PARTICIPANT AGREEMENT
FIRST TRUST EXCHANGE-TRADED FUND
This Participant Agreement (this "Agreement") is entered into between
First Trust Portfolios, L.P. (the "Distributor"), ____________________ (the
"Participant") and The Bank of New York (the "Transfer Agent"). The Transfer
Agent serves as the Transfer Agent of the First Trust Exchange-Traded Fund (the
"Trust") and is an Index Receipt Agent as that term is defined in the rules of
the National Securities Clearing Corporation ("NSCC"). The Distributor, the
Transfer Agent and the Participant acknowledge and agree that the Trust shall be
a third-party beneficiary of the Agreement and shall receive the benefits
contemplated by the Agreement to the extent specified herein. The Distributor
has been retained to provide certain services with respect to acting as
principal underwriter of the Trust in connection with the sale and distribution
of shares of beneficial interest, par value $0.01 per share ("Shares"), of the
Series of the Trust (each a "Fund") on Schedule I attached hereto. The Trust's
prospectus and statement of additional information (collectively, the
"Prospectus") are incorporated herein and included as part of the Trust's
Registration Statement as amended on Form N-1A. Shares may be created or
redeemed only in aggregations of 50,000, referred to therein and herein as a
"Creation Unit." Capitalized terms not otherwise defined herein are used herein
as defined in the Prospectus.
This Agreement is intended to set forth certain premises and the
procedures by which the Participant may create and/or redeem Creation Units (i)
through the Continuous Net Settlement ("CNS") clearing processes of NSCC as such
processes have been enhanced to effect creations and redemptions of Creation
Units, such processes being referred to herein as the "Trust's Clearing
Process," or (ii) outside the Trust's Clearing Process (i.e., through the
facilities of the Depository Trust Company ("DTC")). The parties hereto in
consideration of the premises and of the agreements contained herein agree as
follows:
SECTION 1. STATUS OF PARTICIPANT.
The Participant hereby represents, covenants and warrants that (i) with
respect to orders for the creation or redemption of Creation Units by means of
the Trust's Clearing Process, it is a member of NSCC and a participant in the
CNS System of NSCC (as defined in the Prospectus, a "Participating Party"); and
(ii) with respect to orders for the creation or redemption of Creation Units
outside the Trust's Clearing Process, it is a DTC Participant (as defined in the
Prospectus, a "DTC Participant"). The Participant may place orders for the
creation or redemption of Creation Units either through the Trust's Clearing
Process or outside the Trust's Clearing Process, subject to the procedures for
creation and redemption referred to in Section 2 of this Agreement ("Execution
of Orders") and the procedures described in Attachment A hereto. Any change in
the foregoing status of the Participant shall terminate this Agreement, and the
Participant shall give immediate notice to the Distributor and the Transfer
Agent of such change.
The Participant further represents that it is a broker-dealer
registered with the Securities and Exchange Commission and a member of the
National Association of Securities Dealers, Inc. (the "NASD") or is exempt from
or otherwise not required to be licensed as a broker-dealer or a member of the
NASD. The Participant is qualified as a broker or dealer, or otherwise, under
all applicable state laws where it is required to do so in order that Shares may
be sold in such states where the Participant intends to sell such Shares. The
Participant agrees to conform to the rules of the NASD (if it is a member of
NASD) and the securities laws of any jurisdiction in which it sells, directly or
indirectly, Shares, to the extent such laws, rules and regulations relate to the
Participant's transactions in, and activities with respect to, the Shares.
The Participant understands and acknowledges that the proposed method
by which Creation Units of Shares will be purchased and traded may raise certain
issues under applicable securities laws. For example, because new Creation Units
of Shares may be issued and sold by the Trust on an ongoing basis, the offer and
sale of Shares to investors may involve a "distribution," as such term is used
in the Securities Act of 1933 (the "Securities Act"). The Participant
understands and acknowledges that its offer and sale of Shares to investors,
depending on the circumstances, may result in its being deemed a participant in
a distribution in a manner which could render it a statutory underwriter and
subject it to the prospectus delivery and liability provisions of the Securities
Act. The Participant also understands and acknowledges that dealers who are not
"underwriters" but are effecting transactions in Shares, whether or not
participating in the distribution of Shares, may be required to deliver a
prospectus.
SECTION 2. EXECUTION OF ORDERS.
All orders for the creation or redemption of Creation Units shall be
handled in accordance with the terms of the Trust's Prospectus, and the
procedures described in Attachment A to this Agreement. In the event the
procedures include the use of recorded telephone lines, the Participant hereby
consents to such use. The Trust reserves the right to issue additional or other
procedures relating to the manner of creating or redeeming Creation Units, and
the Participant, the Distributor and the Transfer Agent agree to comply with
such procedures as may be issued from time to time, upon reasonable notice
thereof.
SECTION 3. NSCC.
Solely with respect to orders for the creation or redemption of
Creation Units through the Trust's Clearing Process, the Participant as a
Participating Party hereby authorizes the Distributor or the Transfer Agent, as
the case may be, to transmit to NSCC on behalf of the Participant such
instructions, including share and cash amounts as are necessary with respect to
the creation and redemption of Creation Units consistent with the instructions
issued by the Participant to the Trust telephone representative identified in
Attachment A hereto (the "Trust Representative"). The Participant agrees to be
bound by the terms of such instructions issued by the Distributor or the
Transfer Agent, as the case may be, and reported to NSCC as though such
instructions were issued by the Participant directly to NSCC.
