EX-10.2 5 dex102.htm ADMINISTRATION AGENCY AGREEMENT Form of ADMINISTRATIVE AGENCY AGREEMENT
Exhibit 10.2
Form of ADMINISTRATIVE AGENCY AGREEMENT
THIS ADMINISTRATIVE AGENCY AGREEMENT (the “Agreement”) is made as of by and among XXXXX BROTHERS XXXXXXXX & CO., a limited partnership organized under the laws of the State of New York (the “Administrator”), PROSHARES TRUST II, a statutory trust organized under the laws of the State of Delaware (the “ Trust” for itself and on behalf of each of its series listed on Appendix A to this Agreement, each a “Fund” and collectively, the “Funds”), and PROSHARE CAPITAL MANAGEMENT LLC, the Sponsor of the Funds (the “Sponsor”).
WHEREAS, each Fund is operated as a commodity pool under the Commodity Exchange Act;
2.1 copies of the Trust’s most recent registration statement under the Securities Act of 1933;
2.2 copies of all agreements between the Trust and its service providers, including without limitation, sponsor and distribution agreements;
2.3 copies of each Fund’s valuation procedures, to the extent they are developed;
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2.4 a copy of the Trust’s charter documents;
2.5 any other documents or resolutions which relate to or affect the Administrator’s performance of its duties hereunder; and
2.6 copies of any and all amendments or supplements to the foregoing.
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expense, deliver, cause to be delivered or make available to the Administrator all of the Fund Records in effect as of the date of this Agreement; (b) it will, on a continuing basis and at its own expense, promptly deliver, cause to be delivered or make available to the Administrator any Fund Records created after the date of this Agreement; (c) it has adequate record-keeping policies and procedures in effect to ensure that all Fund Records are promptly provided to the Administrator pursuant to the terms of this Agreement; (d) it shall be responsible for the accuracy and completeness of any Fund Records not created by the Administrator; and (e) it shall be responsible for ensuring the Trust’s or the Funds’ compliance with, fulfillment of its obligations under or enforcement of, any Fund Records not created by the Administrator. The Administrator acknowledges that the records maintained and preserved by the Administrator pursuant to this Agreement are the property of the Trust and will be, at the Trust’s expense, surrendered promptly upon reasonable request. In performing its obligations under this Section, the Administrator may utilize micrographic and electronic storage media as well as independent third party storage facilities.
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5.1 The Administrator shall not be liable for, and shall be indemnified by the Trust from the assets of the Funds against any and all losses, costs, damages or expenses arising from or as a result of, any action taken or omitted in reliance upon Instructions or upon any other written notice, request, direction, instruction, certificate or other instrument believed by it to be genuine and signed or authorized by the proper party or parties. A list of persons so authorized by the Sponsor (“Authorized Persons”) is attached hereto as Appendix C and upon which the Administrator may rely until its receipt of notification to the contrary by the Sponsor or the Trust.
5.2 Instructions shall include a written request, direction, instruction or certification signed or initialed on behalf of the Sponsor by one or more persons as the Trust of the Funds shall have from time to time authorized in writing. Those persons authorized to give Instructions may be identified by the Sponsor by name, title or position and will include at least one officer empowered by the Board to name other individuals who are authorized to give Instructions on behalf of the Fund.
5.3 Telephonic or other oral instructions or instructions given by telefax transmission may be given by any one of the above persons and will also be considered Instructions if the Administrator believes them to have been given by a person authorized to give such Instructions with respect to the transaction involved.
5.4 With respect to telefax transmissions, the Sponsor hereby acknowledges that (i) receipt of legible instructions cannot be assured, (ii) the Administrator cannot verify that authorized signatures on telefax instructions are original, and (iii) the Administrator shall not be responsible for losses or expenses incurred through actions taken in reliance on such telefax instructions. The Sponsor agrees that such telefax instructions shall be conclusive evidence of the Sponsor’s Instruction to the Administrator to act or to omit to act.
5.5 Instructions given orally will not be confirmed in writing and the lack of such confirmation shall in no way affect any action taken by the Administrator in reliance upon such oral Instructions. The Trust authorizes the Administrator to tape record any and all telephonic or other oral Instructions given to the Administrator by or on behalf of the Funds (including the officers, employees or agents of the Sponsor or any person or entity with similar responsibilities which is authorized to give Instructions on behalf of the Funds to the Administrator.)
