TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the 22nd day of September 2005, by and between the
First Trust Exchange-Traded Fund, 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 company 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 and designated agents will issue for purchase and
redeem shares of funds of the Trust (each a "Fund" and together, "Funds") only
in aggregations of shares known as "Creation Units" (currently 50,000 shares)
(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)
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
the Trust ("Shares"), and as the Trust's dividend disbursing agent.
Section 1.2. The Bank agrees that it will perform the following
services:
(a) In accordance with the terms and conditions of the form
of Participant Agreement, attached hereto as Exhibit B, 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 Trust
and held by the Shareholder;
(iv) Record the issuance of Shares of the Trust and
maintain a record of the total number of Shares 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;
(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
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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 Trust;
(ii) Proxies, proxy statements and other proxy
soliciting materials;
(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
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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 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 Fund securities 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 agrees to pay all fees and reimbursable expenses
within ten business days following the receipt of the respective billing notice
accompanied by supporting documentation, as appropriate. Postage for mailing of
dividends, proxies, Trust 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 company 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.
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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 Trust being offered for sale.
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, 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.
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(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
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 Trust.
SECTION 6. INDEMNIFICATION.
Section 6.1. The Bank shall not be responsible for, and the Trust 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.
(c) The breach of any representation or warranty of the Trust
hereunder.
(d) The conclusive reliance on or use by the Bank or its
agents or subcontractors of information, records, documents or services
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
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other person or firm on behalf of the Trust 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 Trust.
(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 their 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 for any action taken
or omitted by it in reliance upon such 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. The Trust shall not be responsible for, and the Bank shall
be liable for and shall indemnify the Trust 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.
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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
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
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
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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 Fund'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:
(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, 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
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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
Commercial Code, as the same may be amended from time to time,
applicable to the transfer of securities, and the Trust 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 effective date of any increase, decrease or other
change in the total number of Shares authorized to be issued:
(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) In the case of an increase, if the appointment of the
Bank was theretofore expressly limited, a certified copy of a
resolution of the Board of Directors of the Trust increasing the
authority of the Bank.
Section 9.3. Prior to the issuance of any additional Shares pursuant to
stock dividends, stock splits or otherwise, and prior to any reduction in the
number of Shares outstanding, 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 Trust authorizing such
issuance of additional Shares of the Trust or such reduction, as the
case may be;
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(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
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 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. Such records
include those listed in Schedule A.
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 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 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 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
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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
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 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 agreed to by the Fund 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 Fund or the Fund'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.
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Section 10.3. The terms of Section 2 and Section 6 shall survive the
termination of this Agreement.
SECTION 11. ADDITIONAL SERIES.
Section 11.1. In the event that the Trust establishes one or more
additional series of Shares 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.
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.
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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 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.
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 properly given when
delivered personally at the address set forth below for the intended party
during normal business hours at such address, when sent by facsimile
transmission to the respective facsimile transmission numbers of the parties set
forth below, or when 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 Fund: First Trust Exchange-Traded Fund
0000 Xxxxxxxxxxx Xxxx, Xxxxx 000
Xxxxx, Xxxxxxxx 00000
Attention: General Counsel
Facsimile: 000-000-0000
Confirm: 000-000-0000
If to Bank: The Bank of New York
000 Xxxxxxx Xxxxxx, 00X
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxx
Facsimile: 000-000-0000
Confirm: 000-000-0000
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
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time designate by written notice to the other parties hereto given in accordance
with this Section. Each notice, request, demand, approval or other communication
which is sent in accordance with this Section shall be deemed given and received
for all purposes of this Agreement as of three business days after the date of
deposit thereof for mailing in a duly constituted United States post office or
branch thereof, one business day after deposit with a recognized overnight
courier service or upon confirmation of receipt of any facsimile transmission.
Notice given to a party hereto by any other method shall only be deemed to be
given and received when actually received in writing by such party.
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.