With respect to any Redemption Order, the Participant also acknowledges
and agrees to use its best efforts to return to the Trust any dividend,
distribution or other corporate action paid to it or to the party for which it
is acting in respect of any Deposit Securities that are transferred to the
Participant or any party for which it is acting that, based on the valuation of
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such Deposit Securities at the time of transfer, should have been paid to the
Trust. With respect to any Redemption Order, the Participant also acknowledges
and agrees that the Trust is entitled to reduce the amount of money or other
proceeds due to the Participant or any party for which it is acting that, based
on the valuation of such Deposit Securities at the time of transfer, should be
paid to the Trust. With respect to any Purchase Order, the Trust 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 Trust in respect of
any Deposit Securities that are transferred to the Trust that, based on the
valuation of such Deposit Securities at the time of transfer, should have been
paid to the Participant or any party for which it is acting.
SECTION 4. DEPOSIT SECURITIES.
The Participant understands that the number and names of the designated
portfolio of Deposit Securities and relevant cash amounts to be included in the
current Fund Deposit for each Fund will be made available each day that the New
York Stock Exchange (the "NYSE") is open for trading through the facilities of
the NSCC. The Participant will not be responsible for errors in the information
relating to the Deposit Securities to be included in the current Fund Deposit to
be transmitted through the facilities of the NSCC in connection with Redemption
Orders and Purchase Orders that are caused by the Trust, the Distributor or the
Transfer Agent.
SECTION 5. ROLE OF PARTICIPANT.
The Participant shall have no authority in any transaction to act as
agent of the Distributor, the Transfer Agent or the Trust. (a) The Participant
agrees (i) subject to any privacy obligations or other obligations arising under
the federal or state securities laws it may have to it customers, to assist the
Distributor in ascertaining certain information regarding sales of Shares made
by or through Participant upon the request of the Trust or the Distributor
necessary for the Trust to comply with its obligation to distribute information
to its shareholders as may be required from time to time under applicable state
or federal securities laws, or (ii) in lieu thereof, and at the option of the
Participant, the Participant may undertake to deliver Prospectuses, as may be
amended or supplemented from time to time, proxy material, annual and other
reports of the Trust or other similar information that the Trust is obligated to
deliver to its shareholders to the Participant's customers that custody Fund
Shares with the Participant, after receipt from the Trust or the Distributor of
sufficient quantities to allow mailing thereof to such customers. The expenses
associated with such transmissions shall be borne by the Distributor or the
Trust in accordance with usual custom and practice in respect of such
communications. None of the Distributor, the Trust or any of their respective
affiliates shall use the names and addresses and other information concerning
Participant's customers for any purpose except in connection with the
performance of their duties and responsibilities hereunder and except for
servicing and informational mailings described in this clause (a) of Section 5,
or as may otherwise be required by applicable law.
(b) The Participant certifies that it has policies, procedures and internal
controls in place that are reasonably designed to comply with all applicable
anti-money laundering laws and regulations, including applicable provisions of
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the USA Patriot Act of 2001 and the regulations administered by the U.S.
Department of the Treasury's Office of Foreign Assets Control.
SECTION 6. PARTICIPANT REPRESENTATIONS.
(a) The Participant represents, warrants and agrees that it will not make any
representations concerning the Trust, the Creation Units or the Shares other
than those consistent with the Trust's then current Prospectus or any
promotional or sales literature furnished to the Participant by the Distributor
or the Trust, or any such materials permitted by clause (b) of this Section 5.
(b) The Participant agrees not to furnish or cause to be furnished by
Participant or its employees to any person or display or publish any information
or materials relating to the Trust (including, without limitation, promotional
materials and sales literature, advertisements, press releases, announcements,
statements, posters, signs or other similar materials, but not including any
materials prepared and used for Participant's internal use only, any brokerage
communications between employees of Participant and customers or any
communications prepared and directed to registered broker-dealers) (Marketing
Materials), except (i) such Marketing Materials as may be furnished to the
Participant by the Distributor or the Trust and (ii) such other Marketing
Materials as are consistent with the Trust's then current Prospectus or
otherwise approved by the Distributor or the Trust; provided that such Marketing
Materials clearly indicate that such Marketing Materials are prepared and
distributed by Participant and, upon request, a copy is forwarded to the
Distributor as soon as practicable.
(c) Notwithstanding anything to the contrary in this Agreement, Participant and
its affiliates may prepare and circulate in the regular course of their
businesses (i) research reports that include information, opinions or
recommendations relating to Shares; and (ii) without reference to the Trust or
its Prospectus, data and information relating to the various indices to which
the Funds are benchmarked.
SECTION 7. TITLE TO SECURITIES: RESTRICTED SHARES.
The Participant represents and warrants that it will not obtain a
Submission Number (as defined in Attachment A) from the Transfer Agent for the
purpose of redeeming a Creation Unit unless it first ascertains that (a) it or
its customer, as the case may be, owns outright or has full legal authority and
legal beneficial right to tender for redemption the requisite number of Shares
of any Fund to be redeemed, and the entire proceeds of the Redemption and (b)
such Shares are not subject to or the subject of a loan, pledge, repurchase
agreement, securities lending agreement or other arrangement which would
preclude the delivery of such Shares to the Transfer Agent in accordance with
the Prospectus or as otherwise required by the Trust.
SECTION 8. FEES.
