Exhibit (h)(5)
PARTICIPATION AGREEMENT
THIS AGREEMENT, dated as of ____________________, 2007, between
______________________________, a [business trust /corporation] organized under
the laws of the [Commonwealth/State] of _______________________________________,
on behalf of itself or its separate series listed on Schedule A, severally and
not jointly (each, a "Fund of Funds"), and XShares Advisors LLC, a limited
liability company organized under the laws of the State of Maryland, and each
exchange traded fund that is advised or sponsored by XShares Advisors LLC listed
on Schedule B, each on behalf of itself or its respective series, severally and
not jointly (each an "XShares Fund" and collectively the "XShares Funds").
WHEREAS, the Fund of Funds and the XShares Funds each are registered
with the U.S. Securities and Exchange Commission ("SEC") as open-end management
investment companies under the Investment Company Act of 1940 (the "1940 Act");
WHEREAS, section 12(d)(l)(A) and (B) of the 1940 Act limits the ability
of an investment company to invest in shares of another investment company, and
therefore limits the ability of a Fund of Funds to invest in shares of an
XShares Fund;
WHEREAS, XShares Advisors LLC and HealthShares(TM), Inc., on behalf of
each Fund, have obtained an order from the SEC dated June 21, 2007 (the "XShares
Order"), that permits registered investment companies to invest in the XShares
Funds in excess of the limits set forth in section 12(d)(1)(A) and (B) in
accordance with the conditions of the XShares Order and the representations in
the application filed to obtain such Order (the "XShares Application"); and
WHEREAS, the Fund of Funds may, from time to time, invest in shares of
one or more XShares Funds in excess of the limitations of section 12(d)(1)(A)
and (B) in reliance on the XShares Order;
NOW THEREFORE, in consideration of the potential benefits to the Fund
of Funds and the XShares Funds arising out of the Fund of Funds' investment in
XShares Funds, the parties agree as follows.
1. Representations and Obligations of the XShares Funds.
(a) The XShares Funds have provided to the Fund of Funds a
copy of the Order and the related SEC Notice of Application
for such Order (attached hereto as Schedule C). The XShares
Funds will promptly provide the Fund of Funds with (i) a copy
of any amendments to the XShares Order, and (ii) a copy of the
XShares Application upon request.
(b) In connection with any investment by a Fund of Funds in an
XShares Fund, the XShares Fund agrees (i) to comply with the
terms and conditions of the XShares Order and this Agreement,
and (ii) to promptly notify the Fund of Funds if such XShares
Fund fails to comply with the terms and conditions of the
XShares Order or this Agreement.
(c) Each registered trademark indicated in the name of the
XShares Fund(s) on Schedule B is a registered trademark of
XShares Advisors LLC, which has licensed the trademark to the
respective XShares Fund.
2. Representations and Obligations of the Investing Funds.
(a) Pursuant to Condition 8 of the XShares Order, each Fund of
Funds represents that the board of directors/trustees of the
Fund of Funds and the Fund of Funds' advisor understand the
terms and conditions of the XShares Order and that each agrees
to fulfill its responsibilities under the XShares Order.
(b) Pursuant to Condition 8 of the XShares Order, each Fund of
Funds will promptly notify the XShares Funds in writing at the
time of any investment by such Fund in an XShares Fund in
excess of the 3% limit in Section 12(d)(1)(A)(i). Upon such
investment, each Fund of Funds shall also provide to the
XShares Funds in writing a list of the names of each Fund of
Funds Affiliate and Underwriting Affiliate (as such terms are
defined in the Order) and shall promptly notify the XShares
Funds of any changes to such list.
(c) Each Fund of Funds will promptly notify the XShares Funds
in writing of any purchase or acquisition of shares of an
XShares Fund that causes such Fund of Funds to hold (i) 5% or
more of such XShares Fund's total outstanding voting
securities, and (ii) 10% or more of such XShares Fund's total
outstanding voting securities.
(d) To the extent a Fund of Funds holds 25% or more of the
total outstanding voting securities of an XShares Fund, the
Fund of Funds agrees to vote its shares in the same proportion
as the vote of all other holders of shares of such XShares
Fund.
(e) If a Fund of Funds exceeds the 5% or 10% limitation in
Section 12(d)(l)(A)(ii) or (iii), the Fund of Funds, as
required by the XShares Application, will disclose in its
prospectus in "Plain English":
(1) That it may invest in exchange-traded funds; and
(2) The unique characteristics of the Fund of Funds
investing in exchange-traded funds, including but not
limited to, the expense structure and any additional
expenses of investing in exchange-traded funds.
(f) Each Fund of Funds: (i) acknowledges that it has received
a copy of the XShares Order and the related SEC Notice of
Application for such Order; (ii) agrees to adhere to the terms
and conditions of the XShares Order and this Agreement and to
participate in the proposed transactions in a manner that
addresses the concerns underlying the XShares Order; (iii)
represents that investments in the XShares Funds will be
accomplished in compliance with its investment restrictions
and will be consistent with the investment policies set forth
in its registration statement; (iv) acknowledges that it may
rely on the
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XShares Order only to invest in XShares Funds and not in any
other registered investment company; and (v) agrees to
promptly notify the XShares Funds if it fails to comply with
the XShares Order or this Agreement.
