EXHIBIT (G)(1)
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DOMESTIC CUSTODY AGREEMENT
BETWEEN
THE EXCHANGE TRADED TRUST
AND
JPMORGAN CHASE BANK, N.A.
___________________, 200__
DOMESTIC CUSTODY AGREEMENT
TABLE OF CONTENTS
1. INTENTION OF THE PARTIES; DEFINITIONS 1
1.1 Intention of the Parties 1
1.2 Definitions 1
2. WHAT BANK IS REQUIRED TO DO 3
2.1 Set Up Accounts 3
2.2 Cash Account 3
2.3 Segregation of Assets; Nominee Name 4
2.4 Settlement of Trades 5
2.5 Contractual Settlement Date Accounting 5
2.6 Actual Settlement Date Accounting 6
2.7 Income Collection (Autocredit(R)) 6
2.8 Certain Ministerial Acts 6
2.9 Corporate Actions 6
2.10 Proxy Voting 7
2.11 Statements and Information Available On-Line 8
2.12 Access to Bank's Records 9
2.13 Tax Relief Services 9
3. INSTRUCTIONS 9
3.1 Acting on Instructions; Unclear Instructions 9
3.2 Confirmation of Oral Instructions/Security Devices 10
3.3 Instructions; Contrary to Law/Market Practice 10
3.4 Cut off Times 10
4. FEES EXPENSES AND OTHER AMOUNTS OWING TO BANK 10
4.1 Fees and Expenses 10
4.2 Overdrafts 11
4.3 Bank's Right Over Securities; Set-off 11
5. SECURITIES DEPOSITORIES AND AGENTS 11
5.1 Use of Depositories 11
5.2 Use of Agents 12
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6. ADDITIONAL PROVISIONS RELATING TO CUSTOMER 12
6.1 Representations of Customer and Bank 12
6.2 Customer to Provide Certain Information to Bank 13
6.3 Customer is Liable to Bank Even if it is Acting for Another Person 13
7. WHEN BANK IS LIABLE TO CUSTOMER 13
7.1 Standard of Care; Liability 13
7.2 Force Majeure 14
7.3 Bank May Consult With Counsel 15
7.4 Bank Provides Diverse Financial Services and May Generate
Profits as a Result 15
8. TAXATION 16
8.1 Tax Obligations 16
8.2 Tax Reclaims With Respect to American Depository Receipts 16
9. TERMINATION 17
10. MISCELLANEOUS 17
10.1 Notices 17
10.2 Successors and Assigns 18
10.3 Interpretation 18
10.4 Entire Agreement 18
10.5 Insurance 18
10.6 Governing Law and Jurisdiction 18
10.7 Severability and Waiver 19
10.8 Counterparts 19
10.9 No Third Party Beneficiaries 19
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DOMESTIC CUSTODY AGREEMENT
This Agreement, dated ____________________, 2006, is between JPMORGAN
CHASE BANK, N.A. ("Bank"), a national banking association organized and existing
under the laws of the United States of America, with a place of business at 0
XxxxxXxxxxXxxx Xxxxxx, Xxxxxxxx, Xxx Xxxx 00000; and THE EXCHANGE TRADED TRUST
("Customer") with a place of business at 000 Xxxx Xxxxxxxxx Xxxxxx, Xxxxx 0000,
Xxxxxxxxx, Xxxxxxxxx,00000.
WHEREAS, Customer is registered under the Investment Company Act of 1940,
as amended, (the "1940 Act"), as an open-end investment company, and is
authorized to issue shares of beneficial interest in separate portfolios, with
each such portfolios representing interests in securities and other assets;
WHEREAS, Bank is a bank having the qualifications prescribed in Section
26(a)(1) of the 1940 Act; and
WHEREAS, Customer desires to retain Bank to act as custodian of the cash
and securities of the only portfolio of Customer, the NYSE Arca Tech 100 ETF.
NOW THEREFORE, in consideration of the promises and mutual covenants
herein contained, and other good and valuable consideration, the receipt of
which is hereby acknowledged, the parties hereto, intending to be legally bound,
do hereby agree as follows.
1. INTENTION OF THE PARTIES; DEFINITIONS
1.1 Intention of the Parties.
(a) This Agreement sets out the terms governing custodial, settlement and
certain other associated services offered by Bank to Customer. Bank will be
responsible for the performance of only those services and duties that are set
forth in this Agreement. Customer acknowledges that Bank is not providing any
legal, tax or investment advice in connection with the services hereunder.
(b) It is the intention of the parties that the services offered by Bank
under this Agreement with respect to the custody of Securities and related
settlement services will be limited to Securities that are issued in the United
States ("U.S.") by an issuer that is organized under the laws of the U.S. or any
state thereof, or that are both traded in the U.S. and that are eligible for
deposit in a U.S. Securities Depository.
(c) Customer hereby appoints Bank as custodian of all Securities and cash
owned by or in possession of Customer at any time during the period of this
Agreement, on the terms and conditions set forth in this Agreement, and Bank
hereby accepts such appointment and agrees to perform the services and duties
set forth in this Agreement.
1.2 Definitions.
(a) As used herein, the following terms have the meaning hereinafter
stated.
"Account" has the meaning set forth in Section 2.1 of this Agreement.
"Affiliate" means an entity controlling, controlled by, or under common
control with, Bank.
"Applicable Law" means any statute, whether national, state or local,
applicable in the United States or any other country, the rules of the
treaty establishing the European Community, any other law, rule,
regulation or interpretation of any governmental entity, any applicable
common law, and any decree, injunction, judgment, order, ruling, or writ
of any governmental entity.
"Authorized Person" means any person who has been designated by written
notice from Customer (or by any agent designated by Customer, including,
without limitation, an investment manager) to act on behalf of Customer
hereunder. Such persons will continue to be Authorized Persons until such
time as Bank receives Instructions from Customer (or its agent) that any
such person is no longer an Authorized Person.
"Bank Indemnitees" means Bank, and its nominees, directors, officers,
employees and agents.
"Cash Account" has the meaning set forth in Section 2.1(a)(ii) of this
Agreement.
