LICENSE AGREEMENT
THIS AGREEMENT, made as of this 19th day of May, 2005, by and between
Horizon Investment Services, LLC ("Horizon"), an Indiana limited liability
company, and ▇▇▇ ▇▇▇▇▇▇ Funds Inc. ("▇▇▇ ▇▇▇▇▇▇"), a Delaware corporation.
W I T N E S S E T H:
WHEREAS, Horizon has developed the investment strategy set forth in
Exhibit A attached hereto (the "Select Dividend Strategy");
WHEREAS, all proprietary rights to the Select Dividend Strategy and the
name "Horizon Investment Services" (collectively, the "Property") are owned by
Horizon;
WHEREAS, ▇▇▇ ▇▇▇▇▇▇ sponsors, underwrites and distributes a wide array
of unit investment trusts ("UITs");
WHEREAS, ▇▇▇ ▇▇▇▇▇▇ desires to establish one or more UITs that will
each initially invest all or a portion of its assets in securities selected in
accordance with the Select Dividend Strategy (the "Trusts");
WHEREAS, ▇▇▇ ▇▇▇▇▇▇, on behalf of the Trusts, desires to license the
Property for use in connection with the Trusts; and
WHEREAS, Horizon is willing to license the Property to ▇▇▇ ▇▇▇▇▇▇ and
the Trusts under the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and conditions contained herein and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
1. Grant of License. (a) Subject to the terms and conditions of this
Agreement, Horizon hereby grants to ▇▇▇ ▇▇▇▇▇▇ and the Trusts an Exclusive (as
defined below) license to use and refer to the Property, with prior approval
from Horizon, in connection with the Trusts. The license granted herein shall
continue until the later to occur of the termination of this Agreement or the
termination date of the last existing Trust.
(b) Horizon covenants and agrees that no person or entity other than
▇▇▇ ▇▇▇▇▇▇ shall need to obtain any other license with respect to the Property
in connection with the initial sale of the Trusts or subsequent resales of the
Trusts in the secondary market.
(c) Horizon represents and warrants that it owns all proprietary rights
in and to the Property and has the right to license the same to ▇▇▇ ▇▇▇▇▇▇ and
the Trusts pursuant to this Agreement.
(d) ▇▇▇ ▇▇▇▇▇▇, on behalf of the Trusts, acknowledges that Horizon has
represented and warranted that the Property is the exclusive property of Horizon
and that Horizon has and retains all proprietary rights thereto except to the
extent otherwise provided herein. Except as otherwise specifically provided
herein, Horizon reserves all rights to the Property, and this Agreement shall
not be construed to transfer to ▇▇▇ ▇▇▇▇▇▇ or the Trusts any ownership right to,
or equity interest in, any of the Property.
2. Fees. For the license granted herein, ▇▇▇ ▇▇▇▇▇▇, on behalf of the
Trusts, agrees that the Trusts shall pay Horizon the license fees set forth in
Exhibit B hereto.
3. Term. Subject to Section 7, the term of this Agreement shall
commence and continue as described in this Section. The term of this Agreement
shall commence as of the date set forth above (the "Effective Date") and shall
remain in full force and effect until the fifth anniversary of the Effective
Date, unless this Agreement is terminated earlier as provided herein (such term
being referred to as the "Initial Term"). At the end of the Initial Term, this
Agreement shall automatically renew for successive one-year periods (each, a
"Renewal Term") unless a party terminates the Agreement by providing the other
parties a written notice to that effect ninety (90) days prior to the end of the
then-current term. The Initial Term and the Renewal Term are referred to herein
as the "Term".
4. Exclusivity and Right of First Refusal. (a) Horizon covenants and
agrees that the licenses granted herein shall be Exclusive (as defined below)
during the period from the Effective Date until the two year anniversary thereof
(the "Initial Exclusivity Period"). This period shall be extended for additional
one-year periods (each one-year period being an "Extended Exclusivity Period")
if at the end of the Initial Exclusivity Period and, subsequent thereto, at the
end of an Extended Exclusivity Period, either (i) the asset balance of all
outstanding Trusts equals or exceeds $250 million or (ii) ▇▇▇ ▇▇▇▇▇▇ pays
Horizon an up front annual minimum license fee with respect to each Extended
Exclusivity Period equal to (A) $62,500 plus (B) $62,500 minus two and one-half
basis points (0.025%) of the asset balance of all outstanding Trusts.
