EXHIBIT (e)(1)
RYDEX ETF TRUST
DISTRIBUTION AGREEMENT
April 11, 2003
Rydex Distributors, Inc.
0000 Xxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Dear Sirs:
This is to confirm that, in consideration of the agreements hereinafter
contained, the above-named investment company (the "Trust") has agreed that you
shall be, for the period of this agreement, the distributor of shares of each
series of the Trust set forth on Exhibit A hereto, as such Exhibit may be
revised from time to time (each, a "Fund"). For purposes of this agreement the
term "Shares" shall mean the authorized shares of the relevant Fund.
1. SERVICES AS DISTRIBUTOR
1.1 You will act as the sole agent of the Trust for the distribution of
Shares in Creation Units (as defined herein) covered by, and in accordance with,
the registration statement and prospectus then in effect under the Securities
Act of 1933, as amended (the "1933 Act") and will transmit promptly any orders
received by you for purchase or redemption of Shares in Creation Units to the
Transfer Agent for the Trust of which the Trust has notified you in writing. You
shall deliver or cause the delivery of a prospectus to persons purchasing Shares
in Creation Units and shall maintain records of both orders placed with you and
confirmations of acceptance furnished by you. You represent and warrant that you
are a broker-dealer registered under the Securities Exchange Act of 1934 (the
"1934 Act") and a member of the National Association of Securities Dealers, Inc.
You agree to comply with all of the applicable terms and provisions of the 1934
Act.
1.2 You agree to use your best efforts to perform the services
contemplated herein on a continuous basis. It is contemplated that you may enter
into "Authorized Participant Agreements" with broker-dealers who agree to
solicit orders for Shares. In addition, you may enter into sales or servicing
agreements with securities dealers, financial institutions and other industry
professionals, such as investment advisers, accountants and estate planning
firms. In entering into sales or servicing agreements, you will act only on your
own behalf as principal.
1.3 You shall act as distributor of Shares in Creation Units in compliance
in all material respects with all applicable laws, rules and regulations,
including, without limitations, all rules
and regulations made or adopted pursuant to the Investment Company Act of 1940,
as amended, (the "1940 Act") by the Securities and Exchange Commission or any
securities association registered under the Securities Exchange Act of 1934, as
amended (the "1934 Act").
1.4 Whenever the parties hereto, in their collective judgment, mutually
agree that such action is warranted by unusual market, economic or political
conditions, or by abnormal circumstances of any kind deemed by them to render
sales of a Trust's Shares in Creation Units not in the best interest of the
Trust, the parties hereto may agree to decline to accept any orders for, or make
any sales of, any Shares in Creation Units until such time as the parties deem
it advisable to accept such orders and to make such sales.
1.5 The Trust agrees to pay all appropriate costs and expenses, including
but not limited to, all expenses in connection with the registration of Shares
under the 1933 Act and all expenses in connection with maintaining facilities
for the issue and transfer of Shares in Creation Units and for supplying
information, prices and other data to be furnished by the Trust hereunder, and
all expenses in connection with the preparation and printing of the Trust's
prospectuses and statements of additional information for regulatory purposes
and for distribution to shareholders; provided however, that the Trust shall not
pay any of the costs of advertising or promotion for the sale of Shares, except
as such payments may be made pursuant to Rule 12b-1 of the 0000 Xxx.
1.6 The Trust agrees to execute any and all documents and to furnish any
and all information and otherwise to take all actions which may be reasonably
necessary in the discretion of the Trust's officers in connection with the
qualification of Shares for sale in Creation Units in such states as you may
designate to the Trust and the Trust may approve, and the Trust agrees to pay
all expenses which may be incurred in connection with such qualification. You
shall pay all expenses connected with your own qualification as a dealer under
state or Federal laws and, except as otherwise specifically provided in this
agreement, all other expenses incurred by you in connection with the sale of
Shares in Creation Units as contemplated in this agreement.
1.7 The Trust shall furnish you from time to time, for use in connection
with the sale of Shares in Creation Units, such information with respect to the
Trust or any relevant Fund and the Shares as you may reasonably request, all of
which shall be signed by one or more of the Trust's duly authorized officers;
and the Trust warrants that the statements contained in any such information,
when so signed by the Trust's officers, shall be true and correct. The Trust
also shall furnish you upon request with: (a) semi-annual reports and annual
audited reports of the Trust's books and accounts made by independent public
accountants regularly retained by the Trust, (b) quarterly earnings statements
prepared by the Trust, (c) a monthly itemized list of the securities in the
Trust's or, if applicable, each Fund' portfolio, (d) monthly balance sheets as
soon as practicable after the end of each month, and (e) from time to time such
additional information regarding the Trust's financial condition as you may
reasonably request.