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8.1 The Administrator shall also incur no liability under this Agreement if the Administrator or any agent or entity utilized by the Administrator shall be prevented, forbidden or delayed from performing, or omits to perform, any act or thing which this Agreement provides shall be performed or omitted to be performed, by reason of causes or events beyond its control, including but not limited to:
8.1.1 any Sovereign Event. A “Sovereign Event” shall mean any nationalization; expropriation; devaluation; revaluation; confiscation; seizure; cancellation; destruction; strike; act of war, terrorism, insurrection or revolution; or any other act or event beyond the Administrator’s control;
8.1.2 any provision of any present or future law, regulation or order of the United States or any state thereof, or of any foreign country or political subdivision thereof, or of any securities depository or clearing agency; and
8.1.3 any provision of any order or judgment of any court of competent jurisdiction.
8.2 The Administrator shall not be held accountable or liable for any losses, damages or expenses the Funds or any unit holder or shareholder or former unit holder shareholder of the Funds or any other person may suffer or incur arising from acts, omissions, errors or delays of the Administrator in the performance of its obligations and duties as provided in Section 3 hereof, including without limitation any error of judgment or mistake of law, except a damage, loss or expense directly resulting from the Administrator’s willful malfeasance, bad faith or negligence in the performance of such Administrator’s obligations and duties.
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8.3 In no event and under no circumstances shall the Administrator be held liable to the other party for consequential or indirect damages, loss of profits, damage to reputation or business or any other special or punitive damages arising under or by reason of any provision of this Agreement or for any act or omissions hereunder, even if the Administrator has been advised of the possibility of such damages or losses.
9.2.1. The parties hereto acknowledge that the Administrator’s causing an error or delay in the determination of NAV may constitute negligence or reckless or willful misconduct. The parties further acknowledge that in accordance with industry practice, the Administrator shall be liable and the recalculation of NAV shall be performed only with regard to errors in the calculation of the NAV that are greater than or equal to any amount rounded to $.01 per share of a Fund. If a recalculation of NAV occurs, the parties hereto agree to reprocess Fund shareholder transactions or take such other action(s) so as to eliminate or minimize to the extent possible the liability of the Administrator.
9.2.2. In no event shall the Administrator be liable or responsible for any error or delay that continued or was undetected after the date of an audit performed by the independent registered public accounting firm employed by the Trust or Sponsor if, in the exercise of reasonable care in accordance with generally accepted accounting standards, such firm should have become aware of such error or delay in the course of performing such audit.
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9.2.3 The Administrator shall not be held accountable or liable for any delays or losses, damages or expenses resulting from (i) the Administrator’s failure to receive timely and suitable notification concerning quotations or corporate actions relating to or affecting Fund securities of the Funds; or (ii) any errors in the computation of NAV based upon or arising out of quotations or information as to corporate actions if received by the Administrator either (a) from a source which the Administrator was authorized to rely upon (including, but not limited to, the fair value pricing procedures of the Sponsor and those sources listed on Appendix D), or (b) based upon relevant information known to the Sponsor which would impact the calculation of NAV but which is not communicated to the Administrator. To the extent that Fund assets are not in the custody of the Administrator or its affiliates, the Administrator may conclusively rely on any reporting in connection with such assets provided to the Administrator by a third party on behalf of a Fund.
9.2.4. In the event of any error or delay in the determination of such NAV for which the Administrator may be liable, the Sponsor and the Administrator will consult and make good faith efforts to reach agreement on what actions should be taken in order to mitigate any loss suffered by a Fund or its present or former shareholders, in order that the Administrator’s exposure to liability shall be reduced to the extent possible after taking into account all relevant factors and alternatives. It is understood that in attempting to reach agreement on the actions to be taken or the amount of the loss which should appropriately be borne by the Administrator, the Sponsor and the Administrator will consider such relevant factors as the amount of the loss involved, the Sponsor’s desire to avoid loss of Fund shareholder good will, the fact that other persons or entities could have been reasonably expected to have detected the error sooner than the time it was actually discovered, the appropriateness of limiting or eliminating the benefit which Fund shareholders or former Fund Shareholders might have obtained by reason of the error, and the possibility that other parties providing services to the Fund might be induced to absorb a portion of the loss incurred. Provided however, that nothing in this Section 9.2.4 shall obligate the Sponsor to in fact reach such agreement on what actions should be taken in order to mitigate any loss suffered by Fund shareholders before it pursues remedies against Administrator.