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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 FUND
By:
Name:________________________________
Title________________________________
THE BANK OF NEW YORK
By:
Name:________________________________
Title________________________________
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Exhibit A
Funds
First Trust Dow Xxxxx Select MicroCap Index(sm) Fund
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
EXHIBIT B
FORM OF PARTICIPANT AGREEMENT
PARTICIPANT AGREEMENT
FIRST TRUST EXCHANGE-TRADED 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 (the
"Trust") and is an Index Receipt Agent as that term is defined in the rules of
the National Securities Clearing Corporation ("NSCC"). The Distributor, the
Transfer Agent and the Participant acknowledge and agree that the Trust shall be
a third-party beneficiary of the Agreement and shall receive the benefits
contemplated by the Agreement to the extent specified herein. The Distributor
has been retained to provide certain services with respect to acting as
principal underwriter of the Trust in connection with the sale and distribution
of shares of beneficial interest, par value $0.01 per share ("Shares"), of the
Series of the Trust (each a "Fund") on Schedule I attached hereto. The Trust's
prospectus and statement of additional information (collectively, the
"Prospectus") are incorporated herein and included as part of the Trust's
Registration Statement as amended on Form N-1A. Shares may be created or
redeemed only in aggregations of 50,000, referred to therein and herein as a
"Creation Unit." Capitalized terms not otherwise defined herein are used herein
as defined in the Prospectus.
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 "Trust's Clearing
Process," or (ii) outside the Trust's Clearing Process (i.e., through the
facilities of the Depository Trust Company ("DTC")). 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 Trust's 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 Trust's 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 either through the Trust's Clearing
Process or outside the Trust's 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 hereto. 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
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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 Trust 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, are generally required to deliver a
prospectus.
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 Trust'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. The Trust reserves the right to issue additional or other
procedures relating to the manner of creating or redeeming Creation Units, 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.
SECTION 3. NSCC.
Solely with respect to orders for the creation or redemption of
Creation Units through the Trust's 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 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 on behalf of itself and any party for which it is acting (regardless
of its capacity) to use its best efforts to return to the Trust any dividend,
distribution or other corporate action paid to it or to the party for which it
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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
Trust. With respect to any Redemption Order, the Participant also acknowledges
and agrees on behalf of itself and any party for which it is acting (regardless
of its capacity) that the Trust 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 Trust. With respect to any Purchase Order, the Trust
acknowledges and agrees to return to the Participant or any party for which it
is acting any dividend, distribution or other corporate action paid to the Trust
in respect of any Deposit Securities that are transferred to the Trust 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.
SECTION 4. DEPOSIT SECURITIES.
The Participant understands that the number and names of the designated
portfolio of Deposit Securities and relevant cash amounts to be included in 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 Purchase Orders that are caused by the Trust, the Distributor or the
Transfer Agent.
SECTION 5. ROLE OF PARTICIPANT.
The Participant shall have no authority in any transaction to act as
agent of the Distributor, the Transfer Agent or the Trust.
(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 the
Trust or the Distributor necessary for the Trust 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 the Trust or other similar information
that the Trust is obligated to deliver to its shareholders to the Participant's
customers that custody Fund Shares with the Participant, after receipt from the
Trust or the Distributor of sufficient quantities to allow mailing thereof to
such customers. None of the Distributor, the Trust 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 and except for
servicing and informational mailings described in this clause (a) of Section 5,
or as may otherwise be required by applicable law.
-4-
(b) The Participant affirms that it has procedures in place reasonably
designed to protect the privacy of non-public personal consumer/customer
financial information to the extent required by applicable law, rule and
regulation.
(c) 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. To the
extent required by applicable law, rule or regulation, the Participant will
cooperate with and provide assistance to the Trust and the Distributor, which
may include providing the Trust and Distributor with additional information
regarding transactions in Shares when required to do so under applicable law,
rule, court order or by an administrative or regulatory entity. Notwithstanding
anything in the foregoing to the contrary, Participant's obligations under this
clause (d) shall be subject to any privacy or other duties Participant may have
to its customers arising under federal or state securities laws.
SECTION 6. PARTICIPANT REPRESENTATIONS.
(a) The Participant represents, warrants and agrees that it will not
make any representations concerning the Trust, the Creation Units or the Shares
other than those consistent with the Trust's then current Prospectus or any
promotional or sales literature furnished to the Participant by the Distributor
or the Trust, or any such materials permitted by clause (b) of this Section 5.
(b) The Participant agrees not to furnish or cause to be furnished by
Participant or its employees to any person or display or publish any information
or materials relating to the Trust (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 such Marketing Materials as may be furnished to the
Participant by the Distributor or the Trust and such other Marketing Materials
as are consistent with the Trust'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 the Trust or
its Prospectus, data and information relating to the various indices to which
the Funds are benchmarked.
-5-
SECTION 7. TITLE TO SECURITIES: RESTRICTED SHARES.
