TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of May 4, 2007, by and between First Trust
Exchange-Traded Alphadex(TM) Fund (the "Trust"), a Massachusetts business trust,
having its principal office and place of business at 0000 Xxxxxxxxxxx Xxxx,
Xxxxx, Xxxxxxxx 00000 (the "Trust") and THE BANK OF NEW YORK, a New York banking
corporation having its principal office and place of business at Xxx Xxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (the "Bank").
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, the Trust is authorized to issue shares in separate series,
with each such series representing interests in a separate portfolio of
securities and other assets; and
WHEREAS, the Trust, so authorized, intends that this Agreement be
applicable to each of its series as set forth on Exhibit A (each such series
together with all other series subsequently established by the Trust and made
subject to this Agreement by amendment hereof in accordance with Section 11,
being referred to as a "Fund" and collectively as the "Funds"); and
WHEREAS, the Trust and designated agents will issue for purchase and
redeem shares of the Funds only in aggregations of shares known as "Creation
Units" (50,000 shares or such other aggregation as is specified in the
prospectus for a Fund) (each a "Creation Unit") principally in kind;
WHEREAS, The Depository Trust Company, a limited purpose trust company
organized under the laws of the State of New York ("DTC"), or its nominee (Cede
& Co.), will be the initial record or registered owner (the "Shareholder") of
all shares;
WHEREAS, the Trust on behalf of the Funds (identified on Exhibit A as
the same may be amended from time to time) desires to appoint the Bank as its
transfer agent, dividend disbursing agent, and agent in connection with certain
other activities, and the Bank desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
SECTION 1. TERMS OF APPOINTMENT; DUTIES OF THE BANK.
SECTION 1.1. Subject to the terms and conditions set forth in this
Agreement, the Trust, on behalf of the Funds, hereby employs and appoints the
Bank to act as, and the Bank agrees to act as its transfer agent for the
authorized and issued shares of beneficial interest, $.01 par value per share of
each Fund ("Shares"), and as the Trust's dividend disbursing agent.
SECTION 1.2. The Bank agrees that it will perform the following
services:
(a) The Bank shall enter into Participant Agreements with the
Participants identified therein in the form attached hereto as Exhibit
B with such changes and modifications as shall be approved by the
Distributor identified therein (the Distributor's execution of the
Participant Agreement being conclusive as to its approval of any such
changes and modifications), provided that no changes or modifications
which adversely affect the Bank's rights or obligations shall be made
without its consent, and in accordance with the terms and conditions of
such Participant Agreements the Bank shall:
(i) Perform and facilitate the performance of
purchases and redemption of Creation Units;
(ii) Prepare and transmit by means of DTC's
book-entry system payments for dividends and distributions
declared by the Trust on behalf of the applicable Fund;
(iii) Maintain the record of the name and address of
the Shareholder and the number of Shares issued by the Funds
of the Trust and held by the Shareholder;
(iv) Record the issuance of Shares of the respective
Funds of the Trust and maintain a record of the total number
of Shares of the Funds of the Trust, and, which are
authorized, based upon data provided to it by the Trust. The
Bank shall have no obligation, when recording the issuance of
Shares, to monitor the issuance of such Shares or to take
cognizance of any laws relating to the issue or sale of such
Shares, which functions shall be the sole responsibility of
the Trust.
(v) Prepare and transmit to the Trust and the
Trust's administrator and to any applicable securities
exchange (as specified to the Bank by the administrator or by
the Trust) information with respect to purchases and
redemptions of Shares;
(vi) On days that the Trust may accept orders for
purchases or redemptions, calculate and transmit to the Bank
and the Trust's administrator the number of outstanding Shares
for each Fund;
(vii) On days that the Trust may accept orders for
purchases or redemptions (pursuant to the Participant
Agreement), transmit to the Bank, the Trust and DTC the amount
of Shares purchased on such day;
(viii) Confirm to DTC the number of Shares issued to
the Shareholder, as DTC may reasonably request;
(ix) Prepare and deliver other reports, information
and documents to DTC as DTC may reasonably request;
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(x) Extend the voting rights to the Shareholder
and/or beneficial owners of Shares in accordance with the
policies and procedures of DTC for book-entry only securities;
(xi) Maintain those books and records of the Trust
specified by the Trust in Schedule A attached hereto;
(xii) Prepare a monthly report of all purchases and
redemptions during such month on a gross transaction basis.
The monthly report shall show the counterpart and amount of
each purchase on a daily basis net number of shares either
redeemed or created for such Business Day.
(xiii) Receive from the Distributor (as defined in the
Participant Agreement) purchase orders from Participants (as
defined in the Participant Agreement) for Creation Unit
aggregations of Shares received in good form and accepted by
or on behalf of the Trust by the Distributor, transmit
appropriate trade instructions to the National Securities
Clearance Corporation, if applicable, and pursuant to such
orders issue the appropriate number of Shares of the
applicable Fund and hold such Shares in the account of the
Shareholder for each of the respective Funds of the Trust; and
(xiv) Receive from the Participants (as defined in the
Participant Agreement) redemption requests, deliver the
appropriate documentation thereof to The Bank of New York as
custodian for the Trust, generate and transmit or cause to be
generated and transmitted confirmation of receipt of such
redemption requests to the Participants submitting the same;
transmit appropriate trade instructions to the National
Securities Clearance Corporation, if applicable, and redeem
the appropriate number of Creation Unit Aggregations of Shares
held in the account of the Shareholder.
(b) In addition to and neither in lieu nor in contravention
of the services set forth in the above paragraph (a), the Bank shall:
perform the customary services of a transfer agent and dividend
disbursing agent including but not limited to: maintaining the account
of the Shareholder, obtaining a list of DTC participants holding
interests in the Global Certificate at the request of the Trust,
mailing proxy materials, shareholder reports and prospectuses to the
Shareholder or DTC participants or beneficial owners of Shares at the
request of the Trust and those services set forth on Schedule A
attached hereto.
(c) The following shall be delivered to DTC for delivery to
beneficial owners in accordance with the procedures for book-entry only
securities of DTC:
(i) Annual and semi-annual reports of the Funds of
the Trust;
(ii) Proxies, proxy statements and other proxy
soliciting materials;
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(iii) Prospectus and amendments and supplements to the
Prospectus, including stickers; and
(iv) Other communications as may be required by law
or reasonably requested by the Trust.
(d) If the Shares are represented by individual Certificates,
the Bank shall perform the services agreed to in writing by the Bank
and the Trust.
(e) The Bank shall provide additional services (if any) on
behalf of the Trust (i.e., escheatment services) which may be agreed
upon in writing between the Trust and the Bank.
(f) The Bank shall keep records relating to the services to
be performed hereunder, in the form and manner as it may deem
advisable. To the extent required by Section 31 of the Investment
Company Act of 1940, as amended, and the Rules thereunder, the Bank
agrees that all such records prepared or maintained by the Bank
relating to the services to be performed by the Bank hereunder are the
property of the Trust and will be preserved, maintained and made
available in accordance with such Section and Rules, and will be
surrendered promptly to the Trust on and in accordance with its
request.
SECTION 2. FEES AND EXPENSES.
SECTION 2.1. The Bank shall receive from the Trust such compensation
for the Transfer Agent's services provided pursuant to this Agreement as may be
agreed to from time to time in a written fee schedule approved by the parties.
The fees are accrued daily and billed monthly and shall be due and payable upon
receipt of the invoice. Upon the termination of this Agreement before the end of
any month, the fee for the part of the month before such termination shall be
prorated according to the proportion which such part bears to the full monthly
period and shall be payable upon the date of termination of this Agreement.
SECTION 2.2. In addition to the fee paid under Section 2.1 above, the
Trust on behalf of the applicable Fund agrees to reimburse the Bank for
out-of-pocket expenses, including but not limited to confirmation production,
postage, forms, telephone, microfilm, microfiche, tabulating proxies, records
storage, or advances incurred by the Bank for the items set out in the fee
schedule attached hereto or relating to dividend distributions and reports
(whereas all expenses related to creations and redemptions of the securities of
any Fund shall be borne by the relevant Participant in such creations and
redemptions). In addition, any other expenses incurred by the Bank at the
request or with the consent of the Trust, will be reimbursed by the Trust on
behalf of the applicable Fund.
SECTION 2.3. The Trust on behalf of the applicable Fund agrees to pay
all fees and reimbursable expenses within ten business days following the
receipt of the respective billing notice accompanied by supporting
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documentation, as appropriate. Postage for mailing of dividends, proxies,
reports and other mailings to all shareholder accounts shall be advanced to the
Bank by the Trust at least seven (7) days prior to the mailing date of such
materials.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE BANK.
SECTION 3.1. The Bank represents and warrants to the Trust that:
It is a banking corporation duly organized and existing and in
good standing under the laws of the State of New York.
It is duly qualified to carry on its business in the State of
New York.
It is empowered under applicable laws and by its Charter and
By-Laws to act as transfer agent and dividend disbursing agent and to
enter into and perform this Agreement.
All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement.
It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and
obligations under this Agreement.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE TRUST.
SECTION 4.1. The Trust represents and warrants to the Bank that:
It is a business trust duly organized and existing and in good
standing under the laws of Massachusetts.
It is empowered under applicable laws and by its Declaration
of Trust and By-Laws to enter into and perform this Agreement.
All corporate proceedings required by said Declaration of
Trust and By-Laws have been taken to authorize it to enter into and
perform this Agreement.
It is an open-end management investment company registered
under the Investment Company Act of 1940, as amended.
A registration statement under the Securities Act of 1933, as amended, on behalf
of each of the Funds is currently effective and will remain effective, and
appropriate state securities law filings have been made and will continue to be
made, with respect to all Shares of the Funds of the Trust being offered for
sale.
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SECTION 5. ANTI-MONEY LAUNDERING.
The Bank shall provide the "Anti-Money Laundering Services" described
in Schedule B attached hereto subject to the terms and conditions of this
Agreement and the following additional terms and conditions:
(a) The Bank shall utilize systems and/or software designed,
and databases provided, by certain third parties, and shall not be
liable for any loss, damage or expense that occur as a result of the
failure of any such systems, software, and/or databases.
(b) The Bank does not warrant that (x) its performance of the
Anti-Money Laundering Services will achieve any particular intended
result or that its performance will satisfy any legal obligations of
the Trust, (y) that its performance will be uninterrupted, or (z) that
it will detect all possible instances of money laundering or
transactions involving money laundering or other unlawful activities.
The Bank makes no warranties, express or implied, including but not
limited to, implied warranties of merchantability and fitness for
particular purpose.
(c) The Bank shall assume the authenticity and accuracy of
any document provided by a Shareholder or potential Shareholder without
verification unless in the sole discretion of the Bank the same on its
face appears not to be genuine.
(d) The Bank shall provide prompt notice to the Trust of any
potential Shareholder with respect to whom the Bank has anti-money
laundering concerns based on the result of its Anti-Money Laundering
Services.
(e) In the event of any failure by the Bank to provide any of
the Anti-Money Laundering Services in accordance with its standard of
care and not otherwise, the Bank's liability shall be limited to the
lesser of (x) the actual direct money damages suffered by the Trust as
a direct result of such failure and (y) the amounts paid by the Trust
under this Agreement for the providing of such services. Any action
brought against the Bank for claims hereunder must be brought within
one year following the date on which such claim accrues.
(f) The Bank is providing the Anti-Money Laundering Services
based on the following representations, warranties and covenants of the
Trust, each of which shall be deemed continued and repeated on each day
on which the Bank provides such services: (x) the Anti-Money Laundering
Services together with the activities of the Trust in accordance with
its internal policies, procedures and anti-money laundering controls
shall together satisfy all the requirements of the laws with respect to
money laundering applicable to the Trust; (y) the Trust shall provide
each Participant Agreement to the Bank a reasonable time before
accepting any initial payment from a Shareholder or potential
Shareholder and shall not accept any such payment unless and until the
Bank shall have completed its providing of the Anti-Money Laundering
Services; and (z) the Trust shall instruct the Bank not to accept any
payment on behalf of the Trust from a Shareholder or potential
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Shareholder or pay on behalf of the Trust any redemption or repurchase
proceeds to a Shareholder or potential Shareholder if the Trust
determines that such acceptance or payment would violate any money
laundering laws applicable to the Fund.
SECTION 6. INDEMNIFICATION.
SECTION 6.1. The Bank shall not be responsible for, and the Trust on
behalf of the applicable Fund shall indemnify and hold the Bank harmless from
and against, any and all losses, damages, costs, charges, counsel fees,
payments, expenses and liability ("Losses") arising out of or attributable to:
(a) All actions of the Bank or its agents or subcontractors
required to be taken pursuant to this Agreement, provided that such
actions are taken without negligence, or willful misconduct. NSCC, DTC
or any third party described in Section 5 are not agents or
subcontractors of the Bank.
(b) The Trust's negligence or willful misconduct in respect
of the applicable Fund.
(c) The breach of any representation or warranty of the Trust
hereunder in respect of the applicable Fund.
(d) The conclusive reliance on or use by the Bank or its
agents or subcontractors of information, records, documents or services
in respect of the applicable Fund which (i) are received by the Bank or
its agents or subcontractors, and (ii) have been prepared, maintained
or performed by the Trust or any other person or firm on behalf of the
Trust in respect of the applicable Fund including but not limited to
any previous transfer agent or registrar.
(e) The conclusive reliance on, or the carrying out by the
Bank or its agents or subcontractors of any instructions or requests of
the Trust on behalf of the applicable Fund.
(f) The offer or sale of Shares in violation of any
requirement under the federal securities laws or regulations or the
securities laws or regulations of any state that such Shares be
registered in such state or in violation of any stop order or other
determination or ruling by any federal agency or any state with respect
to the offer or sale of such Shares in such state.
SECTION 6.2. At any time the Bank may apply to any officer of the Trust
for instructions, and may consult with legal counsel of the Bank's choosing with
respect to any matter arising in connection with the services to be performed by
the Bank under this Agreement, and the Bank and its agents or subcontractors
shall not be liable and shall be indemnified by the Trust on behalf of the
applicable Fund for any action taken or omitted by it in reliance upon such
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instructions or upon the advice or opinion of such counsel and shall promptly
advise the Trust of such advice or opinion (except for actions or omissions by
Bank taken with negligence or willful misconduct). The Bank, its agents and
subcontractors shall be protected and indemnified in acting upon any paper or
document, reasonably believed to be genuine and to have been signed by the
proper person or persons, or upon any instruction, information, data, records or
documents provided the Bank or its agents or subcontractors by machine readable
input, telex, CRT data entry or other similar means authorized by the Trust, and
shall not be held to have notice of any change of authority of any person, until
receipt of written notice thereof from the Trust.