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11. Reliance by the Administrator on Opinions of Counsel and Opinions of Certified Public Accountants.
The Administrator may consult with its counsel in any case where so doing appears to the Administrator to be necessary or desirable. The Administrator shall not be considered to have engaged in any misconduct or to have acted negligently and shall be without liability in acting upon the advice of such counsel.
The Administrator may consult with a certified public accountant in any case where so doing appears to the Administrator to be necessary or desirable. The Administrator shall not be considered to have engaged in any misconduct or to have acted negligently and shall be without liability in acting upon the advice of such certified public accountant.
12.1 This Agreement shall have an initial term of three (3) years from the date hereof. Thereafter, this Agreement shall automatically renew for successive one (1) year periods unless a party terminates this Agreement by written notice effective no sooner than seventy-five (75) days following the date that notice to such effect shall be delivered to the other parties at their addresses set forth herein. Notwithstanding the foregoing provisions, any party may terminate this Agreement at any time (a) for cause, which is a material breach of the Agreement not cured within sixty (60) days, in which case termination shall be effective upon written receipt of notice by the non-terminating party, or upon thirty (30) days written notice to the other party in the event that any party is adjudged bankrupt or insolvent, or there shall be commenced against such party a case under any applicable bankruptcy, insolvency, or other similar law now or hereafter in effect. In the event a termination notice is given by a party hereto, all expenses associated with the movement of records and materials and the conversion thereof shall be paid by the Trust from the assets of the Funds for which services shall cease to be performed hereunder. The Administrator shall be responsible for completing all actions in progress when such termination notice is given unless otherwise agreed.
12.2. Upon termination of the Agreement in accordance with this Section 12, the Sponsor may request the Administrator to promptly deliver to the Sponsor or to any designated third party all records created and maintained by the Administrator pursuant to Section 3.1 of this Agreement, as
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well as any Fund records maintained but not created by the Administrator. If such request is provided in writing by the Sponsor to the Trust within seventy-five (75) days of the date of termination of the Agreement, the Administrator shall provide to the Sponsor a certification that all records created by the Administrator pursuant to its obligations under Section 3.1 of this Agreement are accurate and complete. After seventy-five (75) days of the date of termination of this Agreement, no such certification will be provided to the Sponsor by the Administrator and the Administrator is under no further obligation to ensure that records created by the Administrator pursuant to Section 3.1 of this Agreement are maintained in a form that is accurate or complete.
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18. Governing Law. This Agreement shall be governed by and construed according to the laws of the Commonwealth of Massachusetts without giving effect to conflicts of laws principles and each of the parties hereto irrevocably consents to the exclusive jurisdiction of the courts of the Commonwealth of Massachusetts in the City of Boston and the federal courts located in the City of Boston. The parties hereto irrevocably waives any objection it may now or hereafter have to the laying of venue of any action or proceeding in any of the aforesaid courts and any claim that any such action or proceeding has been brought in an inconvenient forum. Furthermore, each party hereto irrevocably waives any right that it may have to trial by jury in any action, proceeding or counterclaim arising out of or related to this Agreement or the services contemplated hereby.
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The undersigned acknowledges that (I/we) have received a copy of this document .