In connection with the creation or redemption of Creation Units, the
Transfer Agent shall charge, and the Participant agrees to pay to the Transfer
Agent, the Transaction Fee prescribed in the Trust's Prospectus applicable to
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creations or redemptions through the Trust's Clearing Process, or the
Transaction Fee and such additional amounts as may be prescribed pursuant to the
Trust's Prospectus applicable to (i) creations or redemptions outside the
Trust's Clearing Process and (ii) creations within the Trust's Clearing Process
where the cash equivalent value of one or more Deposit Securities is being
deposited in lieu of the inclusion of such Deposit Securities in the securities
portion of the Fund Deposit because the Participant is restricted by regulation
or otherwise from investing or engaging in a transaction in such security. The
Transaction Fee may be waived or otherwise adjusted from time to time subject to
the provisions relating thereto and any limitations as prescribed in the
Prospectus.
SECTION 9. AUTHORIZED PERSONS.
Concurrently with the execution of this Agreement and from time to time
thereafter, the Participant shall deliver to the Distributor and the Transfer
Agent, duly certified as appropriate by its secretary or other duly authorized
person, a certificate setting forth the names and signatures of all persons
authorized to give instructions relating to 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 Transfer Agent as conclusive evidence of the facts set forth
therein and shall be considered to be in full force and effect until delivery to
the Distributor and the Transfer Agent of a superseding certificate bearing a
subsequent date. The Transfer Agent shall issue to each Authorized Person a
unique personal identification number ("PIN Number") by which such Authorized
Person and the Participant shall be identified and instructions issued by the
Participant hereunder shall be authenticated. Upon the termination or revocation
of authority of such Authorized Person by the Participant, the Participant shall
give prompt written notice of such fact to the Distributor and the Transfer
Agent and such notice shall be effective upon receipt by both the Distributor
and the Transfer Agent.
SECTION 10. REDEMPTION.
The Participant represents and warrants that it will not obtain a
Submission Number (as defined in Attachment A) from the Transfer Agent for the
purpose of redeeming a Creation Unit unless it first ascertains that (a) it or
its customer, as the case may be, owns outright or has full legal authority and
legal beneficial right to tender for redemption the requisite number of Shares
of any Fund to be redeemed, and the entire proceeds of the Redemption and (b)
such Shares are not subject to or the subject of a loan, pledge, repurchase
agreement, securities lending agreement or other arrangement which would
preclude the delivery of such Shares to the Transfer Agent in accordance with
the Prospectus or as otherwise required by the Trust.
SECTION 11. TRUST'S TAX BASIS.
The Participant represents and warrants to the Distributor and the
Trust that with respect to any Creation Units it shall only deliver or transfer,
or cause to be delivered or transferred, Deposit Shares (or contracts therefor)
that will cause the Trust's tax basis for such Deposit Securities to be, for
purposes of Section 351 of the Internal Revenue Code of 1986, as amended, equal
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to the closing market price of such Deposit Securities on the date the Creation
Order with respect thereto is Deemed Received. Such representation and warranty
shall be deemed repeated with respect to each Creation Order.
SECTION 12. INDEMNIFICATION.
(a) The Participant hereby agrees to indemnify and hold harmless the Distributor
in its capacity as principal underwriter, the Trust, the Transfer Agent, their
respective affiliates, directors, officers, employees and agents, and each
person, if any, who controls such persons within the meaning of Section 15 of
the Securities Act (each an "Indemnified Party") from and against any loss,
liability, cost and expense (including reasonable attorneys' fees) incurred by
such Indemnified Party as a result of (i) any breach by the Participant of any
provision of this Agreement that relates to the Participant; (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 in relation to
the sales, trading or marketing of Shares and the creation or redemption of or
investment in the Trust, except that the Participant shall not be required to
indemnify an Indemnified Party to the extent that such failure was caused by
Participant's adherence to instructions given or representations made by the
Distributor, the Transfer Agent or any Indemnified Party, as applicable; or (iv)
actions of such Indemnified Party in reliance upon any instructions issued or
representations made in accordance with Attachment A (as it may be amended from
time to time) and reasonably believed by the Distributor or the Transfer Agent,
as applicable, to be genuine and to have been given by the Participant except to
the extent that the Participant had previously revoked a PIN Number used in
giving such instructions or representations (where applicable) and such
revocation was given by the Participant and received by the Distributor and the
Transfer Agent in accordance with the terms of Section 9 hereto. 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.
(b) The Distributor hereby agrees to indemnify and hold harmless the
Participant, its respective subsidiaries, affiliates, directors, officers,
employees and agents, and each person, if any, who controls such persons within
the meaning of Section 15 of the Securities Act (each an "Indemnified Party")
from and against any loss, liability, cost and expense (including reasonable
attorneys' fees) incurred by such Indemnified Party as a result of (i) any
breach by the Distributor of any provision of this Agreement that relates to the
Distributor; (ii) any failure on the part of the Distributor to perform any of
its obligations set forth in this Agreement; (iii) any failure by the
Distributor to comply with applicable laws, including rules and regulations of
self-regulatory organizations in relation to its role as Distributor of the
Funds; or (iv) actions of such Indemnified Party in reliance upon any
instructions issued or representations made in accordance with Attachment A (as
it may be amended from time to time) reasonably believed by the Participant to
be genuine and to have been given by the Distributor or the Transfer Agent.