The Participant represents on behalf of itself and any party for which
it acts that upon delivery of a portfolio of Deposit Securities to the Trust's
custodian, the Trust 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
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 Purchase 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 8. 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, the Transaction Fee prescribed in the Trust's Prospectus applicable to
creations or redemptions through the Trust's Clearing Process, or the
Transaction Fee and such additional amounts as may be prescribed pursuant to the
Trust's Prospectus applicable to (i) creations or redemptions outside the
Trust's Clearing Process and (ii) creations within the Trust's 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 because the Participant is restricted by regulation
or otherwise from investing or engaging in a transaction in such security. 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
Prospectus.
SECTION 9. 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 immediate 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.
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SECTION 10. 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 and (b)
such Shares have not been loaned or pledged to another party nor are the subject
of a repurchase agreement, securities lending agreement or such other
arrangement which would preclude the delivery of such Shares to the Transfer
Agent in accordance with the Prospectus or as otherwise required by the Trust.
SECTION 11. BENEFICIAL OWNERSHIP.
The Participant represents and warrants to the Distributor and the
Trust that it does not hold for the account of any single Beneficial Owner of
Shares, eighty percent (80%) or more of outstanding Shares so as to cause the
Trust to have a basis in the Deposit Securities deposited with the Trust
different from the market value of such Deposit Securities on the date of such
deposit, pursuant to Section 351 of the Internal Revenue Code of 1986, as
amended. The Distributor may request information from the Participant regarding
Share ownership to the extent necessary to make a determination regarding
ownership of eighty percent (80%) or more of outstanding Shares by a Beneficial
Owner as a condition to the acceptance of a Fund Deposit.
SECTION 12. INDEMNIFICATION.
(a) The Participant hereby agrees to indemnify and hold harmless the
Distributor in its capacity as principal underwriter, the Trust, 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 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 the 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 the Trust, 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) and 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 9 hereto. The Participant and the Distributor
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understand and agree that the Trust as a third party beneficiary to this
Agreement is entitled and intends to proceed directly against the Participant in
the event that the Participant fails to honor any of its obligations pursuant to
this Agreement that benefit the Trust.
(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 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. 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 12, 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 13. 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.
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SECTION 14. 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 15. ACKNOWLEDGMENT.
The Participant acknowledges receipt of the Trust's Prospectus and
represents it has reviewed such document and understands the terms thereof.
SECTION 16. 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 17. 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 the
Trust is terminated pursuant to the Declaration of Trust of the Trust, dated as
of August 8, 2003. This Agreement supersedes any prior agreement between the
parties.
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SECTION 18. PROSPECTUS.
(a) The Distributor will provide to the Participant copies of the then
current Prospectus 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 18 when the
Participant has receive such revised, supplemented or amended Prospectus by
email at Xxxxxxxxxx-xx@xx.xxxxx.xx.xxx, 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 on Form N-1A (No. 333-125751) and the Prospectus contained therein
conforms 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 Trust, 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 19. 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 20. NO WAIVER.
Each and every right granted to either 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 either party to exercise, and no delay in exercising, any
right will operate as a waiver thereof, nor will any single or partial exercise
by either party of any right preclude any other or future exercise thereof or
the exercise of any other right.
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SECTION 21. 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 both parties, except that any amendment to the
Schedule I hereto need be signed only by the Trust and any amendment to
Attachment A hereto need be signed only by the Transfer Agent. 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 other.
SECTION 22. 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.
[The remainder of this page is left intentionally blank.]
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FIRST TRUST PORTFOLIOS, L.P.
By
Name:_________________________________
Title:________________________________
Address: 0000 Xxxxxxxxxxx Xxxx
Xxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
[NAME OF PARTICIPANT]
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:
--------------------------------------
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SCHEDULE I
First Trust Dow Xxxxx Select MicroCap Index(sm) Fund
ATTACHMENT A
Subject to the terms and conditions of the Participant Agreement, this
document supplements the Trust's Prospectus, and is an attachment to 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.
A Participant is first required to have signed the Participant
Agreement. Upon acceptance of the Trust Participant Agreement by the
Distributor, the Transfer Agent will assign a personal identification number to
each Authorized Person authorized to act for the Participant. This will allow a
Participant through its Authorized Person(s) to place an order with respect to
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. 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." 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
-2-
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) Trust's Clearing Process-Creation Orders. The Transfer Agent shall
issue to both the Participating Party a confirmation of acceptance of an order
to create Shares in Creation Unit size aggregations through the Trust's 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) Trust's 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 through the Trust's
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 Trust's Clearing Process -- Creation Orders. The
Transfer Agent shall issue to the DTC Participant an acknowledgment of receipt
of an order to create Shares in Creation Unit size aggregations outside the
Trust's 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.