XXXXX BROTHERS XXXXXXXX & CO. | ||
By: | ||
Name: | ||
Title: | ||
Date: |
PROSHARES TRUST II | PROSHARE CAPITAL MANAGEMENT LLC | |||||||
By: | By: | |||||||
Name: | Name: | |||||||
Title: | Title: | |||||||
Date: | Date: |
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APPENDIX A
ADMINISTRATIVE AGENCY AGREEMENT
Dated as of
The following is a list of Funds for which the Administrator shall serve under an Administrative Agency Agreement dated as of :
Ultra DJ AIG Commodity ProShares
UltraShort DJ AIG Commodity ProShares
Ultra DJ AIG Agriculture ProShares
UltraShort DJ AIG Agriculture ProShares
Ultra DJ AIG Crude Oil ProShares
UltraShort DJ AIG Crude Oil ProShares
Ultra Gold ProShares
UltraShort Gold ProShares
Ultra Silver ProShares
UltraShort Silver ProShares
Ultra Euro ProShares
UltraShort Euro ProShares
Ultra Yen ProShares
UltraShort Yen ProShares
PROSHARES TRUST II | ||
By: | ||
Name: | ||
Title: | ||
PROSHARE CAPITAL MANAGEMENT LLC | ||
By: | ||
Name: | ||
Title: | ||
Date: |
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XXXXXXXX X
TO ADMINISTRATIVE AGENCY AGREEMENT
ADMINISTRATIVE SERVICES OF THE ADMINISTRATIVE AGENT
Dated as of
Fund Accounting Services
The Administrator will provide the following fund accounting services to the Funds on any Business Day: transaction processing and review, custodial reconciliation, securities pricing and investment accounting.
Transaction Processing and Review. The Administrator shall input and reconcile the Funds’ investment activity including with respect to:
• | Investment taxlots |
• | Income |
• | Dividends |
• | Principal paydowns |
• | Capital activity |
• | Expense accruals |
• | Cash activity |
• |
• | Securities, Futures and Over-the-Counter Contract (“OTC”) holdings |
• | Cash including cash transfers, fees assessed and other investment related cash transactions |
• | Trade settlements |
Securities, Futures and OTC Valuation. Using the Valuation Procedures set forth in Appendix D, the Administrator shall update each security, Futures and OTC position of the Funds as to the following:
• | Market prices obtained from approved sources including those listed on Appendix C or Fair Valuations obtained from an Authorized Person of the Funds or the Managing Owner |
• | Xxxx to market of non-base receivables/payables utilizing approved foreign exchange quotations as quoted in Appendix C |
• | Xxxx to market of non-base currency positions utilizing the approved sources quoted in Appendix C or Fair Valuations obtained from an Authorized Person of the Funds or the Managing Owner |
Investment Accounting. The Administrator shall provide the following investment accounting services to each Portfolio:
• | Amortization/accretion at the individual tax lot level |
• | General ledger entries |
• | Book value calculations |
• | Trade Date + 1 accounting |
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• | Calculation of Net Asset Value Per Unit (“NAV”) as of the earlier of 4:00 p.m. New York time, the close of trading on the New York Stock Exchange (“NYSE”) or a mutually agreed upon time and published shortly after the close of trading on the NYSE |
The below matrix reflects mutually agreed upon NAV valuation deadlines:
Fund Name | Valuation Time | |
Ultra Short Silver ProShares | 7:00am | |
Ultra Silver ProShares | 7:00am | |
Ultra Gold ProShares | 10:00am | |
UltraShort Gold ProShares | 10:00am | |
Ultra DJ-AIG Agriculture ProShares | 2:15pm | |
UltraShort DJ-AIG Agriculture ProShares | 2:15pm | |
Ultra DJ-AIG Commodity ProShares | 2:30pm | |
UltraShort DJ-AIG Commodity ProShares | 2:30pm | |
Ultra DJ-AIG Crude Oil ProShares | 2:30pm | |
UltraShort DJ-AIG Crude Oil ProShares | 2:30pm | |
Ultra Euro ProShares | 4:00pm | |
UltraShort Euro ProShares | 4:00pm | |
Ultra Yen ProShares | 4:00pm | |
UltraShort Yen ProShares | 4 :00pm |
NAV/Portfolio Holding Dissemination: The Administrator will provide daily NAV and holdings data to Lipper and Morningstar.
