EXHIBIT (E)(2)
THE EXCHANGE TRADED TRUST
000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxx, Xxxxxxxxx 00000
AUTHORIZED PARTICIPANT AGREEMENT
This Authorized Participant Agreement (the "Agreement") is entered into by
and between X.X. Xxxxxxx and Company (the "Distributor") and __________________
________________ (the "Participant") and is subject to acceptance by JPMorgan
Chase Bank, N.A. as index receipt agent for The Exchange Traded Trust (the
"Index Receipt Agent").
The Index Receipt Agent serves as the Index Receipt Agent for The Exchange
Traded Trust (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 Index Receipt Agent, and the Participant acknowledge and agree
that the Trust and its constituent funds (the "Funds") shall be third party
beneficiaries of this Agreement, and shall receive the benefits contemplated by
this Agreement. The Distributor has been retained to provide services as
principal underwriter of the Funds acting on an agency basis in connection with
the sale and distribution of the class of shares issued by the Funds known as
"ETT Shares."
The process by which an investor purchases and redeems ETT Shares from a
Fund is described in detail in the Trust's ETT Shares Prospectus and the
Statement of Additional Information incorporated therein (the "Prospectus") that
comprise part of the Trust's registration statement, as amended, on Form N-1A
(No.811-21827). The discussion of the purchase and redemption process in this
Agreement is modified as necessary by reference to the more complete discussion
in the Prospectus. References to the Prospectus are to the then current
Prospectus as it may be supplemented or amended from time to time. Capitalized
terms not otherwise defined herein are used herein as defined in the Prospectus.
The ETT Shares of a Fund may be purchased or redeemed directly from the
Fund only in aggregations of a specified number, known as a "Creation Unit." The
number of ETT Shares presently constituting a Creation Unit of each Fund is set
forth in Annex I. Creation Units of ETT Shares may be purchased only by or
through an entity that is a participant in The Depository Trust Company ("DTC")
or a broker-dealer or other participant in the Continuous Net Settlement (the
"CNS") System of NSCC and that has entered into an Authorized Participant
Agreement with the Distributor.
To purchase a Creation Unit, an authorized DTC participant or CNS
participant, whether acting for its own account or on behalf of another party,
generally must deliver to the Fund a designated basket of equity securities (the
"Deposit Securities") and an amount of cash computed as described in the
Prospectus (the "Balancing Amount"), plus a purchase transaction fee as
described in the Prospectus (the "Transaction Fee"). The Deposit Securities and
the Balancing Amount together constitute the "Portfolio Deposit." The Balancing
Amount and the Transaction Fee are referred to collectively as the "Cash
Component."
This Agreement is intended to set forth the procedures by which the
Participant may purchase and/or redeem Creation Units of ETT Shares (i) through
the CNS clearing processes of NSCC as such processes have been enhanced to
effect purchases and redemptions of Creation Units, such processes being
referred to herein as the "Clearing Process," or (ii) outside the Clearing
Process. The procedures for processing an order to purchase ETT Shares (a
"Purchase Order") and an order to redeem ETT Shares (a "Redemption Order") are
described in the Fund's Prospectus and in Annex II to this Agreement. All
Purchase and Redemption Orders must be made pursuant to the procedures set forth
in Annex II. The Participant may not cancel a Purchase Order or a Redemption
Order after it is placed.
The parties hereto, in consideration of the premises and of the mutual
agreements contained herein, agree as follows:
1. STATUS OF PARTICIPANT
(a) The Participant hereby represents, covenants, and warrants that it is
a participant in DTC ("DTC Participant") and that, with respect to Purchase
Orders or Redemption Orders of Creation Units of ETT Shares of any Fund placed
through the Clearing Process, it is a member of NSCC and a participant in the
CNS System of NSCC. The Participant may place Purchase Orders or Redemption
Orders for Creation Units either through the Clearing Process or outside the
Clearing Process, subject to the procedures for purchase and redemption referred
to in paragraph 2 and Annex II of this Agreement. If a Participant loses its
status as a DTC Participant or NSCC member, or its eligibility to participate in
the CNS System, it shall promptly notify the Distributor in writing of the
change in status or eligibility, and the Distributor may terminate this
Agreement.