(c) Each of the Distributor and Participant agrees to jointly and severally
indemnify Transfer Agent and hold Transfer Agent harmless from and against any
and all losses sustained or incurred by or asserted against Transfer Agent by
reason of or as a result of any action or inaction, or arising out of Transfer
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Agent's performance hereunder, including reasonable fees and expenses of counsel
incurred by Transfer Agent in a successful defense of claims by the Distributor
and/or Participant; provided however, Distributor and/or Participant shall not
indemnify Transfer Agent for those losses arising out of Transfer Agent's own
negligence or willful misconduct. This indemnity shall be a continuing
obligation of the Distributor and/or Participant, and their respective
successors and assigns, notwithstanding the termination of this Agreement.
(d) Except to the extent that the Transfer Agent is to be indemnified as
provided in this Section 11, no party to this Agreement shall be liable to the
other party or to any other person for any damages arising out of mistakes or
errors in data provided to such Indemnified Party by a third party, or out of
interruptions or delays of electronic means of communications with the
Indemnified Parties.
SECTION 13. STANDARD OF CARE.
Transfer Agent 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, or its breach of any of its
obligations hereunder. In no event shall the Transfer Agent be liable for
special, indirect or consequential damages regardless of the form of action and
even if the same were foreseeable.
SECTION 14. FORCE MAJEURE.
Transfer Agent shall establish and maintain a disaster recovery plan
and back-up system at all times satisfying the requirements of all laws, rules
and regulations (the "Disaster Recovery Plan and Back-Up System") applicable to
the Transfer Agent for providing services as such. Transfer Agent 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 Transfer
Agent 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
Transfer Agent had established and was maintaining the Disaster Recovery Plan
and Back-Up System. Upon the occurrence of any such delay or failure, Transfer
Agent shall use commercially reasonable best efforts to resume performance as
soon as practicable under the circumstances.
SECTION 15. ACKNOWLEDGMENT.
The Participant acknowledges receipt of the Trust's Prospectus and
represents it has reviewed such document and understands the terms thereof.
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SECTION 16. NOTICES.
Except as otherwise specifically provided in this Agreement, all
notices required or permitted to be given pursuant to this Agreement shall be
given in writing and delivered by personal delivery or by postage prepaid
registered or certified United States first class mail, return receipt
requested, or by telex, telegram or facsimile or similar means of same day
delivery (with a confirming copy by mail as provided herein). Unless otherwise
notified in writing, all notices to the Transfer Agent shall be given or sent as
follows: The Bank of New York, 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000,
Attn: ETF Services Group. All notices to the Participant and the Distributor
shall be directed to the address or telephone, facsimile or telex numbers
indicated below the signature line of such party.
SECTION 17. TERMINATION.
This Agreement shall become effective in this form as of the date
accepted by the Transfer Agent and may be terminated at any time by any party
upon thirty (30) days prior notice to the other parties (i) unless earlier
terminated by the Transfer Agent in the event of a breach of this Agreement or
the procedures described herein by the Participant or (ii) in the event that the
Trust is terminated pursuant to the Declaration of Trust of the Trust, dated as
of August 8, 2003. This Agreement supersedes any prior agreement between the
parties.
SECTION 18. PROSPECTUS.
(a) The Distributor will provide to the Participant copies of the then current
Prospectus and any printed supplemental information in reasonable quantities
upon request. The Distributor represents, warrants and agrees that it will
notify the Participant when a revised, supplemented or amended Prospectus for
any Shares is available and deliver or otherwise make available to the
Participant copies of such revised, supplemented or amended Prospectus at such
time and in such numbers as to enable the Participant to comply with any
obligation it may have to deliver such Prospectus to customers. As a general
matter, the Distributor will make such revised, supplemented or amended
Prospectus available to the Participant no later than its effective date. The
Distributor shall be deemed to have complied with this Section 17 when the
Participant has receive such revised, supplemented or amended Prospectus by
email at Xxxxxxxxxx-xx@xx.xxxxx.xx.xxx, in printable form, with such number of
hard copies as may be agreed from time to time by the parties promptly
thereafter.
(b) Distributor represents and warrants that (i) the registration statement on
Form N-1A (No. 333-125751) and the Prospectus contained therein conforms in all
material respects to the requirements of the Securities Act, and the rules and
regulations of the Securities and Exchange Commission thereunder and do not and
will not, as of the applicable effective date as to the registration statement
and any amendment thereto and as of the applicable filing date as to the
Prospectus and any amendment or supplement thereto, contain an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading; (ii) the
sale and distribution of the Shares as contemplated herein will not conflict
with or result in a breach or violation of any statute or any order, rule or
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regulation of any court or governmental agency or body having jurisdiction over
the Trust, any Fund or the Distributor; and (iii) no consent, approval,
authorization, order, registration or qualification of or with any such court or
governmental agency or body is required for the issue and sale of the Shares,
except the registration under the Securities Act of the Shares.
SECTION 19. COUNTERPARTS.
This Agreement may be simultaneously executed in several counterparts,
each of which shall be an original and all shall constitute but one and the same
instrument.
SECTION 20. NO WAIVER.
Each and every right granted to either party hereunder or under any
other document delivered hereunder or in connection herewith, or allowed it by
law or equity, shall be cumulative and may be exercised from time to time. No
failure on the part of either party to exercise, and no delay in exercising, any
right will operate as a waiver thereof, nor will any single or partial exercise
by either party of any right preclude any other or future exercise thereof or
the exercise of any other right.
SECTION 21. ENFORCEABILITY; AMENDMENT.
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. This Agreement may not be amended or modified in any manner except by a
written agreement executed by both parties, except that any amendment to the
Schedule I hereto need be signed only by the Trust and any amendment to
Attachment A hereto need be signed only by the Transfer Agent. This Agreement
shall extend to and shall be binding upon the parties hereto, and their
respective successors and assigns; provided, however, that this Agreement shall
not be assignable by any party without the written consent of the other.