Financial Reporting Services
• | The Administrator shall accumulate information for and prepare |
• | Within a 30 day period following the end of the Funds’ required monthly reporting period, an Account Statement in compliance with the requirements of the U.S. Commodity Futures Trading Commission (“CFTC”) Rule §4.22(a), including a Statement of Income (Loss) and a Statement of Changes in Net Asset Value; such preparation includes the coordination and review of all printer and author edits. The Funds or the Managing Owner shall make arrangements for the printing and mailing of the Account Statements. |
• | Upon review and approval of each above-mentioned report by the Managing Owner’s Treasurer and/or Chief Financial Officer (or such person performing such functions), the Administrator shall file such reports with the CFTC and/or National Futures Association (“NFA”), as required, including any applicable executive officer certifications or other exhibits to such reports. |
• | In connection with the preparation of each Annual Report on Form 10-K, the Administrator shall coordinate the audit of the Funds by their independent public accountant (e.g., manage open items lists, host weekly audit meeting, etc.). |
The Administrator shall assist the Funds and/or the Managing Owner in preparing the Funds’ press releases with respect to interim statements and quarterly results and transmitting such press releases to the American Stock Exchange (“AMEX”) and such other entities as requested by the Funds and/or the Managing Owner.
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The Administrator shall perform the following services as requested by the Managing Owner’s Treasurer (or person performing such function):
• | Prepare and obtain authorization of the Funds’ expense invoices on a bi-monthly basis |
• | Prepare the Funds’ quarterly budget and make recommendations for adjustments as appropriate |
• | Prepare a monthly expense pro forma for the Funds |
• | Provide consultative services with respect to financial matters of the Funds as may be requested and agreed to among the Funds, the Managing Owner and the Administrator from time to time |
Corporate Secretarial Services
The Administrator shall prepare the annual officers questionnaires and distribute the questionnaires to the officers of the Managing Owner.
Regulatory Support Services
The Administrator shall perform the following regulatory services for the Funds:
• | Maintain a calendar for all U.S. Securities and Exchange Commission (“SEC”), CFTC, NFA and AMEX regulatory matters in the form of Exhibit A; provided that the Funds and/or the Managing Owner shall notify the Administrator of additional regulatory matters to be added to such calendar as soon as practicable |
• | Within a 45 day production cycle, or shorter time period as required by the SEC and communicated to the Administrator by the Funds or the Managing Owner, one Quarterly Report on Form 10-Q for the Funds for each of the first three fiscal quarters of the Funds. The preparation of each Form 10-Q includes the coordination of all printer and author edits and the review of printer drafts. |
• | Within a 90 day production cycle, or shorter time period as required by the SEC and communicated to the Administrator by the Funds or the Managing Owner, one Annual Report on Form 10-K for the Funds per fiscal year. The preparation of the Form 10-K includes the coordination of all printer and author edits and the review of printer drafts. The Funds or the Managing Owner shall make arrangements for the printing and mailing of the Form 10-K. |
• | Within 90 days after the end of the Funds’ fiscal year, one Annual Report of the Funds in compliance with the requirements of CFTC Rule §4.22(c); such preparation includes the coordination of all printer and author edits and the review of printer drafts. The Funds or the Managing Owner shall make arrangements for the printing and mailing of the Annual Report. |
Upon review and approval of each above-mentioned report by the Managing Owner’s Treasurer and/or Chief Financial Officer (or such person performing such functions), the Administrator shall Edgarize and file, or caused to be Edgarized and filed, such reports with the SEC, CFTC and/or NFA, as required, including any applicable executive officer certifications or other exhibits to such reports.