(b) The Participant hereby represents and warrants that it is registered
as a broker-dealer under the Securities Exchange Act of 1934, as amended, is
qualified to act as a broker or dealer in the states or other jurisdictions
where it transacts business, and is a member in good standing of the National
Association of Securities Dealers, Inc. (the "NASD"). The Participant agrees
that it will maintain such registrations, qualifications, and membership in good
standing and in full force and effect throughout the term of this Agreement. The
Participant agrees to comply with all applicable federal laws, the laws of the
states or other jurisdictions concerned, and the rules and regulations
promulgated thereunder, and with the Constitution, By-Laws and Conduct Rules of
the NASD, and that it will not offer or sell ETT Shares of any Fund in any state
or jurisdiction where such shares may not lawfully be offered and/or sold.
(c) If the Participant is offering and selling ETT Shares of any Fund in
jurisdictions outside the several states, territories and possessions of the
United States and is not otherwise required to be registered or qualified as a
broker or dealer, or to be a member of the NASD, as set forth above, the
Participant nevertheless agrees to observe the applicable laws of the
jurisdiction in which such offer and/or sale is made, to comply with the full
disclosure requirements of the Securities Act of 1933 as amended (the "1933
Act") and the regulations promulgated thereunder, and to conduct its business in
accordance with the spirit of the NASD Conduct Rules.
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(d) The Participant understands and acknowledges that the proposed method
by which Creation Units of ETT Shares will be created and traded may raise
certain issues under applicable securities laws. For example, because new
Creation Units of ETT Shares may be issued and sold by the Fund on an ongoing
basis, at any point a "distribution," as such term is used in the 1933 Act, may
occur. The Participant understands and acknowledges that some activities on its
part, depending on the circumstances, may result in its being deemed a
participant in the distribution in a manner that could render it a statutory
underwriter and subject it to the prospectus delivery and liability provisions
of the 1933 Act. (A xxxxxx discussion of these risks appears in the Prospectus.)
Whether a person is an underwriter depends upon all of the facts and
circumstances pertaining to that person's activities, and you should consult
legal counsel if you are uncertain of your status. Neither the Distributor nor
the Index Receipt Agent will indemnify the Participant for any violations of the
federal securities laws committed by the Participant.
2. EXECUTION OF PURCHASE AND REDEMPTION ORDERS
(a) All Purchase Orders and Redemption Orders shall be made in accordance
with the terms of the Prospectus and the procedures described in Annex II to
this Agreement. Each party hereto agrees to comply with the provisions of such
documents to the extent applicable to it. It is contemplated that the phone
lines used by the ETT Shares' telephone representatives will be recorded, and
the Participant hereby consents to the recording of all calls with these
representatives. The Funds reserve the right to issue additional or other
procedures relating to the manner of purchasing or redeeming Creation Units, and
the Participant agrees to comply with such procedures as may be issued from time
to time, including but not limited to the ETT Shares cash collateral settlement
procedures that are referenced in Annex II to this Agreement. The Participant
acknowledges and agrees on behalf of itself and any party for which it is acting
that delivery of a Purchase Order or Redemption Order shall be irrevocable, and
that the Funds (or the Distributor on behalf of the Funds) reserve the right to
reject any Purchase Order until the trade is properly released as described in
Annex II. The Participant agrees that the Distributor has and reserves the
right, in its sole discretion without notice, to suspend sales of ETT Shares, at
anytime.