"Corporate Action" means any subscription right, bonus issue, stock
repurchase plan, redemption, exchange, tender offer, or similar matter
with respect to a Financial Asset in the Securities Account that require
discretionary action by the holder, but does not include proxy
solicitations.
"Entitlement Holder" means the person named on the records of a Securities
Intermediary as the person having a Securities Entitlement against the
Securities Intermediary.
"Financial Asset" means a Security and refers, as the context requires,
either to the asset itself or to the means by which a person's claim to it
is evidenced, including a Security, a security certificate, or a
Securities Entitlement. "Financial Asset" does not include cash.
"Instructions" means instructions which: (i) contain all necessary
information required by Bank to enable Bank to carry out the Instructions;
(ii) are received by Bank in writing or via Bank's electronic instruction
system, SWIFT, telephone, tested telex, facsimile or such other methods as
are for the time being agreed by Customer (or an Authorized Person) and
Bank; and (iii) Bank believes in good faith have been given by an
Authorized Person or are transmitted with proper testing or authentication
pursuant to terms and conditions which Bank may specify.
"Liabilities" means any liabilities, losses, claims, costs, damages,
penalties, fines, obligations, or expenses of any kind whatsoever
(including, without limitation, reasonable attorneys', accountants',
consultants' or experts' fees and disbursements).
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"Securities" means stocks, bonds, notes, certificates, rights, warrants
and other negotiable and non-negotiable instruments, whether issued in
certificated or uncertificated form, that are commonly traded or dealt in
on securities exchanges or financial markets. "Securities" also means
other obligations of an issuer, or shares, participations and interests in
an issuer recognized in the country in which it is issued or dealt in as a
medium for investment and any other property as may be acceptable to Bank
for the Securities Account.
"Securities Account" means each Securities custody account on Bank's
records to which Financial Assets are or may be credited pursuant hereto.
"Securities Depository" has the meaning set forth in Section 5.1 of this
Agreement.
"Securities Entitlement" means the rights and property interests of an
Entitlement Holder with respect to a Financial Asset as set forth in Part
5 of Article 8 of the Uniform Commercial Code of the State of New York, as
the same may be amended from time to time.
"Securities Intermediary" means Bank, a Securities Depository, and any
other financial institution which in the ordinary course of business
maintains Securities custody accounts for others and acts in that
capacity.
(b) All terms in the singular will have the same meaning in the plural
unless the context otherwise provides and visa versa.
2. WHAT BANK IS REQUIRED TO DO
2.1 Set Up Accounts.
(a) Bank will establish and maintain the following accounts ("Accounts"):
(i) a Securities Account in the name of Customer for Financial
Assets, which may be received by or on behalf of Bank for the
account of Customer, including as an Entitlement Holder; and
(ii) an account in the name of Customer ("Cash Account") for any
and all cash received by or on behalf of Bank for the account
of Customer.
(b) At the request of Customer, additional Accounts may be opened in the
future, which will be subject to the terms of this Agreement.
2.2 Cash Account.
(a) Except as otherwise provided in Instructions acceptable to Bank, all
cash held in the Cash Account by Bank will be deposited during the period it is
credited to the Accounts in one or more deposit accounts at Bank.
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(b) Whenever Customer instructs Bank to do so, Bank will arrange for the
automatic investment of cash in the Cash Account in mutual funds (including,
without limitation, the JPMorgan Money Market Funds and any other mutual fund
with respect to which Bank or an Affiliate of Bank serves as an investment
adviser, administrator, shareholder servicing agent, and/or custodian or
subcustodian and regardless of whether or not Bank or its Affiliate receives any
fees for services rendered to any such mutual fund in addition to the fees
received by Bank pursuant to this Agreement, all of which such fees Bank is
specifically authorized to retain) which Bank makes available for such purposes
and which Customer selects through instructions to Bank. Furthermore, in this
regard, Bank is directed automatically to arrange for the redemption of such
mutual fund shares as may be necessary to avoid any potential overdraft
hereunder that Bank perceives based upon the information available to Bank at
the time of such redemption or withdrawal. Customer agrees that it will read the
prospectus for any mutual fund prior to investing and acknowledges that
investments in mutual fund shares are not insured by the Federal Deposit
Insurance Corporation ("FDIC") and are not obligations of or guaranteed by Bank.
Customer further acknowledges that certain services for which Bank is paid fees
by mutual funds in which the Customer invests may overlap with the services Bank
provides under this Agreement.
(c) With Bank's consent, Customer may use as the Cash Account a separate
demand deposit account established by Customer at Bank which is electronically
linked to the Securities Account.
2.3 Segregation of Assets; Nominee Name.
(a) Bank will identify in its records that Financial Assets credited to
Customer's Securities Account belong to Customer (except as otherwise may be
agreed by Bank and Customer).
(b) Bank is authorized, in its discretion:
(i) to hold in bearer form, such Financial Assets as are
customarily held in bearer form or are delivered to Bank in
bearer form;
(ii) to hold Securities in or deposit Securities with any
Securities Depository, settlement system or dematerialized
book entry or similar systems a provided by Section 5.1(a) of
this Agreement ; and
(iii) to register in the name of Customer, Bank, a Securities
Depository, or their respective nominees, such Financial
Assets as are customarily held in registered form.
(c) Bank is authorized, when directed to do so by Customer, to hold
Financial Assets at third parties and to register Financial Assets in broker
"street name" or in the name of other third parties (or their nominees).
Notwithstanding Section 7.1, Bank shall have no liability for any loss of
Financial Assets or other damages resulting from holding or registering
Financial Assets as so directed by Customer.
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Customer authorizes Bank to hold Financial Assets in omnibus accounts and will
accept delivery of Financial Assets of the same class and denomination as those
with Bank.
