LICENSE AGREEMENT
THIS AGREEMENT, made as of this 15th day of November, 2007, by and between
Horizon Investment Services, LLC ("Horizon"), an Indiana limited liability
company, and Xxx Xxxxxx Funds Inc. ("Xxx Xxxxxx"), a Delaware corporation.
WITNESSETH:
WHEREAS, Horizon has developed each investment strategy set forth in Exhibit
A attached hereto (each an "Enhanced Index Strategy");
WHEREAS, all proprietary rights to each Enhanced Index Strategy and the name
"Horizon Investment Services" (collectively, the "Property") are owned by
Horizon;
WHEREAS, Xxx Xxxxxx sponsors, underwrites and distributes a wide array of
unit investment trusts ("UITs");
WHEREAS, Xxx Xxxxxx desires to establish one or more UITs that will each
initially invest all or a portion of its assets in securities selected in
accordance with one or more of the Enhanced Index Strategies (the "Trusts");
WHEREAS, Xxx Xxxxxx, on behalf of the Trusts, desires to license the Property
for use in connection with the Trusts; and
WHEREAS, Horizon is willing to license the Property to Xxx Xxxxxx and the
Trusts under the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual covenants and
conditions contained herein and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
1. Grant of License. (a) Subject to the terms and conditions of this
Agreement, Horizon hereby grants to Xxx Xxxxxx and the Trusts an
Exclusive (as defined below) license to use and refer to the Property,
with prior approval from Horizon, in connection with the Trusts. The
license granted herein shall continue until the later to occur of the
termination of this Agreement or the termination date of the last
existing Trust.
(b) Horizon covenants and agrees that no person or entity other than
Xxx Xxxxxx shall need to obtain any other license with respect to
the Property in connection with the initial sale of the Trusts or
subsequent resales of the Trusts in the secondary market.
(c) Horizon represents and warrants that it owns all proprietary
rights in and to the Property and has the right to license the
same to Xxx Xxxxxx and the Trusts pursuant to this Agreement.
(d) Xxx Xxxxxx, on behalf of the Trusts, acknowledges that Horizon
has represented and warranted that the Property is the exclusive
property of Horizon and that Horizon has and retains all
proprietary rights thereto except to the extent otherwise
provided herein. Except as otherwise specifically provided
herein, Horizon reserves all rights to the Property, and this
Agreement shall not be construed to transfer to Xxx Xxxxxx or the
Trusts any ownership right to, or equity interest in, any of the
Property.
2. Fees. For the license granted herein, Xxx Xxxxxx, on behalf of the
Trusts, agrees that the Trusts shall pay Horizon the license fees set
forth in Exhibit B hereto.
3. Term. Subject to Section 7, the term of this Agreement shall commence
and continue as described in this Section. The term of this Agreement
shall commence as of the date set forth above (the "Effective Date")
and shall remain in full force and effect until the fifth anniversary
of the Effective Date, unless this Agreement is terminated earlier as
provided herein (such term being referred to as the "Initial Term").
At the end of the Initial Term, this Agreement shall automatically
renew for successive one-year periods (each, a "Renewal Term") unless
a party terminates the Agreement by providing the other parties a
written notice to that effect ninety (90) days prior to the end of the
then-current term. The Initial Term and the Renewal Term are referred
to herein as the "Term".
4. Exclusivity and Right of First Refusal. (a) Horizon covenants and
agrees that the licenses granted herein shall be Exclusive (as defined
below) during the period from the Effective Date until the two year
anniversary thereof (the "Initial Exclusivity Period"). This period
shall be extended for additional one-year periods (each one-year
period being an "Extended Exclusivity Period") if at the end of the
Initial Exclusivity Period and, subsequent thereto, at the end of an
Extended Exclusivity Period, either (i) the asset balance of all
outstanding Trusts equals or exceeds $250 million or (ii) Xxx Xxxxxx
pays Horizon an up front annual minimum license fee with respect to
each Extended Exclusivity Period equal to (A) $62,500 plus (B) $62,500
minus two and one-half basis points (0.025%) of the asset balance of
all outstanding Trusts. "Exclusive" as used herein shall mean that
neither Horizon nor anyone acting on its behalf shall take any action
to market or promote any UIT based on an Enhanced Index Strategy other
than the Trusts or shall permit the use of any of the Property in
connection with the creation, marketing or promotion of any UIT other
than the Trusts. Except as provided in Section 4(b), nothing contained
herein shall limit the right of Horizon to sponsor, create, market or
promote any investment company (as defined in Section 3(a)(1) of the
Investment Company Act of 1940, as amended, disregarding the
provisions of Sections 3(b) and 3(c) thereof), other than a UIT.