3. Indemnification.
Each Fund of Funds agrees to hold harmless and indemnify the
XShares Funds, including any principals, directors or
trustees, officers, employees and agents, against and from any
and all losses, expenses or liabilities incurred by or claims
or actions ("Claims") asserted against the XShares Funds,
including any principals, directors or trustees, officers,
employees and agents, to the extent such Claims result from
(i) a violation or alleged violation by the Fund of Funds of
any provision of this Agreement or (ii) a violation or alleged
violation by the Fund of Funds of the terms and conditions of
the XShares Order, such indemnification to include any
reasonable counsel fees and expenses incurred in connection
with investigating and/or defending such Claims.
The XShares Funds agree to hold harmless and indemnify a Fund
of Funds, including any directors or trustees, officers,
employees and agents, against and from any Claims asserted
against the Fund of Funds, including any directors or
trustees, officers, employees and agents, to the extent such
Claims result from (i) a violation or alleged violation by the
XShares Fund of any provision of this Agreement or (ii) a
violation or alleged violation by the XShares Fund of the
terms and conditions of the XShares Order, such
indemnification to include any reasonable counsel fees and
expenses incurred in connection with investigating and/or
defending such Claims; provided, however, that the XShares
Fund shall not be liable for indemnifying any Fund of Funds
for any Claims resulting from violations that occur as a
result of incomplete or inaccurate information provided by the
Fund of Funds to the XShares Fund pursuant to terms and
conditions of the Order or this Agreement.
4. Web Sites.
For purposes of determining whether the Fund of Funds has
exceeded the investment thresholds in XShares Funds for
purposes of Section 2(b), (c), (d), and (e) of this Agreement,
the Fund of Funds may use the information contained on the
particular XShares Funds' public Internet web site regarding
such XShares Fund's total outstanding shares, however, any
such use shall be subject to the terms and conditions of such
web site. The XShares Fund's web sites are listed on Schedule
C hereto.
5. Materials.
To the extent a Fund of Funds refers to one or more XShares
Funds in any prospectus, statement of additional information
or otherwise, each Fund of Funds agrees to:
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(a) For those XShares Funds included on Schedule B with names
that are registered trademarks, (i) include the trademark
symbol in all references to the XShares Fund or series thereof
(for example, the "HealthSharesTM [Index] Fund"); (ii) include
the following notice within reasonable proximity to the
reference to the XShares Fund or series thereof:
[Name of XShares Fund]TM is a registered trademark of XShares
Advisors LLC.
(b) For all XShares Funds, include the following notice within
reasonable proximity to the reference to the XShares Fund:
Neither XShares Advisors LLC nor the [Name of XShares Fund]
Funds make any representations regarding the advisability of
investing in [Name of Fund of Funds].
6. Notices.
All notices, including all information that either party is
required to provide under the terms of this Agreement and the
terms and conditions of the XShares Order, shall be in writing
and shall be delivered by registered or overnight mail,
facsimile, or electronic mail to the address for each party
specified below (which address may be changed from time to
time by written notice to the other party).
If to the Fund of Funds:
[Name]
x/x [Xxxxxxx]
[Xxxxxxx]
[Xxxx, Xxxxx, ZIP]
Fax:
Email:
If to the XShares Funds:
Xxxxxxx X. Xxxxxxxxx
XShares Advisors LLC
000 Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Fax: [ ]
Email: xxxxxxxxxx@XXxxxxxxxxxxxxx.xxx
With a copy to:
Xxxxxxx Xxxxxxxx
XShares Advisors LLC
000 Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Fax: [ ]
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Email: xxxxxxxxx@XXxxxxxxxxxxxxx.xxx
Xxxxxxxx Xxxxxxxx
Paul, Hastings, Xxxxxxxx & Xxxxxx LLP
Park Avenue Tower
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Fax: (000) 000-0000
Email: xxxxxxxxxxxxxxxx@xxxxxxxxxxxx.xxx
7. Termination; Governing Law.
(a) This Agreement will continue until terminated in writing
by either party upon sixty (60) days' notice to the other
party, provided, however, that the obligation of a Fund of
Funds in Section 2(d) above shall survive the termination of
this Agreement. This Agreement may not be assigned by either
party without the prior written consent of the other.
(b) This Agreement will be governed by New York law without
regard to choice of law principles.
(c) In any action involving the XShares Funds under this
Agreement, each Fund of Funds agrees to look solely to the
individual XShares Fund(s) listed on Schedule B that is/are
involved in the matter in controversy and not to any other
series of XShares Advisors LLC.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
Each of the Fund of Funds listed on Schedule A, severally and not jointly, on
behalf of itself or each of its series
_______________________________________
Name:
Title:
XSHARES FUNDS, on
behalf of each of its series
_______________________________________
Name: Xxxxxxx X. Xxxxxxxxx
Title: Chief Executive Officer and President
XSHARES ADVISORS LLC, on
behalf of each of its series
_______________________________________
Name: Xxxxxxx X. Xxxxxxxxx
Title: President of XShares Group LLC,
the sole managing member
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SCHEDULE A
List of Fund of Funds
SCHEDULE B
List of XShares Funds
XShares Fund Sub-Adviser Distributor
------------ ----------- -----------
HealthSharesTM, Inc.
TDAX Funds, Inc.
StateSharesTM, Inc.
SCHEDULE C
List of XShares Funds' Websites