2.4 Settlement of Trades.
When Bank receives an Instruction directing settlement of a transaction in
Financial Assets that includes all information required by Bank, Bank will use
reasonable care to effect such settlement as instructed. Settlement of
transactions in Financial Assets will be conducted in accordance with prevailing
standards of the market in which the transaction occurs. Without limiting the
generality of the foregoing, the risk of loss will be Customer's whenever Bank
delivers Financial Assets or payment in accordance with applicable market
practice in advance of receipt or settlement of the expected consideration. In
the case of the failure of Customer's counterparty (or other appropriate party)
to deliver the expected consideration as agreed, Bank will contact the
counterparty to seek settlement, but Bank will not be obligated to institute
legal proceedings, file a proof of claim in any insolvency proceeding, or take
any similar action.
2.5 Contractual Settlement Date Accounting.
(a) Should Customer request to have Bank's Contractual Settlement Date
Accounting Service, Bank will effect book entries on a "contractual settlement
date accounting" basis as described below with respect to the settlement of
trades in those markets where Bank generally offers contractual settlement date
accounting and will notify Customer of those markets from time to time.
(i) Sales: On the settlement date for a sale, Bank will credit the
Cash Account with the proceeds of the sale and transfer the
relevant Financial Assets to an account at Bank pending
settlement of the trade where not already delivered.
(ii) Purchases: On the settlement date for the purchase (or
earlier, if market practice requires delivery of the purchase
price before the settlement date), Bank will debit the Cash
Account for the settlement amount and credit a separate
account at Bank. Bank then will post the Securities Account as
awaiting receipt of the expected Financial Assets. Customer
will not be entitled to the Financial Assets that are awaiting
receipt until Bank actually receives them.
Bank reserves the right to restrict in good faith the availability of
contractual settlement date accounting for credit or operational reasons.
(b) Bank may (in its absolute discretion) upon oral or written
notification to Customer reverse any debit or credit made pursuant to Section
2.5(a) prior to a transaction's actual settlement, and Customer will be
responsible for any costs or liabilities resulting from such reversal. Customer
acknowledges that the procedures described in this sub-section are of an
administrative nature, and Bank does not undertake to make loans and/or
Financial Assets available to Customer.
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2.6 Actual Settlement Date Accounting.
With respect to any sale or purchase transaction that is not posted to the
Account on the contractual settlement date as referred to in Section 2.5, Bank
will post the transaction on the date on which the cash or Financial Assets
received as consideration for the transaction is actually received by Bank.
2.7 Income Collection (Autocredit(R)).
(a) Bank will credit the Cash Account with income and redemption proceeds
on Financial Assets in accordance with the times notified by Bank from time to
time on or after the anticipated payment date, net of any taxes that are
withheld by Bank or any third party. Where no time is specified for a particular
market, income and redemption proceeds from Financial Assets will be credited
only after actual receipt and reconciliation. Bank may reverse such credits upon
oral or written notification to Customer that Bank believes that the
corresponding payment will not be received by Bank within a reasonable period or
such credit was incorrect.
(b) Bank will make good faith efforts in its discretion to contact
appropriate parties to collect unpaid interest, dividends or redemption
proceeds, but Bank will not be obliged to file any formal notice of default,
institute legal proceedings, file a proof of claim in any insolvency proceeding,
or take any similar action.
2.8 Certain Ministerial Acts.
(a) Until Bank receives Instructions to the contrary, Bank will:
(i) present all Financial Assets for which Bank has received
notice of a call for redemption or that have otherwise
matured, and all income and interest coupons and other income
items that call for payment upon presentation;
(ii) execute in the name of Customer such certificates as may be
required to obtain payment in respect of Financial Assets; and
(iii) exchange interim or temporary documents of title held in the
Securities Account for definitive documents of title.
(b) Bank may provide information concerning the Accounts to Securities
Depositories, counterparties, issuers of Financial Assets, governmental
entities, securities exchanges, self-regulatory entities, and similar entities
to the extent required by Applicable Law or as may be required in the ordinary
course by market practice or otherwise in order to provide the services
contemplated by this Agreement.
2.9 Corporate Actions.
(a) Bank will notify Customer of any Corporate Action of which information
is either (i) received by it to the extent that Bank's central corporate actions
department has actual knowledge of the Corporate Action in time to notify its
customers in a timely manner; or (ii) published via a formal notice in
publications and reporting services routinely used by Bank for this purpose in
time for Bank to notify its customers in a timely manner. Bank also will use its
reasonable efforts to notify Customer of any class action litigation for which
information is actually received by Bank's central corporate actions department
but shall not be liable for any Liabilities arising out of Bank's failure to
identify Customer's interest in any class action litigation. Bank does not
commit, however, to provide information concerning Corporate Actions or class
action litigation relating to Financial Assets being held at Customer's request
in a name not subject to the control of Bank.
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(b) If an Authorized Person fails to provide Bank with timely Instructions
regarding Customer's desire to take action with respect to any Corporate Action
or class action, neither Bank nor its nominees will take any action in relation
to that Corporate Action or class action, except as otherwise agreed in writing
by Bank and Customer or as may be set forth by Bank as a default action in the
notification it provides under Section 2.9(a) with respect to that Corporate
Action or class action.
(c) Bank may sell or otherwise dispose of fractional interests in
Financial Assets arising out of a Corporate Action or class action and, to the
extent necessary to protect Customer's interest in that Corporate Action or
class action, credit the Cash Account with the proceeds of the sale or
disposition. If some, but not all, of an outstanding class of Financial Asset is
called for redemption, Bank may allot the amount redeemed among the respective
beneficial holders of such class of Financial Asset in any manner Bank deems to
be fair and equitable.
(d) Notices of Corporate Actions and class actions dispatched to Customer
may have been obtained from sources which Bank does not control and may have
been translated or summarized. Although Bank believes such sources to be
reliable, Bank has no duty to verify the information contained in such notices
nor the faithfulness of any translation or summary and therefore does not
guarantee its accuracy, completeness or timeliness, and shall not be liable to
Customer for any loss that may result from relying on such notice.
2.10 Proxies.
(a) Subject to and upon the terms of this sub-section, Bank will provide
Customer with information which it receives on matters to be voted upon at
meetings of holders of Financial Assets ("Notifications"), and Bank will act in
accordance with Customer's Instructions in relation to such Notifications. If
information is received by Bank at its proxy voting department too late to
permit timely voting by Customer, Bank's only obligation will be to provide, so
far as reasonably practicable, a Notification (or summary information concerning
a Notification) on an "information only" basis.