"Exclusive" as used herein shall mean that neither Horizon nor anyone acting on
its behalf shall take any action to market or promote any UIT based on the
Select Dividend Strategy other than the Trusts or shall permit the use of any of
the Property in connection with the creation, marketing or promotion of any UIT
other than the Trusts. Except as provided in Section 4(b), nothing contained
herein shall limit the right of Horizon to sponsor, create, market or promote
any investment company (as defined in Section 3(a)(1) of the Investment Company
Act of 1940, as amended, disregarding the provisions of Sections 3(b) and 3(c)
thereof), other than a UIT.
(b) Horizon covenants and agrees that, during the Term of this
Agreement, neither Horizon nor anyone acting on its behalf shall be associated
or involved with anyone in connection with the creation, administration,
management, marketing or sale of any unit investment trust within the United
States unless Horizon shall have first promptly delivered a bona fide written
offer to ▇▇▇ ▇▇▇▇▇▇ to act as sponsor, depositor, adviser, promoter, underwriter
or distributor of such a unit investment trust and ▇▇▇ ▇▇▇▇▇▇ shall have failed
to provide a written acceptance of such offer to Horizon within 15 days after
receipt of such offer.
5. Assignment. Neither of the parties hereto may assign its respective
rights and obligations under this Agreement without the prior written consent of
the other party.
6. Relationship of the Parties. The parties understand and agree that
this Agreement shall not be deemed to create any partnership or joint venture
between ▇▇▇ ▇▇▇▇▇▇ and Horizon, and that the services performed hereunder by
Horizon shall be as an independent contractor and not as an employee or agent of
▇▇▇ ▇▇▇▇▇▇. Horizon shall have no authority whatsoever to bind ▇▇▇ ▇▇▇▇▇▇ on any
agreement or obligation and Horizon agrees that it shall not hold itself out as
an employee or agent of ▇▇▇ ▇▇▇▇▇▇.
7. Termination. (a) Horizon may terminate this Agreement immediately
upon a material breach of any representation, warranty or covenant of ▇▇▇
▇▇▇▇▇▇ that is not remedied within ten (10) business days after written notice.
(b) ▇▇▇ ▇▇▇▇▇▇ may terminate this Agreement immediately upon a material
breach of any representation, warranty or covenant of Horizon that is not
remedied within ten (10) business days after written notice thereof.
(c) Horizon and ▇▇▇ ▇▇▇▇▇▇ may terminate this Agreement at any time
upon the execution by each party of a written agreement to that effect.
Any termination under Section 7(a) or (b) shall not limit any other
remedies for breach the non-breaching party may have at law or in equity.
Notwithstanding any provision of this Agreement to the contrary, termination of
this Agreement shall not constitute termination of any Trust.
8. Confidentiality. (a) The parties agree that certain material and
information which has or may come into the possession or knowledge of each party
in connection with this Agreement or the performance hereof (e.g., proprietary
business information (including, without limitation, the names and addresses or
other personal information of customers, distributors, information providers and
suppliers)), consists of confidential and proprietary data whose disclosure to
or use by third parties would be damaging. In addition, a party may reasonably
designate, by notice in writing delivered to the other party, other information
as being confidential or a trade secret.
(b) All such proprietary or confidential information of each party
hereto shall be kept secret by the other party to the degree it keeps secret its
own confidential or proprietary information. Such information belonging to any
party shall not be disclosed by another party to its employees, officers,
agents, service providers or affiliates, except on a need-to-know basis, but may
be disclosed by such other party to State, Federal, or other governmental
agencies, authorities or courts as required by law or regulation, or upon their
order or request provided prompt notice of such order or request is given by
such other party to the party to which such information belongs, if such notice
is legally permitted.
(c) No information that would otherwise be proprietary or confidential
for purposes of this Agreement pursuant to subsections (a) or (b) above shall be
subject to the restrictions on disclosure imposed by this Section in the event
and to the extent that (i) such information is in, or becomes part of, the
public domain otherwise than through the fault of a party to which such
information does not belong, (ii) such information was known to such party prior
to the execution of this Agreement, or (iii) such information was revealed to
such party by a third person, and which the receiving party reasonably believes
has been obtained by such third person not in violation of any existing
confidentiality or non-disclosure agreement.
