ZIEGLER EXCHANGE TRADED TRUST Suite 2000 Milwaukee, Wisconsin 53202 AUTHORIZED PARTICIPANT AGREEMENT
Exhibit
(E)(2)
XXXXXXX
EXCHANGE TRADED TRUST
000
Xxxx Xxxxxxxxx Xxxxxx
Xxxxx
0000
Xxxxxxxxx,
Xxxxxxxxx 00000
This
Authorized Participant Agreement (the “Agreement”) is entered into by and
between X.X. Xxxxxxx and Company (the “Distributor”) and __________________ (the
“Participant”) and is subject to acceptance by JPMorgan Chase Bank, N.A. as
index receipt agent for Xxxxxxx Exchange Traded Trust (the “Index Receipt
Agent”).
The
Index
Receipt Agent serves as the Index Receipt Agent for Xxxxxxx Exchange Traded
Trust (the “Trust”) and all of its designated series (each a “Fund” and
collectively, the “Funds”), and is an Index Receipt Agent as that term is
defined in the rules of the National Securities Clearing Corporation (“NSCC”).
The Distributor provides services as principal underwriter of the Funds acting
on an agency basis in connection with the sale and distribution of the class
of
shares issued by the Funds known as “ETT Shares.” The Distributor has retained
_____________ (“SIDCO”) to provide certain services with respect to the
purchases and redemptions of Fund Shares. The Distributor, the Index Receipt
Agent, and the Participant acknowledge and agree that the Trust, the Funds
and
SIDCO shall be third party beneficiaries of this Agreement, and shall receive
the benefits contemplated by this Agreement.
The
process by which an investor purchases and redeems ETT Shares from a Fund is
described in detail in the Trust’s ETT Shares Prospectus and the Statement of
Additional Information incorporated therein (the “Prospectus”) that comprise
part of the Trust’s registration statement, as amended, on Form N-1A
(No.811-21827) and the Authorized Participant Procedures Handbook (“AP
Handbook”)(hereinafter collectively, “ETT Documents”). The discussion of the
purchase and redemption process in this Agreement is modified as necessary
by
reference to the more complete discussions in the ETT Documents. References
to
the ETT Documents are to the then current Prospectus and AP Handbook as each
may
be supplemented or amended from time to time. Capitalized terms not otherwise
defined herein are used herein as defined in the ETT Documents. In the event
of
a conflict between the Prospectus and AP Handbook, the Prospectus shall control.
Each party to this Agreement agrees to comply with the provisions of the ETT
Documents to the extent applicable to it.
The
ETT
Shares of a Fund may be purchased or redeemed directly from the Fund only in
aggregations of a specified number, known as a “Creation Unit.” The number of
ETT Shares presently constituting a Creation Unit of each Fund is set forth
in
Annex I. Creation Units of ETT Shares may be purchased only by or through an
entity that is a participant in The Depository Trust Company (“DTC”) or a
broker-dealer or other participant in the Continuous Net Settlement (the "CNS")
System of NSCC and that has entered into an Authorized Participant Agreement
with the Distributor. The Participant agrees to be bound by the terms of such
instructions issued by the Index Receipt Agent and reported to the NSCC as
though such instructions were issued by the Participant directly.
To
purchase a Creation Unit, an authorized DTC participant or CNS participant,
whether acting for its own account or on behalf of another party, generally
must
deliver to the Fund a designated basket of equity securities (the “Deposit
Securities”) and an amount of cash computed as described in the Prospectus (the
“Balancing Amount”), plus a purchase transaction fee as described in the ETT
Documents (the “Transaction Fee”). The Deposit Securities and the Balancing
Amount together constitute the “Portfolio Deposit.” The Balancing Amount and the
Transaction Fee are referred to collectively as the “Cash Component.” The amount
of such purchase transaction fee shall be determined by the Trust or investment
adviser to the Trust in its sole discretion and may be changed from time to
time.
This
Agreement is intended to set forth the procedures by which the Participant
may
purchase and/or redeem Creation Units of ETT Shares (i) through the CNS clearing
processes of NSCC as such processes have been enhanced to effect purchases
and
redemptions of Creation Units, such processes being referred to herein as the
“Clearing Process,” or (ii) outside the Clearing Process. The procedures for
processing an order to purchase ETT Shares (a “Purchase Order”) and an order to
redeem ETT Shares (a “Redemption Order”) are described in the Fund’s ETT
Documents and in Annex II to this Agreement. All Purchase and Redemption Orders
must be made pursuant to the procedures set forth in Annex II. The Participant
may not cancel a Purchase Order or a Redemption Order after it is
placed.
The
parties hereto, in consideration of the premises and of the mutual agreements
contained herein, agree as follows:
1. STATUS
OF
PARTICIPANT
(a) The
Participant hereby represents, covenants, and warrants that it is and will
continue to be a participant in DTC ("DTC Participant") so long as this
Agreement is in full force and effect and that, with respect to Purchase Orders
or Redemption Orders of Creation Units of ETT Shares of any Fund placed through
the Clearing Process, it is and will continue to be a member of NSCC and a
participant in the CNS System of NSCC so long as this Agreement is in full
force
and effect. The Participant may place Purchase Orders or Redemption Orders
for
Creation Units either through the Clearing Process or outside the Clearing
Process, subject to the procedures for purchase and redemption referred to
in
paragraph 2 and Annex II of this Agreement. If a Participant loses its status
as
a DTC Participant or NSCC member, or its eligibility to participate in the
CNS
System, this Agreement will automatically terminate and Participant shall
promptly notify the Distributor in writing of the change in status or
eligibility.
(b) The
Participant hereby represents and warrants that it is registered as a
broker-dealer under the Securities Exchange Act of 1934, as amended, is
qualified to act as a broker or dealer in the states or other jurisdictions
where it transacts business, and is a member in good standing of the National
Association of Securities Dealers, Inc. (the “NASD”). The Participant agrees
that it will maintain such registrations, qualifications, and membership in
good
standing and in full force and effect throughout the term of this Agreement.
The
Participant agrees to comply with all applicable federal laws, the laws of
the
states or other jurisdictions concerned, and the rules and regulations
promulgated thereunder, and with the Constitution, By-Laws and Conduct Rules
of
the NASD, and that it will not offer or sell ETT Shares of any Fund in any
state
or jurisdiction where such shares may not lawfully be offered and/or
sold.
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(c) If
the
Participant is offering and selling ETT Shares of any Fund in jurisdictions
outside the several states, territories and possessions of the United States
and
is not otherwise required to be registered or qualified as a broker or dealer,
or to be a member of the NASD, as set forth above, the Participant nevertheless
agrees to observe the applicable laws of the jurisdiction in which such offer
and/or sale is made, to comply with the full disclosure requirements of the
Securities Act of 1933 as amended (the “1933 Act”) and the regulations
promulgated thereunder, and to conduct its business in accordance with the
spirit of the NASD Conduct Rules.