(b) With respect to any Redemption Order, the Participant acknowledges and
agrees on behalf of itself and any party for which it is acting to return to a
Fund any dividend, distribution, or other corporate action paid to it or to the
party for which it is acting in respect of any Deposit Security that is
transferred to the Participant or any party for which it is acting that, based
on the valuation of such Deposit Security at the time of transfer, should have
been paid to the Fund. With respect to any Redemption Order, the Participant
also acknowledges and agrees on behalf of itself and any party for which it is
acting that a Fund is entitled to reduce the amount of money or other proceeds
due to the Participant or any party for which it is acting by an amount equal to
any dividend, distribution, or other corporate action to be paid to it or to the
party for which it is acting in respect of any Deposit Security that is
transferred to the Participant or any party for which it is acting that, based
on the valuation of such Deposit Security at the time of transfer, should be
paid to the Fund. With respect to any Purchase Order, each Fund 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 Fund in respect of
any Deposit Security that is transferred to the Fund that, based on the
valuation of such Deposit Security at the time of transfer, should have been
paid to the Participant or any party for which it is acting.
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3. AUTHORIZATION OF INDEX RECEIPT AGENT
With respect to Purchase Orders or Redemption Orders processed through the
Clearing Process, the Participant hereby authorizes the Index Receipt Agent to
transmit to the NSCC on behalf of the Participant such instructions, including
amounts of the Deposit Securities and Cash Components as are necessary,
consistent with the instructions issued by the Participant to the ETT Shares
telephone representative. The Participant agrees to be bound by the terms of
such instructions issued by the Index Receipt Agent and reported to NSCC as
though such instructions were issued by the Participant directly to NSCC.
4. MARKETING MATERIALS AND REPRESENTATIONS.
(a) The Participant represents, warrants, and agrees that it will not make
any representations concerning ETT Shares other than those contained in the
Funds' then current Prospectus or in any promotional materials or sales
literature furnished to the Participant by the Distributor. The Participant
agrees not to furnish or cause to be furnished to any person or display or
publish any information or materials relating to ETT Shares (including, without
limitation, promotional materials and sales literature, advertisements, press
releases, announcements, statements, posters, signs, or other similar
materials), except such information and materials as may be furnished to the
Participant by the Distributor and such other information and materials as may
be approved in writing by the Distributor. The Participant understands that the
Fund will not be advertised or marketed as an open-end investment company, i.e.,
as a mutual fund, and that any advertising materials will prominently disclose
that the ETT Shares are not individually redeemable. In addition, the
Participant understands that any advertising material that addresses redemption
of ETT Shares will disclose that ETT Shares may be tendered for redemption to
the issuing Fund in Creation Unit aggregations only. Notwithstanding the
foregoing, the Participant may without the written approval of the Distributor
prepare and circulate in the regular course of its business research reports
that include information, opinions, or recommendations relating to ETT Shares
(i) for public dissemination, provided that such research reports compare the
relative merits and benefits of ETT Shares with other products and are not used
for purposes of marketing ETT Shares and (ii) for internal use by the
Participant.
5. 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 Custodian
the Fund will acquire good and unencumbered title to such securities, free and
clear of all liens, restrictions, charges, and encumbrances, and not subject to
any adverse claims, including without limitation any restrictions 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 1933 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 1933 Act if
exempt from such registration), or of the applicable laws or regulations of any
other applicable jurisdiction. In particular, the Participant represents on
behalf of itself and any party for which it acts that no such securities are
"restricted securities" as such term is used in Rule 144(a)(3)(i) under the 1933
Act.
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6. CASH COMPONENT
The Participant hereby agrees that in connection with a Purchase Order,
whether for itself or any party for which it acts, it will make available to the
issuing Fund in same day funds for each purchase of ETT Shares an amount of cash
sufficient to pay the Cash Component. Payment of the Cash Component shall be
made through DTC to an account maintained by the Custodian at JPMorgan Chase
Bank, New York City, and shall be provided in same day or immediately available
funds on or before the settlement date ("Contractual Settlement Date"). The
Participant hereby agrees to ensure that the Cash Component will be received by
the issuing Fund on or before the Contractual Settlement Date, and in the event
payment of such Cash Component has not been made by such Contractual Settlement
Date, the Participant agrees on behalf of itself or any party for which it acts
in connection with a Purchase Order to pay the amount of the Cash Component,
plus interest, computed at such reasonable rate as may be specified by the Fund
from time to time. The Participant shall be liable to the Custodian and/or the
Fund for any amounts advanced by the Custodian in its sole discretion to the
Participant for payment of the amounts due and owing for the Cash Component.