(d) Each party acknowledges and agrees that a breach of this Section
would cause a permanent and irreparable damage for which money damages would be
an inadequate remedy. Therefore, each party shall be entitled to seek equitable
relief (including injunction and specific performance) in the event of any
breach of the provisions of this Section, in addition to all other remedies
available to such party at law or in equity.
(e) The covenants set forth in this Section shall survive the
termination of this Agreement.
9. Covenants. During the period of this Agreement an for as long as
any of the Trusts remains outstanding, each of the parties agree to:
(a) comply with all codes, regulations and laws applicable to the
performance of its obligations under this Agreement and obtain or have obtained
all necessary permits, licenses and other authorizations necessary for such
performance and maintain its business reputation and good standing;
(b) take such other actions as the other parties hereto may reasonably
request to more effectively carry out its obligations under this Agreement; and
(c) do, or cause to be done, all things necessary, proper or advisable
under applicable laws and regulations, including, but not by way of limitation,
obtaining all consents, approvals, and authorizations, required of such party in
connection with the consummation of the transactions contemplated by this
Agreement. No party shall take any action that would be expected to result in
any of its representations and warranties set forth in this Agreement being or
becoming untrue in any material respect.
In addition, Horizon may not refer to ▇▇▇ ▇▇▇▇▇▇ or any affiliates in
any kind of communications, whether oral, written or electronic, or otherwise,
and whether in a Horizon piece or in response to questions of the media or
others, without ▇▇▇ ▇▇▇▇▇▇'▇ prior written consent, except that Horizon may
state that it licenses the Property to the Trusts and may describe the services
provided under this Agreement to the extent that such services are described in
any Registration Statement or other publicly available materials produced by ▇▇▇
▇▇▇▇▇▇.
10. Indemnification. (a) In the event any claim is brought by any third
party against Horizon that relates to, arises out of or is based upon the
performance by ▇▇▇ ▇▇▇▇▇▇ of its obligations hereunder, or the failure of ▇▇▇
▇▇▇▇▇▇, or any of ▇▇▇ ▇▇▇▇▇▇'▇ affiliates, as applicable, to comply with any
law, rule or regulation relating to the Trusts, Horizon, as applicable, shall
promptly notify ▇▇▇ ▇▇▇▇▇▇, and ▇▇▇ ▇▇▇▇▇▇ shall defend such claim at ▇▇▇
▇▇▇▇▇▇'▇ expense and under ▇▇▇ ▇▇▇▇▇▇'▇ control. ▇▇▇ ▇▇▇▇▇▇ shall indemnify and
hold harmless Horizon against any judgment, liability, loss, cost or damage
(including litigation costs and reasonable attorneys' fees) arising from or
related to such claim whether or not such claim is successful. Horizon shall
have the right, at its expense, to participate in the defense of such claim
through counsel of their own choosing; provided, however, that ▇▇▇ ▇▇▇▇▇▇ shall
not be required to pay any settlement amount that it has not approved in
advance. Notwithstanding the above, Horizon shall not be entitled to
indemnification hereunder to the extent that the judgment, liability, loss, cost
or damage arising from a claim for which indemnification is sought hereunder
results directly or indirectly from the gross negligence or willful misconduct
of Horizon.
(b) In the event any claim is brought by any third party against ▇▇▇
▇▇▇▇▇▇, any of the Trusts, or any of ▇▇▇ ▇▇▇▇▇▇'▇ affiliates that relates to,
arises out of or is based upon the performance by Horizon of its respective
obligations hereunder, or the failure of Horizon to comply with any law, rule or
regulation, ▇▇▇ ▇▇▇▇▇▇, the Trusts, or ▇▇▇ ▇▇▇▇▇▇'▇ affiliates, as the case may
be, shall promptly notify Horizon and Horizon shall defend such claim at its
expense and under its control. Horizon shall indemnify and hold harmless ▇▇▇
▇▇▇▇▇▇, the Trusts, and ▇▇▇ ▇▇▇▇▇▇'▇ affiliates against any judgment, liability,
loss, cost or damage (including litigation costs and reasonable attorneys' fees)
arising from or related to such claim, whether or not such claim is successful.