SECTION 22. GOVERNING LAW; CONSENT TO JURISDICTION.
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. The parties 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. Each party 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. Each party hereby irrevocably waives any and all rights to trial by jury
in any legal proceeding arising out of or relating to this Agreement.
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SECTION 23. STATUS OF TRUST
The Distributor hereby represents that each Series of the Trust is a
registered open ended investment company operating in accordance with the
exemption granted under 812-13000 and I.C. Release No. 27068 dated September 20,
2005 and I.C. Release No. 27051 dated August 26, 2005.
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FIRST TRUST PORTFOLIOS, L.P.
By
Name:_________________________________________
Title:________________________________________
Address: 0000 Xxxxxxxxxxx Xxxx
Xxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
[NAME OF PARTICIPANT]
By
Name:_________________________________________
Title:________________________________________
Address: ______________________________________
______________________________________
Telephone:_______________________________________
Facsimile:_______________________________________
THE BANK OF NEW YORK, as Transfer Agent
By
Name:_________________________________________
Title:________________________________________
Address: 000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Dated:____________________________
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SCHEDULE I
First Trust Dow Xxxxx Select MicroCap Index(SM) Fund
First Trust Value Line(R) Arithmetic Index Fund
First Trust Morningstar(R) Dividend Leaders(SM) Index Fund
First Trust NASDAQ-100 Equal Weighted Index(SM) Fund
First Trust NASDAQ-100-Technology Sector Index(SM) Fund
First Trust Ibbotson Core U.S. Equity Allocation Index Fund
First Trust IPOX-100 Index Fund
First Trust AMEX(R) Biotechnology Index Fund
First Trust DB Strategic Value Index Fund
First Trust Dow Xxxxx Internet Index(SM) Fund
First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund
ATTACHMENT A
Subject to the terms and conditions of the Participant Agreement, this
document supplements the Trust's Prospectus, and is an attachment to the
Participant Agreement with respect to the procedures to be used by (i) the
Transfer Agent in processing an order for the creation of Shares, and (ii) the
Transfer Agent in processing a request for the redemption of Shares, and (iii)
the Participants and the Transfer Agent in delivering or arranging for the
delivery of requisite cash payments, Fund Deposit or Shares, as the case may be,
in connection with the submission of orders for creation or requests for
redemption.
A Participant is first required to have signed the Participant
Agreement. Upon acceptance of the Trust Participant Agreement by the
Distributor, the Transfer Agent will assign a personal identification number to
each Authorized Person authorized to act for the Participant. This will allow a
Participant through its Authorized Person(s) to place an order with respect to
Shares.
SECTION I. TO PLACE AN ORDER FOR CREATION OR REDEMPTION OF SHARES
1. Call to Receive a Submission Number. An Authorized Person for the
Participant will call the Trust Telephone Representative at (000) 000-0000 not
later than the closing time of the regular trading session on The New York Stock
Exchange (the "NYSE Closing Time") (ordinarily 4:00 p.m. New York time) to
receive a Submission Number. In the case of custom orders, the order must be
received by the Transfer Agent no later than 3:00 p.m. Eastern time on the trade
date. Upon verifying the authenticity of the caller (as determined by the use of
the appropriate PIN Number) and the terms of the order for creation or request
for redemption, the Trust Telephone Representative will issue a unique
Submission Number. All orders with respect to the creation or redemption of
Shares are required to be in writing and accompanied by the designated
Submission Number. Incoming telephone calls are queued and will be handled in
the sequence received. Calls placed before the NYSE Closing Time will be
processed even if the call is taken after this cut-off time. ACCORDINGLY, DO NOT
HANG UP AND REDIAL. INCOMING CALLS THAT ARE ATTEMPTED LATER THAN THE NYSE
CLOSING TIME WILL NOT BE ACCEPTED.
2. Assemble the Submission. The Authorized Person submitting an order
to create or a request to redeem shall assemble (a) written instructions
regarding such creation order or redemption request and (b) the designated
Submission Number in one document and transmit such document by facsimile or
telex to the Trust Telephone Representative and the Distributor, as applicable,
according to the procedures set forth below in subsection 3. The document so
transmitted is hereinafter referred to as the "Submission," and the Business Day
on which a Submission is made is hereinafter referred to as the "Transmittal
Date." NOTE THAT THE TELEPHONE CALL IN WHICH THE SUBMISSION NUMBER IS ISSUED
INITIATES THE ORDER PROCESS BUT DOES NOT ALONE CONSTITUTE THE ORDER. AN ORDER OR
REQUEST IS ONLY COMPLETED AND PROCESSED UPON RECEIPT OF THE SUBMISSION.
3. Transmit the Submission. A Submission Number is only valid for a
limited time. The Submission for either creations or redemptions of Shares must
be sent by facsimile or telex to the Trust Telephone Representative, as
applicable, within fifteen (15) minutes of the issuance of the Submission
Number. In the event that the Submission is not received within such time
Attachment 1 -1-
period, the Trust Telephone Representative will attempt to contact the
Participant to request immediate transmission of the Submission.
(a) In the case of a Submission for creation, unless the
Submission is received by the Trust Telephone Representative upon the
earlier of within (i) fifteen (15) minutes of contact with the
Participant or (ii) forty-five (45) minutes after the NYSE Closing Time,
the Submission will be deemed invalid.