(d) The
Participant understands and acknowledges that the proposed method by which
Creation Units of ETT Shares will be created and traded may raise certain issues
under applicable securities laws. For example, because new Creation Units of
ETT
Shares may be issued and sold by the Fund on an ongoing basis, at any point
a
“distribution,” as such term is used in the 1933 Act, may occur. The Participant
understands and acknowledges that some activities on its part, depending on
the
circumstances, may result in its being deemed a participant in the distribution
in a manner that could render it a statutory underwriter and subject it to
the
prospectus delivery and liability provisions of the 1933 Act. (A xxxxxx
discussion of these risks appears in the Prospectus.) Whether a person is an
underwriter depends upon all of the facts and circumstances pertaining to that
person’s activities, and you should consult legal counsel if you are uncertain
of your status. Neither the Distributor nor the Index Receipt Agent will
indemnify the Participant for any violations of the federal securities laws
committed by the Participant.
2. EXECUTION
OF PURCHASE AND REDEMPTION ORDERS
(a) All
Purchase Orders and Redemption Orders shall be made in accordance with the
terms
of the ETT Documents and the procedures described in Annex II to this Agreement.
Each party hereto agrees to comply with the provisions of such documents to
the
extent applicable to it. It is contemplated that the phone lines used by the
ETT
Shares’ telephone representatives, which include representatives of the
Distributor, Index Receipt Agent or the Trust and any affiliates thereof, will
be recorded, and the Participant hereby consents to the recording of all calls
with these representatives. The Funds reserve the right to issue additional
or
other procedures relating to the manner of purchasing or redeeming Creation
Units, and the Participant agrees to comply with such procedures as may be
issued from time to time, including but not limited to the ETT Shares cash
collateral settlement procedures that are referenced in Annex II to this
Agreement. The Participant acknowledges and agrees on behalf of itself and
any
party for which it is acting that acceptance of a Purchase Order or Redemption
Order shall be irrevocable, and that the Funds (or the Distributor on behalf
of
the Funds) reserve the right to reject any Purchase Order until the trade is
properly released as described in Annex II. The Participant agrees that the
Distributor has and reserves the right, in its sole discretion without notice,
to reject a Purchase Order or Redemption Order or suspend sales of ETT Shares,
at anytime.
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(b) With
respect to any Redemption Order, the Participant acknowledges and agrees on
behalf of itself and any party for which it is acting to return to a Fund any
dividend, distribution, or other corporate action paid to it or to the party
for
which it is acting in respect of any Deposit Security that is transferred to
the
Participant or any party for which it is acting that, based on the valuation
of
such Deposit Security at the time of transfer, should have been paid to the
Fund. With respect to any Redemption Order, the Participant also acknowledges
and agrees on behalf of itself and any party for which it is acting that a
Fund
is entitled to reduce the amount of money or other proceeds due to the
Participant or any party for which it is acting by an amount equal to any
dividend, distribution, or other corporate action to be paid to it or to the
party for which it is acting in respect of any Deposit Security that is
transferred to the Participant or any party for which it is acting that, based
on the valuation of such Deposit Security at the time of transfer, should be
paid to the Fund. With respect to any Purchase Order, each Fund acknowledges
and
agrees to return to the Participant or any party for which it is acting any
dividend, distribution, or other corporate action paid to the Fund in respect
of
any Deposit Security that is transferred to the Fund that, based on the
valuation of such Deposit Security at the time of transfer, should have been
paid to the Participant or any party for which it is acting.
(c) When
making a Redemption Order, the Participant understands and agrees that in the
event Shares are not transferred to the Fund, such Redemption Order may be
rejected by the Fund and the Participant will be solely responsible for all
costs and losses and fees incurred by the Fund, the Index Receipt Agent or
the
Distributor related to such rejected Redemption Order.
3. AUTHORIZATION
OF INDEX RECEIPT AGENT
With
respect to Purchase Orders or Redemption Orders processed through the Clearing
Process, the Participant hereby authorizes the Index Receipt Agent to transmit
to the NSCC on behalf of the Participant such instructions, including amounts
of
the Deposit Securities and Cash Components as are necessary, consistent with
the
instructions issued by the Participant to the ETT Shares telephone
representative. The Participant agrees to be bound by the terms of such
instructions issued by the Index Receipt Agent and reported to NSCC as though
such instructions were issued by the Participant directly to NSCC.
4. MARKETING
MATERIALS AND REPRESENTATIONS.
The
Participant represents, warrants, and agrees that it will not make any
representations concerning ETT Shares other than those contained in the Funds’
then current Prospectus or in any promotional materials or sales literature
furnished to the Participant by the Distributor. The Participant agrees not
to
furnish or cause to be furnished to any person or display or publish any
information or materials relating to ETT Shares (including, without limitation,
promotional materials and sales literature, advertisements, press releases,
announcements, statements, posters, signs, or other similar materials), except
such information and materials as may be furnished to the Participant by the
Distributor and such other information and materials as may be approved in
writing by the Distributor. The Participant understands that the Fund will
not
be advertised or marketed as an open-end investment company, i.e., as a mutual
fund, and that any advertising materials will prominently disclose that the
ETT
Shares are not individually redeemable. In addition, the Participant understands
that any advertising material that addresses redemption of ETT Shares will
disclose that ETT Shares may be tendered for redemption to the issuing Fund
in
Creation Unit aggregations only. Notwithstanding the foregoing, the Participant
may without the written approval of the Distributor prepare and circulate in
the
regular course of its business research reports that include information,
opinions, or recommendations relating to ETT Shares (i) for public
dissemination, provided that such research reports compare the relative merits
and benefits of ETT Shares with other products and are not used for purposes
of
marketing ETT Shares and (ii) for internal use by the Participant.
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5. TITLE
TO
SECURITIES; RESTRICTED SHARES
The
Participant represents on behalf of itself and any party for which it acts
that
upon delivery of a portfolio of Deposit Securities to the Custodian the Fund
will acquire good and unencumbered title to such securities, free and clear
of
all liens, restrictions, charges, and encumbrances, and not subject to any
adverse claims, including without limitation any restrictions upon the sale
or
transfer of such securities imposed by (i) any agreement or arrangement entered
into by the Participant or any party for which it is acting in connection with
a
Purchase Order; or (ii) any provision of the 1933 Act, and any regulations
thereunder (except that portfolio securities of issuers other than U.S. issuers
shall not be required to have been registered under the 1933 Act if exempt
from
such registration), or of the applicable laws or regulations of any other
applicable jurisdiction. In particular, the Participant represents on behalf
of
itself and any party for which it acts that no such securities are “restricted
securities” as such term is used in Rule 144(a)(3)(i) under the 1933
Act.
6. CASH
COMPONENT
The
Participant hereby agrees that in connection with a Purchase Order, whether
for
itself or any party for which it acts, it will make available to the issuing
Fund in same day funds for each purchase of ETT Shares an amount of cash
sufficient to pay the Cash Component. Payment of the Cash Component shall be
made through DTC to an account maintained by the Custodian at JPMorgan Chase
Bank, New York City, and shall be provided in same day or immediately available
funds on or before the settlement date (“Contractual Settlement Date”). The
Participant hereby agrees to ensure that the Cash Component will be received
by
the issuing Fund on or before the Contractual Settlement Date, and in the event
payment of such Cash Component has not been made by such Contractual Settlement
Date, the Participant agrees on behalf of itself or any party for which it
acts
in connection with a Purchase Order to pay the amount of the Cash Component,
plus interest, computed at such reasonable rate as may be specified by the
Fund
from time to time. The Participant shall be liable to the Custodian and/or
the
Fund for any amounts advanced by the Custodian in its sole discretion to the
Participant for payment of the amounts due and owing for the Cash Component.