The Administrator also shall prepare and file, or cause to be filed, the following regulatory notices/forms/reports:
• | With the SEC, Forms 3, 4 and 5 and Schedules 13D and 13G for the officers of the Managing Owner and such other persons as requested by the Funds |
• | With the SEC, Current Reports on Form 8-K as circumstances warrant |
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• | With the AMEX, such notices/forms as agreed to among the Funds, the Managing Owner and the Administrator |
Transfer Agency Services
The Administrator shall perform the following transfer agency services:
A. | Pursuant to such purchase orders that the Administrator as the Index Receipt Agent shall receive from ALPS Distributors, Inc. (“Marketing Agent”) and pursuant to the procedures set forth in the Authorized Participant Agreement entered into by the Funds, the Administrator shall transfer appropriate trade instructions to the Funds’ custodian, Xxxxx Brothers Xxxxxxxx & Co. (“Custodian”) and pursuant to such orders register the appropriate number of book entry only the Funds’ Units in the name of The Depository Trust Company (“DTC”) or its nominee as a unitholder (each a “Authorized Participant”) of the Funds and deliver the Basket of Units of the Funds. |
B. | Pursuant to such redemption orders that Index Receipt Agent shall receive from the Marketing Agent, pursuant to the procedures set forth in the Authorized Participant Agreement entered into by the Funds, the Administrator shall transfer appropriate trade instructions to the Custodian and, pursuant to such orders, redeem the appropriate number of the Funds’ Units that are delivered to the designated DTC Participant Account of the Custodian for redemption and debit such Units from the account of the Authorized Participant on the register of the Funds. |
C. | On behalf of the Funds, the Administrator shall issue the Funds’ Units in Creation Baskets for settlement with purchasers through DTC as the purchaser is authorized to receive. Beneficial ownership of the Funds’ Units shall be shown on the records of DTC and DTC Participants and not on any records maintained by the Administrator. In issuing the Funds’ Units through DTC to an Authorized Participant, the Administrator shall be entitled to rely upon the latest Instructions that are received from the Marketing Agent by the Administrator as Index Receipt Agent concerning the issuance and delivery of such Units for settlement. |
D. | The Administrator shall not issue on behalf of the Funds any of the Funds’ Units where it has received an Instruction from the Funds or the Marketing Agent or written notification from any federal or state authority that the sale of the Funds’ Units has been suspended or discontinued, and the Administrator shall be entitled to rely upon such Instructions or written notification. |
E. | Upon the issuance of the Funds’ Units as provided herein, the Administrator shall not be responsible for the payment of any original issue or other taxes, if any, required to be paid by the Funds’ or the Marketing Agent in connection with such issuance. |
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F. | The Funds’ Units may be redeemed in accordance with the procedures set forth in the relevant Authorized Participant Agreement and the Administrator shall duly process all redemption requests. |
G. | The Administrator will act only upon Instruction from the Funds and/or the Managing Owner in addressing any failure in the delivery of cash, treasuries and/or Units in connection with the issuance and redemption of the Funds’ Units. |
A. | The Administrator shall record the issuance of the Funds’ Creation Baskets and maintain, pursuant to Rule 17Ad-14(e) under the Securities Exchange Act of 1934, as amended, a record of the total number of the Funds’ Creation Baskets that are authorized, issued and outstanding based upon data provided to the Administrator by the Funds or the Managing Owner. The Administrator shall also provide the Funds on a regular basis with the total number of the Funds’ Units authorized, issued and outstanding; provided however that the Administrator shall not be responsible for monitoring the issuance of such Units or compliance with any laws relating to the validity of the issuance or the legality of the sale of such Units. |
PROSHARES TRUST II | ||
By: | ||
Name: | ||
Title: | ||
PROSHARE CAPITAL MANAGEMENT LLC | ||
By: | ||
Name: | ||
Title: |
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APPENDIX C
ADMINISTRATIVE AGENCY AGREEMENT
List of Authorized Persons
Xxxxxxx Xxxxx Execution & Clearing X.X.
Xxxxxxx Xxxxx Professional Clearing Corp.
PROSHARES TRUST II | ||
By: | ||
Name: | ||
Title: | ||
PROSHARE CAPITAL MANAGEMENT LLC | ||
By: | ||
Name: | ||
Title: | ||
Date: |
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APPENDIX D
ADMINISTRATIVE AGENCY AGREEMENT
AUTHORISED SOURCES
The Sponsor and Trust hereby acknowledge that the Administrator is authorized to use the following authorized sources and their successors and assigns for financial reporting and pricing (including corporate actions, dividends and rights offering), and foreign exchange quotations, to assist it in fulfilling its obligations under the aforementioned Agreement.
MARKIT
XX XXXXXX
XXXXXXXXX
XXXXXXX/XXXXXX
EXTEL (LONDON)
FUND MANAGERS
INTERACTIVE DATA CORPORATION
REPUTABLE BROKERS
REUTERS
SUBCUSTODIAN BANKS
TELEKURS
VALORINFORM (GENEVA)
REPUTABLE FINANCIAL PUBLICATIONS
STOCK EXCHANGES
FINANCIAL INFORMATION INC. CARD
XX XXXXX
FRI CORPORATION
XXXXXX XXXXXXX CAPITAL INTERNATIONAL
Other data source:
PROSHARES TRUST II | ||
By: | ||
Name: | ||
Title: | ||
PROSHARE CAPITAL MANAGEMENT LLC | ||
By: | ||
Name: | ||
Title: |
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