(b) Horizon covenants and agrees that, during the Term of this
Agreement, neither Horizon nor anyone acting on its behalf shall
be associated or involved with anyone in connection with the
creation, administration, management, marketing or sale of any
unit investment trust within the United States unless Horizon
shall have first promptly delivered a bona fide written offer to
Xxx Xxxxxx to act as sponsor, depositor, adviser, promoter,
underwriter or distributor of such a unit investment trust and
Xxx Xxxxxx shall have failed to provide a written acceptance of
such offer to Horizon within 15 days after receipt of such offer.
5. Assignment. Neither of the parties hereto may assign its respective
rights and obligations under this Agreement without the prior written
consent of the other party.
6. Relationship of the Parties. The parties understand and agree that
this Agreement shall not be deemed to create any partnership or joint
venture between Xxx Xxxxxx and Horizon, and that the services
performed hereunder by Horizon shall be as an independent contractor
and not as an employee or agent of Xxx Xxxxxx. Horizon shall have no
authority whatsoever to bind Xxx Xxxxxx on any agreement or obligation
and Horizon agrees that it shall not hold itself out as an employee or
agent of Xxx Xxxxxx.
7. Termination. (a) Horizon may terminate this Agreement immediately upon
a material breach of any representation, warranty or covenant of Xxx
Xxxxxx that is not remedied within ten (10) business days after
written notice.
(b) Xxx Xxxxxx may terminate this Agreement immediately upon a
material breach of any representation, warranty or covenant of
Horizon that is not remedied within ten (10) business days after
written notice thereof.
(c) Horizon and Xxx Xxxxxx may terminate this Agreement at any time
upon the execution by each party of a written agreement to that
effect.
Any termination under Section 7(a) or (b) shall not limit any other remedies
for breach the non-breaching party may have at law or in equity. Notwithstanding
any provision of this Agreement to the contrary, termination of this Agreement
shall not constitute termination of any Trust.
8. Confidentiality.
(a) The parties agree that certain material and information which has
or may come into the possession or knowledge of each party in
connection with this Agreement or the performance hereof (e.g.,
proprietary business information (including, without limitation,
the names and addresses or other personal information of
customers, distributors, information providers and suppliers)),
consists of confidential and proprietary data whose disclosure to
or use by third parties would be damaging. In addition, a party
may reasonably designate, by notice in writing delivered to the
other party, other information as being confidential or a trade
secret.
(b) All such proprietary or confidential information of each party
hereto shall be kept secret by the other party to the degree it
keeps secret its own confidential or proprietary information.
Such information belonging to any party shall not be disclosed by
another party to its employees, officers, agents, service
providers or affiliates, except on a need-to-know basis, but may
be disclosed by such other party to State, Federal, or other
governmental agencies, authorities or courts as required by law
or regulation, or upon their order or request provided prompt
notice of such order or request is given by such other party to
the party to which such information belongs, if such notice is
legally permitted.
(c) No information that would otherwise be proprietary or
confidential for purposes of this Agreement pursuant to
subsections (a) or (b) above shall be subject to the restrictions
on disclosure imposed by this Section in the event and to the
extent that (i) such information is in, or becomes part of, the
public domain otherwise than through the fault of a party to
which such information does not belong, (ii) such information was
known to such party prior to the execution of this Agreement, or
(iii) such information was revealed to such party by a third
person, and which the receiving party reasonably believes has
been obtained by such third person not in violation of any
existing confidentiality or non-disclosure agreement.
(d) Each party acknowledges and agrees that a breach of this Section
would cause a permanent and irreparable damage for which money
damages would be an inadequate remedy. Therefore, each party
shall be entitled to seek equitable relief (including injunction
and specific performance) in the event of any breach of the
provisions of this Section, in addition to all other remedies
available to such party at law or in equity.
(e) The covenants set forth in this Section shall survive the
termination of this Agreement.