Computation of the Cash Component shall exclude any taxes, duties or other
fees
and expenses payable upon the transfer of beneficial ownership of the Deposit
Securities, which shall be the sole responsibility of the Participant and not
the Trust.
7. ROLE
OF
PARTICIPANT
(a) The
Participant acknowledges and agrees that for all purposes of this Agreement,
the
Participant will be deemed to be an independent contractor, and will have no
authority to act as agent for the Funds or the Distributor in any matter or
in
any respect. The Participant agrees to make itself and its employees available,
upon request, during normal business hours to consult with the Funds or the
Distributor or their designees concerning the performance of the Participant’s
responsibilities under this Agreement.
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(b) The
Participant agrees as a DTC Participant and in connection with any purchase
or
redemption transactions in which it acts on behalf of a third party, that it
shall extend to such party all of the rights, and shall be bound by all of
the
obligations, of a DTC Participant in addition to any obligations that it
undertakes hereunder or in accordance with the Prospectus.
(c) The
Participant agrees to maintain all books and records of all sales of ETT Shares
made by or through it pursuant to its obligations under the federal Securities
laws and to furnish copies of such records to the Fund or the Distributor upon
the request of the Fund or the Distributor.
(d) The
Participant represents that from time to time it may be a beneficial owner
of
ETT Shares. To the extent that it is a beneficial owner of ETT Shares, the
Participant agrees to irrevocably appoint Distributor as its attorney and proxy
with full authorization and power to vote (or abstain from voting) its
beneficially owned shares. The Distributor intends to vote (or abstain from
voting) the Participant’s beneficially owned shares in the same proportion as
the votes (or abstentions) of all other shareholders of the Fund on any matter
submitted to the vote of shareholders of the Fund or Trust. The Distributor,
as
attorney and proxy for Participant under this Paragraph, (i) is hereby given
full power of substitution and revocation; (ii) may act through such agents,
nominees, or attorneys as it may appoint from time to time; (iii) may provide
voting instructions to such agents, nominees, or substitute attorneys.
Distributor may terminate this irrevocable proxy within sixty (60) days written
notice to the Participant.
(e) The
Participant understands that under the terms of NYSE Arca Equities Rule
5.2(j)(3) Investment Company Units Listing Standards, NYSE Arca, Inc. requires
that members, including Equity Permit Holders and Market Makers, provide to
all
purchasers of ETT Shares a written description of the terms and characteristics
of such securities, in a form prepared by the open-end management investment
company issuing such securities, not later than the time a confirmation of
the
first transaction in such series is delivered to such purchaser. In addition,
members shall include a written description with any sales material relating
to
ETT Shares that is provided to customers or the public. Any other written
materials provided by a member to customers or the public making specific
reference to a Fund of the Trust as an investment vehicle must include a
statement in substantially the following form: “A circular describing the terms
and characteristics of [ETT Shares] has been prepared by Xxxxxxx Exchange Traded
Trust NYSE Arca Tech 100 ETF and is available from your broker or NYSE Arca,
Inc. It is recommended that you obtain and review such circular before
purchasing ETT Shares. In addition, upon request you may obtain from your broker
a prospectus for ETT Shares.” Such other written materials provided by a member
to customers or the public shall include all other necessary and appropriate
disclosures. A Participant who is a NYSE Arca, Inc. member who is carrying
an
omnibus account for a non-member broker-dealer is required, if appropriate,
to
inform such non-member that the execution of an order to purchase ETT Shares
for
such omnibus account will be deemed to constitute agreement by the non-member
to
make such written description available to its customers on the same terms
as
are directly applicable to members under this Rule.
6
(f) The
Participant affirms that it maintains procedures that are reasonably designed
to
safeguard non-public personal consumer/customer financial information to the
extent required by applicable law, rule and regulation.
(g) The
Participant further represents that its anti-money laundering program is
maintained consistent with all applicable federal laws, rules and regulations,
including the USA Patriot Act and rules promulgated by the SEC.
8. AUTHORIZED
PERSONS OF THE PARTICIPANT
(a) Concurrently
with the execution of this Agreement and from time to time thereafter as may
be
requested by the Funds, the Participant shall deliver to the Funds, with copies
to the Index Receipt Agent, a certificate in a form approved by the Funds (see
Annex III hereto), duly certified as appropriate by the Participant’s Secretary
or other duly authorized official, setting forth the names and signatures of
all
persons authorized to give instructions relating to any activity contemplated
hereby or any other notice, request, or instruction on behalf of the Participant
(each an “Authorized Person”). Such certificate may be accepted and relied upon
by the Distributor and the Funds as conclusive evidence of the facts set forth
therein and shall be considered to be in full force and effect until delivery
to
the Funds of a superseding certificate. Upon the termination or revocation
of
authority of such Authorized Person by the Participant, the Participant shall
give immediate written notice of such fact to the Funds with copy to the Index
Receipt Agent and such notice shall be effective upon receipt by the Funds.
(b) The
Funds
shall issue to the Participant a unique personal identification number (“PIN
Number”) by which the Participant shall be identified and instructions issued by
the Participant hereunder shall be authenticated. The PIN Number shall be kept
confidential and provided to Authorized Persons only. If the Participant’s PIN
Number is changed, the new PIN Number will become effective on a date mutually
agreed upon by the Participant and the Distributor. If for some reason, the
Participant’s PIN number is compromised, the Participant shall contact the fund
immediately in order for a new one to be issued. (SEI generates
PIN#).
(c) The
Distributor shall assume that all instructions issued to it using the
Participant’s PIN Number have been properly placed, unless the Distributor has
actual knowledge to the contrary or the Participant has revoked its PIN Number.
The Distributor shall not verify that an Order is being placed by or on behalf
of the Participant. The Participant agrees that the Distributor, the Index
Receipt Agent and the Trust shall not be liable, absent fraud or willful
misconduct, for losses incurred by the Participant as a result of unauthorized
use of the Participant’s PIN Number, unless the Participant previously submitted
written notice to revoke its PIN Number.
9. REDEMPTIONS
(a) The
Participant understands and agrees that Redemption Orders may be submitted
only
on days that the Trust is open for business, as requires by Section 22(e) of
the
Investment Company Act of 1940.
(b) The
Participant represents and warrants that it will not attempt to place a
Redemption Order for the purpose of redeeming any Creation Unit of ETT Shares
of
any Fund unless it first ascertains that it or its customer, as the case may
be,
owns outright or has full legal authority and legal and beneficial right to
tender for redemption the requisite number of the Fund’s ETT Shares and to the
entire proceeds of the redemption, and that such ETT Shares have not been loaned
or pledged to another party and are not the subject of a repurchase agreement,
securities lending agreement, or any other agreement that would preclude the
delivery of such ETT Shares to the Fund.
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(c) The
Participant understands that ETT Shares of any Fund may be redeemed only when
one or more Creation Units of ETT Shares of a Beneficial Owner are held in
the
account of a single Participant.