(b) Bank will act upon Instructions to vote on matters referred to in a
Notification, provided Instructions are received by Bank at its proxy voting
department by the deadline referred to in the relevant Notification. If
Instructions are not received in a timely manner, Bank will not be obligated to
provide further notice to Customer and shall not be obliged to vote. It is
Customer's obligation to monitor the agreed means of providing Notifications to
determine if new Notifications have been received.
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(c) Customer acknowledges that the provision of proxy voting services may
be precluded or restricted under a variety of circumstances. These circumstances
include, but are not limited to:
(i) the Financial Assets being on loan or out for registration;
(ii) the pendency of conversion or another Corporate Action;
(iii) Financial Assets being held at Customer's request in a name
not subject to the control of Bank;
(iv) Financial Assets being held in a margin or collateral account
at Bank or another bank or broker, or otherwise in a manner
which affects voting; and
(v) local market regulations or practices, or restrictions by the
issuer.
(d) Notwithstanding the fact that Bank may act in a fiduciary capacity
with respect to Customer under other agreements, in performing proxy voting
services, Bank will be acting solely as the agent of Customer, and will not
exercise any discretion with regard to such proxy voting services or vote any
proxy except when directed by an Authorized Person.
2.11 Statements and Information Available On-Line.
(a) Bank will send, or make available on-line, to Customer on a daily
basis an activity statement and summary of all transfers to or from the Accounts
on the day following such transfers and on a monthly basis a formal, detailed
statement of account in Bank's standard format for each Account maintained by
Customer with Bank, identifying the Financial Assets and cash held in each
Account (each such statement a "Statement of Account"). Additionally, Bank will
send (or make available on-line) to Customer an advice or notification of any
transfers of cash or Financial Assets with respect to each Account. Unless Bank
receives from Customer a written notice or objection with regard to any matter
set forth in those portions of any Statement of Account or any such advice or
notification (or reasonably implied therefrom) within sixty (60) days of receipt
of the Statement of Account, Bank will not be liable with respect to such
matters, advice or notification, provided such matter is not the result of
Bank's willful misconduct or bad faith. References in this Agreement to
Statements of Account include Statements of Account in electronic form.
(b) As Customer may reasonably request from time to time, Bank shall
provide Customer with the published reports from its outside auditor on the
internal accounting controls and procedures for safeguarding Financial Assets,
which are employed by Bank.
(c) Prices and other information obtained from third parties which may be
contained in any Statement of Account or other statement sent to Customer have
been obtained from sources Bank believes to be reliable. Bank does not, however,
make any representation as to the accuracy of such information or that the
prices specified necessarily reflect the proceeds that would be received on a
disposal of the relevant Financial Assets.
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(d) Customer acknowledges that, except for Statements of Account or as
otherwise expressly agreed by Bank, records and reports available to it on-line
may not be accurate due to mis-postings, delays in updating Account records, and
other causes. Bank will not be liable for any loss or damage arising out of the
inaccuracy of any such records or reports accessed on-line, unless such loss or
damage is the result of Bank's bad faith or willful misconduct.
2.12 Records.
(a) Bank shall maintain complete and accurate records with respect to
Financial Assets, cash or other property held for Customer's account, including
(i) records of original entry containing an itemized daily record in detail of
all receipts and deliveries of Securities and all receipts and disbursements of
cash; (ii) records reflecting (A) Securities in transfer (i.e., Securities out
for re-registration with the transfer agent in connection with a purchase or
sale) , (B) Securities in physical possession,, and (C) dividends and interest
received, and (E) dividend receivable and interest receivable. Bank shall keep
such other books and records applicable to its custody services hereunder as
Customer may reasonably request, including those required by Section 31 of the
1940 Act and the rules promulgated thereunder.
(b) All such books and records maintained by Bank shall (i) be maintained
in a form reasonably acceptable to Customer and, subject to Customer's
notification and advice to Bank of the applicable rules and regulations, in
compliance with such rules and regulations of the Securities and Exchange
Commission ("SEC"), (ii) be the property of Bank and at all times during the
regular business hours of Bank be made available upon request for inspection by
duly authorized officers, employees or agents of Customer and employees or
agents of the SEC, and (iii) if required to be maintained by the rules
promulgated under the 1940 Act, be preserved for the periods prescribed in such
rules.
(c) Bank will allow Customer's independent public accountants such
reasonable access to the records of Bank relating to Financial Assets as is
required in connection with their examination of books and records pertaining to
Customer's affairs.
2.13 Tax Relief Services.
Bank will provide tax relief services as provided in Section 8.2.
3. INSTRUCTIONS
3.1 Acting on Instructions; Unclear Instructions.
(a) Customer authorizes Bank to accept and act upon any Instructions
received by it without inquiry. Customer will indemnify the Bank Indemnitees
against, and hold each of them harmless from, any Liabilities that may be
imposed on, incurred by, or asserted against the Bank Indemnitees as a result of
any action or omission taken in reliance on Instructions in the absence of
Bank's bad faith or willful misconduct. Further, it is understood that Bank
shall remain responsible for its proper execution of those Instructions without
negligence.
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(b) Unless otherwise expressly provided, all Instructions will continue in
full force and effect until canceled or superseded.
(c) Bank may (in its sole discretion and without affecting any part of
this Section 3.1), when reasonably necessary, seek clarification or confirmation
of an Instruction from an Authorized Person and may decline to act upon an
Instruction if it does not receive clarification or confirmation satisfactory to
it. Bank will not be liable for any loss arising from any delay while it seeks
such clarification or confirmation.
(d) In executing or paying a payment order Bank may rely upon the
identifying number (e.g. Fedwire routing number or account) of any party as
instructed in the payment order. Customer assumes full responsibility for any
inconsistency between the name and identifying number of any party in payment
orders issued to Bank in Customer's name, except where such inconsistency is the
result of Bank's own negligence, bad faith or willful misconduct.