(b) In the case of a Submission for redemption, unless such
Submission is received by the Trust Telephone Representative within (i)
fifteen (15) minutes of contact with the Participant or (ii) forty-five
(45) minutes after the NYSE Closing Time, whichever is earlier, such
order for redemption contained therein shall be deemed invalid.
4. Await Receipt of Confirmation.
(a) Trust's Clearing Process-Creation Orders. The Transfer
Agent shall issue to both the Participating Party a confirmation of
acceptance of an order to create Shares in Creation Unit size
aggregations through the Trust's Clearing Process within fifteen (15)
minutes of its receipt of a Submission received in good form. In the
event the Participating Party does not receive a timely confirmation
from the Transfer Agent, it should contact the Distributor and the Trust
Telephone Representative at the business numbers indicated.
(b) Trust's Clearing Process-Requests for Redemptions. The
Transfer Agent shall issue to the Participating Party a confirmation of
acceptance of a request to redeem Shares in Creation Unit size
aggregations through the Trust's Clearing Process within fifteen (15)
minutes of its receipt of a Submission received in good form. In the
event the Participating Party does not receive a timely confirmation
from the Transfer Agent, it should contact the Transfer Agent directly
at the business number indicated.
(c) Outside the Trust's Clearing Process--Creation Orders.
The Transfer Agent shall issue to the DTC Participant an acknowledgment
of receipt of an order to create Shares in Creation Unit size
aggregations outside the Trust's Clearing Process within fifteen (15)
minutes of its receipt of a Submission received in good form. In the
event the DTC Participant does not receive a timely acknowledgment from
the Transfer Agent, it should contact the Transfer Agent at the business
numbers indicated.
(d) Outside the Trust's Clearing Process -- Requests for
Redemption. The Transfer Agent shall issue to the DTC Participant an
acknowledgment of receipt of an order to redeem Shares in Creation Unit
size aggregations outside the Trust's Clearing Process within fifteen
(15) minutes of its receipt of a Submission received in good form. In
the event the DTC Participant does not receive a timely acknowledgment
from the Transfer Agent, it should contact the Transfer Agent directly
at the business number indicated.
Attachment 1 -2-
SECTION II. PARTICIPANTS' RESPONSIBILITY FOR DELIVERING OR EFFECTING
THE DELIVERY OF REQUISITE FUND DEPOSIT OR SHARES AND
CASH PAYMENTS IN CONNECTION WITH ORDERS FOR CREATION OR
REQUESTS FOR REDEMPTION
1. Trust's Clearing Process -- Creation Orders. The Participating Party
notified of confirmation of an order to create Shares through the Trust's
Clearing Process shall be required to transfer or arrange for the transfer of
(a) the requisite Deposit Securities (or contracts to purchase such Deposit
Securities expected to be delivered through NSCC by the "regular way" settlement
date) and (b) the Cash Component, if any, to the Transfer Agent by means of the
Trust's Clearing Process so as to be received no later than on the "regular way"
settlement date following the Business Day on which such order is Deemed
Received by the Transfer Agent as set forth below in Section IV.
2. Trust's Clearing Process -- Redemption Requests. The Participating
Party notified of confirmation of a request to redeem Shares through the Trust's
Clearing Process shall be required to transfer or arrange for the transfer of
the requisite Shares and the Cash Redemption Amount, if any, to the Transfer
Agent by means of the Trust's Clearing Process so as to be received no later
than on the "regular way" settlement date following the Business Day on which
such order is Deemed Received by the Transfer Agent as set forth below in
Section IV.
3. Outside the Trust's Clearing Process -- Creation Orders. The DTC
Participant notified of acknowledgment of an order to create Shares outside the
Trust's Clearing Process shall be required to effect a transfer to the Transfer
Agent of (a) the requisite Deposit Securities through DTC so as to be received
by the Transfer Agent no later than 11:00 a.m. on the next Business Day
immediately following the Business Day on which such order is Deemed Received by
the Distributor as set forth below in Section IV, in such a way as to replicate
the Fund Deposit established on the Transmittal Date by the Transfer Agent and
(b) the Cash Component, if there is a positive Cash Component, through the
Federal Reserve Bank wire system so as to be received by the Transfer Agent by
2:00 p.m. on the next Business Day immediately following the day such order is
Deemed Received. If the Transfer Agent does not receive the Deposit Securities
by 11:00 a.m. and the Cash Component, if any, by 2:00 p.m. on the Business Day
immediately following the day such order is Deemed Received, the creation order
contained in such Submission shall be canceled. Upon written notice to the
Transfer Agent, the DTC Participant may resubmit such canceled order on the
following Business Day using a Fund Deposit as newly constituted.
4. Purchase of Creation Unit Aggregations Prior to Receipt of Deposit
Securities. Creation Unit Aggregations may be created in advance of receipt by
the Trust 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 Fund 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 Cash Component, plus (ii) one hundred fifteen
percent (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 4:00 p.m., Eastern time, on such date, and federal funds in
the appropriate amount are deposited with the Transfer Agent by 11:00 a.m.,
Attachment 1 -3-
Eastern time, the following Business Day. If the order is not placed in proper
form by 4:00 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 canceled
and the Authorized Participant shall be liable to the Fund for losses, if any,
resulting therefrom. An additional amount of cash shall be required to be
deposited with the Trust, pending delivery of the missing Deposit Securities to
the extent necessary to maintain the Additional Cash Deposit with the Trust in
an amount at least equal to one hundred fifteen percent (115%) of the daily
marked to market value of the missing Deposit Securities.