▇▇▇ ▇▇▇▇▇▇, the Trusts, or ▇▇▇ ▇▇▇▇▇▇'▇ affiliates, as the case may be, shall
have the right, at their expense, to participate in the defense of such claim
through counsel of their own choosing; provided, however, Horizon shall not be
required to pay any settlement amount that it has not approved in advance.
Notwithstanding the above, neither ▇▇▇ ▇▇▇▇▇▇, the Trusts, nor any of ▇▇▇
▇▇▇▇▇▇'▇ affiliates shall be entitled to indemnification hereunder to the extent
that the judgment, liability, loss, cost or damage arising from a claim for
which indemnification is sought hereunder results directly or indirectly from
the gross negligence or willful misconduct of ▇▇▇ ▇▇▇▇▇▇, the Trusts, or ▇▇▇
▇▇▇▇▇▇'▇ affiliates.
(c) The indemnifications set forth in this Section shall survive the
termination of this Agreement for any cause whatsoever.
11. Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of New York.
12.Waiver of Breach. The failure of any party to require the
performance of any term of this Agreement or the waiver of any party of any
breach hereunder shall not prevent a subsequent enforcement of such term nor be
deemed a waiver of any subsequent breach.
13. Scope of Agreement. This document constitutes the entire Agreement
of the parties with respect to the subject matter hereof, supersedes all prior
oral or written agreements, and can be amended only by a writing executed by
all of the parties.
14. Notices. All notices from any party to the other pursuant to this
Agreement shall be in writing or by facsimile transmission and shall be sent to
the following addresses, or to such addresses as the parties hereto may be
notified in writing from time to time:
If to Horizon:
Horizon Investment Services, LLC
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
If to ▇▇▇ ▇▇▇▇▇▇:
▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇
With copy to :
▇▇▇ ▇▇▇▇▇▇ Investments Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Office of the General Counsel
Notices shall be deemed given upon receipt via certified mail,
overnight courier, or hand delivery.
15. Severability. In the event that any provision of this Agreement or
application hereof to any person or in any circumstances shall be determined to
be invalid, unlawful, or unenforceable to any extent, the remainder of this
Agreement, and the application of any provision to persons or circumstances
other than those as to which it is determined to be unlawful, invalid or
enforceable, shall not be affected thereby, and each remaining provision of this
Agreement shall continue to be valid and may be enforced to the fullest extent
permitted by law.
16. Conflicts. In the event that any provision in this Agreement
conflicts in any way with the trust agreement governing a particular Trust, the
provisions of the trust agreement in respect thereof shall control.
17. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, each of the parties hereto have caused this
Agreement to be executed by a duly authorized representative thereof as of the
date first above written.
▇▇▇ ▇▇▇▇▇▇ FUNDS INC.
By
Name_____________________________________________________
Title____________________________________________________
HORIZON INVESTMENT SERVICES, LLC
By
Name_____________________________________________________
Title____________________________________________________
EXHIBIT A
SELECT DIVIDEND STRATEGY
"Select Dividend Strategy" means:
Beginning with the stocks in the Dow ▇▇▇▇▇ Select Dividend Index, rank
each company in such index from highest to lowest based on One-Year Change in
Tangible Book Value, Five-Year Expected Profit Growth, Three-Year Dividend
Growth and Price to Book Value. A rank score is assigned to each company from 1
to 100 for each of these four categories. A score of 100 is given to the stock
with the best rank in each category (highest rank for One-Year Change in
Tangible Book Value, Five-Year Expected Profit Growth, Three-Year Dividend
Growth and the lowest rank for Price to Book Value), and a score of 1 is given
to the stock with the worst rank. The highest possible total rank score is 400
and the lowest possible score is 4. If two stocks are assigned the same total
rank score, the stock with the lower Price to Book Value is ranked higher. Rank
the stocks by total score and select the top 20 stocks, provided that no more
than 12 stocks are selected from any single industry sector.
The four categories used by the Select Dividend Strategy are defined as
follows:
o One-Year Change in Tangible Book Value--The percentage change
in the net asset value of a company, calculated by total
assets minus intangible assets (such as patents and goodwill)
and liabilities.
o Five-Year Expected Profit Growth--Calculated by using the
I/B/E/S 5-year average growth estimate. I/B/E/S is a database
of security recommendations and estimates from many different
contributing firms that translates the data into a uniform
consensus average recommendations and estimates from the
contributing firms.
o Three-Year Dividend Growth--The average growth rate of a
company's paid dividends over the previous three years.
o Price to Book Value--A ratio calculated by dividing the
current stock price per share by the current book value per
share.