3.2 Confirmation of Oral Instructions/Security Devices.
Any Instructions delivered to Bank by telephone will promptly thereafter
be confirmed in writing by an Authorized Person. Each confirmation is to be
clearly marked "Confirmation". Bank will not be liable for having followed such
Instructions notwithstanding the failure of an Authorized Person to send such
confirmation in writing or the failure of such confirmation to conform to the
telephone Instructions received. Either party may record any of their telephonic
communications. Customer will comply with any security procedures reasonably
required by Bank from time to time with respect to verification of Instructions.
Customer will be responsible for safeguarding any test keys, identification
codes or other security devices that Bank will make available to Customer or any
Authorized Person.
3.3 Instructions; Contrary to Law/Market Practice.
Bank need not act upon Instructions which it reasonably believes to be
contrary to law, regulation or market practice and Bank will be under no duty to
investigate whether any Instructions comply with Applicable Law or market
practice.
3.4 Cut-off Times.
Bank has established cut-off times for receipt of some categories of
Instruction, which will be made available to Customer. If Bank receives an
Instruction after its established cut-off time, Bank will attempt to act upon
the Instruction on the day requested if Bank deems it practicable to do so or
otherwise as soon as practicable on the next business day. Bank will notify
Customer if Instructions cannot be acted upon on the day requested.
4. FEES, EXPENSES AND OTHER AMOUNTS OWING TO BANK
4.1 Fees and Expenses.
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Customer will pay Bank for its services hereunder the fees set forth in
Schedule A hereto or such other amounts as may be agreed upon in writing from
time to time, together with Bank's reasonable out-of-pocket or incidental
expenses as are reasonably incurred by Bank in performing its duties hereunder,
including, but not limited to, legal fees and tax or related fees incidental to
processing by governmental authorities, issuers, or their agents. Bank may
increase such fees by not less than thirty (30) days' notice in writing to
Customer. Without prejudice to Bank's other rights, Bank reserves the right to
charge interest on overdue amounts from the due date until actual payment at
such rate as Bank may reasonably determine.
4.2 Overdrafts.
Customer will have sufficient immediately available funds each day in the
Cash Account (without regard to any Cash Account investments) to pay for the
settlement of all Financial Assets delivered against payment to Customer and
credited to the Securities Account. If a debit to the Cash Account results (or
will result) in a debit balance, then Bank may, in its discretion, (i) advance
an amount equal to the overdraft, (ii) refuse to settle in whole or in part the
transaction causing such debit balance, or (iii) if any such transaction is
posted to the Securities Account, reverse any such posting. If Bank elects to
make such an advance, the advance will be deemed a loan to Customer, payable on
demand, bearing interest at the applicable rate charged by Bank from time to
time, for such overdrafts, from the date of such advance to the date of payment
(both after as well as before judgment) and otherwise on the terms on which Bank
makes similar overdrafts available from time to time. No prior action or course
of dealing on Bank's part with respect to the settlement of transactions on
Customer's behalf will be asserted by Customer against Bank for Bank's refusal
to make advances to the Cash Account or to settle any transaction for which
Customer does not have sufficient available funds in the Cash Account.
4.3 Bank's Right Over Securities; Set-off.
(a) Customer grants Bank a security interest in and a lien on the
Financial Assets held in the Securities Account as security for any and all
amounts which are now or become owing to Bank under any provision of this
Agreement (except such as may result from Bank's bad faith, or willful
misconduct), whether or not matured or contingent ("Indebtedness").
(b) Without prejudice to Bank's rights under Applicable Law, Bank may set
off against any Indebtedness any amount standing to the credit of any of
Customer's accounts (whether deposit or otherwise) with any Bank branch or
office or with any Affiliate of Bank. For this purpose, Bank shall be entitled
to accelerate the maturity of any fixed term deposits.
5. SECURITIES DEPOSITORIES AND OTHER AGENTS
5.1 Use of Securities Depositories.
(a) Bank may deposit Financial Assets with, and hold Financial Assets in,
any Securities Depository, settlement system, dematerialized book entry system
or similar system (together a "Securities Depository") on such terms as such
systems customarily operate and Customer will provide Bank with such
documentation or acknowledgements that Bank may require to hold the Financial
Assets in such systems.
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(b) Bank will not be liable for any act or omission by (or the insolvency
of) any Securities Depository. In the event Customer incurs a loss due to the
negligence, willful misconduct, or insolvency of a Securities Depository, Bank
will make good faith efforts, in its discretion, to seek recovery from the
Securities Depository, but Bank will not be obligated to institute legal
proceedings, file a proof of claim in any insolvency proceeding, or take any
similar action.
(c) With respect to its responsibilities under this Section 5.1 and
pursuant to Rule 17f-4 under the 1940 Act, Bank shall (i) exercise due care in
accordance with reasonable commercial standards in discharging its duty as a
Securities Intermediary to obtain and thereafter maintain such Financial Assets
with Securities Depositories, (ii) provide, promptly upon request by Customer,
such published reports as are available concerning Bank's internal accounting
controls and financial strength, including, but not limited to, Bank's SAS 70
Report prepared by Bank's external auditors and (iii) to the extent that Bank
uses subcustodians, that are Securities Intermediaries and qualified to act as
custodians, in connection with the custody services under this Agreement,
require any such subcustodian to exercise due care in accordance with reasonable
commercial standards in discharging its duty as a Securities Intermediary to
obtain and thereafter maintain Financial Assets corresponding to the Security
Entitlements of its Entitlement Holders.
5.2 Use of Agents.
(a) Bank may provide certain services under this Agreement through third
parties which may be Affiliates. Bank will not be responsible for any loss as a
result of a failure by any broker or any other third party that it selects and
retains using reasonable care to provide ancillary services that it may not
customarily provide itself, including, without limitation, delivery services and
providers of information regarding matters such as pricing, proxy voting,
Corporate Actions and class action litigation. Nevertheless, Bank will be liable
for the performance of any such broker selected by Bank that is an Affiliate to
the same extent as Bank would have been liable if it performed such services
itself.