SECTION 6.3. Neither the Trust nor any Fund shall be responsible for,
and the Bank shall be liable for and shall indemnify the Trust and the
applicable Fund against direct money damages arising out of or attributable to:
(a) The Bank's own negligence or willful misconduct.
(b) The breach of any representation or warranty of the Bank
hereunder.
SECTION 6.4. The provisions of Section 6 shall survive and remain in
effect after any termination of this Agreement or any resignation or removal of
the Bank as transfer agent hereunder.
SECTION 7. STANDARD OF CARE.
The Bank shall have no responsibility and shall not be liable for any
loss or damage unless such loss or damage is caused by its own negligence or
willful misconduct or that of its employees, or its breach of any of its
representations. In no event shall the Bank be liable for special, indirect or
consequential damages regardless of the form of action and even if the same were
foreseeable.
SECTION 8. CONCERNING THE BANK.
SECTION 8.1. The Bank may enter into subcontracts, agreements and
understandings with any Bank affiliate, whenever and on such terms and
conditions as it deems necessary or appropriate to perform its services
hereunder. No such subcontract, agreement or understanding shall discharge the
Bank from its obligations hereunder.
SECTION 8.2. The Bank shall be entitled to conclusively rely upon any
written or oral instruction actually received by the Bank and reasonably
believed by the Bank to be duly authorized and delivered. The Trust agrees to
forward to Bank written instructions confirming oral instructions by the close
of business of the same day that such oral instructions are given to the Bank.
The Trust agrees that the fact that such confirming written instructions are not
received or that contrary written instructions are received by the Bank shall in
no way affect the validity or enforceability of transactions authorized by such
oral instructions and effected by the Bank. If the Trust elects to transmit
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written instructions through an on-line communication system offered by the
Bank, the Trust's use thereof shall be subject to the terms and conditions
attached hereto as Appendix A.
SECTION 8.3. The Bank shall establish and maintain a disaster recovery
plan and back-up system at all times satisfying the requirements of all
applicable law, rules, and regulations (the "Disaster Recovery Plan and Back-Up
System"). The Bank shall not be responsible or liable for any failure or delay
in the performance of its obligations under this Agreement arising out of or
caused, directly or indirectly, by circumstances beyond its control which are
not a result of its negligence, including without limitation, acts of God;
earthquakes; fires; floods; wars; civil or military disturbances; sabotage;
epidemics; riots; interruptions, loss or malfunctions of utilities,
transportation, computer (hardware or software) or communications service;
accidents; labor disputes; acts of civil or military authority; governmental
actions; or inability to obtain labor, material, equipment or transportation,
provided that the Bank has established and is maintaining the Disaster Recovery
Plan and Back-Up System, or if not, that such delay or failure would have
occurred even if Bank had established and was maintaining the Disaster Recovery
Plan and Back-Up System. Upon the occurrence of any such delay or failure, the
Bank shall use commercially reasonable best efforts to resume performance as
soon as practicable under the circumstances.
SECTION 8.4. The Bank shall have no duties or responsibilities
whatsoever except such duties and responsibilities as are specifically set forth
in this Agreement, and no covenant or obligation shall be implied against the
Bank in connection with this Agreement.
SECTION 8.5. At any time the Bank may apply to an officer of the Trust
for written instructions with respect to any matter arising in connection with
the Bank's duties and obligations under this Agreement, and the Bank shall not
be liable for any action taken or omitted to be taken by the Bank in good faith
in accordance with such instructions. Such application by the Bank for
instructions from an officer of the Trust may, at the option of the Bank, set
forth in writing any action proposed to be taken or omitted to be taken by the
Bank with respect to its duties or obligations under this Agreement and the date
on and/or after which such action shall be taken, and the Bank shall not be
liable for any action taken or omitted to be taken in accordance with a proposal
included in any such application on or after the date specified therein unless,
prior to taking or omitting to take any such action, the Bank has received
written instructions in response to such application specifying the action to be
taken or omitted. If the Bank shall be in doubt as to any question of law
pertaining to any action it should take or should not take, the Bank may request
advice from outside counsel (who may be counsel for the Trust, the Trust's
investment adviser or the Bank, at the option of the Bank). The Trust shall pay
the reasonable cost of any counsel retained by the Bank with prior notice to the
Trust. The Bank shall not be liable with respect to anything done or omitted by
it in good faith in accordance with the advice or opinion of such counsel.
SECTION 8.6. Notwithstanding any provisions of this Agreement to the
contrary, the Bank shall be under no duty or obligation to inquire into, and
shall not be liable for:
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(a) The legality of the issue, sale or transfer of any
Shares, the sufficiency of the amount to be received in connection
therewith, or the authority of the Trust to request such issuance, sale
or transfer;
(b) The legality of the purchase of any Shares, the
sufficiency of the amount to be paid in connection therewith, or the
authority of the Trust to request such purchase;
(c) The legality of the declaration of any dividend by the
Trust in respect of the Shares of any Fund, or the legality of the
issue of any Shares in payment of any stock dividend; or
(d) The legality of any recapitalization or readjustment of
the Shares.
SECTION 9. COVENANTS OF THE TRUST AND THE BANK
SECTION 9.1. The Trust shall promptly furnish to the Bank the
following:
(a) A certified copy of the resolution of the Board of
Trustees of the Trust authorizing the appointment of the Bank and the
execution and delivery of this Agreement.
(b) A copy of the Declaration of Trust and By-Laws of the
Trust and all amendments thereto.
(c) Shares will be transferred upon presentation to the Bank
of Shares to its electronic account at DTC, accompanied by such
documents as the Bank deems necessary to evidence the authority of the
person making such transfer, and bearing satisfactory evidence of the
payment of applicable stock transfer taxes, if any. In the case of
small estates where no administration is contemplated, the Bank may,
when furnished with an appropriate surety bond, and without further
approval of the Trust, transfer Shares registered in the name of the
decedent where the current market value of the Shares being transferred
does not exceed such amount as may from time to time be prescribed by
the various states. The Bank reserves the right to refuse to transfer
Shares until it is satisfied that the endorsements on documents
submitted to it are valid and genuine, and for that purpose it may
require, unless otherwise instructed by an Officer of the Trust, a
guaranty of signature by an "eligible guarantor institution" meeting
the requirements of the Bank, which requirements include membership or
participation in STAMP or such other "signature guarantee program" as
may be determined by the Bank in addition to, or in substitution for,
STAMP, all in accordance with the Securities Exchange Act of 1934, as
amended. The Bank also reserves the right to refuse to transfer Shares
until it is satisfied that the requested transfer is legally
authorized, and it shall incur no liability for the refusal in good
faith to make transfers which the Bank, in its judgment, deems improper
or unauthorized, or until it is satisfied that there is no basis to any
claims adverse to such transfer. The Bank may, in effecting transfers
of Shares, rely upon those provisions of the Uniform Act for the
Simplification of Fiduciary Security Transfers or the Uniform
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Commercial Code, as the same may be amended from time to time,
applicable to the transfer of securities, and the Trust on behalf of
the applicable Fund shall indemnify the Bank for any act done or
omitted by it in good faith in reliance upon such laws.
(d) The Bank assumes no responsibility with respect to the
transfer of restricted securities where counsel for the Trust advises
that such transfer may be properly effected.
SECTION 9.2. The Trust shall deliver to the Bank the following
documents on or before the initial issuance of Shares of any Fund:
(a) An opinion of counsel for the Trust, in a form
satisfactory to the Bank, with respect to (i) the validity of the
Shares, the obtaining of all necessary governmental consents, whether
such Shares are fully paid and non-assessable and the status of such
Shares under the Securities Act of 1933, as amended, the Securities
Exchange Act of 1934, as amended, and any other applicable federal law
or regulations (i.e., if subject to registration, that they have been
registered and that the Registration Statement has become effective or,
if exempt, the specific grounds therefore), (ii) the status of the
Trust with regard to the Investment Company Act of 1940, as amended,
and (iii) the due and proper listing of the Shares on all applicable
securities exchanges; and
(b) A certified copy of a resolution of the Board of
Directors of the Trust establishing the authority of the Bank.
SECTION 9.3. Prior to the issuance of any additional Shares of any Fund
pursuant to stock dividends or stock splits, and prior to any reduction in the
number of Shares of any Fund outstanding pursuant to any reverse stock split,
the Trust shall deliver the following documents to the Bank:
(a) A certified copy of the resolutions adopted by the Board
of Trustees and/or the shareholders of the applicable Fund authorizing
such issuance of additional Shares of the Fund or such reduction, as
the case may be;
(b) A certified copy of the order or consent of each
governmental or regulatory authority required by law as a prerequisite
to the issuance or reduction of such Shares, as the case may be, and an
opinion of counsel for the Trust that no other order or consent is
required; and
(c) An opinion of counsel for the Trust, in a form
satisfactory to the Bank, with respect to (i) the validity of the
Shares, the obtaining of all necessary governmental consents, whether
such Shares are fully paid and non-assessable and the status of such
Shares under the Securities Act of 1933, as amended, the Securities
Exchange Act of 1934, as amended, and any other applicable federal law
or regulations (i.e., if subject to registration, that they have been
registered and that the Registration Statement has become effective or,
if exempt, the specific grounds therefore), (ii) the status of the
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Trust with regard to the Investment Company Act of 1940, as amended,
and (iii) the due and proper listing of the Shares on all applicable
securities exchanges.
SECTION 9.4. The Bank agrees that all records listed on Schedule A
hereto or otherwise prepared or maintained by the Bank relating to the services
to be performed by the Bank hereunder as required by applicable law are the
property of the Trust and will be preserved, maintained and made available upon
reasonable request, and will be surrendered promptly to the Trust on and in
accordance with its request.
SECTION 9.5. Each party shall keep confidential any information
relating to the other party's business ("Confidential Information").
Confidential Information shall include (a) any data or information that is
competitively sensitive material, and not generally known to the public,
including, but not limited to, information about product plans, marketing
strategies, finances, operations, customer relationships, customer profiles,
customer lists, sales estimates, business plans, and internal performance
results relating to the past, present or future business activities of the Trust
or the Bank and their respective subsidiaries and affiliated companies; (b) any
scientific or technical information, design, process, procedure, formula, or
improvement that is commercially valuable and secret in the sense that its
confidentiality affords the Trust or the Bank a competitive advantage over its
competitors; (c) all confidential or proprietary concepts, documentation,
reports, data, specifications, computer software, source code, object code, flow
charts, databases, inventions, know-how, and trade secrets, whether or not
patentable or copyrightable; and (d) anything designated as confidential.
Notwithstanding the foregoing, information shall not be Confidential Information
and shall not be subject to such confidentiality obligations if: (a) it is
necessary for the Bank to release such information in connection with the
provision of services under this Agreement; (b) it is already known to the
receiving party at the time it is obtained; (c) it is or becomes publicly known
or available through no wrongful act of the receiving party; (d) it is
rightfully received from a third party who, to the best of the receiving party's
knowledge, is not under a duty of confidentiality; (e) it is released by the
protected party to a third party without restriction; (f) it is requested or
required to be disclosed by the receiving party pursuant to a court order,
subpoena, governmental or regulatory agency request or law (provided the
receiving party will provide the other party written notice of the same, to the
extent such notice is permitted); (g) it is relevant to the defense of any claim
or cause of action asserted against the receiving party; (h) it has been or is
independently developed or obtained by the receiving party; or (i) it is
necessary for Bank to release such information to the Bank's internal or
external accountants or legal counsel who are subject to a duty of
confidentiality. Bank acknowledges and agrees that in connection with its
services under this Agreement it receives non-public confidential portfolio
holdings information ("Portfolio Information") with respect to the Trust. Bank
agrees that, subject to the foregoing provisions of and the exceptions set forth
in this Section 9.5 (other than the exception set forth above in this Section
9.5 as sub-item (a), which exception set forth in sub-item (a) shall not be
applicable to the Trust's Portfolio Information), Bank will keep confidential
the Trust's Portfolio Information and will not disclose the Trust's Portfolio
Information other than pursuant to a written instruction from the Trust;
provided that without the need for such a written instruction and
notwithstanding any other provision of this Section 9.5 to the contrary, the
Trust's Portfolio Information may be disclosed to third party pricing services
which are engaged by Bank in connection with the provision of services under
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this Agreement and which shall be subject to a duty of confidentiality with
respect to such Portfolio Information.
SECTION 9.6. In case of any requests or demands for the inspection of
the Shareholder records of a Fund of the Trust, the Bank will endeavor to notify
the Trust and to secure instructions from an authorized officer of the Trust as
to such inspection. The Bank reserves the right, however, to exhibit the
Shareholder records to any person whenever it is advised by its counsel that it
may be held liable for the failure to exhibit the Shareholder records to such
person.
SECTION 9.7. The Bank shall file such appropriate information returns
concerning the payment and composition of dividends and capital gain
distributions and tax withholding with the proper Federal, State and local
authorities as are required by law to be filed by the Trust and shall withhold
such sums as are required to be withheld by applicable law.
SECTION 9.8. From time to time as requested by the Trust, the Bank
shall provide to the Trust such certifications and sub-certifications, in the
form reasonably agreed to by the Trust and Bank, with respect to Form N-Qs, Form
N-CSRs, compliance policies and procedures under Rule 38a-1 under the Investment
Company Act of 1940, as amended, and such other matters that may be reasonably
requested by the Trust or the Trust's Chief Compliance Officer from time to
time. In addition, the Bank will, from time to time, provide a written
assessment of its compliance program in conformity with current industry
standards that is reasonably acceptable to enable the Trust to fulfill its
obligations under Rule 38a-1 of the Investment Company Act of 1940, as amended.
SECTION 10. TERMINATION OF AGREEMENT.
Section 10.1. Either of the parties may terminate this Agreement by
giving to the other party a notice in writing specifying the date of such
termination, which shall not be less than ninety (90) days after the date of
giving such notice.
SECTION 10.2. Should the Trust exercise its right to terminate, all
out-of-pocket expenses associated with the movement of records and material will
be borne by the Trust. Additionally, the Bank reserves the right to charge for
any other reasonable expenses associated with such termination.