(d) Outside the Trust's Clearing Process -- Requests for Redemption.
The Transfer Agent shall issue to the DTC Participant an acknowledgment of
receipt of an order to redeem Shares in Creation Unit size aggregations outside
the Trust's 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.
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SECTION II. PARTICIPANTS' RESPONSIBILITY FOR DELIVERING OR
EFFECTING THE DELIVERY OF REQUISITE FUND DEPOSIT OR SHARES
AND CASH PAYMENTS IN CONNECTION WITH ORDERS FOR CREATION OR
REQUESTS FOR REDEMPTION
1. Trust's Clearing Process -- Creation Orders. The Participating
Party notified of confirmation of an order to create Shares through the Trust's
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
Trust's 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. Trust's Clearing Process -- Redemption Requests. The Participating
Party notified of confirmation of a request to redeem Shares through the Trust's
Clearing Process shall be required to transfer or arrange for the transfer of
the requisite Shares and the Cash Redemption Amount, if any, to the Transfer
Agent by means of the Trust's 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 Trust's Clearing Process -- Creation Orders. The DTC
Participant notified of acknowledgment of an order to create Shares outside the
Trust's 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. 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 any, through the Federal Reserve Bank wire system so
as to be received by the Transfer Agent by 2:00 p.m. 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. and the Cash
Component, if any, by 2:00 p.m. 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.
4. Purchase of Creation Unit Aggregations Prior to Receipt of Deposit
Securities. Creation Unit Aggregations may be created in advance of receipt by
the Trust 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 Fund Shares on the date the 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 order shall be deemed to be received on the
Business Day on which the order is placed provided that the 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 order is not placed in proper
-4-
form by 4:00 p.m. or federal funds in the appropriate amount are not received by
11:00 a.m. the next Business Day, then the 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 Trust, pending delivery of the missing Deposit Securities to
the extent necessary to maintain the Additional Cash Deposit with the Trust in
an amount at least equal to one hundred fifteen percent (115%) of the daily
marked to market value of the missing Deposit Securities.
5. Outside the Trust's Clearing Process -- Redemption Requests. The
DTC Participant notified of acknowledgment of a request to redeem Shares outside
the Trust's Clearing Process shall be required to effect a transfer to the
Transfer Agent (a) the requisite number of Shares through DTC no later than the
NYSE Closing Time on the Business Day on which such 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, the Transaction Fee prescribed in the Trust's
prospectus applicable to (i) creations or redemptions through the Trust's
Clearing Process, or the Transaction Fee and such additional amounts as may be
prescribed pursuant to the Trust's prospectus applicable to creations or
redemptions outside the Trust's Clearing Process and (ii) creations within the
Trust's 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 because the Participant
is restricted by regulation or otherwise from investing or engaging in a
transaction in such security. Such Transaction Fee and additional amounts, if
any, shall be included in the calculation of 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 or redemption order.
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. Trust's Clearing Process -- Creation Order. After the Transfer
Agent has received notification of a Submission from the Participant for a
creation order for Shares through the Trust's 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 Trust's 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. Trust's Clearing Process -- Redemption Requests. After the Transfer
Agent has received a Submission for a redemption request for Shares through the
Trust's Clearing Process and Deemed Received such submission 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
-5-
delivered through NSCC by the "regular way" settlement date) and the Cash
Redemption Amount, if any, through the Trust's 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 Trust's 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 Trust's 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 on the third (3rd) Business Day following the Business Day on which the
Submission is Deemed Received by the Transfer Agent.
4. Outside the Trust's Clearing Process -- Redemption Requests. After
the Transfer Agent has received a Submission for a redemption request for Shares
outside the Trust's Clearing Process and Deemed Received such submission 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 Beneficial Owner no later than on
the third (3rd) Business Day following the Business Day on which the Submission
is Deemed Received by the Transfer Agent.
SECTION IV. PROCEDURES BY WHICH AN ORDER TO CREATE OR A REQUEST TO
REDEEM SHALL BE "DEEMED RECEIVED"
1. Trust's Clearing Process -- Creation Orders. An order to create
Shares through the Trust's 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. Trust's Clearing Process -- Redemption Requests. A request to
redeem Shares through the Trust's 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 order 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 Trust's Clearing Process -- Creation Orders. An order
to create Shares outside the Trust's 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, (b) such Submission is received by the
-6-
Transfer Agent no later than the time on such Transmittal Date as set forth in
Section I(3)(a) hereof, (c) the requisite number of Deposit Securities is
transferred through DTC to the account of the Trust no later than 11:00 a.m. on
the Business Day next following the Transmittal Date and (d) the cash equal to
the Cash Component, if any, is transferred via the Federal Reserve Bank wire
system to the account of the Trust by no later than 2:00 p.m. 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.