(b) In the case of the sale under Section 2.9(c) of a fractional interest
(or in other cases where Customer has requested Bank to arrange for execution of
a trade) Bank will place trades with a broker which is an Affiliate provided
that Bank has established a program for such trading with such Affiliate. An
Affiliate broker may charge its customary commission (or retain its customary
spread) with respect to any such transaction.
6. ADDITIONAL PROVISIONS RELATING TO CUSTOMER
6.1 Representations of Customer and Bank.
(a) Customer represents and warrants that (i) it has full authority and
power, and has obtained all necessary authorizations and consents, to deposit
and control the Financial Assets and cash in the Accounts, to use Bank as its
custodian in accordance with the terms of this Agreement, to borrow money or
otherwise incur indebtedness as contemplated by this Agreement, to pledge
Financial Assets as contemplated by Section 4.3; (ii) assuming execution and
delivery of this Agreement by Bank, this Agreement is Customer's legal, valid
and binding obligation, enforceable in accordance with its terms and it has full
power and authority to enter into and has taken all necessary corporate action
to authorize the execution of this Agreement; (iii) it has not relied on any
oral or written representation made by Bank or any person on its behalf, and
acknowledges that this Agreement sets out to the fullest extent the duties of
Bank; and (iv) it is a resident of the United States and shall notify Bank of
any changes in residency.
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(b) Bank represents and warrants that (i) assuming execution and delivery
of this Agreement by Customer, this Agreement is Bank's legal, valid and binding
obligation, enforceable in accordance with its terms; (ii) it is duly organized
and existing under the laws of the jurisdiction of its organization, with full
power to carry on business as now conducted, to enter into this Agreement and to
perform its obligations hereunder; (iii) it has full power and authority to
enter into this Agreement and has taken all necessary corporate action to
authorize the execution of this Agreement; and (iv) it is conducting business
its institutional custody services business in compliance in all material
respects with all applicable laws and regulations, both state and federal, has
obtained all regulatory approvals necessary to carry on such business as now
conducted and there is no statute, rules, regulation, order or judgment binding
on it and no provision of its charter, bylaws or any contract binding it or
affecting its property that would prohibit its execution or performance of this
Agreement.
Each party may rely upon the above or the certification of such other facts as
may be required to administer its obligations hereunder.
6.2 Customer to Provide Certain Information to Bank.
Upon request, Customer will promptly provide to Bank such information
about itself and its financial status as Bank may reasonably request, including
Customer's organizational documents and its current audited and unaudited
financial statements.
6.3 Customer is Liable to Bank Even if it is Acting for Another Person.
If Customer is acting as an agent for a disclosed or undisclosed principal
in respect of any transaction, cash, or Financial Asset, Bank nevertheless will
treat Customer as its principal for all purposes under this Agreement. In this
regard, Customer will be liable to Bank as a principal in respect of any
transactions relating to the Account. The foregoing will not affect any rights
Bank might have against Customer's principal.
7. WHEN BANK IS LIABLE TO CUSTOMER
7.1 Standard of Care; Liability.
(a) Bank will use reasonable care in performing its obligations under this
Agreement. Bank will not be in violation of this Agreement with respect to any
matter as to which it has satisfied its obligation of reasonable care.
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(b) Bank will be liable for Customer's direct damages to the extent they
result from Bank's bad faith, negligence or willful misconduct in performing its
duties as set out in this Agreement. Nevertheless, under no circumstances will
Bank be liable for any indirect, consequential or special damages (including,
without limitation, lost profits) of any form incurred by any person or entity,
whether or not foreseeable and regardless of the type of action in which such a
claim may be brought, with respect to the Accounts, Bank's performance hereunder
or Bank's role as custodian.
(c) Customer will indemnify the Bank Indemnitees against, and hold them
harmless from, any Liabilities that may be imposed on, incurred by or asserted
against any of the Bank Indemnitees in connection with or arising out of (i)
Bank's performance under this Agreement, provided the Bank Indemnitees have not
acted with negligence or engaged in fraud or willful misconduct in connection
with the Liabilities in question or (ii) any Bank Indemnitee's status as a
holder of record of Customer's Financial Assets.
(d) Without limiting Subsections 7.1(a), (b) or (c), Bank will have no
duty or responsibility to: (i) question Instructions or make any suggestions to
Customer or an Authorized Person regarding such Instructions; (ii) supervise or
make recommendations with respect to investments or the retention of Financial
Assets; (iii) advise Customer or an Authorized Person regarding any default in
the payment of principal or income of any security other than as provided in
Section 2.7(b) of this Agreement; (iv) evaluate or report to Customer or an
Authorized Person regarding the financial condition of any broker, agent or
other party to which Bank is instructed to deliver Financial Assets or cash; or
(v) review or reconcile trade confirmations received from brokers (and Customer
or its Authorized Persons issuing Instructions will bear any responsibility to
review such confirmations against Instructions issued to and Statements of
Account issued by Bank).
7.2 Force Majeure.
(a) Bank will maintain and update from time to time business continuation
and disaster recovery procedures with respect to its custody business that it
determines from time to time meet reasonable commercial standards. Neither party
will have any liability, however, for any damage, loss, expense or liability of
any nature that may be suffered or incurred, caused by an act of God, fire,
flood, civil or labor disturbance, war, terrorism, act of any governmental
authority or other act or threat of any authority (de jure or de facto), legal
constraint, fraud or forgery, malfunction of equipment or software (except where
such malfunction is primarily attributable to Bank's negligence in maintaining
the equipment or software), failure of or the effect of rules or operations of
any external funds transfer system, inability to obtain or interruption of
external communications facilities, or any cause beyond the reasonable control
of either party (including without limitation, the non-availability of
appropriate foreign exchange). However, that in the event of a failure or delay,
Bank (i) shall not discriminate against Customer in favor of any other customer
of Bank in making computer time and personnel available to input of process the
transactions contemplated by this Agreement, and (ii) shall use its best efforts
to ameliorate the effects of any such failure or delay. (Each such event
hereinbefore described a "Force Majeure"). If, as a result of a Force Majeure,
Bank is rendered unable, in whole or in part, to carry out its obligations under
this Agreement (including, without limitation, the payment of money) then the
obligations of Bank, so far as and to the extent that the obligations are
affected by such Force Majeure, shall be suspended during the continuation of
any inability so caused. Bank shall use reasonable efforts to resume service and
mitigate loss to Customer through implementation of its disaster recovery and
business continuation plan. Bank shall promptly notify Customer of a Force
Majeure that may affect services provided to Customer under this Agreement.