SECTION 10.3. The terms of Section 2 and Section 6 shall survive
the termination of this Agreement.
SECTION 11. ADDITIONAL FUNDS.
SECTION 11.1. In the event that the Trust establishes one or more
additional Funds with respect to which it desires to have the Bank render
services as transfer agent under the terms hereof, it shall so notify the Bank
in writing, and if the Bank agrees in writing to provide such services, such
additional issuance shall become Shares hereunder and Exhibit A shall be amended
to include the Fund.
-13-
SECTION 12. ASSIGNMENT.
SECTION 12.1. Neither this Agreement nor any rights or obligations
hereunder may be assigned by either party without the written consent of the
other party.
SECTION 12.2. This Agreement shall inure to the benefit of and be
binding upon the parties and their respective permitted successors and assigns.
SECTION 13. SEVERABILITY AND BENEFICIARIES.
SECTION 13.1. In case any provision in or obligation under this
Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected thereby. This Agreement shall extend to and shall be binding
upon the parties hereto, and their respective successors and assigns; provided,
however, that this Agreement shall not be assignable by either party without the
written consent of the other.
SECTION 14. AMENDMENT.
SECTION 14.1. This Agreement may be amended or modified by a written
agreement executed by both parties and authorized or approved by a resolution of
the Board of Trustees of the Trust.
SECTION 15. NEW YORK LAW TO APPLY
SECTION 15.1. This Agreement shall be construed in accordance with the
substantive laws of the State of New York, without regard to conflicts of laws
principles thereof. The Trust and the Bank hereby consent to the jurisdiction of
a state or federal court situated in New York City, New York in connection with
any dispute arising hereunder. The Trust hereby irrevocably waives, to the
fullest extent permitted by applicable law, any objection which it may now or
hereafter have to the laying of venue of any such proceeding brought in such a
court and any claim that such proceeding brought in such a court has been
brought in an inconvenient forum. The Trust and the Bank each hereby irrevocably
waives any and all rights to trial by jury in any legal proceeding arising out
of or relating to this Agreement.
SECTION 16. MERGER OF AGREEMENT.
SECTION 16.1. This Agreement constitutes the entire agreement between
the parties hereto and supersedes any prior agreement with respect to the
subject matter hereof whether oral or written.
SECTION 17. LIMITATIONS OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS.
SECTION 17.1. It is expressly acknowledged and agreed that the
obligations of the Trust (and Funds thereof) hereunder shall not be binding upon
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any of the shareholders, Trustees, officers, employees or agents of the Trust
(and Funds thereof), personally, but shall bind only the trust property of the
Trust and the applicable Fund, as provided in the Trust's Declaration of Trust.
The execution and delivery of this Agreement have been authorized by the
Trustees of the Trust and signed by an officer of the Trust, acting as such, and
neither such authorization by such Trustees nor such execution and delivery by
such officer shall be deemed to have been made by any of them individually or to
impose any liability on any of them personally, but shall bind only the trust
property of the Trust and the applicable Fund as provided in the Trust's
Declaration of Trust.
SECTION 17.2. This Agreement is an agreement entered into between the
Bank and the Trust with respect to each Fund. With respect to any obligation of
the Trust on behalf of any Fund arising out of this Agreement, the Bank shall
look for payment of such obligation solely to the assets of the Fund to which
such obligation relates with the same effect as if the Bank had separately
contracted with the Trust by separate written instrument with respect to each
Fund.
SECTION 17.3. As used herein, the "applicable Fund" shall be each Fund
in respect of which any amount due the Bank arises, and if any amount due the
Bank arises in respect of more than one Fund, the same shall be allocated by the
Bank among such Funds in accordance with Section 17.2. Any amounts due the Bank
which may not be allocated in accordance with the preceding sentence shall
constitute General Liabilities as defined in the Trust's Declaration of Trust
and allocated by the Trust and paid in accordance with the provisions thereof.
SECTION 18. NOTICES.
SECTION 18.1. Each notice, request, demand, approval or other
communication which may be or is required to be given under this Agreement shall
be in writing in English and shall be deemed to have been sufficiently given
when received by the intended party, if delivered personally at the address set
forth below for the intended party during normal business hours at such address,
if sent by facsimile transmission to the respective facsimile transmission
numbers of the parties set forth below, or if sent by recognized overnight
courier service or by United States registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
If to the Trust: First Trust Exchange-Traded Alphadex(TM) Fund
0000 Xxxxxxxxxxx Xxxx, Xxxxx 000
Xxxxx, Xxxxxxxx 00000
Attention: General Counsel
Facsimile: 000-000-0000
Confirm: 000-000-0000
If to BNY: The Bank of New York
000 Xxxxxxx Xxxxxx, 00X
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxx
Facsimile: 000 000-0000
Confirm: 000 000-0000
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Notices shall be given to such other addressee or address, or both, or by way of
such other facsimile transmission number, as a particular party may from time to
time designate by written notice to the other parties hereto given in accordance
with this Section.
SECTION 19. COUNTERPARTS.
SECTION 19.1. This Agreement may be executed by the parties hereto on
any number of counterparts, and all of said counterparts taken together shall be
deemed to constitute one and the same instrument.
-16-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf by and through their duly authorized
officers, as of the day and year first above written.
FIRST TRUST EXCHANGE-TRADED ALPHADEX(TM) FUND
By:
Name: /s/ Xxxxx X. Xxxxx
-------------------------------------
Title President
THE BANK OF NEW YORK
By:
Name: /s/ Xxxxxx X. XxXxxx
-------------------------------------
Title Managing Director
-17-
Exhibit A
Funds of First Trust Exchange-Traded AlphaDEX(TM) Fund
First Trust Consumer Discretionary AlphaDEX(TM) Fund
First Trust Consumer Staples AlphaDEX(TM) Fund
First Trust Energy AlphaDEX(TM) Fund
First Trust Financials AlphaDEX(TM) Fund
First Trust Health Care AlphaDEX(TM) Fund
First Trust Industrials / Producer Durables AlphaDEX(TM) Fund
First Trust Materials AlphaDEX(TM) Fund
First Trust Technology AlphaDEX(TM) Fund
First Trust Utilities AlphaDEX(TM) Fund
First Trust Large Cap Core AlphaDEX(TM) Fund
First Trust Mid Cap Core AlphaDEX(TM) Fund
First Trust Small Cap Core AlphaDEX(TM) Fund
First Trust Large Cap Growth Opportunities AlphaDEX(TM) Fund
First Trust Large Cap Value Opportunities AlphaDEX(TM) Fund
First Trust Multi Cap Growth AlphaDEX(TM) Fund
Exhibit A
SCHEDULE A
BOOKS AND RECORDS TO BE MAINTAINED BY BANK
Source Documents requesting Creations and Redemptions
Correspondence/AP Inquiries
Reconciliations, bank statements, copies of canceled checks, cash proofs
Daily/Monthly reconciliation of outstanding units between the Trust and DTC
Net Asset Computation Documentation
Dividend Records
Year-end Statements and Tax Forms
Information obtained pursuant to Schedule B to the extent required to be
preserved under applicable law
Schedule A
EXHIBIT B
FORM OF PARTICIPANT AGREEMENT
PARTICIPANT AGREEMENT
FIRST TRUST EXCHANGE-TRADED FUND,
FIRST TRUST EXCHANGE-TRADED FUND II AND
FIRST TRUST EXCHANGE-TRADED ALPHADEX (TM) FUND
This Participant Agreement (this "Agreement") is entered into between
First Trust Portfolios, L.P. (the "Distributor"), ______________________________
(the "Participant") and The Bank of New York (the "Transfer Agent"). The
Transfer Agent serves as the Transfer Agent of the First Trust Exchange-Traded
Fund, First Trust Exchange-Traded Fund II and First Trust Exchange-Traded
AlphaDEX(TM) Fund (each, a "Trust" and, collectively, the "Trusts") and is an
Index Receipt Agent as that term is defined in the rules of the National
Securities Clearing Corporation ("NSCC"). The Distributor has been retained to
provide certain services with respect to acting as principal underwriter of each
Trust in connection with the sale and distribution of shares of beneficial
interest, par value $0.01 per share ("Shares"), of the Series of each Trust
(each a "Fund") on Schedule I attached hereto and incorporated herein, as the
same may be amended from time to time. Certain Funds (each, an "International
Fund") may include securities of issuers that are domiciled outside the United
States and listed on the foreign equivalent of a U.S. national securities
exchange (a "U.S. exchange"). The Distributor, the Transfer Agent and the
Participant acknowledge and agree that each Trust and Fund shall be a
third-party beneficiary of this Agreement and shall receive the benefits
contemplated by this Agreement to the extent specified herein. The prospectus
and statement of additional information for each Fund (collectively, the
"Prospectus") are incorporated herein and included as part of the respective
Trust's Registration Statement as amended on Form N-1A. Shares may be created or
redeemed only in aggregations of 50,000 (or such other aggregation as is
specified in the relevant Fund's Prospectus), referred to therein and herein as
a "Creation Unit." Capitalized terms not otherwise defined herein are used
herein as defined in the relevant Fund's Prospectus. All references to "cash"
shall refer to U.S. dollars.
This Agreement is intended to set forth certain premises and the
procedures by which the Participant may create and/or redeem Creation Units (i)
through the Continuous Net Settlement ("CNS") clearing processes of NSCC as such
processes have been enhanced to effect creations and redemptions of Creation
Units, such processes being referred to herein as the "Trusts' Clearing
Process," or (ii) outside the Trusts' Clearing Process (e.g., through the
facilities of the Depository Trust Company ("DTC")).
This Agreement supersedes any prior Participant Agreement entered into
by the parties with respect to the Trusts and any Fund from and after the date
hereof. Any and all prior Participant Agreements entered into by the parties are
deemed terminated upon execution of this Agreement.
The parties hereto in consideration of the premises and of the
agreements contained herein agree as follows:
SECTION 1. STATUS OF PARTICIPANT.
The Participant hereby represents, covenants and warrants that (i) with
respect to orders for the creation or redemption of Creation Units by means of
the Trusts' Clearing Process, it is a member of NSCC and a participant in the
CNS System of NSCC (as defined in the Prospectus, a "Participating Party"); and
(ii) with respect to orders for the creation or redemption of Creation Units
outside the Trusts' Clearing Process, it is a DTC Participant (as defined in the
Prospectus, a "DTC Participant"). The Participant may place orders for the
creation or redemption of Creation Units (a "Creation Order" and "Redemption
Order," respectively) either through the Trusts' Clearing Process or outside the
Trusts' Clearing Process, subject to the procedures for creation and redemption
referred to in Section 2 of this Agreement ("Execution of Orders") and the
procedures described in Attachment A attached hereto and incorporated herein and
made a part hereof, as the same may be amended from time to time ("Attachment
A"). Any change in the foregoing status of the Participant shall terminate this
Agreement, and the Participant shall give immediate notice to the Distributor
and the Transfer Agent of such change.
The Participant further represents that it is a broker-dealer
registered with the Securities and Exchange Commission and a member of the
National Association of Securities Dealers, Inc. (the "NASD") or is exempt from
or otherwise not required to be licensed as a broker-dealer or a member of the
NASD. The Participant is qualified as a broker or dealer, or otherwise, under
all applicable state laws where it is required to do so in order that Shares may
be sold in such states where the Participant intends to sell such Shares. The
Participant agrees to conform to the rules of the NASD (if it is a member of
NASD) and the securities laws of any jurisdiction in which it sells, directly or
indirectly, Shares, to the extent such laws, rules and regulations relate to the
Participant's transactions in, and activities with respect to, the Shares.
The Participant understands and acknowledges that the proposed method
by which Creation Units of Shares will be purchased and traded may raise certain
issues under applicable securities laws. For example, because new Creation Units
of Shares may be issued and sold by the Trusts and their respective Funds on an
ongoing basis, the offer and sale of Shares to investors may involve a
"distribution," as such term is used in the Securities Act of 1933 (the
"Securities Act"). The Participant understands and acknowledges that its offer
and sale of Shares to investors, depending on the circumstances, may result in
its being deemed a participant in a distribution in a manner which could render
it a statutory underwriter and subject it to the prospectus delivery and
liability provisions of the Securities Act. The Participant also understands and
acknowledges that dealers who are not "underwriters" but are effecting
transactions in Shares, whether or not participating in the distribution of
Shares, may be required to deliver a prospectus.
-2-
SECTION 2. EXECUTION OF ORDERS.
All orders for the creation or redemption of Creation Units shall be
handled in accordance with the terms of the respective Fund's Prospectus, and
the procedures described in Attachment A to this Agreement. In the event the
procedures include the use of recorded telephone lines, the Participant hereby
consents to such use. Each Trust reserves the right to issue additional or other
procedures relating to the manner of creating or redeeming Creation Units (and
the procedures for the Trusts may, but need not be, identical), and the
Participant, the Distributor and the Transfer Agent agree to comply with such
procedures as may be issued from time to time, upon reasonable notice thereof.
The Participant understands and agrees that Creations Orders and
Redemption Orders may be submitted only on days that the U.S. exchange where the
Shares are principally listed (as specified in the Prospectus) is open for
trading or business.
SECTION 3. NSCC.
Solely with respect to orders for the creation or redemption of
Creation Units through the Trusts' Clearing Process, the Participant as a
Participating Party hereby authorizes the Distributor or the Transfer Agent, as
the case may be, to transmit to NSCC on behalf of the Participant such
instructions, including share and cash amounts as are necessary with respect to
the creation and redemption of Creation Units consistent with the instructions
issued by the Participant to the Trust telephone representative identified in
Attachment A hereto (the "Trust Telephone Representative"). The Participant
agrees to be bound by the terms of such instructions issued by the Distributor
or the Transfer Agent, as the case may be, and reported to NSCC as though such
instructions were issued by the Participant directly to NSCC.
With respect to any Redemption Order, the Participant also acknowledges
and agrees to use its best efforts to return to the applicable Fund any
dividend, distribution or other corporate action paid to it or to the party for
which it is acting in respect of any Deposit Securities that are transferred to
the Participant or any party for which it is acting that, based on the valuation
of such Deposit Securities at the time of transfer, should have been paid to the
Fund. With respect to any Redemption Order, the Participant also acknowledges
and agrees that the applicable Fund is entitled to reduce the amount of money or
other proceeds due to the Participant or any party for which it is acting that,
based on the valuation of such Deposit Securities at the time of transfer,
should be paid to the Fund. With respect to any Creation Order, the Distributor
shall cause the applicable Fund's Custodian to return to the Participant or any
party for which it is acting any dividend, distribution or other corporate
action paid to the Fund in respect of any Deposit Securities that are
transferred to a Fund that, based on the valuation of such Deposit Securities at
the time of transfer, should have been paid to the Participant or any party for
which it is acting.