1.8 The Trust represents to you that all registration statements and
prospectuses filed by the Trust with the Securities and Exchange Commission
under the 1933 Act, and under the 1940 Act, with respect to the Shares have been
prepared in conformity with the requirements of said Acts and rules and
regulations of the Securities and Exchange Commission thereunder. As used in
this agreement the terms "registration statement" and "prospectus" shall mean
any registration
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statement and prospectus, including the statement of additional information
incorporated by reference therein, filed with the Securities and Exchange
Commission and any amendments and supplements thereto which at any time shall
have been filed with said Commission. The Trust represents and warrants to you
that any registration statement and prospectus, when such registration statement
becomes effective, will contain all statements required to be stated therein in
conformity with said Acts and the rules and regulations of said Commission; that
all statements of fact contained in any such registration statement and
prospectus will be true and correct when such registration statement becomes
effective; and that neither any registration statement nor any prospectus when
such registration statement becomes effective will include 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. The Trust
may, but shall not be obligated to, propose from time to time such amendment or
amendments to any registration statement and such supplement or supplements to
any prospectus as it may deem necessary or advisable. If the Trust shall not
propose such amendment or amendments and/or supplement or supplements within
fifteen days after receipt by the Trust of a written request from you to do so,
you may, at your option, terminate this agreement or decline to make offers of
the Trust's securities until such amendments are made. The Trust will give you
reasonable notice in advance of its filing of any amendment to any registration
statement or supplement to any prospectus; provided, however, that nothing
contained in this agreement shall in any way limit the Trust's right to file at
any time such amendments to any registration statement and/or supplements to any
prospectus, of whatever character, as the Trust may deem advisable, such right
being in all respects absolute and unconditional.
1.9 The Trust authorizes you and any dealers with whom you have entered
into dealer agreements to use any prospectus in the form most recently furnished
by the Trust in connection with the sale of Shares in Creation Units. The Trust
agrees to indemnify, defend and hold you, your several officers and directors,
and any person who controls you within the meaning of Section 15 of the 1933
Act, free and harmless from and against any and all claims, demands, liabilities
and expenses (including the cost of investigating or defending such claims,
demands or liabilities and any reasonable counsel fees incurred in connection
therewith) which you, your officers and directors, or any such controlling
persons, may incur under the 1933 Act, the 1940 Act or common law or otherwise,
(a) arising out of or on the basis of any untrue statement, or alleged untrue
statement, of a material fact required to be stated in either any registration
statement or any prospectus or any statement of additional information, or (b)
arising out of or based upon any omission, or alleged omission, to state a
material fact required to be stated in any registration statement, any
prospectus or any statement of additional information or necessary to make the
statements in any of them not misleading, (c) arising out of breach of any
obligation, representation or warranty pursuant to this Agreement by the Trust,
or (d) the Trust's failure to comply with applicable securities laws, except
that the Trust's agreement to indemnify you, your officers or directors, and any
such controlling person will not be deemed to cover any such claim, demand,
liability or expense to the extent that it arises out of or is based upon any
such untrue statement, alleged untrue statement, omission or alleged omission
made in any registration statement, any prospectus or any statement of
additional information in reliance upon information furnished by you, your
officers, directors or any such controlling person to the Trust or its
representatives for use in the preparation thereof, and except that the Trust's
agreement to
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indemnify you and the Trust's representations and warranties set out in
paragraph 1.8 of this Agreement will not be deemed to cover any liability to the
Funds or their shareholders to which you would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the performance of your
duties, or by reason of your reckless disregard of your obligations and duties
under this Agreement ("Disqualifying Conduct"). The Trust's agreement to
indemnify you, your officers and directors, and any such controlling person, as
aforesaid, is expressly conditioned upon the Trust's being notified of any
action brought against you, your officers or directors, or any such controlling
person, such notification to be given by letter, by facsimile or by telegram
addressed to the Trust at its address set forth above within a reasonable period
of time after the summons or other first legal process shall have been served.