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(b) Whenever a Force Majeure causes Bank to allocate limited resources
between or among Banks customers, Customer shall receive no less priority
treatment than is accorded to other similarly situated customers of Bank, with
respect to such allocation.
7.3 Bank May Consult With Counsel.
Bank will be entitled to rely on, and may act upon the advice of
professional advisers in relation to matters of law, regulation or market
practice (which may be the professional advisers of Customer), and will not be
liable to Customer for any action reasonably taken or omitted pursuant to such
advice. Bank shall promptly notify Customer of any action taken or omitted by
Bank pursuant to such advice.
7.4 Bank Provides Diverse Financial Services and May Generate Profits as a
Result.
Customer acknowledges that Bank or its Affiliates may have a material
interest in transactions entered into by Customer with respect to the Accounts
or that circumstances are such that Bank may have a potential conflict of duty
or interest. For example, Bank or its Affiliates may act as a market maker in
the Financial Assets to which Instructions relate, provide brokerage services to
other customers, act as financial adviser to the issuer of such Financial
Assets, act in the same transaction as agent for more than one customer, have a
material interest in the issue of the Financial Assets; or earn profits from any
of these activities. Customer further acknowledges that Bank or its Affiliates
may be in possession of information tending to show that the Instructions
received may not be in the best interests of Customer but that Bank is not under
any duty to disclose any such information. However, Bank's interests or
conflicts shall not interfere with Bank's provision of services to Customer
under this Agreement.
7.5 Proprietary and Confidential Information.
Bank agrees on behalf of itself and its directors, officers and employees
to treat confidentially and as proprietary information of the Customer, all
records and other information relative to Customer and prior, present or
potential shareholders of Customer (and clients of said shareholders), and not
to use such records and information for any purpose other than the performance
of its responsibilities and duties hereunder, except (i) after prior
notification to and approval in writing by Customer, which approval shall not be
unreasonably withheld and may not be withheld where Bank may be exposed to civil
or criminal contempt proceedings for failure to comply, (ii) when requested to
divulge such information by duly constituted authorities, or (iii) when so
requested by the Customer. Records and other information which have become known
to the public through no wrongful act of Bank or any of its employees, agents or
representatives, and information that was already in the possession of Bank
prior to receipt thereof from Customer or its agent, shall not be subject to
this paragraph.
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Further, Bank will adhere to the privacy policies adopted by Customer
pursuant to Title V of the Xxxxx-Xxxxx-Xxxxxx Act, as may be modified from time
to time, and any other rules or regulations Customer must abide by. In this
regard, Bank shall have in place and maintain physical, electronic and
procedural safeguards reasonably designed to protect the security,
confidentiality and integrity of, and to prevent unauthorized access to and use
of, records and information relating to Customer and its shareholders.
8. TAXATION
8.1 Tax Obligations.
(a) Customer confirms that Bank is authorized to deduct from any cash
received or credited to the Cash Account any taxes or levies required by any
revenue or governmental authority for whatever reason in respect of Customer's
Accounts.
(b) Customer will provide to Bank such certifications, documentation, and
information as it may require in connection with taxation, and warrants that,
when given, this information is true and correct in every respect, not
misleading in any way, and contains all material information. Customer
undertakes to notify Bank immediately if any information requires updating or
correcting. Bank shall not be liable for any taxes, penalties, interest or
additions to tax, payable or paid that result from (i) the inaccurate completion
of documents by Customer or any third party; (ii) the provision to Bank or a
third party of inaccurate or misleading information by Customer or any third
party; (iii) the withholding of material information by Customer or any third
party; or (iv) any delay by any revenue authority or any other cause beyond
Bank's control.
(c) If Bank does not receive appropriate certifications, documentation and
information then, as and when appropriate and required, additional tax shall be
deducted from all income received in respect of the Financial Assets issued
(including, but not limited to, United States non-resident alien tax and/or
backup withholding tax).
(d) Customer will be responsible in all events for the timely payment of
all taxes relating to the Financial Assets in the Securities Account. Customer
will indemnify and hold Bank harmless from and against any and all liabilities,
penalties, interest or additions to tax with respect to or resulting from, any
delay in, or failure by, Bank (i) to pay, withhold or report any U.S. federal,
state or local taxes or foreign taxes imposed on, or (ii) to report interest,
dividend or other income paid or credited to the Cash Account, regardless of the
reason for such delay or failure; provided however, that Customer will not be
liable to Bank for any penalty or additions to tax due solely as a result of
Bank's negligent acts or omissions with respect to paying or withholding tax or
reporting interest, dividend or other income paid or credited to the Cash
Account.
8.2 Tax Relief Services With Respect to American Depository Receipts.
(a) Subject to the provisions of this Section, Bank will apply for a
reduction of withholding tax and any refund of any tax paid or tax credits in
respect of income payments on Financial Assets comprising American Depository
Receipts credited to the Securities Account that Bank believes may be available.
To defray expenses pertaining to nominal tax claims, Bank may from time-to-time
set minimum thresholds as to a de minimus value of tax relief claims or
reduction of withholding which it will pursue in respect of income payments
under this Section 8.2.
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(b) The provision of a tax relief service by Bank is conditional upon Bank
receiving from Customer (i) a declaration of its identity and place of residence
and (ii) certain other documentation (pro forma copies of which are available
from Bank), prior to the receipt of Financial Assets comprising American
Depository Receipts in the Account or the payment of income.
(c) Bank will perform tax relief services only with respect to taxation
levied by the revenue authorities of the countries advised to Customer from time
to time and Bank may, by notification in writing, in its absolute discretion,
supplement or amend the countries in which the tax relief services are offered.