5. Outside the Trust's Clearing Process -- Redemption Requests. The DTC
Participant notified of acknowledgment of a request to redeem Shares outside the
Trust's Clearing Process shall be required to effect a transfer to the Transfer
Agent (a) the requisite number of Shares through DTC no later than the NYSE
Closing Time on the Business Day on which such order is Deemed Received by the
Transfer Agent and (b) the Cash Redemption Amount, if there is a
[positive/negative Cash Redemption Amount], through the Federal Reserve Bank
wire system by no later than 2:00 p.m. on the next Business Day immediately
following the Business Day on which such order is Deemed Received by the
Transfer Agent.
6. Transaction Fee. In connection with the creation or redemption of
Creation Units, the Transfer Agent shall charge, and the Participant agrees to
pay to the Transfer Agent, the Transaction Fee prescribed in the Trust's
prospectus applicable to (i) creations or redemptions through the Trust's
Clearing Process, or the Transaction Fee and such additional amounts as may be
prescribed pursuant to the Trust's prospectus applicable to creations or
redemptions outside the Trust's Clearing Process and (ii) creations within the
Trust's Clearing Process where the cash equivalent value of one or more Deposit
Securities is being deposited in lieu of the inclusion of such Deposit
Securities in the securities portion of the Fund Deposit because the Participant
is restricted by regulation or otherwise from investing or engaging in a
transaction in such security. Such Transaction Fee and additional amounts, if
any, shall be included in the calculation of the Cash Component or Cash
Redemption Amount payable or to be received, as the case may be, by the
Participant in connection with the creation or redemption order.
SECTION III. TRANSFER AGENT'S RESPONSIBILITY FOR EFFECTING DELIVERY OF
REQUISITE SHARES OR SECURITIES AND CASH PAYMENTS IN
CONNECTION WITH ORDERS FOR CREATION OR REQUESTS FOR REDEMPTION
1. Trust's Clearing Process -- Creation Order. After the Transfer Agent
has received notification of a Submission from the Participant for a creation
order for Shares through the Trust's Clearing Process which has been Deemed
Received by the Transfer Agent as set forth below in Section IV, the Transfer
Agent shall initiate procedures to transfer the requisite Shares and the Cash
Component, if any, through the Trust's Clearing Process so as to be received by
the creator no later than on the "regular way" settlement date following the
Business Day on which the Submission is Deemed Received by the Transfer Agent.
2. Trust's Clearing Process -- Redemption Requests. After the Transfer
Agent has received a Submission for a redemption request for Shares through the
Attachment 1 -4-
Trust's Clearing Process and Deemed Received such submission as set forth below
in Section IV, the Transfer Agent shall initiate procedures to transfer the
requisite securities (or contracts to purchase such securities expected to be
delivered through NSCC by the "regular way" settlement date) and the Cash
Redemption Amount, if any, through the Trust's Clearing Process so as to be
received by the Beneficial Owner no later than on the "regular way" settlement
date following the Business Day on which the Submission is Deemed Received by
the Transfer Agent.
3. Outside the Trust's Clearing Process -- Creation Orders. After the
Transfer Agent has received notification of a Submission from the Participant
for a creation order for Shares outside the Trust's Clearing Process which has
been Deemed Received by the Transfer Agent as set forth below in Section IV, the
Transfer Agent shall initiate procedures to transfer the requisite Shares
through DTC and the DTC Participants and the Cash Component, if any, through the
Federal Reserve Bank wire system so as to be received by the creator no later
than the same Business Day on which the transfer of Deposit Securities is
required to be made pursuant to Section IV (3) in order for the Deemed Received
order to continue to be Deemed Received.
4. Outside the Trust's Clearing Process -- Redemption Requests. After
the Transfer Agent has received a Submission for a redemption request for Shares
outside the Trust's Clearing Process and Deemed Received such submission as set
forth below in Section IV, the Transfer Agent shall initiate procedures to
transfer the requisite securities (or contracts to purchase such securities
expected to be delivered within three Business Days) through DTC and the DTC
Participants and the Cash Redemption Amount, if any, through the Federal Reserve
Bank wire system so as to be received by the Beneficial Owner no later than the
same Business Day on which the transfer of Shares is required to be made
pursuant to Section IV (4) in order for the Deemed Received order to continue to
be Deemed Received.
SECTION IV. PROCEDURES BY WHICH AN ORDER TO CREATE OR A REQUEST TO
REDEEM SHALL BE "DEEMED RECEIVED"
1. Trust's Clearing Process -- Creation Orders. An order to create
Shares through the Trust's Clearing Process shall be "Deemed Received" by the
Transfer Agent on the Transmittal Date only if (a) the Submission containing
such order is in proper form and (b) such Submission is received by the Transfer
Agent no later than the time on such Transmittal Date as set forth in Section
I(3)(a) hereof. Orders to create Shares contained in Submissions transmitted
after such time on a Transmittal Date shall be deemed invalid.
2. Trust's Clearing Process -- Redemption Requests. A request to redeem
Shares through the Trust's Clearing Process shall be Deemed Received by the
Transfer Agent on the Transmittal Date only if (a) the Submission containing
such request is in proper form and (b) such Submission is received by the
Transfer Agent no later than the time on such Transmittal Date as set forth in
Section I(3)(b) hereof. Requests to redeem Shares contained in Submissions
transmitted after such time on a Transmittal Date shall be "Deemed Received" by
the Transfer Agent on the next Business Day immediately following such
Transmittal Date.