7. ROLE OF PARTICIPANT
(a) The Participant acknowledges and agrees that for all purposes of this
Agreement, the Participant will be deemed to be an independent contractor, and
will have no authority to act as agent for the Funds or the Distributor in any
matter or in any respect. The Participant agrees to make itself and its
employees available, upon request, during normal business hours to consult with
the Funds or the Distributor or their designees concerning the performance of
the Participant's responsibilities under this Agreement.
(b) The Participant agrees, in connection with any purchase or redemption
transactions in which it acts on behalf of a third party, that it shall extend
to such party all of the rights, and shall be bound by all of the obligations,
of a DTC Participant in addition to any obligations that it undertakes hereunder
or in accordance with the Prospectus.
(c) The Participant agrees to maintain records of all sales of ETT Shares
made by or through it and to furnish copies of such records to the Fund or the
Distributor upon the request of the Fund or the Distributor.
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(d) The Participant represents that from time to time it may be a
beneficial owner of ETT Shares. To the extent that it is a beneficial owner of
ETT Shares, the Participant agrees to irrevocably appoint Distributor as its
attorney and proxy with full authorization and power to vote (or abstain from
voting) its beneficially owned shares. The Distributor intends to vote (or
abstain from voting) the Participant's beneficially owned shares in the same
proportion as the votes (or abstentions) of all other shareholders of the Fund
on any matter submitted to the vote of shareholders of the Fund or Trust. The
Distributor, as attorney and proxy for Participant under this Paragraph, (i) is
hereby given full power of substitution and revocation; (ii) may act through
such agents, nominees, or attorneys as it may appoint from time to time; (iii)
may provide voting instructions to such agents, nominees, or substitute
attorneys. Distributor may terminate this irrevocable proxy within sixty (60)
days written notice to the Participant.
(e) The Participant understands that under the terms of NYSE Arca Equities
Rule 5.2(j)(3) Investment Company Units Listing Standards, NYSE Arca, Inc.
requires that members, including Equity Permit Holders and Market Makers,
provide to all purchasers of ETT Shares a written description of the terms and
characteristics of such securities, in a form prepared by the open-end
management investment company issuing such securities, not later than the time a
confirmation of the first transaction in such series is delivered to such
purchaser. In addition, members shall include a written description with any
sales material relating to ETT Shares that is provided to customers or the
public. Any other written materials provided by a member to customers or the
public making specific reference to a Fund of the Trust as an investment vehicle
must include a statement in substantially the following form: "A circular
describing the terms and characteristics of [ETT Shares] has been prepared by
The Exchange Traded Trust NYSE Arca Tech 100 ETF and is available from your
broker or NYSE Arca, Inc. It is recommended that you obtain and review such
circular before purchasing ETT Shares. In addition, upon request you may obtain
from your broker a prospectus for ETT Shares." Such other written materials
provided by a member to customers or the public shall include all other
necessary and appropriate disclosures. A Participant who is a NYSE Arca, Inc.
member who is carrying an omnibus account for a non-member broker-dealer is
required, if appropriate, to inform such non-member that the execution of an
order to purchase ETT Shares for such omnibus account will be deemed to
constitute agreement by the non-member to make such written description
available to its customers on the same terms as are directly applicable to
members under this Rule.
8. AUTHORIZED PERSONS OF THE PARTICIPANT
(a) Concurrently with the execution of this Agreement and from time to
time thereafter as may be requested by the Funds, the Participant shall deliver
to the Funds, with copies to the Index Receipt Agent, a certificate in a form
approved by the Funds (see Annex III hereto), duly certified as appropriate by
the Participant's Secretary or other duly authorized official, setting forth the
names and signatures of all persons authorized to give instructions relating to
any 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 Funds as conclusive evidence of the facts set
forth therein and shall be considered to be in full force and effect until
delivery to the Funds of a superseding certificate. 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 Funds with
copy to the Index Receipt Agent and such notice shall be effective upon receipt
by the Funds.