(d) Notwithstanding
anything to the contrary in this Agreement or the Prospectus, the Participant
understands and agrees that residents of Australia and New Zealand, and
potentially other countries, are entitled to receive only cash upon redemption
of a Creation Unit of ETT Shares. Accordingly, the Participant may be required
to confirm that any request it submits for an in-kind redemption has not been
submitted on behalf of a Beneficial Owner who is a resident of a country
requiring that all redemptions be made in cash.
10. COMPLIANCE
WITH INTERNAL REVENUE CODE SECTION 351
(a) The
Participant represents and warrants that, based upon the number of outstanding
ETT Shares of any particular Fund, it does not, and will not in the future,
hold
for the account of any single Beneficial Owner, or group of related Beneficial
Owners, 80 percent or more of the currently outstanding ETT Shares of such
Fund,
so as to cause the Fund to have a basis in the portfolio securities deposited
with the Fund different from the market value of such portfolio securities
on
the date of such deposit, pursuant to section 351 of the Internal Revenue Code
of 1986, as amended.
(b) The
Participant agrees that the confirmation relating to any order for one or more
Creation Units of ETT Shares of a Fund shall state as follows: “Purchaser
represents and warrants that, after giving effect to the purchase of ETT Shares
to which this confirmation relates, it will not hold 80% or more of the
outstanding ETT Shares of the issuing Fund and will not treat such purchase
as
eligible for tax-free treatment under Section 351 of the Internal Revenue Code
of 1986, as amended. If purchaser is a dealer, it agrees to deliver similar
written confirmations to any person purchasing from it any of the ETT Shares
to
which this confirmation relates.”
(c) A
Fund
and its Index Receipt Agent and Distributor shall have the right to require,
as
a condition to the acceptance of a deposit of Deposit Securities, information
from the Participant regarding ownership of the Fund’s ETT Shares by such
Participant and its customers, and to rely thereon to the extent necessary
to
make a determination regarding ownership of 80 percent or more of the Fund’s
currently outstanding ETT Shares by a Beneficial Owner.
11. OBLIGATIONS
OF PARTICIPANT
(a) The
Participant agrees to maintain records of all sales of Shares made by or through
it and to furnish copies of such records to the Trust or the Distributor upon
their reasonable request.
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(b) The
Participant affirms that it has procedures in place reasonably designed to
protect the privacy of non-public personal consumer/customer financial
information to the extent required by applicable law, rule and
regulation.
(c) The
Participant further represents that its anti-money laundering program (“AML
Program”), at a minimum, (i) designates a compliance officer to administer and
oversee the AML Program, (ii) provides ongoing employee training, (iii) includes
an independent audit function to test the effectiveness of the AML Program,
(iv)
establishes internal policies, procedures, and controls that are tailored to
its
particular business, (v) includes a customer identification program consistent
with the rules under section 326 of the USA Patriot Act, (vi) provides for
the
filing of all necessary anti-money laundering reports including, but not limited
to, currency transaction reports and suspicious activity reports, (vii) provides
for screening all new and existing customers against reports and suspicious
activity reports, (vii) provides for screening all new and existing customers
against the Office of Foreign Asset Control list and any other government list
that is or becomes required under the USA Patriot Act, and (viii) allows for
appropriate regulators to examine its anti-money laundering books and records.
The Distributor shall verify the identity of each Authorized Participant and
maintain identification verification and transactional records in accordance
with the requirements of applicable laws and regulations aimed at the prevention
and detection of money laundering and/or terrorism activities.
(d) The
Participant represents and warrants that, during the term of this Agreement,
it
will not be an affiliated person of a fund, a promoter or a principal
underwriter of a fund or an affiliated person of such persons, except under
2(a)(3)(A) or 2(a)(3)(C) of the Investment Company Act of 1940, as amended
(the
“1940 Act”) due to ownership of Shares.
(e) The
Participant agrees that it will meet Distributor’s written creditworthiness
standards at all times at which it performs activities pursuant to this
Agreement and will inform the Distributor immediately should Participant not
meet such standards. Participant agrees that it will be subject to various
tests
performed by Distributor to determine if the Participant is in compliance with
the Distributor’s written creditworthiness standards and agrees to comply with
all requests for information in order to permit the Distributor to perform
such
tests.
12. INDEMNIFICATION
Note:
This paragraph shall survive the termination of this Agreement.
(a) The
Participant hereby agrees to indemnify and hold harmless the Distributor, the
Funds, the Index Receipt Agent, their
respective subsidiaries, affiliates, directors, officers, employees, and agents,
and each person, if any, who controls such persons within the meaning of Section
15 of the 1933 Act (each an “Indemnified Party”), from and against any loss,
liability, cost, or expense (including attorneys’ fees) incurred by such
Indemnified Party as a result of (i) any breach by the Participant of any
provision of this Agreement; (ii) any failure on the part of the Participant
to
perform any of its obligations set forth in the Agreement; (iii) any failure
by
the Participant to comply with applicable laws, including rules and regulations
of self-regulatory organizations; (iv) actions of such Indemnified Party in
reliance upon any instructions issued in accordance with Annex II or III (as
each may be amended from time to time) reasonably believed by the Distributor
and/or the Index Receipt Agent to be genuine and to have been given by the
Participant; or (v) the Participant’s failure to complete a Purchase Order or
Redemption Order that has been accepted. The Participant understands and agrees
that the Funds as third party beneficiaries to this Agreement are entitled
to
proceed directly against the Participant in the event that the Participant
fails
to honor any of its obligations under this Agreement that benefit the Fund.
The
Distributor shall not be liable to the Participant for any damages arising
out
of mistakes or errors in data provided to the Distributor, or out of
interruptions or delays of communications with the Indemnified Parties who
are
service providers to the Fund, nor is the Distributor liable for any action,
representation, or solicitation made by the wholesalers of the
Fund.
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(b) The
Distributor hereby agrees to indemnify and hold harmless the Participant and
the
Index Receipt Agent, their respective subsidiaries, affiliates, directors,
officers, employees, and agents, and each person, if any, who controls such
persons within the meaning of Section 15 of the 1933 Act (each an “Indemnified
Party”), from and against any loss, liability, cost, or expense (including
attorneys’ fees) incurred by such Indemnified Party as a result of (i) any
breach by the Distributor of any provision of this Agreement; (ii) any failure
on the part of the Distributor to perform any of its obligations set forth
in
this Agreement; (iii) any failure by the Distributor to comply with applicable
laws, including rules and regulations of self-regulatory organizations; or
(iv)
actions of such Indemnified Party in reliance upon any representations made
in
accordance with Annex II and III (as each may be amended from time to time)
reasonably believed by the Participant to be genuine and to have been given
by
the Distributor. The Participant shall not be liable to the Distributor for
any
damages arising out of mistakes or errors in data provided to the Participant,
or out of interruptions or delays of communications with the Indemnified Parties
who are service providers to the Fund, nor is the Participant liable for any
action, representation, or solicitation made by the wholesalers of the
Fund.
(c) Neither
the Funds, the Distributor, or the Index Receipt Agent, or any person who
controls such persons within the meaning of Section 15 of the 1933 Act, shall
be
liable to the Participant for any damages arising from any differences in
performance between the Deposit Securities in a Portfolio Deposit and the Fund’s
benchmark index.