EXHIBIT B
LICENSE FEES
LICENSE FEES FOR SINGLE-STRATEGY TRUSTS
In connection with a Trust that initially invests all of its assets in
securities selected in accordance with the Select Dividend Strategy, ▇▇▇ ▇▇▇▇▇▇
shall pay license fees in accordance with the following:
During each Year (defined below) of the Term, ▇▇▇ ▇▇▇▇▇▇ will provide
to Horizon a written report (each, a "Quarterly Report"), within 10 days after
the end of each Quarter (defined below), which sets forth (i) the asset balance
for the Trusts at such Quarter-end, and (ii) a calculation of the Rolling
Average Asset Balance (defined below) at such Quarter-end. Within 10 days after
the end of each Quarter during each Year of the Term, ▇▇▇ ▇▇▇▇▇▇ will pay (each,
a "Quarterly Payment"), to Horizon, an amount equal to one-quarter of the Basis
Point Amount (defined below).
All amounts will be paid in cash or readily available funds and will be
non-refundable.
Definitions:
"Basis Point Amount" means, at any time during a Year, an amount equal
to ten (10) basis points (.10%) on the then Rolling Average Asset Balance.
"Quarter" means, with respect to any Year, the three-month period
commencing on the first day of such Year, and each succeeding three-month period
during such Year.
"Rolling Average Asset Balance" means, at any Quarter-end during a
Year, the average assets in the Trusts in the aggregate for the month then ended
together with all previous months in such Year, calculated by adding the
month-end asset balances for the Trusts for such months and dividing the result
by the number of such months.
"Year" means a twelve-month period commencing on the Effective Date or
on any anniversary of the Effective Date.
LICENSE FEES FOR MULTI-STRATEGY TRUSTS
In connection with a Trust that initially invests a portion of its
assets (but not all of its assets) in securities selected in accordance with the
Select Dividend Strategy, ▇▇▇ ▇▇▇▇▇▇ shall pay license fees in accordance with
the following:
During each Year (defined below) of the Term, ▇▇▇ ▇▇▇▇▇▇ will provide
to Horizon a written report (each, a "Multi-Strategy Trust Quarterly Report"),
within 10 days after the end of each Quarter (defined below), which sets forth
(i) the asset balance for the Multi-Strategy Trusts at such Quarter-end, and
(ii) a calculation of the Multi-Strategy Trust Rolling Average Asset Balance
(defined below) at such Quarter-end. Within 10 days after the end of each
Quarter during each Year of the Term, ▇▇▇ ▇▇▇▇▇▇ will pay (each, a
"Multi-Strategy Trust Quarterly Payment"), to Horizon, an amount equal to
one-quarter of the Multi-Strategy Trust Basis Point Amount (defined below).
All amounts will be paid in cash or readily available funds and will be
non-refundable.
Definitions:
"Multi-Strategy Trust Basis Point Amount" means, at any time during a
Year, an amount equal to ten (10) basis points (.10%) on the then Multi-Strategy
Trust Rolling Average Asset Balance multiplied by the Select Dividend Strategy
Ratio.
"Quarter" means, with respect to any Year, the three-month period
commencing on the first day of such Year, and each succeeding three-month period
during such Year.
"Multi-Strategy Trust Rolling Average Asset Balance" means, at any
Quarter-end during a Year, the average assets in the Multi-Strategy Trusts in
the aggregate for the month then ended together with all previous months in such
Year, calculated by adding the month-end asset balances for the Multi-Strategy
Trusts for such months and dividing the result by the number of such months.
"Select Dividend Strategy Ratio" means the portion of the initial
assets in a Multi-Strategy Trust invested in accordance with the Select Dividend
Strategy as a percentage of all assets in such Multi-Strategy Trust at the time
of the creation of such Multi-Strategy Trust.
"Year" means a twelve-month period commencing on the Effective Date or
on any anniversary of the Effective Date.