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(b) The Funds shall issue to the Participant a unique personal
identification number ("PIN Number") by which the Participant shall be
identified and instructions issued by the Participant hereunder shall be
authenticated. The PIN Number shall be kept confidential and provided to
Authorized Persons only. If the Participant's PIN Number is changed, the new PIN
Number will become effective on a date mutually agreed upon by the Participant
and the Distributor.
9. REDEMPTIONS
(a) The Participant understands and agrees that Redemption Orders may be
submitted only on days that the Trust is open for business, as requires by
Section 22(e) of the Investment Company Act of 1940.
(b) The Participant represents and warrants that it will not attempt to
place a Redemption Order for the purpose of redeeming any Creation Unit of ETT
Shares of any Fund unless it first ascertains that it or its customer, as the
case may be, owns outright or has full legal authority and legal and beneficial
right to tender for redemption the requisite number of the Fund's ETT Shares and
to the entire proceeds of the redemption, and that such ETT Shares have not been
loaned or pledged to another party and are not the subject of a repurchase
agreement, securities lending agreement, or any other agreement that would
preclude the delivery of such ETT Shares to the Fund.
(c) The Participant understands that ETT Shares of any Fund may be
redeemed only when one or more Creation Units of ETT Shares of a Beneficial
Owner are held in the account of a single Participant.
(d) Notwithstanding anything to the contrary in this Agreement or the
Prospectus, the Participant understands and agrees that residents of Australia
and New Zealand, and potentially other countries, are entitled to receive only
cash upon redemption of a Creation Unit of ETT Shares. Accordingly, the
Participant may be required to confirm that any request it submits for an
in-kind redemption has not been submitted on behalf of a Beneficial Owner who is
a resident of a country requiring that all redemptions be made in cash.
10. COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 351
(a) The Participant represents and warrants that, based upon the number of
outstanding ETT Shares of any particular Fund, it does not, and will not in the
future, hold for the account of any single Beneficial Owner, or group of related
Beneficial Owners, 80 percent or more of the currently outstanding ETT Shares of
such Fund, so as to cause the Fund to have a basis in the portfolio securities
deposited with the Fund different from the market value of such portfolio
securities on the date of such deposit, pursuant to section 351 of the Internal
Revenue Code of 1986, as amended.
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(b) The Participant agrees that the confirmation relating to any order for
one or more Creation Units of ETT Shares of a Fund shall state as follows:
"Purchaser represents and warrants that, after giving effect to the purchase of
ETT Shares to which this confirmation relates, it will not hold 80% or more of
the outstanding ETT Shares of the issuing Fund and will not treat such purchase
as eligible for tax-free treatment under Section 351 of the Internal Revenue
Code of 1986, as amended. If purchaser is a dealer, it agrees to deliver similar
written confirmations to any person purchasing from it any of the ETT Shares to
which this confirmation relates."
(c) A Fund and its Index Receipt Agent and Distributor shall have the
right to require, as a condition to the acceptance of a deposit of Deposit
Securities, information from the Participant regarding ownership of the Fund's
ETT Shares by such Participant and its customers, and to rely thereon to the
extent necessary to make a determination regarding ownership of 80 percent or
more of the Fund's currently outstanding ETT Shares by a Beneficial Owner.
11. INDEMNIFICATION
Note: This paragraph shall survive the termination of this Agreement.