9. Covenants. During the period of this Agreement and for as long as any
of the Trusts remains outstanding, each of the parties agree to:
(a) comply with all codes, regulations and laws applicable to the
performance of its obligations under this Agreement and obtain or
have obtained all necessary permits, licenses and other
authorizations necessary for such performance and maintain its
business reputation and good standing;
(b) take such other actions as the other parties hereto may
reasonably request to more effectively carry out its obligations
under this Agreement; and
(c) do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations, including, but
not by way of limitation, obtaining all consents, approvals, and
authorizations, required of such party in connection with the
consummation of the transactions contemplated by this Agreement.
No party shall take any action that would be expected to result
in any of its representations and warranties set forth in this
Agreement being or becoming untrue in any material respect.
In addition, Horizon may not refer to Xxx Xxxxxx or any affiliates in any
kind of communications, whether oral, written or electronic, or otherwise, and
whether in a Horizon piece or in response to questions of the media or others,
without Xxx Xxxxxx'x prior written consent, except that Horizon may state that
it licenses the Property to the Trusts and may describe the services provided
under this Agreement to the extent that such services are described in any
Registration Statement or other publicly available materials produced by Xxx
Xxxxxx.
10. Indemnification.
(a) In the event any claim is brought by any third party against
Horizon that relates to, arises out of or is based upon the
performance by Xxx Xxxxxx of its obligations hereunder, or the
failure of Xxx Xxxxxx, or any of Xxx Xxxxxx'x affiliates, as
applicable, to comply with any law, rule or regulation relating
to the Trusts, Horizon, as applicable, shall promptly notify Xxx
Xxxxxx, and Xxx Xxxxxx shall defend such claim at Xxx Xxxxxx'x
expense and under Xxx Xxxxxx'x control. Xxx Xxxxxx shall
indemnify and hold harmless Horizon against any judgment,
liability, loss, cost or damage (including litigation costs and
reasonable attorneys' fees) arising from or related to such claim
whether or not such claim is successful. Horizon shall have the
right, at its expense, to participate in the defense of such
claim through counsel of their own choosing; provided, however,
that Xxx Xxxxxx shall not be required to pay any settlement
amount that it has not approved in advance. Notwithstanding the
above, Horizon shall not be entitled to indemnification hereunder
to the extent that the judgment, liability, loss, cost or damage
arising from a claim for which indemnification is sought
hereunder results directly or indirectly from the gross
negligence or willful misconduct of Horizon.
(b) In the event any claim is brought by any third party against Xxx
Xxxxxx, any of the Trusts, or any of Xxx Xxxxxx'x affiliates that
relates to, arises out of or is based upon the performance by
Horizon of its respective obligations hereunder, or the failure
of Horizon to comply with any law, rule or regulation, Xxx
Xxxxxx, the Trusts, or Xxx Xxxxxx'x affiliates, as the case may
be, shall promptly notify Horizon and Horizon shall defend such
claim at its expense and under its control. Horizon shall
indemnify and hold harmless Xxx Xxxxxx, the Trusts, and Xxx
Xxxxxx'x affiliates against any judgment, liability, loss, cost
or damage (including litigation costs and reasonable attorneys'
fees) arising from or related to such claim, whether or not such
claim is successful. Xxx Xxxxxx, the Trusts, or Xxx Xxxxxx'x
affiliates, as the case may be, shall have the right, at their
expense, to participate in the defense of such claim through
counsel of their own choosing; provided, however, Horizon shall
not be required to pay any settlement amount that it has not
approved in advance. Notwithstanding the above, neither Xxx
Xxxxxx, the Trusts, nor any of Xxx Xxxxxx'x affiliates shall be
entitled to indemnification hereunder to the extent that the
judgment, liability, loss, cost or damage arising from a claim
for which indemnification is sought hereunder results directly or
indirectly from the gross negligence or willful misconduct of Xxx
Xxxxxx, the Trusts, or Xxx Xxxxxx'x affiliates.
(c) The indemnifications set forth in this Section shall survive the
termination of this Agreement for any cause whatsoever.
11. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York.
12. Waiver of Breach. The failure of any party to require the performance
of any term of this Agreement or the waiver of any party of any breach
hereunder shall not prevent a subsequent enforcement of such term nor
be deemed a waiver of any subsequent breach.
13. Scope of Agreement. This document constitutes the entire Agreement of
the parties with respect to the subject matter hereof, supersedes all
prior oral or written agreements, and can be amended only by a writing
executed by all of the parties.