Other than as expressly provided in this Section 8.2, Bank will have no
responsibility with regard to Customer's tax position or status in any
jurisdiction.
(d) Customer confirms that Bank is authorized to disclose any information
requested by any revenue authority or any governmental entity in relation to the
processing of any tax relief claim.
9. TERMINATION
Either party may terminate this Agreement on sixty (60) days' written
notice to the other party. If Customer gives notice of termination, it must
provide full details of the persons to whom Bank must deliver Financial Assets
and cash. If Bank gives notice of termination, then Customer must, within sixty
(60) days, notify Bank of details of its new custodian, failing which Bank may
elect (at any time after the sixty day notice period) either to retain the
Financial Assets and cash until such details are given, continuing to charge
fees due (in which case Bank's sole obligation will be for the safekeeping of
the Financial Assets and cash), or deliver the Financial Assets and cash to
Customer. Bank will in any event be entitled to deduct any amounts owing to it
prior to delivery of the Financial Assets and cash (and, accordingly, Bank will
be entitled to sell Financial Assets and apply the sale proceeds in satisfaction
of amounts owing to it). Customer will reimburse Bank promptly for all
out-of-pocket expenses it incurs in delivering Financial Assets upon
termination. Termination will not affect any of the liabilities either party
owes to the other arising under this Agreement prior to such termination. In
addition, either party may, at any time, immediately terminate this Agreement in
the event, in the case of the other party, of the appointment of a conservator
or receiver of such party by regulatory authorities or upon the happening of a
like event at the direction of an appropriate regulator agency or court of
competent jurisdiction.
10. MISCELLANEOUS
10.1 Notices.
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Notices (other than Instructions) will be served by registered mail or
hand delivery to the address of the respective parties as set out on the first
page of this Agreement, unless notice of a new address is given to the other
party in writing. Notice will not be deemed to be given unless it has been
received and shall be deemed to have been given on the date received.
10.2 Successors and Assigns.
This Agreement will be binding on each of the parties' successors and
assigns, but the parties agree that neither party can assign its rights and
obligations under this Agreement without the prior written consent of the other
party, which consent will not be unreasonably withheld.
10.3 Interpretation.
Headings are for convenience only and are not intended to affect
interpretation. References to sections are to sections of this Agreement and
references to sub-sections and paragraphs are to sub-sections of the sections
and paragraphs of the sub-sections in which they appear.
10.4 Amendment.
This Agreement may not be amended or modified in any manner except by
written agreement executed by Bank and Customer.
10.5 Entire Agreement.
This Agreement, including the Schedules, Exhibits, and the Rider (and any
separate agreement which Bank and Customer may enter into with respect to any
Cash Account), sets out the entire Agreement between the parties in connection
with the subject matter, and this Agreement supersedes any other agreement,
statement, or representation relating to custody, whether oral or written.
Amendments must be in writing and signed by both parties.
10.6 Governing Law and Jurisdiction.
This Agreement will be construed, regulated, and administered under the
laws of the United States, including any rule, regulation, law or order of the
SEC, or State of New York, as applicable, without regard to New York's
principles regarding conflict of laws, except that New York General Obligations
Law Sections 1401 and 1402 shall continue to apply. The United States District
Court for the Southern District of New York will have the sole and exclusive
jurisdiction over any lawsuit or other judicial proceeding relating to or
arising from this Agreement. If that court lacks federal subject matter
jurisdiction, the Supreme Court of the State of New York, New York County will
have sole and exclusive jurisdiction. Either of these courts will have proper
venue for any such lawsuit or judicial proceeding, and the parties waive any
objection to venue or their convenience as a forum. The parties agree to submit
to the jurisdiction of any of the courts specified and to accept service of
process to vest personal jurisdiction over them in any of these courts. The
parties further hereby knowingly, voluntarily and intentionally waive, to the
fullest extent permitted by Applicable Law, any right to a trial by jury with
respect to any such lawsuit or judicial proceeding arising or relating to this
Agreement or the transactions contemplated hereby.
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10.7 Severability; Waiver; and Survival.
(a) If one or more provisions of this Agreement are held invalid, illegal
or unenforceable in any respect on the basis of any particular circumstances or
in any jurisdiction, the validity, legality and enforceability of such provision
or provisions under other circumstances or in other jurisdictions and of the
remaining provisions will not in any way be affected or impaired.
(b) Except as otherwise provided herein, no failure or delay on the part
of either party in exercising any power or right hereunder operates as a waiver,
nor does any single or partial exercise of any power or right preclude any other
or further exercise, or the exercise of any other power or right. No waiver by a
party of any provision of this Agreement, or waiver of any breach or default, is
effective unless it is in writing and signed by the party against whom the
waiver is to be enforced.
(c) Each party's rights, protections, and remedies under this Agreement
shall survive its termination.
10.8 Counterparts.
This Agreement may be executed in several counterparts each of which will
be deemed to be an original and together shall constitute one and the same
agreement.
10.9 No Third Party Beneficiaries.
A person who is not a party to this Agreement shall have no right to
enforce any term of this Agreement.
10.10 Security Holding Disclosure.
With respect to Rule 14b-2(b)(1)(ii) under Securities and Exchange Act of
1934, regarding disclosure of beneficial owners' information to issuers of
Securities, Bank is instructed not to disclose the name, address or Security
positions of Customer in response to shareholder communications requests
regarding the Account.
10.11 USA PATRIOT Act Disclosure.
Section 326 of the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 ("USA
PATRIOT Act") requires Bank to implement reasonable procedures to verify the
identity of any person that opens a new account with Bank. Accordingly, Customer
acknowledges that Section 326 of the USA PATRIOT Act and Bank's identity
verification procedures require Bank to obtain certain information ("identifying
information") from Customer or on some occasions from third parties regarding
Customer. Customer agrees to provide Bank with and consents to Bank obtaining
from third parties any such identifying information required as a condition of
opening an account with or using any service provided by Bank.
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THE EXCHANGE TRADED TRUST
By:_________________________________
Title:
Date:
JPMORGAN CHASE BANK, N.A.
By:_________________________________
Title:
Date:
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