-3-
SECTION 4. DEPOSIT SECURITIES.
The Participant understands that the number and names of the designated
portfolio of securities (each, a "Deposit Security" and, collectively, the
"Deposit Securities") and relevant cash amounts (the "Cash Component") to be
deposited in connection with the purchase of a Creation Unit (the current "Fund
Deposit") for each Fund will be made available each day that the New York Stock
Exchange (the "NYSE") is open for trading through the facilities of the NSCC.
The Participant will not be responsible for errors in the information relating
to the Deposit Securities to be included in the current Fund Deposit to be
transmitted through the facilities of the NSCC in connection with Redemption
Orders and Creation Orders that are caused by the applicable Trust or Fund, the
Distributor or the Transfer Agent.
Under certain circumstances, a Trust may, in its discretion, permit or
require, with respect to one or more Funds a Participant to substitute cash in
lieu of depositing some or all of the requisite Deposit Securities. A Trust may
additionally permit, in its discretion, with respect to one or more
International Funds under certain circumstances, a Participant to substitute a
different security in lieu of depositing some or all of the Deposit Securities.
Substitution of cash or a different security might be permitted or required, for
example, because one or more Deposit Securities may be unavailable, may not be
available in the quantity needed, or may not be eligible for trading by the
Participant (or any party on whose behalf the Participant is acting) due to
local trading restrictions (including, for example, requirements that securities
be traded only for cash in local currency) or other circumstances.
SECTION 5. ROLE OF PARTICIPANT.
The Participant shall have no authority in any transaction to act as
agent of the Distributor, the Transfer Agent, any Trust or any Fund. (a) The
Participant agrees (i) subject to any privacy obligations or other obligations
arising under the federal or state securities laws it may have to it customers,
to assist the Distributor in ascertaining certain information regarding sales of
Shares made by or through Participant upon the request of a Trust or Fund or the
Distributor necessary for the applicable Trust or Fund to comply with its
obligation to distribute information to its shareholders as may be required from
time to time under applicable state or federal securities laws, or (ii) in lieu
thereof, and at the option of the Participant, the Participant may undertake to
deliver Prospectuses, as may be amended or supplemented from time to time, proxy
material, annual and other reports of a Fund or other similar information that
the applicable Trust or Fund is obligated to deliver to its shareholders to the
Participant's customers that custody Fund Shares with the Participant, after
receipt from the applicable Trust or Fund or the Distributor of sufficient
quantities to allow mailing thereof to such customers. The expenses associated
with such transmissions shall be borne by the Distributor or the applicable
Trust or Fund in accordance with usual custom and practice in respect of such
communications. None of the Distributor, the applicable Trust or Fund or any of
their respective affiliates shall use the names and addresses and other
information concerning Participant's customers for any purpose except in
connection with the performance of their duties and responsibilities hereunder
-4-
and except for servicing and informational mailings described in this clause (a)
of Section 5, or as may otherwise be required by applicable law.
(b) The Participant certifies that it has policies, procedures and internal
controls in place that are reasonably designed to comply with all applicable
anti-money laundering laws and regulations, including applicable provisions of
the USA Patriot Act of 2001 and the regulations administered by the U.S.
Department of the Treasury's Office of Foreign Assets Control as the same may in
effect from time to time.
SECTION 6. PARTICIPANT REPRESENTATIONS.
(a) The Participant represents, warrants and agrees that it will not make any
representations concerning any Fund, the applicable Trust, the Creation Units or
the Shares other than those consistent with the Fund's then current Prospectus
or any promotional or sales literature furnished to the Participant by the
Distributor or the applicable Trust or Fund, or any such materials permitted by
clause (b) of this Section 6.
(b) The Participant agrees not to furnish or cause to be furnished by
Participant or its employees to any person or to display or publish any
information or materials relating to a Trust or any Fund (including, without
limitation, promotional materials and sales literature, advertisements, press
releases, announcements, statements, posters, signs or other similar materials,
but not including any materials prepared and used for Participant's internal use
only, any brokerage communications between employees of Participant and
customers or any communications prepared and directed to registered
broker-dealers) ("Marketing Materials"), except (i) such Marketing Materials as
may be furnished to the Participant by the Distributor or the applicable Trust
or Fund and (ii) such other Marketing Materials as are consistent with the
applicable Fund's then current Prospectus or otherwise approved by the
Distributor or the Trust; provided that such Marketing Materials clearly
indicate that such Marketing Materials are prepared and distributed by
Participant and, upon request, a copy is forwarded to the Distributor as soon as
practicable.
(c) Notwithstanding anything to the contrary in this Agreement,
Participant and its affiliates may prepare and circulate in the regular course
of their businesses (i) research reports that include information, opinions or
recommendations relating to Shares; and (ii) without reference to a Fund or its
Prospectus, data and information relating to the various indices to which the
Funds are benchmarked.
SECTION 7. SUBCUSTODIAN ACCOUNTS.
The Participant understands and agrees that in the case of an
International Fund, the relevant Trust has caused The Bank of New York acting in
its capacity as the Trust's custodian ("Custodian") to maintain with one or more
applicable subcustodians (each, a "Subcustodian") for such International Fund an
account in the relevant foreign jurisdiction(s) to which the Participant shall
deliver or cause to be delivered in connection with the purchase of a Creation
Unit the securities and any other cash amounts (or the cash value of all or a
-5-
part of such securities, in the case of a permitted or required cash purchase or
"cash in lieu" amount) on behalf of itself or any party for which it is acting
(whether or not a customer), with any appropriate adjustments as advised by the
Trust or such International Fund, in accordance with the terms and conditions
applicable to such account in such foreign jurisdiction.
SECTION 8. TITLE TO SECURITIES: RESTRICTED SHARES.
The Participant represents that upon delivery of a portfolio of Deposit
Securities to a Fund's custodian, the Fund will acquire good and unencumbered
title to such securities, free and clear of all liens, restrictions, charges and
encumbrances and not subject to any adverse claims, including, without
limitation, any special restriction upon the sale or transfer of such securities
imposed by (i) any agreement or arrangement entered into by the Participant or
any party for which it is acting in connection with a Creation Order or (ii) any
provision of the Securities Act, and any regulations thereunder (except that
portfolio securities of issuers other than U.S. issuers shall not be required to
have been registered under the Securities Act if exempt from such registration),
or of the applicable laws or regulations of any other applicable jurisdiction.
SECTION 9. FEES.
In connection with the creation or redemption of Creation Units, the
Transfer Agent shall charge, and the Participant agrees to pay to the Transfer
Agent, (i) the Creation Transaction Fee or Redemption Transaction Fee (each also
sometimes referred to individually herein as the "Transaction Fee") prescribed
in the relevant Fund's Prospectus applicable to creations or redemptions through
the Trusts' Clearing Process, or (ii) the applicable Creation Transaction Fee or
Redemption Transaction Fee plus, in each case, such additional variable amounts
as may be prescribed in the relevant Fund's Prospectus for (a) creations or
redemptions outside the Trusts' Clearing Process and (b) creations through the
Trusts' Clearing Process where the cash equivalent value of one or more Deposit
Securities is being deposited in lieu of the inclusion of such Deposit
Securities in the securities portion of the Fund Deposit. The Transaction Fee
may be waived or otherwise adjusted from time to time subject to the provisions
relating thereto and any limitations as prescribed in the relevant Fund's
Prospectus. With respect to International Funds (for which creations and
redemptions are processed outside the Trusts' Clearing Process), such additional
variable amounts may include any expenses incurred by a Fund in the transfer of
Deposit Securities to the Fund in connection with a creation of Creation Units,
and in the transfer of Deposit Securities to the Participant in connection with
a redemption of Creation Units; such expenses may include operational processing
and brokerage costs, transfer fees, stamp taxes and the like. When an
International Fund permits a Participant to substitute cash or a different
security in lieu of depositing one or more of the requisite Deposit Securities,
the Participant may be assessed a higher Transaction Fee on the substitute
security portion of its investment to cover the cost of purchasing the Deposit
Securities and/or disposing of the substituted securities, including operational
processing and brokerage costs, transfer fees, stamp taxes, and part or all of
the spread between the expected bid and offer side of the market related to such
Deposit Securities and/or substitute securities.
-6-
SECTION 10. AUTHORIZED PERSONS.
Concurrently with the execution of this Agreement and from time to time
thereafter, the Participant shall deliver to the Distributor and the Transfer
Agent, duly certified as appropriate by its secretary or other duly authorized
person, a certificate setting forth the names and signatures of all persons
authorized to give instructions relating to activity contemplated hereby or any
other notice, request or instruction on behalf of the Participant (each, an
"Authorized Person"). Such certificate may be accepted and relied upon by the
Distributor and the Transfer Agent as conclusive evidence of the facts set forth
therein and shall be considered to be in full force and effect until delivery to
the Distributor and the Transfer Agent of a superseding certificate bearing a
subsequent date. The Transfer Agent shall issue to each Authorized Person a
unique personal identification number ("PIN Number") by which such Authorized
Person and the Participant shall be identified and instructions issued by the
Participant hereunder shall be authenticated. Upon the termination or revocation
of authority of such Authorized Person by the Participant, the Participant shall
give prompt written notice of such fact to the Distributor and the Transfer
Agent and such notice shall be effective upon receipt by both the Distributor
and the Transfer Agent.
SECTION 11. REDEMPTION.
The Participant represents and warrants that it will not obtain a
Submission Number (as defined in Attachment A) from the Transfer Agent for the
purpose of redeeming a Creation Unit unless it first ascertains that (a) it or
its customer, as the case may be, owns outright or has full legal authority and
legal beneficial right to tender for redemption the requisite number of Shares
of any Fund to be redeemed, and the entire proceeds of the redemption, (b) the
delivery of such Shares to the Transfer Agent in accordance with the Prospectus
or as otherwise required by the Trust or Fund would not be precluded as the
result of their being subject to or the subject of a loan, repurchase agreement,
securities lending agreement or other arrangement and (c) upon delivery to the
Fund's custodian, the Shares will be free and clear of all liens.
A Trust may make redemptions in cash in lieu of transferring one or
more Deposit Securities if the Trust or Fund determines, in its discretion, that
such method is warranted because a Participant who has placed the Redemption
Order is restrained by regulation or policy from transacting in the Deposit
Securities, delivery of the Deposit Securities is not permissible under
applicable law or foreign stock exchange regulations, or for other reasons.
In connection with an International Fund, a Participant must maintain
appropriate securities broker-dealer, bank or other custody arrangements to
which account Deposit Securities will be delivered in connection with a
redemption. If a redeeming Participant, or any party on whose behalf the
Participant is acting, does not have appropriate arrangements to take delivery
of the Deposit Securities in the relevant foreign jurisdiction(s) and it is not
possible to make other such arrangements, or if it is not possible to effect
deliveries of the Deposit Securities in such foreign jurisdiction(s) and in
certain other circumstances, the Trust or Fund may in its discretion redeem
Shares for cash, and the redeeming Participant, on behalf of itself or any part
for which it is acting, will be required to receive redemption proceeds in cash.
-7-
In such case, the Participant will receive a cash payment equal to the net asset
value (next determined after receipt of the Redemption Order) times the number
of Shares in a Creation Unit of the relevant International Fund, minus the
Transaction Fee and other costs specified in Section 9.
In the case of a beneficial owner of an International Fund who is a
resident of Australia or New Zealand, the Participant understands and agrees
that such beneficial owner is only entitled to receive cash upon its redemption
of Creation Units. In a Redemption Order, the Participant will be required to
confirm that an in-kind redemption request has not been submitted on behalf of a
beneficial owner who is an Australian or New Zealand resident.
SECTION 12. FUND'S TAX BASIS.
The Participant represents and warrants to the Distributor and each
Trust and Fund that with respect to any Creation Units it shall only deliver or
transfer, or cause to be delivered or transferred, Deposit Securities (or
contracts therefor) that, should Section 351 of the Internal Revenue Code of
1986, as amended, apply to such delivery or transfer, will have a tax basis in
the hands of the Fund receiving the Deposit Securities equal to the closing
market price of such Deposit Securities on the date the Creation Order with
respect thereto is Deemed Received (as such term is defined in Attachment A
hereto). Such representation and warranty shall be deemed repeated with respect
to each Creation Order.
SECTION 13. INDEMNIFICATION.
(a) The Participant hereby agrees to indemnify and hold harmless the Distributor
in its capacity as principal underwriter, each Trust, each Fund, the Transfer
Agent, their respective affiliates, directors, officers, employees and agents,
and each person, if any, who controls such persons within the meaning of Section
15 of the Securities Act (each, for purposes of this paragraph, an "Indemnified
Party") from and against any loss, liability, cost and expense (including
reasonable attorneys' fees) incurred by such Indemnified Party as a result of
(i) any breach by the Participant of any provision of this Agreement that
relates to the Participant; (ii) any failure on the part of the Participant to
perform any of its obligations set forth in this Agreement; (iii) any failure by
the Participant to comply with applicable laws, including rules and regulations
of self-regulatory organizations in relation to the sales, trading or marketing
of Shares and the creation or redemption of or investment in a Fund or Funds,
except that the Participant shall not be required to indemnify an Indemnified
Party to the extent that such failure was caused by Participant's adherence to
instructions given or representations made by the Distributor, the Transfer
Agent or any Indemnified Party, as applicable; or (iv) actions of such
Indemnified Party in reliance upon any instructions issued or representations
made in accordance with Attachment A (as it may be amended from time to time)
reasonably believed by the Distributor or the Transfer Agent, as applicable, to
be genuine and to have been given by the Participant except to the extent that
the Participant had previously revoked a PIN Number used in giving such
instructions or representations (where applicable) and such revocation was given
by the Participant and received by the Distributor and the Transfer Agent in
accordance with the terms of Section 10 hereto. The Participant and the
Distributor understand and agree that each Trust and Fund as a third party
beneficiary of this Agreement is entitled and intends to proceed directly
-8-
against the Participant in the event that the Participant fails to honor any of
its obligations pursuant to this Agreement that benefit each such Trust and
Fund.