4. Outside the Trust's Clearing Process -- Redemption Requests. A
request to redeem Shares outside the Trust's Clearing Process shall be Deemed
Received by the Transfer Agent the Transmittal Date only if (a) the Submission
containing such request is in proper form, (b) such Submission is received by
the Trust no later than the time as set forth in Section I(3)(b) hereof, (c) 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 (d) the Cash
Redemption Amount owed to the Trust, if any, is received by the Transfer Agent
no later than 2:00 p.m. 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 Trust 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. 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. The Distributor or Transfer
Agent reserves the right to suspend a Submission in the event that its
acceptance would appear to result in the Participant or a Beneficial Owner
owning eighty percent (80%) or more of all outstanding Shares and if pursuant to
Section 351 of the Internal Revenue Code of 1986, as amended, such a
circumstance would result in the Trust having a basis in the securities
deposited different from the market value of such securities on the date of
deposit. In such event, the Distributor or the Trust Telephone Representative
-7-
will attempt to contact an Authorized Person for purposes of confirmation of the
fact that with respect to such Participant no Beneficial Owner would own eighty
percent (80%) or more of all outstanding Shares upon execution of the Submission
or that such a circumstance would not result in the Trust having a basis in the
securities deposited different from the market value of such securities on the
date of deposit. In the event that (i) the Distributor or the Trust Telephone
Representative is unable to contact an Authorized Person or (ii) the Participant
fails to transmit an identical Submission containing a representation and
warranty as to such fact, then the Submission shall be deemed invalid.
The 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 investor(s), upon obtaining the Fund Shares
ordered, would own eighty percent (80%) or more of the currently outstanding
shares of any Fund; (iii) the Deposit Securities delivered are not as
disseminated for that date by the Custodian, as described above; (iv) acceptance
of the Deposit Securities would have certain adverse tax consequences to the
Fund; (v) acceptance of the Fund Deposit would, in the opinion of counsel, be
unlawful; (vi) acceptance of the Fund Deposit would otherwise, in the discretion
of the Trust or the Adviser, have an adverse effect on the Trust or the rights
of beneficial owners; or (vii) in the event that circumstances exist outside the
control of the Trust, the Transfer Agent, the Distributor and the Adviser that,
in their 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 the Trust,
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 Transfer Agent 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. The
Trust, 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:
Telephone: (000) 000-0000
Facsimile:___________________________________________
TRANSFER AGENT:
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
-8-
PARTICIPANT:
Telephone:___________________________________________
Facsimile:___________________________________________
FIRST TRUST PORTFOLIOS, L.P.
By
Title:________________________________
[NAME OF PARTICIPANT]
By
Title:________________________________
ACCEPTED BY:
THE BANK OF NEW YORK, as Transfer Agent
By___________________________________________________
Title:__________________________________________
Dated:_______________________________________________
-9-
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 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
Funds' Money Laundering Reporting Officer or equivalent (as identified by the
Funds 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 of the Funds.
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
Funds' Money Laundering Reporting Officer or equivalent (as identified by the
Funds 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
-2-
APPENDIX A
THE BANK OF NEW YORK
ON-LINE COMMUNICATIONS SYSTEM (THE "SYSTEM")
TERMS AND CONDITIONS
1. License; Use. Upon delivery to an officer of the Trust of software
enabling the Trust to obtain access to the System (the "Software"), the Bank
grants to the Trust a personal, nontransferable and nonexclusive license to use
the Software solely for the purpose of transmitting Written Instructions,
receiving reports, making inquiries or otherwise communicating with the Bank in
connection with the Account(s). The Trust shall use the Software 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 with respect to the Software. The Trust acknowledges that the Bank
and its suppliers retain and have title and exclusive proprietary rights to the
Software, including any trade secrets or other ideas, concepts, know-how,
methodologies, or information incorporated therein and the exclusive rights to
any copyrights, trademarks and patents (including registrations and applications
for registration of either), or other statutory or legal protections available
in respect thereof. The Trust further acknowledges that all or a part of the
Software may be copyrighted or trademarked (or a registration or claim made
therefor) by the Bank or its suppliers. The Trust shall not take any action with
respect to the Software inconsistent with the foregoing acknowledgments, nor
shall you attempt to decompile, reverse engineer or modify the Software. The
Trust may not copy, sell, lease or provide, directly or indirectly, any of the
Software or any portion thereof to any other person or entity without the Bank's
prior written consent. The Trust may not remove any statutory copyright notice
or other notice included in the Software or on any media containing the
Software. The Trust shall reproduce any such notice on any reproduction of the
Software and shall add any statutory copyright notice or other notice to the
Software or media upon the Bank's request.