The failure so to notify the Trust of any such action shall not relieve the
Trust from any liability which the Trust may have to the person against whom
such action is brought by reason of any such untrue, or alleged untrue,
statement or omission, or alleged omission, otherwise than on account of the
Trust's indemnity agreement contained in this paragraph 1.9. The Trust will be
entitled to assume the defense of any suit brought to enforce any such claim,
demand or liability, but, in such case, such defense shall be conducted by
counsel of good standing chosen by the Trust and approved by you. In the event
the Trust elects to assume the defense of any such suit and retain counsel of
good standing approved by you, the defendant or defendants in such suit shall
bear the fees and expenses of any additional counsel retained by any of them;
but in case the Trust does not elect to assume the defense of any such suit, the
Trust will reimburse you, your officers and directors, or the controlling person
or persons named as defendant or defendants in such suit, for the reasonable
fees and expenses of any counsel retained by you or them. The Trust's
indemnification agreement contained in this paragraph 1.9 and the Trust's
representations and warranties in this Agreement shall remain operative and in
full force and effect regardless of any investigation made by or on behalf of
you, your officers and directors, or any controlling person, and shall survive
the delivery of any Shares. This agreement of indemnity will inure exclusively
to your benefit, to the benefit of your several officers and directors, and
their respective estates, and to the benefit of any controlling persons or other
affiliates, and their SUCCESSORS. The Trust agrees promptly to notify you of the
commencement of any litigation or proceedings against the Trust or any of its
officers or Board members in connection with the issue and sale of Shares.
1.10 You agree to indemnify, defend and hold the Trust, its several
officers and Board members, and any person who controls the Trust within the
meaning of Section 15 of the 1933 Act, free and harmless from and against any
and all claims, demands, liabilities and expenses (including the cost of
investigating or defending such claims, demands or liabilities and any counsel
fees incurred in connection therewith) which the Trust, its officers or Board
members, or any such controlling person, may incur under the 1933 Act, the 1940
Act, or under common law or otherwise, but only to the extent that such
liability or expense incurred by the Trust, its officers or Board members, or
such controlling person resulting from such claims or demands, (a) shall arise
out of or be based upon any information, statements or representations made or
provided by you in any sales literature or advertisements, or any Disqualifying
Conduct by you in connection with the offering and sale of any Shares, (b) shall
arise out of or be based upon any untrue, or alleged untrue, statement of a
material fact contained in information furnished in writing by you to the Trust
specifically for use in the Trust's registration statement and used in the
answers to any of the items of the registration statement or in the
corresponding statements
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made in the prospectus or statement of additional information, or shall arise
out of or be based upon any omission, or alleged omission, to state a material
fact in connection with such information furnished in writing by you to the
Trust and required to be stated in such answers or necessary to make such
information not misleading, (c) arising out of your breach of any obligation,
representation or warranty pursuant to this Agreement, or (d) your failure to
comply with applicable securities laws. Your agreement to indemnify the Trust,
its officers and Board members, and any such controlling person, as aforesaid,
is expressly conditioned upon your being notified of any action brought against
the Trust, its officers or Board members, or any such controlling person, such
notification to be given by letter, by facsimile or by telegram addressed to you
at your address set forth above within a reasonable period of time after the
summons or other first legal process shall have been served. The failure so to
notify you of any such action shall not relieve you from any liability which you
may have to the Trust, its officers or Board members, or to such controlling
person by reason of any such untrue, or alleged untrue, statement or omission,
or alleged omission, otherwise than on account of your indemnity agreement
contained in this paragraph. You will be entitled to assume the defense of such
action, but, in such case, such defense shall be conducted by counsel of good
standing chosen by you and approved by an executive officer of the Trust, if
such action is based solely upon such alleged misstatement or omission on your
part, and in any other event Trust, its officers or Board members, or such
controlling person shall each have the right to participate in the defense or
preparation of the defense of any such action. This agreement of indemnity will
inure exclusively to the Trust's benefit, to the benefit of the Trust's officers
and Board members, and their respective estates, and to the benefit of any
controlling persons and their successors. You agree promptly to notify the Trust
of the commencement of any litigation or proceedings against you or any of your
officers or directors in connection with the issue and sale of Shares.
1.11 No Shares shall be offered by either you or the Trust under any of the
provisions of this agreement and no orders for the purchase or sale of such
Shares hereunder shall be accepted by the Trust if and so long as the
effectiveness of the registration statement then in effect or any necessary
amendments thereto shall be suspended under any of the provisions of the 1933
Act or if and so long as a current prospectus as required by Section 10 of said
Act is not on file with the Securities and Exchange Commission; provided,
however, that nothing contained in this paragraph 1.11 shall in any way restrict
or have any application to or bearing upon the Trust's obligation to redeem or
repurchase any Shares from any shareholder in accordance with the provisions of
the Trust's prospectus or charter documents.