(b) The Distributor hereby agrees to indemnify and hold harmless the
Participant, its respective subsidiaries, affiliates, directors, officers,
employees and agents, and each person, if any, who controls such persons within
the meaning of Section 15 of the Securities Act (each, for purposes of this
paragraph, an "Indemnified Party") from and against any loss, liability, cost
and expense (including reasonable attorneys' fees) incurred by such Indemnified
Party as a result of (i) any breach by the Distributor of any provision of this
Agreement that relates to the Distributor; (ii) any failure on the part of the
Distributor to perform any of its obligations set forth in this Agreement; (iii)
any failure by the Distributor to comply with applicable laws, including rules
and regulations of self-regulatory organizations in relation to its role as
Distributor of the Funds; or (iv) actions of such Indemnified Party in reliance
upon any instructions issued or representations made in accordance with
Attachment A (as it may be amended from time to time) reasonably believed by the
Participant to be genuine and to have been given by the Distributor or the
Transfer Agent.
(c) Each of the Distributor and Participant agrees to jointly and
severally indemnify Transfer Agent and hold Transfer Agent harmless from and
against any and all losses sustained or incurred by or asserted against Transfer
Agent by reason of or as a result of any action or inaction, or arising out of
Transfer Agent's performance hereunder, including reasonable fees and expenses
of counsel incurred by Transfer Agent in a successful defense of claims by the
Distributor and/or Participant; provided however, Distributor and/or Participant
shall not indemnify Transfer Agent for those losses arising out of Transfer
Agent's own negligence or willful misconduct or that of its employees. This
indemnity shall be a continuing obligation of the Distributor and/or
Participant, and their respective successors and assigns, notwithstanding the
termination of this Agreement.
(d) Except to the extent that the Transfer Agent is to be indemnified
as provided in this Section 13, no party to this Agreement shall be liable to
the other party or to any other person for any damages arising out of mistakes
or errors in data provided to such Indemnified Party by a third party, or out of
interruptions or delays of electronic means of communications with the
Indemnified Parties.
SECTION 14. STANDARD OF CARE.
Transfer Agent shall have no responsibility and shall not be liable for
any loss or damage unless such loss or damage is caused by its own negligence or
willful misconduct or that of its employees, or its breach of any of its
obligations hereunder. In no event shall the Transfer Agent be liable for
special, indirect or consequential damages regardless of the form of action and
even if the same were foreseeable.
-9-
SECTION 15. FORCE MAJEURE.
Transfer Agent shall establish and maintain a disaster recovery plan
and back-up system at all times satisfying the requirements of all laws, rules
and regulations (the "Disaster Recovery Plan and Back-Up System") applicable to
the Transfer Agent for providing services as such. Transfer Agent shall not be
responsible or liable for any failure or delay in the performance of its
obligations under this Agreement arising out of or caused, directly or
indirectly, by circumstances beyond its control which are not a result of its
negligence, including without limitation, acts of God; earthquakes; fires;
floods; wars; civil or military disturbances; sabotage; epidemics; riots;
interruptions, loss or malfunctions of utilities, transportation, computer
(hardware or software) or communications service; accidents; labor disputes;
acts of civil or military authority; governmental actions; or inability to
obtain labor, material, equipment or transportation, provided that Transfer
Agent has established and is maintaining the Disaster Recovery Plan and Back-Up
System, or if not, that such delay or failure would have occurred even if
Transfer Agent had established and was maintaining the Disaster Recovery Plan
and Back-Up System. Upon the occurrence of any such delay or failure, Transfer
Agent shall use commercially reasonable best efforts to resume performance as
soon as practicable under the circumstances.
SECTION 16. ACKNOWLEDGMENT.
The Participant acknowledges receipt of each relevant Fund's Prospectus
and represents it has reviewed such document and understands the terms thereof.
SECTION 17. NOTICES.
Except as otherwise specifically provided in this Agreement, all
notices required or permitted to be given pursuant to this Agreement shall be
given in writing and delivered by personal delivery or by postage prepaid
registered or certified United States first class mail, return receipt
requested, or by telex, telegram or facsimile or similar means of same day
delivery (with a confirming copy by mail as provided herein). Unless otherwise
notified in writing, all notices to the Transfer Agent shall be given or sent as
follows: The Bank of New York, 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000,
Attn: ETF Services Group. All notices to the Participant and the Distributor
shall be directed to the address or telephone, facsimile or telex numbers
indicated below the signature line of such party.
SECTION 18. TERMINATION.
This Agreement shall become effective in this form as of the date
accepted by the Transfer Agent and may be terminated at any time by any party
upon thirty (30) days prior notice to the other parties (i) unless earlier
terminated by the Transfer Agent in the event of a breach of this Agreement or
the procedures described herein by the Participant or (ii) in the event that a
Trust is terminated pursuant to its Declaration of Trust. This Agreement
supersedes any prior Participant Agreement entered into by the parties. Any and
all prior Participant Agreements entered into by the parties are deemed
terminated upon execution of this Agreement.
-10-
SECTION 19. PROSPECTUS.
(a) The Distributor will provide to the Participant copies of the then current
Prospectus for each Fund and any printed supplemental information in reasonable
quantities upon request. The Distributor represents, warrants and agrees that it
will notify the Participant when a revised, supplemented or amended Prospectus
for any Shares is available and deliver or otherwise make available to the
Participant copies of such revised, supplemented or amended Prospectus at such
time and in such numbers as to enable the Participant to comply with any
obligation it may have to deliver such Prospectus to customers. As a general
matter, the Distributor will make such revised, supplemented or amended
Prospectus available to the Participant no later than its effective date. The
Distributor shall be deemed to have complied with this Section 19 when the
Participant has received such revised, supplemented or amended Prospectus by
email at _____________________, in printable form, with such number of hard
copies as may be agreed from time to time by the parties promptly thereafter.
(b) Distributor represents and warrants that (i) the registration statement(s)
for First Trust Exchange-Traded Fund on Form N-1A (No. 333-125751) and the
Prospectus(es) contained therein, the registration statement(s) for First Trust
Exchange-Traded Fund II on Form N-1A (No. 333-137036) and the Prospectus(es)
contained therein, and the registration statement(s) for First Trust
Exchange-Traded AlphaDEX(TM) Fund (No. 333-140895) conform in all material
respects to the requirements of the Securities Act, and the rules and
regulations of the Securities and Exchange Commission thereunder and do not and
will not, as of the applicable effective date as to the registration statement
and any amendment thereto and as of the applicable filing date as to the
Prospectus and any amendment or supplement thereto, contain an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading; (ii) the
sale and distribution of the Shares as contemplated herein will not conflict
with or result in a breach or violation of any statute or any order, rule or
regulation of any court or governmental agency or body having jurisdiction over
the Trusts, any Fund or the Distributor; and (iii) no consent, approval,
authorization, order, registration or qualification of or with any such court or
governmental agency or body is required for the issue and sale of the Shares,
except the registration under the Securities Act of the Shares.
SECTION 20. COUNTERPARTS.
This Agreement may be simultaneously executed in several counterparts,
each of which shall be an original and all shall constitute but one and the same
instrument.
SECTION 21. NO WAIVER.
Each and every right granted to any party hereunder or under any other
document delivered hereunder or in connection herewith, or allowed it by law or
equity, shall be cumulative and may be exercised from time to time. No failure
on the part of any party hereto to exercise, and no delay in exercising, any
right will operate as a waiver thereof, nor will any single or partial exercise
by any party hereto of any right preclude any other or future exercise thereof
or the exercise of any other right.
-11-
SECTION 22. ENFORCEABILITY; AMENDMENT.
In case any provision in or obligation under this Agreement shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
thereby. This Agreement may not be amended or modified in any manner except by a
written agreement executed by the parties hereto, except that any amendment to
Schedule I approved in writing by the Distributor (upon which written approval
the Transfer Agent may conclusively rely) and any amendment to Attachment A
hereto need be signed only by the Transfer Agent. The Transfer Agent shall
provide the Participant a copy of any such amendment in the manner provided in
Section 17. This Agreement shall extend to and shall be binding upon the parties
hereto, and their respective successors and assigns; provided, however, that
this Agreement shall not be assignable by any party without the written consent
of the others.
SECTION 23. GOVERNING LAW; CONSENT TO JURISDICTION.
This Agreement shall be construed in accordance with the substantive
laws of the State of New York, without regard to conflicts of laws principles
thereof. The parties hereby consent to the jurisdiction of a state or federal
court situated in New York City, New York in connection with any dispute arising
hereunder. Each party hereby irrevocably waives, to the fullest extent permitted
by applicable law, any objection which it may now or hereafter have to the
laying of venue of any such proceeding brought in such a court and any claim
that such proceeding brought in such a court has been brought in an inconvenient
forum. Each party hereby irrevocably waives any and all rights to trial by jury
in any legal proceeding arising out of or relating to this Agreement.
SECTION 24. STATUS OF FUND
The Distributor hereby represents that each Series (i) of the First
Trust Exchange-Traded Fund (ii) of the First Trust Exchange-Traded Fund II, and
(iii) of the First Trust Exchange-Traded AlphaDEX (TM) Fund is a registered open
ended investment company operating in accordance with the exemptive order
granted under 812-13000 and I.C. Release No. 27068 dated September 20, 2005, as
the same may be amended from time to time, and I.C. Release No. 27051 dated
August 26, 2005 and any additional I.C. Releases related to such amendments.
-12-
FIRST TRUST PORTFOLIOS, L.P.
By
Name:_________________________________________________
Title:________________________________________________
Address: 0000 Xxxxxxxxxxx Xxxx
Xxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
-----------------------------
By
Name:_________________________________________________
Title:________________________________________________
Address: _______________________________
_______________________________
Telephone:_______________________________________________
Facsimile:_______________________________________________
THE BANK OF NEW YORK, as Transfer Agent
By
Name:_________________________________________________
Title:________________________________________________
Address: 000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Dated:______________________________
-13-
SCHEDULE I
Series of First Trust Exchange-Traded Fund
First Trust Dow Xxxxx Select MicroCap IndexSM Fund
First Trust Morningstar(R) Dividend LeadersSM Index Fund
First Trust NASDAQ-100 Equal Weighted IndexSM Fund
First Trust NASDAQ-100-Technology Sector IndexSM Fund
First Trust IPOX-100 Index Fund
First Trust AMEX(R) Biotechnology Index Fund
First Trust DB Strategic Value Index Fund
First Trust Dow Xxxxx Internet IndexSM Fund
First Trust NASDAQ(R) Clean Edge(R) U.S. Liquid Series Index Fund
First Trust NASDAQ-100 Ex-Technology Sector IndexSM Fund
First Trust Value Line(R) Dividend Index Fund
First Trust Value Line(R) Equity Allocation Index Fund
Participant shall be a participant with respect to, and this Agreement shall be
applicable to, the following additional Funds if and when they shall become
Series of First Trust Exchange-Traded Fund:
First Trust Value Line(R) Arithmetic Index Fund
First Trust Ibbotson Core U.S. Equity Allocation Index Fund
First Trust S&P REIT Index Fund
First Trust ISE Water Index Fund
First Trust ISE-Revere Natural Gas Index Fund
First Trust ISE Chindia Index Fund
First Trust Value Line(R) 100 Exchange-Traded Fund
Series of First Trust Exchange-Traded Fund II
Sch. I
Series of First Trust Exchange-Traded AlphaDEX(TM) Fund
First Trust Consumer Discretionary AlphaDEX(TM) Fund
First Trust Consumer Staples AlphaDEX(TM) Fund
First Trust Energy AlphaDEX(TM) Fund
First Trust Financials AlphaDEX(TM) Fund
First Trust Health Care AlphaDEX(TM) Fund
First Trust Industrials / Producer Durables AlphaDEX(TM) Fund
First Trust Materials AlphaDEX(TM) Fund
First Trust Technology AlphaDEX(TM) Fund
First Trust Utilities AlphaDEX(TM) Fund
First Trust Large Cap Core AlphaDEX(TM) Fund
First Trust Mid Cap Core AlphaDEX(TM) Fund
First Trust Small Cap Core AlphaDEX(TM) Fund
First Trust Large Cap Growth Opportunities AlphaDEX(TM) Fund
First Trust Large Cap Value Opportunities AlphaDEX(TM) Fund
First Trust Multi Cap Growth AlphaDEX(TM) Fund
First Trust Multi Cap Value AlphaDEX(TM) Fund
ATTACHMENT A
Subject to the terms and conditions of the attached Participant
Agreement, this document supplements the Prospectuses for the Series of First
Trust Exchange-Traded Fund, for the Series of First Trust Exchange-Traded Fund
II, and for the Series of First Trust Exchange-Traded AlphaDEX(TM) Fund and is
an attachment to, and incorporated into and made a part of, the Participant
Agreement with respect to the procedures to be used by (i) the Transfer Agent in
processing an order for the creation of Shares, and (ii) the Transfer Agent in
processing a request for the redemption of Shares, and (iii) the Participants
and the Transfer Agent in delivering or arranging for the delivery of requisite
cash payments, Fund Deposit or Shares, as the case may be, in connection with
the submission of orders for creation or requests for redemption. Capitalized
terms not otherwise defined have the meaning assigned to them in the Participant
Agreement.
A Participant is first required to have signed the Participant
Agreement. Upon acceptance of the Participant Agreement by the Distributor, the
Transfer Agent will assign a unique personal identification number ("PIN
Number") to each Authorized Person authorized to act for the Participant. This
will allow a Participant through its Authorized Person(s) to place orders for
either creation or redemption of Shares.
SECTION I. TO PLACE AN ORDER FOR CREATION OR REDEMPTION OF SHARES
1. CALL TO RECEIVE A SUBMISSION NUMBER. An Authorized Person for the Participant
will call the Trust Telephone Representative at (000) 000-0000 not later than
the closing time of the regular trading session on The New York Stock Exchange
(the "NYSE Closing Time") (ordinarily 4:00 p.m. New York time) to receive a
submission number ("Submission Number"). In the case of custom orders, the order
must be received by the Transfer Agent no later than 3:00 p.m. Eastern time on
the trade date. Upon verifying the authenticity of the caller (as determined by
the use of the appropriate PIN Number) and the terms of the order for creation
or request for redemption, the Trust Telephone Representative will issue a
unique Submission Number. All orders with respect to the creation or redemption
of Shares are required to be in writing and accompanied by the designated
Submission Number. Incoming telephone calls are queued and will be handled in
the sequence received. Calls placed before the NYSE Closing Time will be
processed even if the call is taken after this cut-off time. ACCORDINGLY, DO NOT
HANG UP AND REDIAL. INCOMING CALLS THAT ARE ATTEMPTED LATER THAN THE NYSE
CLOSING TIME WILL NOT BE ACCEPTED.