Attachment 1 -5-
3. Outside the Trust's Clearing Process -- Creation Orders. An order to
create Shares outside the Trust's Clearing Process shall be Deemed Received by
the Transfer Agent on the Transmittal Date only if: (a) the Submission
containing such order is in proper form, and (b) such Submission is received by
the Transfer Agent no later than the time on such Transmittal Date as set forth
in Section I(3)(a) hereof, provided, however, that such order shall cease to be
Deemed Received unless (a) the requisite number of Deposit Securities is
transferred through DTC to the account of the Trust no later than 11:00 a.m. on
the Business Day next following the Transmittal Date and (b) the cash equal to
the Cash Component, if any, is transferred via the Federal Reserve Bank wire
system to the account of the Trust by no later than 2:00 p.m. on the Business
Day next following the Transmittal Date. If either the Submission, the requisite
Deposit Securities or the cash equal to the Cash Component is not received by
the Transfer Agent within the time periods set forth above, such order shall be
deemed invalid.
4. Outside the Trust's Clearing Process -- Redemption Requests. A
request to redeem Shares outside the Trust's Clearing Process shall be Deemed
Received by the Transfer Agent on the Transmittal Date only if (a) the
Submission containing such request is in proper form, and (b) such Submission is
received by the Trust no later than the time as set forth in Section I(3)(b)
hereof, provided, however, that such order shall cease to be Deemed Received
unless (a) the requisite number of Shares is transferred via DTC to the account
of the Transfer Agent by the NYSE Closing Time on such Transmittal Date and (b)
the Cash Redemption Amount owed to the Trust, if any, is received by the
Transfer Agent no later than 2:00 p.m. of the Business Day next following such
Transmittal Date. If either the Submission, the Shares or cash equal to the Cash
Redemption Amount, if any, is not received by the Trust within the time periods
set forth above, such redemption request shall be Deemed Received by the
Transfer Agent on the Business Day on which both the Submission and the
requisite number of Shares are delivered to the Transfer Agent within the proper
time periods as set forth above; provided that the Cash Redemption Amount, if
any, is then paid on the next Business Day within the time period set forth
above.
5. Ambiguous Instructions. In the event that a Submission contains terms
that differ from the information provided in the telephone call at the time of
issuance of the Submission Number, the Trust Telephone Representative will
attempt to contact the Participant to request confirmation of the terms of the
order. If an Authorized Person confirms the terms as they appear in the
Submission then the Submission will be accepted and processed. If an Authorized
Person contradicts its terms, the Submission will be deemed invalid, and a
corrected Submission must be received by the Transfer Agent, as applicable, not
later than the earlier of (i) within fifteen (15) minutes of such contact with
the Participant or (ii) forty-five (45) minutes after the NYSE Closing Time. For
the avoidance of doubt, notwithstanding the invalidation of the initial
Submission pursuant to this paragraph, a Submission that is otherwise in proper
form shall be deemed submitted at the time of its initial submission for
purposes of determining when orders are Deemed Received hereunder. If the Trust
Telephone Representative is not able to contact an Authorized Person, then the
Submission shall be accepted and processed in accordance with its terms
notwithstanding any inconsistency from the terms of the telephone information.
In the event that a Submission contains terms that are illegible, the Submission
will be deemed invalid and the Trust Telephone Representative will attempt to
contact the Participant to request retransmission of the Submission. A corrected
Attachment 1 -6-
Submission must be received by the Transfer Agent, as applicable, not later than
the earlier of (i) within fifteen (15) minutes of such contact with the
Participant or (ii) forty-five (45) minutes after the NYSE Closing Time.
6. Suspension or Rejection of an Order. The Trust reserves the absolute
right to reject a creation order transmitted to it by the Distributor in respect
of a Fund if: (i) the order is not in proper form; (ii) the Deposit Securities
delivered are not as disseminated for that date by the Custodian, as described
above; (iii) acceptance of the Fund Deposit would, in the opinion of counsel, be
unlawful; (iv) acceptance of the Fund Deposit would otherwise, in the reasonable
opinion of the Trust or the Adviser, have an adverse effect on the Trust or the
rights of beneficial owners; or (v) in the event that circumstances exist
outside the control of the Trust, the Transfer Agent, the Distributor and the
Adviser that, in their reasonable judgment, make it for all practical purposes
impossible 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 Adviser, the Distributor, DTC, NSCC, the Transfer Agent, the
Custodian or sub-custodian or any other participant in the creation process, and
similar extraordinary events. The Trust shall notify immediately a prospective
creator of a Creation Unit and/or the Authorized Participant acting on behalf of
such prospective creator of its rejection of the order of such person. The
Trust, the Custodian, any sub-custodian and the Distributor are under no duty,
however, to give notification of any defects or irregularities in the delivery
of Fund Deposits, and shall not incur any liability for the failure to give any
such notification.
SECTION V. TELEPHONE, FACSIMILE, AND TELEX NUMBERS
FIRST TRUST EXCHANGE-TRADED FUND:
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
TRANSFER AGENT:
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
PARTICIPANT:
Telephone:__________________________________
Facsimile:__________________________________
FIRST TRUST PORTFOLIOS, L.P.
By
Title:_________________________
Attachment 1 -7-
[NAME OF PARTICIPANT]
By
Title:_________________________
ACCEPTED BY:
THE BANK OF NEW YORK, as Transfer Agent
By____________________________________________
Title:___________________________________
Dated:________________________________________