1.12. The Trust agrees to advise you immediately in writing of the
occurrence of any of the following events, as soon as any such event comes to
the attention of the Trust:
(a) any request by the Securities and Exchange Commission for
amendments to the registration statement or prospectus then in effect or for
additional information;
(b) the event of the issuance by the Securities and Exchange
Commission of any stop order suspending the effectiveness of the registration
statement or prospectus then in effect or the initiation of any proceeding
for that purpose;
(c) the happening of any event which makes untrue any statement of a
material fact
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made in the registration statement or prospectus then in effect or which
requires the making of a change in such registration statement or prospectus
in order to make the statements therein not misleading; and
(d) all actions of the Securities and Exchange Commission with respect
to any amendments to any registration statement or prospectus which may from
time to time be filed with the Securities and Exchange Commission.
2. OFFERING CREATION UNITS
Shares in Creation Units of each Fund will be offered for sale by you
at a price per Creation Unit in the manner set forth in the then-current
prospectus, based on a net asset value determined in accordance with the Trust's
prospectus and charter documents. Any payments to dealers shall be governed by a
separate agreement between you and such dealer and the Trust's then-current
prospectus.
You will accept as compensation for the performance of your
obligations hereunder such compensation, if any, as may be provided for in any
plan of distribution adopted by the Trust with respect to the Trust or any Fund
pursuant to Rule 12b-1 under the 1940 Act.
3. TERM
This Agreement shall become effective with respect to each Fund of the
Trust as of the date hereof and will continue for an initial two-year term and
is renewable annually thereafter so long as such continuance is specifically
approved (i) by the Trust's Board on behalf of each Fund or (ii) by a vote of a
majority (as defined in the 0000 Xxx) of the Shares of the Trust or the relevant
Fund, as the case may be, provided that in either event its continuance also is
approved by a majority of the Board members who are not "interested persons" (as
defined in the 0000 Xxx) of any party to this Agreement, by vote cast in person
at a meeting called for the purpose of voting on such approval. This agreement
may be terminated in respect of a Fund at any time, without the payment of any
penalty, (i) by vote of a majority of the Directors who are not interested
persons of the Trust (as defined under the 0000 Xxx) or (ii) by vote of a
majority (as defined under the 0000 Xxx) of the outstanding voting securities of
the relevant Fund, on at least 60 days' written notice to you. This agreement
may also be terminated at any time by you, without the payment of any penalty,
upon 60 days' notice by you and will terminate automatically in the event of its
assignment (as defined under the 1940 Act).
4. MISCELLANEOUS
4.1 The Trust recognizes that your directors, officers and employees may
from time to time serve as directors, trustees, officers and employees of
corporations and business trusts (including other investment companies), and
that you or your affiliates may enter into distribution or other agreements with
such other corporations and trusts.
4.2 No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which an enforcement of
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the change, waiver, discharge or termination is sought.
4.3 This Agreement shall be governed by the laws of the State of Delaware,
without regard to principles of conflicts of laws.
4.4 The Declaration of Trust dated November 22, 2002, establishing the
Trust, which is hereby referred to and a Certification of Formation for which is
on file with the Secretary of State of the state of Delaware, provides that the
name Rydex ETF Trust means the Trustees from time to time serving (as Trustees
but not personally) under such Declaration of Trust. It is expressly
acknowledged and agreed that the obligations of the Trust hereunder shall not be
binding upon any of the shareholders, Trustees, officers, employees or agents of
the Trust, personally, but shall bind only the trust property of the Trust, as
provided in its 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 as provided in
its Declaration of Trust. You understand and agree that the rights and
obligations of each series of shares of the Trust under the Declaration of Trust
are separate and distinct from those of any and all other series.
4.5 If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule, or otherwise, the remainder of this Agreement
shall not be affected thereby. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors.
Please confirm that the foregoing is in accordance with your
understanding and indicate your acceptance hereof by signing below, whereupon it
shall become a binding agreement between us.
Very truly yours,
RYDEX ETF TRUST
By:
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Accepted:
RYDEX DISTRIBUTORS, INC.
By:
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EXHIBIT A
FUND SYMBOL
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Rydex S&P Equal Weight ETF
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