2. ASSEMBLE THE SUBMISSION. The Authorized Person submitting an order to create
or a request to redeem shall assemble (a) written instructions regarding such
creation order or redemption request and (b) the designated Submission Number in
one document and transmit such document by facsimile or telex to the Trust
Telephone Representative and the Distributor, as applicable, according to the
procedures set forth below in subsection 3. The document so transmitted is
hereinafter referred to as the "Submission," and the Business Day on which a
Submission is made is hereinafter referred to as the "Transmittal Date." As used
herein, a Business Day ("Business Day") is any day on which The New York Stock
Exhibit B
Attachment A
Exchange is open. NOTE THAT THE TELEPHONE CALL IN WHICH THE SUBMISSION NUMBER IS
ISSUED INITIATES THE ORDER PROCESS BUT DOES NOT ALONE CONSTITUTE THE ORDER. AN
ORDER OR REQUEST IS ONLY COMPLETED AND PROCESSED UPON RECEIPT OF THE SUBMISSION.
3. TRANSMIT THE SUBMISSION. A Submission Number is only valid for a limited
time. The Submission for either creations or redemptions of Shares must be sent
by facsimile or telex to the Trust Telephone Representative, as applicable,
within fifteen (15) minutes of the issuance of the Submission Number. In the
event that the Submission is not received within such time period, the Trust
Telephone Representative will attempt to contact the Participant to request
immediate transmission of the Submission.
(a) In the case of a Submission for creation, unless the Submission is
received by the Trust Telephone Representative upon the earlier of
within (i) fifteen (15) minutes of contact with the Participant or
(ii) forty-five (45) minutes after the NYSE Closing Time, the
Submission will be deemed invalid.
(b) In the case of a Submission for redemption, unless such Submission is
received by the Trust Telephone Representative within (i) fifteen (15)
minutes of contact with the Participant or (ii) forty-five (45) minutes
after the NYSE Closing Time, whichever is earlier, such order for
redemption contained therein shall be deemed invalid.
4. AWAIT RECEIPT OF CONFIRMATIOn.
(a) TRUSTS' CLEARING PROCESS-CREATION ORDERS. The Transfer Agent shall
issue to the Participating Party a confirmation of acceptance of an
order to create Shares in Creation Unit size aggregations ("Creation
Order") through the Trusts' Clearing Process within fifteen (15)
minutes of its receipt of a Submission received in good form. In the
event the Participating Party does not receive a timely confirmation
from the Transfer Agent, it should contact the Distributor and the
Trust Telephone Representative at the business numbers indicated.
(b) TRUSTS' CLEARING PROCESS-REQUESTS FOR REDEMPTIONS. The Transfer Agent
shall issue to the Participating Party a confirmation of acceptance of
a request to redeem Shares in Creation Unit size aggregations
("Redemption Order") through the Trusts' Clearing Process within
fifteen (15) minutes of its receipt of a Submission received in good
form. In the event the Participating Party does not receive a timely
confirmation from the Transfer Agent, it should contact the Transfer
Agent directly at the business number indicated.
(c) OUTSIDE THE TRUSTS' CLEARING PROCESS -- CREATION ORDERS. The Transfer
Agent shall issue to the DTC Participant an acknowledgment of receipt
of a Creation Order outside the Trusts' Clearing Process within fifteen
(15) minutes of its receipt of a Submission received in good form. In
the event the DTC Participant does not receive a timely acknowledgment
from the Transfer Agent, it should contact the Transfer Agent at the
business numbers indicated.
Exhibit B-Attachment A-2-
(d) OUTSIDE THE TRUSTS' CLEARING PROCESS -- REDEMPTION ORDERS. The Transfer
Agent shall issue to the DTC Participant an acknowledgment of receipt
of a Redemption Order outside the Trusts' Clearing Process within
fifteen (15) minutes of its receipt of a Submission received in good
form. In the event the DTC Participant does not receive a timely
acknowledgment from the Transfer Agent, it should contact the Transfer
Agent directly at the business number indicated.
SECTION II. PARTICIPANTS' RESPONSIBILITY FOR DELIVERING OR EFFECTING THE
DELIVERY OF REQUISITE FUND DEPOSIT OR SHARES AND CASH PAYMENTS
IN CONNECTION WITH CREATION ORDERS OR REDEMPTION ORDERS
1. TRUSTS' CLEARING PROCESS -- CREATION ORDERS. The Participating Party
notified of confirmation of a Creation Order to create Shares through the
Trusts' Clearing Process shall be required to transfer or arrange for the
transfer of (a) the requisite Deposit Securities (or contracts to purchase
such Deposit Securities expected to be delivered through NSCC by the
"regular way" settlement date) and (b) the Cash Component, if any, to the
Transfer Agent by means of the Trusts' Clearing Process so as to be
received no later than on the "regular way" settlement date following the
Business Day on which such order is Deemed Received by the Transfer Agent
as set forth below in Section IV.
2. TRUSTS' CLEARING PROCESS -- REDEMPTION ORDERS. The Participating Party
notified of confirmation of a Redemption Order to redeem Shares through the
Trusts' Clearing Process shall be required to transfer or arrange for the
transfer of the requisite Shares and the Cash Redemption Amount, as defined
in the applicable Fund's Prospectus ("Cash Redemption Amount"), if any, to
the Transfer Agent by means of the Trusts' Clearing Process so as to be
received no later than on the "regular way" settlement date following the
Business Day on which such order is Deemed Received by the Transfer Agent
as set forth below in Section IV.
3. OUTSIDE THE TRUSTS' CLEARING PROCESS -- CREATION ORDERS. The DTC
Participant notified of acknowledgment of a Creation Order to create Shares
outside the Trusts' Clearing Process shall be required to effect a transfer
to the Transfer Agent of (a) the requisite Deposit Securities through DTC
so as to be received by the Transfer Agent no later than 11:00 a.m.,
Eastern Time, on the next Business Day immediately following the Business
Day on which such order is Deemed Received by the Distributor as set forth
below in Section IV, in such a way as to replicate the Fund Deposit
established on the Transmittal Date by the Transfer Agent and (b) the Cash
Component, if there is a positive Cash Component, through the Federal
Reserve Bank wire system so as to be received by the Transfer Agent by 2:00
p.m., Eastern Time, on the next Business Day immediately following the day
such order is Deemed Received. If the Transfer Agent does not receive the
Deposit Securities by 11:00 a.m. Eastern Time and the Cash Component, if
any, by 2:00 p.m., Eastern Time, on the Business Day immediately following
the day such order is Deemed Received, the Creation Order contained in such
Submission shall be canceled. Upon written notice to the Transfer Agent,
the DTC Participant may resubmit such canceled order on the following
Business Day using a Fund Deposit as newly constituted.
Exhibit B-Attachment A-3-
4. PURCHASE OF CREATION UNIT AGGREGATIONS PRIOR TO RECEIPT OF DEPOSIT
SECURITIES. Creation Unit Aggregations may be created in advance of receipt
by a Fund of all or a portion of the applicable Deposit Securities as
described below. In these circumstances, the initial deposit will have a
value greater than the NAV of the applicable Fund's Shares on the date the
Creation Order is placed in proper form since, in addition to available
Deposit Securities, cash must be deposited in an amount equal to the sum of
(i) the Cash Component, plus (ii) one hundred fifteen percent (115%) of the
market value of the undelivered Deposit Securities (the "Additional Cash
Deposit"). The Creation Order shall be deemed to be received on the
Business Day on which the order is placed provided that the Creation Order
is placed in proper form prior to 4:00 p.m., Eastern Time, on such date,
and federal funds in the appropriate amount are deposited with the Transfer
Agent by 11:00 a.m., Eastern Time, the following Business Day. If the
Creation Order is not placed in proper form by 4:00 p.m., Eastern Time, or
federal funds in the appropriate amount are not received by 11:00 a.m.,
Eastern Time, the next Business Day, then the Creation Order may be deemed
to be canceled and the Authorized Participant shall be liable to the Fund
for losses, if any, resulting therefrom. An additional amount of cash shall
be required to be deposited with the applicable Fund, pending delivery of
the missing Deposit Securities to the extent necessary to maintain the
Additional Cash Deposit with the Fund in an amount at least equal to one
hundred fifteen percent (115%) of the daily marked to market value of the
missing Deposit Securities. The parties hereto further agree that the Trust
may purchase the missing Deposit Securities at any time and the Participant
agrees to accept liability for any shortfall between the cost to the Trust
of purchasing such securities and the amount of the Additional Cash Deposit
maintained with the Fund, as the Trust may determine in its sole
discretion.
5. OUTSIDE THE TRUSTS' CLEARING PROCESS -- REDEMPTION ORDERS. The DTC
Participant notified of acknowledgment of a Redemption Order to redeem
Shares outside the Trusts' Clearing Process shall be required to effect a
transfer to the Transfer Agent of (a) the requisite number of Shares
through DTC no later than the NYSE Closing Time on the Business Day on
which such Redemption Order is Deemed Received by the Transfer Agent and
(b) the Cash Redemption Amount, if any, through the Federal Reserve Bank
wire system by no later than 2:00 p.m. on the next Business Day immediately
following the Business Day on which such order is Deemed Received by the
Transfer Agent.
6. TRANSACTION FEE. In connection with the creation or redemption of Creation
Units, the Transfer Agent shall charge, and the Participant agrees to pay
to the Transfer Agent, (i) the Creation Transaction Fee or Redemption
Transaction Fee prescribed in the relevant Fund's Prospectus applicable to
creations or redemptions through the Trusts' Clearing Process, or (ii) the
applicable Creation Transaction Fee or Redemption Transaction Fee plus, in
each case, such additional variable amounts as may be prescribed in the
relevant Fund's Prospectus for (a) creations or redemptions outside the
Trusts' Clearing Process and (b) creations through the Trusts' Clearing
Process where the cash equivalent value of one or more Deposit Securities
is being deposited in lieu of the inclusion of such Deposit Securities in
the securities portion of the Fund Deposit. The Cash Component or Cash
Redemption Amount payable or to be received, as the case may be, by the
Participant in connection with the Creation Order or Redemption Order shall
be adjusted by the amount of such applicable Transaction Fee and additional
variable amounts, if any.
Exhibit B-Attachment A-4-
7. INTERNATIONAL FUNDS -- CREATION ORDERS.
(a) Except as provided below, Deposit Securities must be
delivered to an account maintained at the applicable local Subcustodian
of the Trust on or before the International Contractual Settlement Date
(defined below). The Participant must also pay on or before the
International Contractual Settlement Date immediately available or same
day funds estimated by Trust to be sufficient to pay the Cash Component
next determined after acceptance of the Creation Order, together with
the applicable Creation Transaction Fee and additional variable amounts
(as described below and in the Prospectus). The "International
Contractual Settlement Date" with respect to each International Fund is
the earlier of (i) the date upon which all of the required Deposit
Securities, the Cash Component and any other cash amounts which may be
due are delivered to the Fund and (ii) the latest day for settlement on
the customary settlement cycle in the jurisdiction(s) where any of the
securities of such International Fund are customarily traded.
(b) Except as provided in the next two paragraphs, a Creation
Unit of Shares will not be issued until the transfer of good title to
the Trust of the portfolio of Deposit Securities, the payment of the
Cash Component, the payment of any other cash amounts and the Creation
Transaction Fee have been completed. When the Subcustodian confirms to
Custodian that the required Deposit Securities (or, when permitted in
the sole discretion of Trust, the cash in lieu thereof) have been
delivered to the account of the relevant Subcustodian, the Custodian
shall notify Distributor and the Transfer Agent which, acting on behalf
of the Trust, will issue and cause the delivery of the Creation Unit of
Shares.
(c) The Trust may in its sole discretion permit or require the
substitution of an amount of cash (i.e., a "cash in lieu" amount) to be
added to the Cash Component to replace any Deposit Security which may
not be available in sufficient quantity for delivery or for other
similar reasons. If the Distributor, acting on behalf of the Trust,
determines that a "cash in lieu" amount will be accepted, Distributor
will notify the Participant and the Transfer Agent, and the Participant
shall deliver, on behalf of itself or the party on whose behalf it is
acting, the "cash in lieu" amount, with any appropriate adjustments as
advised by the Trust.
(d) In the event that a Fund Deposit is incomplete on the
International Contractual Settlement Date for a Creation Order because
certain or all of the Deposit Securities are missing, the Trust may
issue a Creation Unit of Shares notwithstanding such deficiency in
reliance on the undertaking of the Participant to deliver the missing
Deposit Securities as soon as possible, which undertaking shall be
secured by an Additional Cash Deposit with respect to undelivered
Deposit Securities as described above in Section 4.
(e) Cash shall be delivered in the manner provided above for
Creation Orders outside the Trusts' Clearing Process.
Exhibit B-Attachment A-5-
(f) In addition to the Creation Transaction Fee, the
Participant shall pay additional variable amounts which may include
expenses incurred by the Fund in the transfer of Deposit Securities to
the Fund in connection with a creation of Creation Units. These
expenses may include operational processing and brokerage costs,
transfer fees, stamp taxes and the like. When an International Fund
permits a Participant to substitute cash or a different security in
lieu of depositing one or more of the requisite Deposit Securities, the
Participant may also be assessed an amount to cover the cost of
purchasing the Deposit Securities and/or disposing of the substituted
securities, including operational processing and brokerage costs,
transfer fees, stamp taxes, and part or all of the spread between the
expected bid and offer side of the market related to such Deposit
Securities and/or substitute securities.
8. INTERNATIONAL FUNDS -- REDEMPTION ORDERS.
(a) A Participant must maintain appropriate securities
broker-dealer, bank or other custody arrangements to which account
Deposit Securities will be delivered in connection with a Redemption
Order. If the Participant, or any party on whose behalf the Participant
is acting, does not have appropriate arrangements to take delivery of
the Deposit Securities in the relevant foreign jurisdiction(s) and it
is not possible to make other such arrangements, the Participant will
be required to receive redemption proceeds in cash, as described in
paragraph (d) below.