13. INFORMATION
ABOUT DEPOSIT SECURITIES
The
Distributor will make available on each day that the Trust is open for business,
through the facilities of the NSCC, the names and amounts of Deposit Securities
to be included in the current Portfolio Deposit for each Fund.
14. RECEIPT
OF PROSPECTUS BY PARTICIPANT
The
Participant acknowledges receipt of the Prospectus and represents that it has
reviewed that document (including the Statement of Additional Information
incorporated therein) and understands the terms thereof.
10
15. CONSENT
TO ELECTRONIC DELIVERY OF PROSPECTUS
As
set
forth in the Fund Prospectus, the Distributor may deliver electronically a
single prospectus, annual or semi-annual report or other shareholder information
(each, a “Shareholder Document”) to persons who have effectively consented to
such electronic delivery. The Distributor will deliver Shareholder Documents
electronically by sending consenting persons an e-mail message informing them
that the applicable Shareholder Document has been posted and is available on
the
Fund’s website (xxx.XXXXXxxxXXX.xxx) and providing a hypertext link to the
document. The electronic versions of the Shareholder Documents will be in PDF
format and can be downloaded and printed using Adobe Acrobat.
By
signing this Agreement, the Participant hereby consents to the foregoing
electronic delivery of all Shareholder Documents to the e-mail address set
forth
on the signature page attached to this Agreement. The Participant further
understands and agrees that unless such consent is revoked, the Participant
can
only obtain access to the Shareholder Documents from the Distributor
electronically. The Participant can revoke the consent to electronic delivery
of
Shareholder Documents at anytime by providing written notice to the Distributor.
The Participant agrees to maintain the e-mail address set forth on the signature
page to this Agreement and further agrees to promptly notify the Distributor
if
its e-mail address changes. The Participant understands that it must have
continuous Internet access to access all Shareholder Documents.
16. CONSENT
TO RECORDING OF CONVERSATIONS
By
signing this Agreement, the Participant acknowledges that certain telephone
conversations between the Distributor or SIDCO and the Participant in connection
with the placing of orders may be recorded, and the Participant hereby grants
its consent to such recordings.
17. NOTICES
Except
as
otherwise specifically provided in this Agreement, all notices required or
permitted to be given pursuant to this Agreement shall be given in writing
and
delivered by personal delivery; by Federal Express; by registered or certified
United States first class mail, return receipt requested; or by telex, telegram,
facsimile, or similar means of same day delivery (with a confirming copy by
mail). Unless otherwise notified in writing, all notices to the Fund shall
be at
the address or telephone, facsimile, or telex numbers indicated below the
signature of the Distributor. All notices to the Participant, the Distributor,
and the Index Receipt Agent shall be directed to the address or telephone,
facsimile or telex numbers indicated below the signature line of such
party.
18. EFFECTIVENESS,
TERMINATION, AND AMENDMENT OF AGREEMENT
(a) This
Agreement shall become effective five Business Days after execution and delivery
to the Distributor upon notice by the Distributor to the Authorized Participant.
A “Business Day” shall mean each day the Trust is open for business.
11
(b) This
Agreement may be terminated at any time by any party upon sixty days’ prior
written notice to the other parties, and may be terminated earlier by the Fund
or the Distributor at any time in the event of a breach by the Participant
of
any provision of this Agreement or the procedures described or incorporated
herein. This Agreement will be binding on each parties' successors and assigns,
but the parties agree that neither party can assign its rights and obligations
under this Agreement without the prior written consent of the other party.
(c) This
Agreement may be amended by the Distributor from time to time without the
consent of the Participant or Index Receipt Agent by the following procedure.
The Distributor will deliver a copy of the amendment to the Participant and
the
Index Receipt Agent in accordance with paragraph 14 above. If neither the
Participant or the Index Receipt Agent objects in writing to the amendment
within five days after its receipt, the amendment will become part of this
Agreement in accordance with its terms.
19. TRUST
AS
THIRD PARTY BENEFICIARY
The
Participant and the Distributor understand and agree that the Trust as a third
party beneficiary to this Agreement is entitled and intends to proceed directly
against the Participant in the event that the Participant fails to honor any
of
its obligations pursuant to this Agreement that benefit the Trust.
20. INCORPORATION
BY REFERENCE
The
Participant acknowledges receipt of the Prospectus and AP Handbook, represents
that it has reviewed such documents and understands the terms thereof, and
further acknowledges that the procedures contained therein pertaining to the
creation and redemption of Shares are incorporated herein by reference.
21. GOVERNING
LAW
This
Agreement shall be governed by and interpreted in accordance with the laws
of
the State of Wisconsin. The parties irrevocably submit to the non-exclusive
jurisdiction of any Wisconsin State or United States federal court sitting
in
Milwaukee, Wisconsin over any suit, action or proceeding arising out of or
relating to this Agreement.
22. COUNTERPARTS
This
Agreement may be executed in several counterparts, each of which shall be an
original and all of which shall constitute but one and the same
instrument.
12
IN
WITNESS WHEREOF, the parties have caused this Agreement to be executed and
delivered as of the day and year written below.
DATED:__________________________________
|
X.X.
Xxxxxxx and Company
|
||
| |
|
|
| By: | ||
|
Name:
________________________________________
Title:
_________________________________________
Address:
000
Xxxx Xxxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxx, Xxxxxxxxx 00000
Telephone:
____________________________________
Facsimile:
_____________________________________
Telex:
________________________________________
|
||
|
[Name
of Participant]
|
||
| |
|
|
| By: | ||
|
Name:
________________________________________
Title:
_________________________________________
Address:
______________________________________
Telephone:
____________________________________
Facsimile:
_____________________________________
Telex:
________________________________________
|
||
|
ACCEPTED
BY:
|
||
|
JPMORGAN
CHASE BANK, as Index Receipt Agent
|
||
| |
|
|
| By: | ||
|
Name:
________________________________________
Title:
_________________________________________
Address: [3]
Xxxxx XxxxxXxxx Xxxxxx
Xxxxxxxx, Xxx Xxxx 00000
Telephone:
____________________________________
Facsimile:
_____________________________________
Telex:
________________________________________
|
||
13
ANNEX
I
CREATION
UNIT SIZE FOR ETT SHARES
Shares
Per Creation Unit
Xxxxxxx
Exchange Traded Trust NYSE Arca Tech 100 ETF 50,000
shares
14
ANNEX
II
PROCEDURES
FOR PROCESSING PURCHASE ORDERS AND
REDEMPTION
ORDERS
The
procedures set forth below are based upon and subject to each Fund’s then
current Prospectus and Statement of Additional Information (the “Fund
Documents”) and all applicable Exemptive Orders issued by the Securities &
Exchange Commission (collectively with the Fund Documents, the “Regulatory
Documents”). In the event that the term of any procedure described below
conflicts with the term of any Regulatory Document or any applicable law or
regulation, the term of such Regulatory Document, law or regulation supersede
such procedure.
Purchase
Orders for Creation Units Generally.
All
purchase orders must be placed for one or more Creation Units. All orders to
purchase Creation Units, whether through the CNS System of the NSCC (the
"Clearing Process") or outside the Clearing Process, must be received by X.X.
