed to have been made by any of them individually or to
impose any liability on any of them personally, but shall bind only the trust
property of the Trust as provided in its Declaration of Trust. In addition, the
Bank hereby expressly agrees that any obligations in this Agreement of a
particular Fund and of the Trust with respect to that Fund shall be limited
solely to the assets of that Fund, and the Bank shall not seek satisfaction of
any obligation from any other Fund, the Shareholders of any Fund, or the
Trustees, officers, employees or agents of the Trust.
18. Counterparts
This Agreement may be executed by the parties hereto on any number of
counterparts, and all of said counterparts taken together shall be deemed to
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf by and through their duly authorized
officers, as of the day and year first above written.
Rydex ETF Trust
(the "Trust")
By: /S/ XXXX X. XXXXXXXXXXX
-------------------------------
Name: Xxxx X. Xxxxxxxxxxx
Title: Vice President
THE BANK OF NEW YORK
(the "Bank")
By: /S/ XXXX XXXXXXX
-------------------------------
Name: Xxxx Xxxxxxx
Title: Vice President
SCHEDULE A
BOOKS AND RECORDS TO BE MAINTAINED BY BANK
Source Documents requesting Creations and Redemptions
Correspondence/AP Inquiries
Reconciliations, bank statements, copies of canceled checks, cash proofs
Daily/Monthly reconciliation of outstanding units between the Trust and DTC
Net Asset Computation Documentation
Dividend Records
Year-end Statements and Tax Forms
EXHIBIT A
Form of Authorized Participant Agreement