14. Notices. All notices from any party to the other pursuant to this
Agreement shall be in writing or by facsimile transmission and shall
be sent to the following addresses, or to such addresses as the
parties hereto may be notified in writing from time to time:
If to Horizon:
Horizon Investment Services, LLC
0000 Xxxxxxx Xxxxxx
Xxxxxxx, XX 00000-0000
Attn: Xxxxxxx X. Xxxxxxx
If to Xxx Xxxxxx:
0 Xxxxxxxx Xxxxx
X.X. Xxx 0000
Xxxxxxxx Xxxxxxx, XX 00000-0000
Attn: Xxxxx Xxxxxxx
With copy to :
Xxx Xxxxxx Investments Inc.
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Office of the General Counsel
Notices shall be deemed given upon receipt via certified mail, overnight
courier, or hand delivery.
15. Severability. In the event that any provision of this Agreement or
application hereof to any person or in any circumstances shall be
determined to be invalid, unlawful, or unenforceable to any extent,
the remainder of this Agreement, and the application of any provision
to persons or circumstances other than those as to which it is
determined to be unlawful, invalid or enforceable, shall not be
affected thereby, and each remaining provision of this Agreement shall
continue to be valid and may be enforced to the fullest extent
permitted by law.
16. Conflicts. In the event that any provision in this Agreement conflicts
in any way with the trust agreement governing a particular Trust, the
provisions of the trust agreement in respect thereof shall control.
17. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, each of the parties hereto have caused this Agreement to
be executed by a duly authorized representative thereof as of the date first
above written.
XXX XXXXXX FUNDS INC.
By
Name_____________________________________________________
Title____________________________________________________
HORIZON INVESTMENT SERVICES, LLC
By
Name_____________________________________________________
Title____________________________________________________
EXHIBIT A
ENHANCED INDEX STRATEGIES
"The Dow Xxxxx Large Cap Growth Strategy"means:
Beginning with the stocks in the Dow Xxxxx U.S. Large Cap Growth Index (the
"Index"), the strategy excludes the bottom 20% of stocks based on market
capitalization. The strategy then ranks each remaining company in the Index from
highest to lowest based on the following strategy screens:
o Price/Sales to Five-Year Average - Current price/sales ratio divided
by median price/sales ratio over past 60 months,
o Price/Free Cash Flow Ratio - Stock price divided by per share free
cash flow over past four quarters. Free cash flow represents the net
change in cash from all items classified in the operating activities
section on a statement of cash flows, minus capital spending and cash
dividends,
o Price/Earnings Ratio - Stock price divided by earnings per share from
operations over past four quarters,
o Total Return for the Past Six Months - The percentage return on a
stock over most recent six months, reflecting dividends and change in
stock price,
o Long-Term Expected Profit Growth - The simple average of analysts'
estimates for five-year growth in earnings per share, and
o EPS Revisions Current Quarter - The net percentage of positive
profit-estimate revisions. First, the number of earnings estimates for
the next fiscal quarter that have been decreased from the prior month
are subtracted from the number that have been increased. Next, that
result is divided by the total number of earnings estimates for the
quarter.
The strategy assigns each stock a rank score for each of these categories
with the lowest score being 1 and the highest score being the total number of
stocks in the Index. The strategy ranks the remaining stocks by total score and
selects the top 20 stocks, provided that no more than 8 of the stocks in the
initial portfolio are selected from any single sector. If two stocks are
assigned the same total score, the stock with the higher score for Total Return
for the Past Six Months is ranked higher.
"The Dow Xxxxx Large Cap Value Strategy"means:
Beginning with the stocks in the Dow Xxxxx U.S. Large Cap Value Index (the
"Index"), the strategy excludes the bottom 20% of stocks based on market
capitalization. The strategy then ranks each remaining company in the Index from
highest to lowest based on the following strategy screens:
o Dividend Yield - The indicated annual dividend divided by the stock
price,
o Price/Book Value Ratio - Stock price divided by current book value per
share,
o Price/Sales Ratio - Stock price divided by per share sales over most
recent four quarters,
o Total Return for the Past Six Months - The percentage return on a
stock over most recent six months, reflecting dividends and change in
stock price,
o Long-Term Expected Profit Growth - The simple average of analysts'
estimates for five-year growth in earnings per share, and
o EPS Revisions Current Quarter - The net percentage of positive
profit-estimate revisions. First, the number of earnings estimates for
the next fiscal quarter that have been decreased from the prior month
are subtracted from the number that have been increased. Next, that
result is divided by the total number of earnings estimates for the
quarter.