Xxxxxxx and Company or its authorized agent (the “Distributor”) prior to the
market close of business Eastern Time, or 3:00 p.m. Eastern Time in the case
of
nonconforming orders (or, with respect to nonconforming orders, one hour before
the market closes on days on which the market closes prior to 4:00 p.m.), in
each case on the date such order is placed in order for the creation of Creation
Units to be effected based on the NAV of shares of the ETF as next determined
on
such date after receipt of the order in proper form. All rejected Orders must
be
re-submitted on the next business day. The date on which an order to purchase
Creation Units (or an order to redeem Creation Units as discussed below) is
placed is referred to as the “Transmittal Date.”
Purchase
Orders must be transmitted by an Authorized Participant by telephone or other
transmission method acceptable to the Distributor pursuant to procedures set
forth in the AP Handbook, a copy of which is provided to each Authorized
Participant (see also “Purchasing Through the Clearing Process” and “Purchasing
Outside the Clearing Process” below). Severe economic or market disruption or
changes, or telephone or other communications failure may impede the ability
to
reach the Distributor or an Authorized Participant.
Those
placing orders to purchase Creation Units through the Clearing Process should
afford sufficient time to permit proper submission of the order to the
Distributor prior to 4:00 p.m. Eastern Time on the Transmittal Date. Orders
of
Creation Units effected outside the Clearing Process are likely to require
transmittal by the DTC participant earlier on the Transmittal Date than orders
effected using the Clearing Process. Those persons placing orders outside the
Clearing Process should do so in a timely manner so as to ensure the delivery
of
both the Deposit Securities, through DTC, and the Balancing Amount, through
the
Federal Reserve Bank wire system to the Custodian, by 11:00 a.m. and 2:00 p.m.
Eastern Time, respectively, on the next Business Day immediately following
the
Transmittal Date.
15
AS
THE
ORDER ENTRY PROCESS CAN TAKE SEVERAL MINUTES OR LONGER, DEPENDING UPON CALL
VOLUME AND THE TYPE OF ORDER INVOLVED, PARTICIPANTS ARE URGED TO PLACE PURCHASE
ORDERS AS EARLY IN THE DAY AS POSSIBLE, AS ORDERS INITIATED NEAR THE APPLICABLE
CLOSING TIME MAY NOT BE PROCESSED IN TIME TO RECEIVE A BATCH NUMBER AND BE
RECEIVED PRIOR TO THE CLOSING TIME.
Purchases
Through the Clearing Process.
Each
Authorized Participant authorizes the Distributor to transmit through the
transfer agent to NSCC, on behalf of the Authorized Participant, such trade
instructions as are necessary to effect the Authorized Participant’s purchase
order. Pursuant to such trade instructions to NSCC, the Authorized Participant
agrees to deliver the requisite Deposit Securities and the Balancing Amount
to
the ETF, together with such additional information as may be required by the
Distributor. An order to purchase Creation Units through the Clearing Process
is
deemed received by the Distributor on the Transmittal Date if (i) such order
is
received by the Distributor prior to 4:00 p.m. Eastern Time on such Transmittal
Date (or prior to the time the market closes on days on which the market closes
prior to 4:00 p.m.); and (ii) all other procedures set forth in this Participant
Agreement are properly followed. The delivery of Creation Units so purchased
will occur not later than the third (3rd)
Business Day following the day on which the purchase order is deemed received
by
the Distributor. In the event that an Authorized Participant purchases or
redeems Creation Units of the ETF on the same Transmittal Date, the ETF reserves
the right to settle these transactions on a net basis.
Purchases
Outside the Clearing Process.
An
Authorized Participant who wishes to place an order to purchase Creation Units
outside the Clearing Process must state that it is not using the Clearing
Process and that the purchase of Creation Units will instead be effected through
a transfer of securities and cash directly through DTC and the ETF’s Custodian.
The Portfolio Deposit transfer must be ordered by the DTC participant on the
Transmittal Date in a timely fashion so as to ensure the delivery of the
requisite number of Deposit Securities through DTC to the account of the ETF
by
no later than 11:00 a.m. Eastern Time of the next Business Day immediately
following the Transmittal Date. In the event that an Authorized Participant
purchases or redeems Creation Units of the ETF on the same Transmittal Date,
the
ETF reserves the right to settle these transactions on a net basis.
All
questions as to the number of Deposit Securities to be delivered, and the
validity, form and eligibility (including time of receipt) for the deposit
of
any tendered securities, will be determined by the ETF, whose determination
shall be final and binding. The amount of cash equal to the Balancing Amount
must be transferred directly to the ETF’s Custodian through the Federal Reserve
Bank wire transfer system in a timely manner so as to be received by the ETF’s
Custodian no later than 2:00 p.m. Eastern Time on
the
next Business Day immediately following such Transmittal Date. An order to
purchase Creation Units outside the Clearing Process is deemed received by
the
Distributor on the Transmittal Date if (i) such order is received by the
Distributor prior to 3:00 p.m. Eastern Time on such Transmittal Date (or one
hour prior to the maket close on days on which the market closes prior to
4:00p.m.); and (ii) all other procedures set forth in this Participant Agreement
are properly followed. However, if the ETF’s Custodian does not receive both the
required Deposit Securities and the Balancing Amount by 11:00 a.m. and 2:00
p.m., respectively, on the next Business Day immediately following the
Transmittal Date, such order will be deemed not in proper form and canceled.
Upon written notice to the Distributor, such canceled order may be resubmitted
the following Business Day using a Portfolio Deposit as newly constituted to
reflect the next calculated NAV of the ETF. The delivery of Creation Units
so
purchased will occur not later than the third (3rd)
Business Day following the day on which the purchase order is deemed received
by
the Distributor.
16
Creation
Units may be created in advance of receipt by the ETF of all or a portion of
the
applicable Deposit Securities as described below. In these circumstances, the
initial deposit will have a value greater than the NAV of the shares on the
date
the order is placed in proper form since, in addition to available Deposit
Securities, cash must be deposited in an amount equal to the sum of (i) the
Balancing Amount; plus (ii) 115% of the market value of the undelivered Deposit
Securities (the “Additional Cash Deposit”). The order shall be deemed to be
received on the Business Day on which the order is placed provided that the
order is placed in proper form prior to 3:00 p.m. Eastern Time on such date
and
federal funds in the appropriate amount are deposited with the ETF’s Custodian
by 11:00 a.m. Eastern Time the following Business Day. If the order is not
placed in proper form by 3:00 p.m. or federal funds in the appropriate amount
are not received by 11:00 a.m. the next Business Day, then the order may be
deemed to be rejected and the Authorized Participant shall be liable to the
ETF
for losses, if any, resulting therefrom. An additional amount of cash shall
be
required to be deposited with the ETF pending delivery of the missing Deposit
Securities to the extent necessary to maintain the Additional Cash Deposit
with
the ETF in an amount at least equal to 115% of
the
daily xxxx-to-market value of the missing Deposit Securities. To the extent
that
missing Deposit Securities are not received by 11:00 a.m. Eastern
Time on
the
third (3rd)
Business Day following the day on which the purchase order is deemed received
by
the Distributor or in the event a xxxx-to-market payment is not made within
one
Business Day following notification by the Distributor that such a payment
is
required, the ETF may use the cash on deposit to purchase the missing Deposit
Securities. Authorized Participants will be liable to the ETF for the costs
incurred by the ETF in connection with any such purchases. These costs will
be
deemed to include the amount by which the actual purchase price of the Deposit
Securities exceeds the market value of such Deposit Securities on the day the
purchase order was deemed received by the Distributor plus the brokerage and
related transaction costs associated with such purchases. The ETF will return
any unused portion of the Additional Cash Deposit once all of the missing
Deposit Securities have been properly received by the Distributor or purchased
by the ETF and deposited into the ETF. In addition, a transaction fee of $1,000
will be charged in all cases, as well as an additional fee of $3,000. The
delivery of Creation Units so purchased will occur no later than the third
(3rd)
Business Day following the day on which the purchase order is deemed received
by
the Distributor.