(a) The Participant hereby agrees to indemnify and hold harmless the
Distributor, the Funds, the Index Receipt Agent, their 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 1933 Act (each
an "Indemnified Party"), from and against any loss, liability, cost, or expense
(including attorneys' fees) incurred by such Indemnified Party as a result of
(i) any breach by the Participant of any provision of this Agreement; (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; or (iv) actions of such Indemnified Party in reliance upon any
instructions issued in accordance with Annex II or III (as each may be amended
from time to time) reasonably believed by the Distributor and/or the Index
Receipt Agent to be genuine and to have been given by the Participant. The
Participant understands and agrees that the Funds as third party beneficiaries
to this Agreement are entitled to proceed directly against the Participant in
the event that the Participant fails to honor any of its obligations under this
Agreement that benefit the Fund. The Distributor shall not be liable to the
Participant for any damages arising out of mistakes or errors in data provided
to the Distributor, or out of interruptions or delays of communications with the
Indemnified Parties who are service providers to the Fund, nor is the
Distributor liable for any action, representation, or solicitation made by the
wholesalers of the Fund.
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(b) The Distributor hereby agrees to indemnify and hold harmless the
Participant and the Index Receipt Agent, their 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 1933 Act (each
an "Indemnified Party"), from and against any loss, liability, cost, or expense
(including attorneys' fees) incurred by such Indemnified Party as a result of
(i) any breach by the Distributor of any provision of this Agreement; (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; or (iv) actions of such Indemnified Party in reliance upon any
representations made in accordance with Annex II and III (as each may be amended
from time to time) reasonably believed by the Participant to be genuine and to
have been given by the Distributor. The Participant shall not be liable to the
Distributor for any damages arising out of mistakes or errors in data provided
to the Participant, or out of interruptions or delays of communications with the
Indemnified Parties who are service providers to the Fund, nor is the
Participant liable for any action, representation, or solicitation made by the
wholesalers of the Fund.
(c) Neither the Funds, the Distributor, or the Index Receipt Agent, or any
person who controls such persons within the meaning of Section 15 of the 1933
Act, shall be liable to the Participant for any damages arising from any
differences in performance between the Deposit Securities in a Portfolio Deposit
and the Fund's benchmark index.
12. INFORMATION ABOUT DEPOSIT SECURITIES
The Distributor will make available on each day that the Trust is open for
business, through the facilities of the NSCC, the names and amounts of Deposit
Securities to be included in the current Portfolio Deposit for each Fund.
13. RECEIPT OF PROSPECTUS BY PARTICIPANT
The Participant acknowledges receipt of the Prospectus and represents that
it has reviewed that document (including the Statement of Additional Information
incorporated therein) and understands the terms thereof.
14. 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; by Federal Express; by registered or
certified United States first class mail, return receipt requested; or by telex,
telegram, facsimile, or similar means of same day delivery (with a confirming
copy by mail). Unless otherwise notified in writing, all notices to the Fund
shall be at the address or telephone, facsimile, or telex numbers indicated
below the signature of the Distributor. All notices to the Participant, the
Distributor, and the Index Receipt Agent shall be directed to the address or
telephone, facsimile or telex numbers indicated below the signature line of such
party.
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15. EFFECTIVENESS, TERMINATION, AND AMENDMENT OF AGREEMENT
(a) This Agreement shall become effective five Business Days after
execution and delivery to the Distributor upon notice by the Distributor to the
Authorized Participant. A "Business Day" shall mean each day the Trust is open
for business.
(b) This Agreement may be terminated at any time by any party upon sixty
days' prior written notice to the other parties, and may be terminated earlier
by the Fund or the Distributor at any time in the event of a breach by the
Participant of any provision of this Agreement or the procedures described or
incorporated herein. This Agreement will be binding on each parties' successors
and assigns, but the parties agree that neither party can assign its rights and
obligations under this Agreement without the prior written consent of the other
party.
(c) This Agreement may be amended by the Distributor from time to time
without the consent of the Participant or Index Receipt Agent by the following
procedure. The Distributor will deliver a copy of the amendment to the
Participant and the Index Receipt Agent in accordance with paragraph 14 above.
If neither the Participant or the Index Receipt Agent objects in writing to the
amendment within five days after its receipt, the amendment will become part of
this Agreement in accordance with its terms.