The strategy assigns each stock a rank score for each of these categories
with the lowest score being 1 and the highest score being the total number of
stocks in the Index. The strategy ranks the remaining stocks by total score and
selects the top 20 stocks, provided that no more than 8 of the stocks in the
initial portfolio are selected from any single sector. If two stocks are
assigned the same total score, the stock with the higher score for Total Return
for the Past Six Months is ranked higher.
EXHIBIT B
LICENSE FEES
LICENSE FEES FOR TRUSTS THAT INVEST ONLY IN ENHANCED INDEX STRATEGIES
In connection with a Trust that initially invests all of its assets in
securities selected in accordance with one or more of the Enhanced Index
Strategies, the Trust shall pay license fees in accordance with the following:
During each Year (defined below) of the Term, Xxx Xxxxxx will provide to
Horizon a written report (each, a "Quarterly Report"), within 10 days after the
end of each Quarter (defined below), which sets forth (i) the asset balance for
the Trusts at such Quarter-end, and (ii) a calculation of the Rolling Average
Asset Balance (defined below) at such Quarter-end. Within 10 days after the end
of each Quarter during each Year of the Term, each applicable Trust will pay
(each, a "Quarterly Payment"), to Horizon, an amount equal to one-quarter of the
Basis Point Amount (defined below).
All amounts will be paid in cash or readily available funds and will be
non-refundable.
Definitions:
"Basis Point Amount" means, at any time during a Year, an amount equal to ten
(10) basis points (.10%) on the then Rolling Average Asset Balance.
"Quarter" means, with respect to any Year, the three-month period commencing
on the first day of such Year, and each succeeding three-month period during
such Year.
"Rolling Average Asset Balance" means, at any Quarter-end during a Year, the
average assets in the Trusts in the aggregate for the month then ended together
with all previous months in such Year, calculated by adding the month-end asset
balances for the Trusts for such months and dividing the result by the number of
such months.
"Year" means a twelve-month period commencing on the Effective Date or on any
anniversary of the Effective Date.
LICENSE FEES FOR MULTI-STRATEGY TRUSTS
In connection with a Trust that initially invests a portion of its assets
(but not all of its assets) in securities selected in accordance with one or
more of the Enhanced Index Strategies (a "Multi-Strategy Trust"), the Trust
shall pay license fees in accordance with the following:
During each Year (defined below) of the Term, Xxx Xxxxxx will provide to
Horizon a written report (each, a "Multi-Strategy Trust Quarterly Report"),
within 10 days after the end of each Quarter (defined below), which sets forth
(i) the asset balance for the Multi-Strategy Trusts at such Quarter-end, and
(ii) a calculation of the Multi-Strategy Trust Rolling Average Asset Balance
(defined below) at such Quarter-end. Within 10 days after the end of each
Quarter during each Year of the Term, each applicable Trust will pay (each, a
"Multi-Strategy Trust Quarterly Payment"), to Horizon, an amount equal to
one-quarter of the Multi-Strategy Trust Basis Point Amount (defined below).
All amounts will be paid in cash or readily available funds and will be
non-refundable.
Definitions:
"Multi-Strategy Trust Basis Point Amount" means, at any time during a Year,
an amount equal to ten (10) basis points (.10%) on the then Multi-Strategy Trust
Rolling Average Asset Balance multiplied by the Enhanced Sector Strategy Ratio.
"Quarter" means, with respect to any Year, the three-month period commencing
on the first day of such Year, and each succeeding three-month period during
such Year.
"Multi-Strategy Trust Rolling Average Asset Balance" means, at any
Quarter-end during a Year, the average assets in the Multi-Strategy Trusts in
the aggregate for the month then ended together with all previous months in such
Year, calculated by adding the month-end asset balances for the Multi-Strategy
Trusts for such months and dividing the result by the number of such months.
"Enhanced Index Strategy Ratio" means the portion of the initial assets in a
Multi-Strategy Trust invested in accordance with one or more of the Enhanced
Index Strategies as a percentage of all assets in such Multi-Strategy Trust at
the time of the creation of such Multi-Strategy Trust.
"Year" means a twelve-month period commencing on the Effective Date or on any
anniversary of the Effective Date.