Rejection
of Purchase Orders.
The
Trust, on behalf of the ETF, reserves the absolute right to reject a purchase
order transmitted to it by the Distributor if (i) the order is not in proper
form; (ii) the investor(s), upon obtaining the shares ordered, would own 80%
or
more of the currently outstanding shares of the ETF; (iii) the Deposit
Securities delivered are not as disseminated through the facilities of NSCC
for
that date by the Distributor, as described above; (iv) acceptance of the Deposit
Securities would have certain adverse tax consequences to the ETF; (v)
acceptance of the Portfolio Deposit would, in the opinion of counsel, be
unlawful; (vi) acceptance of the Portfolio Deposit would otherwise, in the
discretion of the Trust or the Advisor, have an adverse effect on the ETF or
the
rights of Beneficial Owners; or (vii) in the event that circumstances outside
the control of the Trust, the ETF, the Advisor, the Distributor and the transfer
agent make it impractical to process creation orders. Examples of such
circumstances include acts of God; public service or utility problems such
as
fires, floods, extreme weather conditions and power outages resulting in
telephone, telecopy and computer failures; market conditions or activities
causing trading halts; systems failures involving computer or other information
systems affecting the Trust, the ETF, the Advisor, the Distributor, DTC, NSCC,
the transfer agent or any other participant in the purchase process, and similar
extraordinary events. The ETF has the right to require information to determine
beneficial share ownership for purposes of (ii) above should it so choose or
to
rely on a certification from a broker-dealer who is a member of the NASD as
to
the cost basis of Deposit Securities. The Distributor shall notify a prospective
purchaser of a Creation Unit and/or the Authorized Participant acting on the
purchaser’s behalf, of its rejection of the purchaser’s order. The Trust, the
ETF, the transfer agent, the Custodian and the Distributor are under no duty,
however, to give notification of any defects or irregularities in the delivery
of a Portfolio Deposit, nor shall any of them incur any liability for the
failure to give any such notification.
17
Transaction
Fees on Purchases of Creation Units.
A
fixed
transaction fee of $1,000 is applicable to each purchase, regardless of the
number of Creation Units purchased. An additional transaction charge of $3,000
will be imposed for purchases effected outside the Clearing Process, which
would
include purchases of Creation Units for cash and in-kind purchases where the
investor is allowed to substitute cash in lieu of depositing a portion of the
Deposit Securities. Accordingly, the maximum transaction fee charge may be
$4,000. Purchasers of shares in Creation Units are responsible for the costs
of
transferring the securities constituting the Deposit Securities to the account
of the ETF. The transaction fees are charged to cover the estimated costs
associated with the issuance of Creation Units.
Redemption
of Creation Units Generally.
Shares
may be redeemed only in Creation Units at their NAV next determined after
receipt of a redemption request in proper form by the ETF through the
Distributor and only on a Business Day. The ETF will not redeem shares in
amounts less than Creation Unit-size aggregations. Beneficial Owners must
accumulate enough shares in the secondary market to constitute a Creation Unit
in order to have such shares redeemed by the ETF.
Redemption
Orders must be transmitted by an Authorized Participant by telephone or other
transmission method acceptable to the Distributor pursuant to procedures set
forth in the AP Handbook, (see also “Redemption Through the Clearing Process”
and “Redemption Outside the Clearing Process” below). Severe economic or market
disruption or changes, or telephone or other communications failure may impede
the ability to reach the Distributor or an Authorized Participant.
18
The
Advisor through NSCC makes
available prior to the opening of trading on the NYSE Arca Marketplace
(currently 4:00 a.m. Eastern Time) on each Business Day, the identity of the
basket of securities (the “Fund Securities”) that will be applicable (subject to
possible amendment or correction) to redemption requests received in proper
form
(as defined below) on that day. Fund Securities received on redemption may
not
be identical to Deposit Securities that are applicable to purchases of Creation
Units.
AS
THE
ORDER ENTRY PROCESS CAN TAKE SEVERAL MINUTES OR LONGER, DEPENDING UPON CALL
VOLUME AND THE TYPE OF ORDER INVOLVED, PARTICIPANTS ARE URGED TO PLACE
REDEMPTION ORDERS AS EARLY IN THE DAY AS POSSIBLE, AS ORDERS INITIATED NEAR
THE
APPLICABLE CLOSING TIME MAY NOT BE PROCESSED IN TIME TO RECEIVE A BATCH NUMBER
AND BE RECEIVED PRIOR TO THE CLOSING TIME.
Unless
cash redemptions are available or specified for the ETF, the redemption proceeds
for a Creation Unit generally consists of Fund Securities - as announced by
the
Advisor on the Business Day of the request for redemption received in proper
form - plus cash in an amount equal to the difference between the NAV of the
shares being redeemed, as next determined after a receipt of the request in
proper form, and the value of the Fund Securities (the “Cash Redemption
Amount”), less a redemption transaction fee as listed below. In the event that
the Fund Securities have a value greater than the NAV of the shares, a
compensating cash payment equal to the differential is required to be made
by or
through an Authorized Participant by the redeeming shareholder.
As
permitted by federal securities laws, the right of redemption may be suspended
or the date of payment postponed with respect to the ETF (i) for any period
during which The NYSE is closed (other than the customary weekend and holiday
closings); (ii) for any period during which trading on NYSE is suspended or
restricted; (iii) for any period during which an emergency exists as a result
of
which disposal of the shares or determination of the ETF’s NAV is not reasonably
practicable; or (iv) in such other circumstances as is permitted by the
SEC.
Redemption
Through the Clearing Process.
An
order
to redeem Creation Units using the Clearing Process is deemed received on the
Transmittal Date if (i) such order is received in proper form by the Distributor
prior to 4:00 p.m. Eastern Time on such Transmittal Date (or prior to the market
close on days on which the market closes prior to 4:00 p.m.); and (ii) all
other
procedures set forth in this Participant Agreement are properly followed, such
order will be effected based on the NAV of the ETF as next determined. An order
to redeem Creation Units using the Clearing Process made in proper form but
received by the ETF after 4:00 p.m. Eastern Time (or after the market closes
if
the market closes prior to 4:00 p.m.) will be deemed received on the next
Business Day immediately following the Transmittal Date and will be effected
at
the NAV next determined on such Business Day. The requisite Fund Securities
and
the Cash Redemption Amount will be transferred by the third (3rd)
Business Day following the date on which such request for redemption is deemed
received, which in no event shall be more than seven (7) days after such request
for redemption. In the event that an Authorized Participant purchases or redeems
Creation Units of the ETF on the same Transmittal Date, the ETF reserves the
right to settle these transactions on a net basis.