(b) The delivery of redemption proceeds will be made within
twelve calendar days after the Redemption Order is received in proper
form, except to the extent that a delivery is delayed due to the
introduction of new or special holidays, the treatment by participants
in the local market of certain days as "informal holidays" (e.g., days
on which no or limited securities transactions occur, as a result of
substantially shortened trading hours), or changes in local securities
delivery practices. Under these circumstances, the Fund will notify the
Participant as soon as reasonably practicable.
(c) The Trust may in its sole discretion permit or require the
substitution of an amount of cash (i.e., a "cash in lieu" amount) to be
added to the Cash Component to replace any Deposit Security which may
not be available in sufficient quantity for delivery or for other
similar reasons. If the Distributor, acting on behalf of the Trust,
determines that a "cash in lieu" amount will be delivered, Distributor
will notify the Participant and the Transfer Agent and the Participant
shall receive the "cash in lieu" amount, with any appropriate
adjustments as advised by Trust.
(d) If a redeeming Participant, or any party on whose behalf
the Participant is acting, does not have appropriate arrangements to
take delivery of the Deposit Securities in the relevant foreign
jurisdiction(s) and it is not possible to make other such arrangements,
or if it is not possible to effect deliveries of the Deposit Securities
in such foreign jurisdiction(s) and in certain other circumstances, the
Trust may in its discretion redeem Shares for cash, and the redeeming
Participant, on behalf of itself or any party for which it is acting,
will be required to receive redemption proceeds in cash. In such case,
the Participant will receive a cash payment equal to the net asset
value (next determined after receipt of the Redemption Order) times the
Exhibit B-Attachment A-6-
number of Shares in a Creation Unit of the relevant International Fund,
minus the Transaction Fee.
(e) Cash shall be delivered in the manner provided above for
Redemption Orders outside the Trusts' Clearing Process.
(f) In addition to the Redemption Transaction Fee, the
Participant shall pay additional variable amounts which may include
expenses incurred by the Fund in the transfer of Deposit Securities to
the Participant. These expenses may include operational processing and
brokerage costs, transfer fees, stamp taxes and the like. When an
International Fund redeems Shares for cash, the Participant may also be
assessed an amount to cover the cost of selling the Deposit Securities,
including operational processing and brokerage costs, transfer fees and
stamp taxes.
SECTION III. TRANSFER AGENT'S RESPONSIBILITY FOR EFFECTING DELIVERY OF
REQUISITE SHARES OR SECURITIES AND CASH PAYMENTS IN
CONNECTION WITH ORDERS FOR CREATION OR REQUESTS FOR REDEMPTION
1. TRUSTS' CLEARING PROCESS -- CREATION ORDERS. After the Transfer Agent has
received notification of a Submission from the Participant for a Creation
Order for Shares through the Trusts' Clearing Process which has been Deemed
Received by the Transfer Agent as set forth below in Section IV, the
Transfer Agent shall initiate procedures to transfer the requisite Shares
and the Cash Component, if any, through the Trusts' Clearing Process so as
to be received by the creator no later than on the "regular way" settlement
date following the Business Day on which the Submission is Deemed Received
by the Transfer Agent.
2. TRUSTS' CLEARING PROCESS -- REDEMPTION ORDERS. After the Transfer Agent has
received a Submission for a Redemption Order for Shares through the Trusts'
Clearing Process which has been Deemed Received by the Transfer Agent as
set forth below in Section IV, the Transfer Agent shall initiate procedures
to transfer the requisite securities (or contracts to purchase such
securities expected to be delivered through NSCC by the "regular way"
settlement date) and the Cash Redemption Amount, if any, through the
Trusts' Clearing Process so as to be received by the beneficial owner no
later than on the "regular way" settlement date following the Business Day
on which the Submission is Deemed Received by the Transfer Agent.
3. OUTSIDE THE TRUSTS' CLEARING PROCESS -- CREATION ORDERS. After the Transfer
Agent has received notification of a Submission from the Participant for a
Creation Order for Shares outside the Trusts' Clearing Process which has
been Deemed Received by the Transfer Agent as set forth below in Section
IV, the Transfer Agent shall initiate procedures to transfer the requisite
Shares through DTC and the DTC Participants and the Cash Component, if any,
through the Federal Reserve Bank wire system so as to be received by the
creator no later than the same Business Day on which the transfer of
Deposit Securities is required to be made pursuant to Section IV (3) in
order for the Deemed Received order to continue to be Deemed Received. A
Creation Order relating to Shares of an International Fund will be
processed in the manner provided in this paragraph.
4. OUTSIDE THE TRUSTS' CLEARING PROCESS -- REDEMPTION ORDERS. After the
Transfer Agent has received a Submission for a Redemption Order for Shares
outside the Trusts' Clearing Process which has been Deemed Received by the
Transfer Agent as set forth below in Section IV, the Transfer Agent shall
initiate procedures to transfer the requisite securities (or contracts to
purchase such securities expected to be delivered within three Business
Days) through DTC and the DTC Participants and the Cash Redemption Amount,
if any, through the Federal Reserve Bank wire system so as to be received
by the Participant no later than the same Business Day on which the
transfer of Shares is required to be made pursuant to Section IV (4) in
order for the Deemed Received order to continue to be Deemed Received. A
Redemption Order relating to Shares of an International Fund will be
processed in the manner provided in this paragraph, except as otherwise
provided in Section II 8 (b).
SECTION IV. PROCEDURES BY WHICH AN ORDER TO CREATE OR A REQUEST TO
REDEEM SHALL BE "DEEMED RECEIVED"
1. TRUSTS' CLEARING PROCESS -- CREATION ORDERS. A Creation Order to create
Shares through the Trusts' Clearing Process shall be "Deemed Received" by
the Transfer Agent on the Transmittal Date only if (a) the Submission
containing such order is in proper form and (b) such Submission is received
by the Transfer Agent no later than the time on such Transmittal Date as
set forth in Section I (3) (a) hereof. Orders to create Shares contained in
Submissions transmitted after such time on a Transmittal Date shall be
deemed invalid.
2. TRUSTS' CLEARING PROCESS -- REDEMPTION ORDERS. A Redemption Order to redeem
Shares through the Trusts' Clearing Process shall be Deemed Received by the
Transfer Agent on the Transmittal Date only if (a) the Submission
containing such request is in proper form and (b) such Submission is
received by the Transfer Agent no later than the time on such Transmittal
Date as set forth in Section I(3)(b) hereof. Requests to redeem Shares
contained in Submissions transmitted after such time on a Transmittal Date
shall be "Deemed Received" by the Transfer Agent on the next Business Day
immediately following such Transmittal Date.
3. OUTSIDE THE TRUSTS' CLEARING PROCESS -- CREATION ORDERS. A Creation Order
to create Shares outside the Trusts' Clearing Process shall be Deemed
Received by the Transfer Agent on the Transmittal Date only if: (a) the
Submission containing such order is in proper form, and (b) such Submission
is received by the Transfer Agent no later than the time on such
Transmittal Date as set forth in Section I(3)(a) hereof, provided, however,
that such order shall cease to be Deemed Received unless (a) the requisite
number of Deposit Securities is transferred through DTC to the account of
the applicable Fund no later than 11:00 a.m., Eastern Time, on the Business
Day next following the Transmittal Date and (b) the cash equal to the Cash
Component, if any, is transferred via the Federal Reserve Bank wire system
to the account of the applicable Fund by no later than 2:00 p.m., Eastern
Time, on the Business Day next following the Transmittal Date. If either
the Submission, the requisite Deposit Securities or the cash equal to the
Cash Component is not received by the Transfer Agent within the time
periods set forth above, such order shall be deemed invalid.
Exhibit B-Attachment A-8-
4. OUTSIDE THE TRUSTS' CLEARING PROCESS -- REDEMPTION ORDERS. A request to
redeem Shares outside the Trusts' Clearing Process shall be Deemed Received
by the Transfer Agent on the Transmittal Date only if (a) the Submission
containing such request is in proper form, and (b) such Submission is
received by the Transfer Agent no later than the time as set forth in
Section I(3)(b) hereof, provided, however, that such order shall cease to
be Deemed Received unless (a) the requisite number of Shares is transferred
via DTC to the account of the Transfer Agent by the NYSE Closing Time on
such Transmittal Date and (b) the Cash Redemption Amount owed to the
applicable Fund, if any, is received by the Transfer Agent no later than
2:00 p.m., Eastern Time, of the Business Day next following such
Transmittal Date. If either the Submission, the Shares or cash equal to the
Cash Redemption Amount, if any, is not received by the applicable Fund
within the time periods set forth above, such redemption request shall be
Deemed Received by the Transfer Agent on the Business Day on which both the
Submission and the requisite number of Shares are delivered to the Transfer
Agent within the proper time periods as set forth above; provided that the
Cash Redemption Amount, if any, is then paid on the next Business Day
within the time period set forth above.
5. AMBIGUOUS INSTRUCTIONS. In the event that a Submission contains terms that
differ from the information provided in the telephone call at the time of
issuance of the Submission Number, the Trust Telephone Representative will
attempt to contact the Participant to request confirmation of the terms of
the order. If an Authorized Person confirms the terms as they appear in the
Submission then the Submission will be accepted and processed. If an
Authorized Person contradicts its terms, the Submission will be deemed
invalid, and a corrected Submission must be received by the Transfer Agent,
as applicable, not later than the earlier of (i) within fifteen (15)
minutes of such contact with the Participant or (ii) forty-five (45)
minutes after the NYSE Closing Time. For the avoidance of doubt,
notwithstanding the invalidation of the initial Submission pursuant to this
paragraph, a Submission that is otherwise in proper form shall be deemed
submitted at the time of its initial Submission for purposes of determining
when orders are Deemed Received hereunder. If the Trust Telephone
Representative is not able to contact an Authorized Person, then the
Submission shall be accepted and processed in accordance with its terms
notwithstanding any inconsistency from the terms of the telephone
information. In the event that a Submission contains terms that are
illegible, the Submission will be deemed invalid and the Trust Telephone
Representative will attempt to contact the Participant to request
retransmission of the Submission. A corrected Submission must be received
by the Transfer Agent, as applicable, not later than the earlier of (i)
within fifteen (15) minutes of such contact with the Participant or (ii)
forty-five (45) minutes after the NYSE Closing Time.
6. SUSPENSION OR REJECTION OF AN ORDER. Each Trust reserves the absolute right
to reject a Creation Order transmitted to it by the Distributor in respect
of a Fund if: (i) the order is not in proper form; (ii) the Deposit
Securities delivered are not as disseminated for that date by the
Custodian, as described above; (iii) acceptance of the Fund Deposit would,
in the opinion of counsel, be unlawful; (iv) acceptance of the Fund Deposit
would otherwise, in the reasonable opinion of the applicable Trust or its
investment adviser (the "Adviser"), have an adverse effect on the Trust,
the applicable Fund or the rights of beneficial owners; or (v) in the event
that circumstances exist outside the control of the applicable Trust or
Fund, the Transfer Agent, the Distributor and the Adviser that, in their
Exhibit B-Attachment A-9-
reasonable judgment, make it for all practical purposes impossible to
process Creation Orders. Examples of such circumstances include acts of
God; public service or utility problems such as fires, floods, extreme
weather conditions and power outages resulting in telephone, telecopy and
computer failures; market conditions or activities causing trading halts;
systems failures involving computer or other information systems affecting
a Trust or Fund, the Adviser, the Distributor, DTC, NSCC, the Transfer
Agent, the Custodian or sub-custodian or any other participant in the
creation process, and similar extraordinary events. The applicable Trust
shall notify immediately a prospective creator of a Creation Unit and/or
the Authorized Participant acting on behalf of such prospective creator of
its rejection of the order of such person. Each Trust and Fund, the
Custodian, any sub-custodian and the Distributor are under no duty,
however, to give notification of any defects or irregularities in the
delivery of Fund Deposits, and shall not incur any liability for the
failure to give any such notification.
SECTION V. TELEPHONE, FACSIMILE, AND TELEX NUMBERS
FIRST TRUST EXCHANGE-TRADED FUND, FIRST TRUST EXCHANGE-TRADED FUND II
AND FIRST TRUST EXCHANGE-TRADED ALPHADEX (TM) FUND :
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
TRANSFER AGENT:
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
PARTICIPANT::
Telephone: ______________
Facsimile: ______________
FIRST TRUST PORTFOLIOS, L.P.
By
Title:_____________________________________________
Exhibit B-Attachment A-10-
PARTICIPANT:
-----------------------------
By
Title:_____________________________________________
ACCEPTED BY:
THE BANK OF NEW YORK, as Transfer Agent
By _______________________________________________
Title: ________________________________________
Dated:____________________________________________
Exhibit B-Attachment A-11-
Schedule B
Anti-Money Laundering Services
I. SUBSCRIBER IDENTIFICATION AND VERIFICATION:
The following information will be obtained with respect to each
shareholder or potential shareholders:
(a) NATURAL PERSONS
o Full name (i.e., no initial for a first name);
o Full residence address, including apartment number and standardized
country code; o Nationality;
o Occupation
o A copy of a utility xxxx to verify the residence address;
o Social security number (U.S. Persons) and a photocopy of passport
or driver's license bearing a photograph and signature to verify
identity and nationality;
o Information regarding the legal capacity in which person is acting
(i.e., on his or her own behalf, or on behalf of another person or
legal entity);
o Information regarding the identity of any ultimate beneficial
owners of the interest; and
o Identification of the source of person's (or, if the person is
acting on behalf of another person or legal entity, such third
party's) funds, including (1) the name and address of the remitting
financial institution, name and address of the person and the
person's account number, and (2) a statement of what transaction or
business generated the funds.
(b) LEGAL ENTITIES
o Full legal name;
o Type of entity;
o Description of business;
o Jurisdiction in which organized;
o Registered address;
o Business address;
o Taxpayer Identification Number (U.S. entities) and a photocopy of
the authorized signatory's passport or driver's license;
o Certified copy of Charter Documents;
o List/register of directors; and
o Identification of the source of the entity's (or, if the entity is
acting on behalf of another person or legal entity, such third
party's) funds, including (1) the name and address of the remitting
financial institution, name and address of the entity and the
Schedule B
entity's account number, and (2) a statement of what transaction or
business generated the funds.
Bank's review of such information shall include: an examination of the
subscription application or other identification documents provided by the
person or entity to determine if the same has been completed, but without
verifying the same except as set forth above. Any inability on the part of Bank
to obtain or verify the information as set forth above shall be reported to the
Fund's Money Laundering Reporting Officer or equivalent (as identified by the
Fund to Bank from time to time) for further disposition.