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 the Software and obtain access to the
System, and the Bank shall not be responsible for the reliability or
availability of any such equipment or services.
3. Proprietary Information. The Software, any data base and any
proprietary data, processes, 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 the Bank or its suppliers. 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 Software license granted herein for any reason, the Trust shall
return to the Bank any and all copies of the Information which are in its
possession or under its control.
4. Modifications. The Bank reserves the right to modify the Software
from time to time and the Trust shall install new releases of the Software as
the Bank may direct. The Trust agrees not to modify or attempt to modify the
Software without the Bank's prior written consent. The Trust acknowledges that
any modifications to the Software, whether by the Trust or the Bank and whether
with or without the Bank's consent, shall become the property of the Bank.
5. NO REPRESENTATIONS OR WARRANTIES. THE BANK AND ITS MANUFACTURERS
AND SUPPLIERS MAKE NO WARRANTIES OR REPRESENTATIONS WITH RESPECT TO THE
SOFTWARE, SERVICES OR ANY DATABASE, EXPRESS OR IMPLIED, IN FACT OR IN LAW,
INCLUDING BUT NOT LIMITED TO WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE. THE TRUST ACKNOWLEDGES THAT THE SOFTWARE, SERVICES AND ANY
DATABASE ARE PROVIDED "AS IS." IN NO EVENT SHALL THE BANK OR ANY SUPPLIER BE
LIABLE FOR ANY DAMAGES, WHETHER DIRECT, INDIRECT SPECIAL, OR CONSEQUENTIAL,
WHICH THE TRUST MAY INCUR IN CONNECTION WITH THE SOFTWARE, SERVICES OR ANY
DATABASE, EVEN IF THE BANK OR SUCH SUPPLIER HAS BEEN ADVISED OF THE POSSIBILITY
OF SUCH DAMAGES. IN NO EVENT SHALL THE BANK 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. The Trust will cause all
persons utilizing the Software and System to treat all applicable user and
authorization codes, passwords and authentication keys with extreme care, and it
will establish internal control and safekeeping procedures to restrict the
availability of the same to persons duly authorized to give Instructions. The
Bank is hereby irrevocably authorized to act in accordance with and rely on
Instructions received by it through the System. The Trust acknowledges that it
is its sole responsibility to assure that only persons duly authorized use the
System and that the Bank shall not be responsible nor liable for any
unauthorized use thereof.
7. System Acknowledgments. The Bank shall acknowledge through the
System its receipt of each transmission communicated through the System, and in
the absence of such acknowledgment the Bank shall not be liable for any failure
to act in accordance with such transmission and the Trust may not claim that
such transmission was received by the Bank.
8. EXPORT RESTRICTIONS. EXPORT OF THE SOFTWARE IS PROHIBITED BY UNITED
STATES LAW. THE TRUST MAY NOT UNDER ANY CIRCUMSTANCES RESELL, DIVERT, TRANSFER,
TRANSSHIP OR OTHERWISE DISPOSE OF THE SOFTWARE (IN ANY FORM) IN OR TO ANY OTHER
COUNTRY. IF THE BANK DELIVERED THE SOFTWARE TO THE TRUST OUTSIDE OF THE UNITED
STATES, THE SOFTWARE WAS EXPORTED FROM THE UNITED STATES IN ACCORDANCE WITH THE
EXPORTER ADMINISTRATION REGULATIONS. DIVERSION CONTRARY TO U.S. LAW IS
PROHIBITED.
The Trust hereby authorizes the Bank to report its name and address to
government agencies to which the Bank is required to provide such information by
law.
9. Encryption. The Trust acknowledges and agrees that
encryption may not be available for every communication through the System, or
for all data. The Trust agrees that the Bank may deactivate any encryption
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features at any time, without notice or liability to the Trust, for the purpose
of maintaining, repairing or troubleshooting the System or the Software.
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