19
Redemptions
Outside the Clearing Process.
An
Authorized Participant who wishes to place an order for redemption of Creation
Units to be effected outside the Clearing Process must state that it is not
using the Clearing Process and that redemption of Creation Units will instead
be
effected through a transfer of shares directly through DTC. An order to redeem
Creation Units outside the Clearing Process is deemed received by the ETF on
the
Transmittal Date if (i) such order is received in proper form by the Distributor
prior to 3:00 p.m. Eastern Time on such Transmittal Date (or one hour prior
to
the market close if the market closes before 4:00 p.m.); (ii) such order is
accompanied or followed by the requisite number of shares of the ETF and the
Cash Redemption Amount specified in such order, which delivery must be made
through DTC to the ETF’s Custodian no later than 11:00 a.m., for the shares, and
2:00 p.m., for the Cash Redemption Amount Eastern Time on
the
next Business Day following such Transmittal Date (the “DTC Cut-Off Time”); and
(iii) all other procedures set forth in this Participant Agreement are properly
followed. The requisite Fund Securities and the Cash Redemption Amount will
be
transferred by the third (3rd)
Business Day following the date on which such request for redemption is deemed
received, which in no event shall be more than seven (7) days after such request
for redemption. In the event that an Authorized Participant purchases or redeems
Creation Units of the ETF on the same Transmittal Date, the ETF reserves the
right to settle these transactions on a net basis.
In
the
event the Authorized Participant has submitted a redemption request in proper
form but is unable to transfer all or part of the Creation Units to be redeemed
by the Distributor, on behalf of the ETF, at or prior to the time required
above
on the date such redemption request is submitted, the Distributor will
nonetheless accept the redemption request in reliance on the undertaking by
the
Authorized Participant to deliver the missing ETF shares as soon as possible,
which undertaking shall be secured by the Authorized Participant’s delivery and
maintenance of collateral consisting of cash having a value (xxxx-to-market
daily) at least equal to 115% of the value of the missing ETF shares. The
current procedures for collateralization of missing shares require, among other
things, that any cash collateral shall be in the form of U.S. dollars in
immediately available funds and shall be held by the ETF and xxxx-to-market
daily, and that the fees of the ETF and any sub-custodians in respect of the
delivery, maintenance and redelivery of the cash collateral shall be payable
by
the Authorized Participant. The Authorized Participant agrees that the ETF
may
purchase the missing ETF shares or acquire the Deposit Securities and the
Balancing Amount underlying such share at any time and will subject the
Authorized Participant to liability for any shortfall between the cost to the
ETF of purchasing such shares, Deposit Securities or Balancing Amount and the
value of the collateral.
The
calculation of the value of the Fund Securities and the Cash Redemption Amount
to be delivered upon redemption will be made by the Custodian according to
the
procedures set forth in the ETF's prospectus computed on the Business Day on
which a redemption order is deemed received by the Distributor. Therefore,
if a
conforming redemption order in proper form is submitted to the Distributor
by a
DTC participant prior to 4:00 p.m. Eastern Time, or 3:00 p.m. Eastern Time
in
the case of nonconforming orders, on the Transmittal Date, and the requisite
number of shares of the ETF are delivered to the ETF’s Custodian prior to the
DTC Cut-Off Time, then the value of the Fund Securities and the Cash Redemption
Amount to be delivered will be determined by the Custodian on such Transmittal
Date. If, however, a conforming redemption order is submitted to the Distributor
by an Authorized Participant prior to 4:00 p.m. Eastern Time on the Transmittal
Date (or prior to the time the market closes if the market closes prior to
4:00
p.m.) but either (i) the requisite number of shares of the ETF and the Cash
Redemption Amount are not delivered by the DTC Cut-Off Time as described above
on the next Business Day following the Transmittal Date; or (ii) the redemption
order is not submitted in proper form, then the redemption order will not be
deemed received as of the Transmittal Date. In such case, the value of the
Fund
Securities and the Cash Redemption Amount to be delivered will be computed
on
the Business Day that such order is deemed received by the Distributor (i.e.,
the Business Day on which the shares of the ETF are delivered through DTC to
the
Custodian by the DTC Cut-Off Time on such Business Day pursuant to a properly
submitted redemption order).
20
If
it is
not possible to effect deliveries of the Fund Securities, the ETF may in its
discretion exercise its option to redeem such shares in cash, and the redeeming
Beneficial Owner will be required to receive its redemption proceeds in cash.
In
such a case, the investor will receive a cash payment equal to the NAV of its
shares based on the NAV of shares of the ETF next determined after the
redemption request is received in proper form (minus a redemption transaction
fee and additional charge for requested cash redemptions specified above, to
offset the ETF’s brokerage and other transaction costs associated with the
disposition of Fund Securities).
Redemption
of shares for Fund Securities will be subject to compliance with applicable
federal and state securities laws and the ETF (whether or not it otherwise
permits cash redemptions) reserves the right to redeem Creation Units for cash
to the extent that the ETF could not lawfully deliver specific Fund Securities
upon redemptions or could not do so without first registering the Fund
Securities under such laws. An Authorized Participant or a Beneficial Owner
for
which it is acting subject to a legal restriction with respect to a particular
stock included in the Fund Securities is applicable to the redemption of a
Creation Unit may be paid an equivalent amount of cash.
Transaction
Fees on Redemption of Creation Units.
A
fixed
transaction fee of $1,000 is applicable to each redemption, regardless of the
number of Creation Units redeemed. An additional charge of $3,000 will be
imposed for redemptions effected outside the Clearing Process, which would
include cash redemptions. Accordingly, the maximum transaction fee charge may
be
$4,000. Investors will also bear the costs of transferring the Fund Securities
from the ETF to their account or on their order. Investors who use the services
of a broker or other such intermediary may be charged a fee for such services.
The transaction fees are charged to cover the estimated costs associated with
the redemption of Creation Units.
21
ANNEX
III
FORM
OF CERTIFIED AUTHORIZED PERSONS OF PARTICIPANT
The
following are the names, titles and signatures of all persons (each an
"Authorized Person") authorized to give instructions relating to any activity
contemplated by this Authorized Participant Agreement, or any other notices,
request or instruction on behalf of Participant pursuant to this Authorized
Participant Agreement.
For
each Authorized Person:
Name:
Title:
Signature:
E-Mail
Address:
Telephone:
Facsimile:
Name:
Title:
Signature:
E-Mail
Address:
Telephone:
Facsimile:
22
The
undersigned [name], [title], [company] does hereby certify that the persons
listed above have been duly elected to the offices set forth beneath their
names, that they presently hold such offices, that they have been duly
authorized to act as Authorized Persons pursuant to the Authorized Participant
Agreement by and among X.X. Xxxxxxx and Company and [Participant] dated [date]
and that their signatures set forth above are their own true and genuine
signatures.
By:
___________________________
Date:
Name:
Title:
[Participant's] Secretary or Other Duly Authorized Officer
23