II. OFAC AND OTHER VERIFICATIONS
Bank shall verify that each person or entity is not (a) a designated
national and blocked person as identified on the most recently updated U.S.
Department of Treasury Office Foreign Assets Control (OFAC) List, and (b) a
senior foreign political figure, their immediate family members and close
associates, or any foreign shell bank; provided that with respect to (II)(b)
hereof, Bank's verifications shall be based solely upon the representations (if
any) made in the Subscription Agreement applicable to the Funds of the Trust.
III. MONITORING AND REPORTING
The following will be monitored for significant changes or
inconsistencies in the pattern of transactions by a person or entity and a
report of any such changes or inconsistencies shall be made promptly to the
Trust's Money Laundering Reporting Officer or equivalent (as identified by the
Trust to Bank from time to time) for further disposition:
o Subscription and redemption payments
o Frequency
o Amount
o Geographic origin/destination
o Account signatories
Schedule B-2-
APPENDIX A
1. LICENSE; USE. (a) This Appendix I shall govern use by FIRST TRUST
EXCHANGE-TRADED ALPHADEX (TM) FUND (the "Trust") of electronic communications,
information delivery, portfolio management and banking services, that The Bank
of New York and its affiliates (herein "BNY") may provide in connection with the
services as Custodian pursuant to the annexed Custody Agreement (the
"Agreement"), such as The Bank of New York Inform (TM) and The Bank of New York
CA$H-Register Plus(R), and any computer software, proprietary data and
documentation provided by BNY to the Trust in connection therewith
(collectively, the "ELECTRONIC SERVICES"). In the event of any conflict between
the terms of this Appendix I and the main body of this Agreement with respect to
the Trust's use of the Electronic Services, the terms of this Appendix I shall
control.
(b) BNY grants to the Trust a personal, nontransferable and
nonexclusive license to use the Electronic Services to which the Trust
subscribes solely for the purpose of transmitting instructions and information
("Written Instructions"), obtaining reports, analyses and statements and other
information and data, making inquiries and otherwise communicating with BNY in
connection with the Trust's relationship with BNY, as Custodian pursuant to the
Agreement. The Trust shall use the Electronic Services solely for its own
internal and proper business purposes and not in the operation of a service
bureau. Except as set forth herein, no license or right of any kind is granted
to the Trust or any other person with respect to the Electronic Services. The
Trust acknowledges that BNY and its suppliers retain and have title and
exclusive proprietary rights to the Electronic Services, including any trade
secrets or other ideas, concepts, know-how, methodologies, and information
incorporated therein and the exclusive rights to any copyrights, trade dress,
look and feel, trademarks and patents (including registrations and applications
for registration of either), and other legal protections available in respect
thereof (unless such information was provided by the Trust). The Trust further
acknowledges that all or a part of the Electronic Services may be copyrighted or
trademarked (or a registration or claim made therefor) by BNY or its suppliers.
The Trust shall not take any action with respect to the Electronic Services
inconsistent with the foregoing acknowledgments, nor shall the Trust attempt to
decompile, reverse engineer or modify the Electronic Services. The Trust may not
copy, distribute, sell, lease or provide, directly or indirectly, the Electronic
Services or any portion thereof to any other person or entity without BNY's
prior written consent. The Trust may not remove any statutory copyright notice
or other notice included in the Electronic Services. The Trust shall reproduce
any such notice on any reproduction of any portion of the Electronic Services
and shall add any statutory copyright notice or other notice upon BNY's request.
(c) Portions of the Electronic Services may contain, deliver or rely on
data supplied by third parties ("Third Party Data"), such as pricing data and
indicative data, and services supplied by third parties ("Third Party Services")
such as analytic and accounting services. Third Party Data and Third Party
Services supplied hereunder are obtained from sources that BNY believes to be
reliable but, except to the extent otherwise expressly provided in the Agreement
with respect to the duties of BNY as Custodian, are provided without any
independent investigation by BNY. BNY and its suppliers do not represent or
warrant that the Third Party Data or Third Party Services are correct, complete
or current. Third Party Data and Third Party Services are proprietary to their
Appendix A
suppliers, are provided solely for the Trust's internal use, and may not be
reused, disseminated or redistributed in any form. The Trust shall not use any
Third Party Data in any manner that would act as a substitute for obtaining a
license for the data directly from the supplier. Third Party Data and Third
Party Services should not be used in making any investment decision. BNY AND ITS
SUPPLIERS ARE NOT RESPONSIBLE FOR ANY RESULTS OBTAINED FROM THE USE OF OR
RELIANCE UPON THIRD PARTY DATA OR THIRD PARTY SERVICES. BNY's suppliers of Third
Party Data and Services are intended third party beneficiaries of this Section
1(c) and Section 5 below.
(d) The Trust understands and agrees that any links in the Electronic
Services to Internet sites may be to sites sponsored and maintained by third
parties. BNY make no guarantees, representations or warranties concerning the
information contained in any third party site (including without limitation that
such information is correct, current, complete or free of viruses or other
contamination), or any products or services sold through third party sites. All
such links to third party Internet sites are provided solely as a convenience to
the Trust and the Trust accesses and uses such sites at its own risk. A link in
the Electronic Services to a third party site does not constitute BNY's
endorsement, authorisation or sponsorship of such site or any products and
services available from such site.
2. EQUIPMENT. The Trust shall obtain and maintain at its own cost and
expense all equipment and services, including but not limited to communications
services, necessary for it to utilize and obtain access to the Electronic
Services, and BNY shall not be responsible for the reliability or availability
of any such equipment or services.
3. PROPRIETARY INFORMATION. The Electronic Services, and any
proprietary data (including Third Party Data), processes, software, information
and documentation made available to the Trust (other than which are or become
part of the public domain or are legally required to be made available to the
public) (collectively, the "Information"), are the exclusive and confidential
property of BNY or its suppliers. However, for the avoidance of doubt, reports
generated by the Trust containing information relating to its account(s) (except
for Third Party Data contained therein) are not deemed to be within the meaning
of the term "Information." The Trust shall keep the Information confidential by
using the same care and discretion that the Trust uses with respect to its own
confidential property and trade secrets, but not less than reasonable care. Upon
termination of the Agreement or the licenses granted herein for any reason, the
Trust shall return to BNY any and all copies of the Information which are in its
possession or under its control (except that the Trust may retain reports
containing Third Party Data, provided that such Third Party Data remains subject
to the provisions of this Appendix). The provisions of this Section 3 shall not
affect the copyright status of any of the Information which may be copyrighted
and shall apply to all information whether or not copyrighted.
4. MODIFICATIONS. BNY reserves the right to modify the Electronic
Services from time to time. The Trust agrees not to modify or attempt to modify
the Electronic Services without BNY's prior written consent. The Trust
Appendix A -2-
acknowledges that any modifications to the Electronic Services, whether by the
Trust or BNY and whether with or without BNY's consent, shall become the
property of BNY.
5. NO REPRESENTATIONS OR WARRANTIES; LIMITATION OF LIABILITY.BNY AND
ITS MANUFACTURERS AND SUPPLIERS MAKE NO WARRANTIES OR REPRESENTATIONS WITH
RESPECT TO THE ELECTRONIC SERVICES OR ANY THIRD PARTY DATA OR THIRD PARTY
SERVICES, EXPRESS OR IMPLIED, IN FACT OR IN LAW, INCLUDING BUT NOT LIMITED TO
WARRANTIES OF MERCHANTABILITY, NON-INFRINGEMENT AND FITNESS FOR A PARTICULAR
PURPOSE. CUSTOMER ACKNOWLEDGES THAT THE ELECTRONIC SERVICES, THIRD PARTY DATA
AND THIRD PARTY SERVICES ARE PROVIDED "AS IS." TO THE FULLEST EXTENT PERMITTED
BY APPLICABLE LAW, IN NO EVENT SHALL BNY OR ANY SUPPLIER BE LIABLE FOR ANY
DAMAGES, WHETHER DIRECT, INDIRECT SPECIAL, OR CONSEQUENTIAL, WHICH CUSTOMER MAY
INCUR IN CONNECTION WITH THE ELECTRONIC SERVICES, THIRD PARTY DATA OR THIRD
PARTY SERVICES, EVEN IF BNY OR SUCH SUPPLIER KNEW OF THE POSSIBILITY OF SUCH
DAMAGES. IN NO EVENT SHALL BNY OR ANY SUPPLIER BE LIABLE FOR ACTS OF GOD,
MACHINE OR COMPUTER BREAKDOWN OR MALFUNCTION, INTERRUPTION OR MALFUNCTION OF
COMMUNICATION FACILITIES, LABOR DIFFICULTIES OR ANY OTHER SIMILAR OR DISSIMILAR
CAUSE BEYOND THEIR REASONABLE CONTROL.
6. SECURITY; RELIANCE; UNAUTHORIZED USE; FUNDS TRANSFERS. BNY will
establish security procedures to be followed in connection with the use of the
Electronic Services, and the Trust agrees to comply with the security
procedures. The Trust understands and agrees that the security procedures are
intended to determine whether instructions received by BNY as Custodian through
the Electronic Services are authorized but are not (unless otherwise specified
in writing) intended to detect any errors contained in such instructions. The
Trust will cause all persons utilizing the Electronic Services to treat any user
and authorization codes, passwords, authentication keys and other security
devices with the highest degree of care and confidentiality. Upon termination of
the Trust's use of the Electronic Services, the Trust shall return to BNY any
security devices (e.g., token cards) provided by BNY. BNY is hereby irrevocably
authorized to comply with and rely upon on Written Instructions and other
communications, whether or not authorized, received by it through the Electronic
Services. The Trust acknowledges that it has sole responsibility for ensuring
that only Authorized Persons (as defined in the Agreement) use the Electronic
Services and that to the fullest extent permitted by applicable law BNY shall
not be responsible nor liable for any unauthorized use thereof or for any losses
sustained by the Trust arising from or in connection with the use of the
Electronic Services or BNY's reliance upon and compliance with Written
Instructions and other communications received through the Electronic Services.
With respect to instructions for a transfer of funds issued through the
Electronic Services, when instructed to credit or pay a party by both name and a
unique numeric or alpha-numeric identifier (e.g. ABA number or account number),
BNY, its affiliates, and any other bank participating in the funds transfer, may
rely solely on the unique identifier, even if it identifies a party different
than the party named. Such reliance on a unique identifier shall apply to
beneficiaries named in such instructions as well as any financial institution
which is designated in such instructions to act as an intermediary in a funds
Appendix A-3-
transfer. It is understood and agreed that unless otherwise specifically
provided herein, and to the extent permitted by applicable law, the parties
hereto shall be bound by the rules of any funds transfer system utilized to
effect a funds transfer hereunder.
7. ACKNOWLEDGMENTS. BNY, as Custodian, shall acknowledge through the
Electronic Services its receipt of each Written Instruction communicated through
the Electronic Services, and in the absence of such acknowledgment BNY shall not
be liable for any failure to act in accordance with such Written Instruction and
the Trust may not claim that such Written Instruction was received by BNY. The
Custodian may in its discretion decline to act upon any instructions or
communications that are insufficient or incomplete (and in such event, the
Custodian shall use commercially reasonable efforts to advise the Trust of any
instruction or communication which it determines to be insufficient or
incomplete in such manner that the Trust may submit a revised instruction or
communication) or are not received by the Custodian by the time specified in the
Agreement for the Custodian to act upon, or in accordance with such,
instructions or communications.
8. VIRUSES. Each of the Trust and BNY, as Custodian, agrees to use
reasonable efforts to prevent the transmission through the Electronic Services
of any software or file which contains any viruses, worms, harmful component or
corrupted data and agrees not to use any device, software, or routine to
interfere or attempt to interfere with the proper working of the Electronic
Services.
9. ENCRYPTION. The Trust acknowledges and agrees that encryption may
not be available for every communication through the Electronic Services, or for
all data. The Trust agrees that BNY may deactivate any encryption features at
any time, without notice or liability to the Trust, for the purpose of
maintaining, repairing or troubleshooting its systems.
10. ON-LINE INQUIRY AND MODIFICATION OF RECORDS. In connection with the
Trust's use of the Electronic Services, BNY may, at the Trust's request, permit
the Trust to enter data directly into a BNY database for the purpose of
modifying certain information maintained by BNY's systems, including, but not
limited to, change of address information. To the extent that the Trust is
granted such access, the Trust agrees to indemnify and hold BNY harmless from
all loss, liability, cost, damage and expense (including attorney's fees and
expenses) to which BNY may be subjected or which may be incurred in connection
with any claim which may arise out of or as a result of changes to BNY database
records initiated by the Trust.
11. AGENTS. The Trust may, on advance written notice to the BNY, permit
its agents and contractors who are not otherwise identified as Authorized
Persons ("Agents") to access and use the Electronic Services on the Trust's
behalf, except that the BNY reserves the right to prohibit the Trust's use of
any particular Agent for any reason. The Trust shall require its Agent(s) to
agree in writing to be bound by the terms of the Agreement and this Appendix,
and the Trust shall be liable and responsible for any act or omission of such
Agent in the same manner, and to the same extent, as though such act or omission
Appendix A-4-
were that of the Trust. Each submission of a Written Instruction or other
communication by the Agent through the Electronic Services shall constitute a
representation and warranty by the Trust that the Agent continues to be duly
authorized by the Trust to so act on its behalf and the BNY may rely on the
representations and warranties made herein in complying with such Written
Instruction or communication. Any Written Instruction or other communication
through the Electronic Services by an Agent shall be deemed that of the Trust,
and the Trust shall be bound thereby whether or not authorized. The Trust may,
subject to the terms of this Appendix and upon advance written notice to the
Bank, provide a copy of the Electronic Service user manuals to its Agent if the
Agent requires such copies to use the Electronic Services on the Trust's behalf.
Upon cessation of any such Agent's services, the Trust shall promptly terminate
such Agent's access to the Electronic Services, retrieve from the Agent any
copies of the manuals and destroy them, and retrieve from the Agent any token
cards or other security devices provided by BNY and return them to BNY.
12. PROPRIETARY RIGHTS. Notwithstanding Section 5, all intellectual
property rights in the Electronic Services are either owned by BNY or secured by
it for use as contemplated hereunder.
On-line communications terms.doc
(9/06)
Appendix A-5-