CONFIDENTIAL
AMENDMENT No. 4 TO LICENSE AGREEMENT
This Amendment to the License Agreement dated September 8, 1998 between Dow
▇▇▇▇▇ & Company, Inc. ("Dow ▇▇▇▇▇") and ▇▇▇ ▇▇▇▇▇▇ Funds, Inc. (the "Licensee")
(the "License Agreement"), as amended by Amendment No. 1 dated December 1, 1999
and Amendment No. 2 dated February 1, 2000 and Amendment No. 3 dated September
8, 2003 is made as of this May 19, 2005 (the "Amendment Effective Date"), by and
between Dow ▇▇▇▇▇ and the Licensee.
WHEREAS, the License Agreement grants a license to Licensee to use certain
proprietary Indexes and related Dow ▇▇▇▇▇ Marks in connection with the issuance,
trading, marketing and promotion of Products;
WHEREAS, in addition to the Products authorized for use under the License
Agreement, the Licensee also wishes to issue, sell, market and promote certain
Products based on a Strategy identified on Schedule A hereto (the "DIVY
Strategy") using the Dow ▇▇▇▇▇ Select Dividend Index (the "DIVY Index"), and to
use the related Dow ▇▇▇▇▇ proprietary service marks associated with such indexes
in connection therewith; and
WHEREAS, the Licensee and Dow ▇▇▇▇▇ have agreed to amend the License
Agreement to permit Licensee's issuance, sale, marketing and promotion of
Products based on the DIVY Strategy, and to use Dow ▇▇▇▇▇'▇ proprietary service
marks in connection therewith on the terms provided herein and in the License
Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein and in the License Agreement, it is agreed as
follows:
1. Subject to the terms and conditions of the License Agreement, Dow
▇▇▇▇▇ hereby grants to Licensee a further non-transferable
non-exclusive license to (i) use the Dow ▇▇▇▇▇ Select Dividend Index,
and to use and refer to the service marks "Dow JonesSM" and "Dow ▇▇▇▇▇
Select Dividend IndexSM" (collectively, the "Dow ▇▇▇▇▇ Select Dividend
Marks"), in connection with the issuance, sale, marketing and
promotion of Products based on the DIVY Strategy to indicate that Dow
▇▇▇▇▇ is the source of the DIVY Index and as may otherwise be required
by applicable laws, rules, regulations, court orders or under the
License Agreement.
2. Except as otherwise expressly provided herein, all terms and
conditions in the License Agreement that apply to the Dow ▇▇▇▇▇ Marks
shall apply equally to the Dow ▇▇▇▇▇ Select Dividend Marks.
3. Except as otherwise expressly provided herein, all terms and
conditions of the License Agreement that apply to the Products shall
apply equally to the Products based on the DIVY Strategy.
4. Section 9(a) shall be amended to insert "or (iii) the DIVY Strategy"
after "or (ii) the Products".
5. In consideration for the license granted under this Amendment,
Licensee shall pay to Dow ▇▇▇▇▇ the license fees set forth on Schedule
B-1 attached hereto.
6. Except as expressly amended hereby, all provisions in the License
Agreement shall continue to remain in full force and effect.
7. Except as otherwise specified herein, all capitalized terms used in
this Amendment shall have the meaning ascribed to them in the License
Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 4 to
the License Agreement to be executed as of the date first set forth above.
Dow ▇▇▇▇▇ & Company, Inc.
By: _________________________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: President, Dow ▇▇▇▇▇ Indexes
Date:
▇▇▇ ▇▇▇▇▇▇ FUNDS, INC.
By: __________________________
Name: __________________________
Title: __________________________
Date: __________________________
SCHEDULE A
"DIVY Strategy" shall mean an investment strategy as follows:
Beginning with the Dow ▇▇▇▇▇ Select Dividend Index, which currently
consists of the highest dividend-yielding stocks derived from the Dow ▇▇▇▇▇ US
Total Market Index, the strategy ranks each company from highest to lowest based
on Tangible Book Value One-Year Change, Long-Term Expected Profit Growth,
Three-Year Dividend Growth and Price to Book Value. The strategy assigns each
company a rank score from 1 to 100 for each of these four categories. A score of
100 is given to the stock with the best rank in each category (highest rank for
Tangible Book Value One-Year Change, Long-Term Expected Profit Growth,
Three-Year Dividend Growth and the lowest rank for Price to Book Value), and a
score of 1 is given to the stock with the worst rank. The highest possible total
rank score is 400 and the lowest possible score is 4. If two stocks are assigned
the same score, the stock with the lower Price to Book Value is ranked higher.
The strategy ranks the remaining stocks by total score and selects the top 20
stocks, provided that no more than 12 stocks are selected from any single
industry sector.
The four categories used by the DIVY Strategy are defined as follows:
1. Tangible Book Value One-Year Change--The percentage change in the net
asset value of a company, calculated by total assets minus intangible
assets (such as patents and goodwill) and liabilities.
2. Long-Term Expected Profit Growth--Calculated by using the I/B/E/S
5-year average growth estimate. I/B/E/S is a database of security
recommendations and estimates from many different contributing firms
that translates the data into uniform consensus average
recommendations and estimates from the contributing firms.
3. Three-Year Dividend Growth--The average growth rate of a company's
[paid or declared] dividends over the previous three years.
4. Price to Book Value--A ratio calculated by dividing the current stock
price per share by the current book value per share.
"Organized Securities Market" shall mean a U.S. national securities
exchange, an automated quotation or other electronic trading system, a foreign
securities exchange or any other domestic or foreign securities market
determined by Dow ▇▇▇▇▇ in its reasonable judgment to constitute an organized
Securities Market.
The name of the Product shall be subject to Dow ▇▇▇▇▇'▇ prior written
consent.
SCHEDULE B
LICENSE FEES
Licensee shall pay license fees in accordance with the following:
Upon signing of this Amendment, and during the Term on each anniversary of the
Amendment Effective Date, the Licensee will pay to Dow ▇▇▇▇▇ a flat annual
minimum payment of $15,000 in respect of the twelve-month period commencing on
such anniversary date (each, an "DIVY Annual Minimum Payment").
In addition, during each Year (defined below) of the Term, the Licensee will
provide to Dow ▇▇▇▇▇ a written report (each, a "DIVY Quarterly Report"), within
10 days after the end of each Quarter (as defined below), which sets forth (i)
the asset balance for each Product based on the DIVY Strategy at such
Quarter-end, and (ii) a calculation of the DIVY Rolling Average Asset Balance
(defined below) at such month-end.
Within 10 days after each Quarter-end during each Year of the Term, the Licensee
will pay (each, a "DIVY Quarterly Payment") to the Dow ▇▇▇▇▇ affiliate
designated by Dow ▇▇▇▇▇ an amount equal to one-quarter of the DIVY Basis Point
Amount (defined below); provided, however that, in each year of the Term,
Licensee shall be entitled to apply a credit in an amount equal to the DIVY
Annual Minimum Payment against the aggregate of the DIVY Quarterly Payments for
that year until such credit is depleted. Licensee shall send the DIVY Quarterly
Report to Dow ▇▇▇▇▇ by fax/email and/or regular mail to (609)
▇▇▇-▇▇▇▇/▇▇▇▇@▇▇▇.▇▇▇▇▇▇▇▇.▇▇▇/▇▇▇ ▇▇▇▇▇ & Company, ▇.▇. ▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇ Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, respectively.
All amounts will be paid in cash and will be non-refundable. All amounts are
stated in U.S. dollars (at the applicable exchange rate prevailing at the time
payment is due, as published in the Wall Street Journal. All amounts are stated
net of any withholding taxes (i.e., the amount stated is the amount to be
received by Dow ▇▇▇▇▇ after payment of any withholding taxes).
The terms hereof shall be deemed "Confidential Information" for purposes of
Section 7(b) of this Agreement.
Definitions:
"DIVY Basis Point Amount" means, at any time during a Year, an amount equal to
four basis points (.0004) on the Rolling Average Asset Balance.
"Quarter" means, with respect to any Year, the three-month period commencing on
the first day of such Year, and each succeeding three-month period during such
Year.
"DIVY Rolling Average Asset Balance" means, at any Quarter-end during a Year,
the average assets in the Products based on the DIVY Strategy in the aggregate
for the Quarter then ended, calculated by adding the month-end asset balances
for such products for such months in the Quarter and dividing the result by the
number three (i.e., the number of months in the Quarter).
"Year" means a twelve-month period commencing on the Amendment Effective Date or
on any anniversary of the Amendment Effective Date.