16. GOVERNING LAW
This Agreement shall be governed by and interpreted in accordance with the
laws of the State of Wisconsin. The parties irrevocably submit to the
non-exclusive jurisdiction of any Wisconsin State or United States federal court
sitting in Milwaukee, Wisconsin over any suit, action or proceeding arising out
of or relating to this Agreement.
17. COUNTERPARTS
This Agreement may be executed in several counterparts, each of which
shall be an original and all of which shall constitute but one and the same
instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered as of the day and year written below.
DATED:__________________________________
X.X. Xxxxxxx and Company
By:________________________________________
Name:______________________________________
Title:_______________________________________
Address: 000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxx, Xxxxxxxxx 00000
Telephone:__________________________________
Facsimile:___________________________________
Telex:______________________________________
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[Name of Participant]
By:_________________________________________
Name:______________________________________
Title:________________________________________
Address:_____________________________________
Telephone:___________________________________
Facsimile:____________________________________
Telex:_______________________________________
ACCEPTED BY:
JPMORGAN CHASE BANK, as Index Receipt Agent
By:__________________________________________
Name: _____________
Title: ______________
Address: [3] Xxxxx XxxxxXxxx Xxxxxx
Xxxxxxxx, Xxx Xxxx 00000
Telephone: ______________________
Facsimile: ______________________
Telex:________________________________________
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ANNEX I
Creation Unit Size for ETT Shares
Shares Per Creation Unit
The Exchange Traded Trust NYSE Arca Tech 100 ETF 50,000 shares
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ANNEX II
The Exchange Traded Trust NYSE Arca Tech 100 ETF (the "Fund")
Procedures for Processing Purchase Orders and Redemption Orders
Purchase Orders for Creation Units Generally.
All purchase orders must be placed for one or more Creation Units. All
orders to purchase Creation Units, whether through the CNS System of the NSCC
(the "Clearing Process") or outside the Clearing Process, must be received by
the Distributor no later than 4:00 p.m. Eastern Time, or 3:00 p.m. Eastern Time
in the case of nonconforming orders, in each case on the date such order is
placed in order for the creation of Creation Units to be effected based on the
NAV of shares of the ETF as next determined on such date after receipt of the
order in proper form. The date on which an order to purchase Creation Units (or
an order to redeem Creation Units as discussed below) is placed is referred to
as the "Transmittal Date." Orders must be transmitted by an Authorized
Participant by telephone or other transmission method acceptable to the
Distributor pursuant to procedures set forth in the Participant Agreement (see
"Purchasing Through the Clearing Process" and "Purchasing Outside the Clearing
Process" below). Severe economic or market disruption or changes, or telephone
or other communications failure may impede the ability to reach the Distributor
or an Authorized Participant.
Those placing orders to purchase Creation Units through the Clearing
Process should afford sufficient time to permit proper submission of the order
to the Distributor prior to 4:00 p.m. Eastern Time on the Transmittal Date.
Orders of Creation Units effected outside the Clearing Process are likely to
require transmittal by the DTC participant earlier on the Transmittal Date than
orders effected using the Clearing Process. Those persons placing orders outside
the Clearing Process should do so in a timely manner so as to ensure the
delivery of both the Deposit Securities, through DTC, and the Balancing Amount,
through the Federal Reserve Bank wire system to the Custodian, by 11:00 a.m. and
2:00 p.m. Eastern Time, respectively, on the next Business Day immediately
following the Transmittal Date.
Purchases Through the Clearing Process.
Each Authorized Participant authorizes the Distributor to transmit through
the transfer agent to NSCC, on behalf of the Authorized Participant, such trade
instructions as are necessary to effect the Authorized Participant's purchase
order. Pursuant to such trade instructions to NSCC, the Authorized Participant
agrees to deliver the requisite Deposit Securities and the Balancing Amount to
the ETF, together with such additional information as may be required by the
Distributor. An order to purchase Creation Units through the Clearing Process is
deemed received by the Distributor on the Transmittal Date if (i) such order is
received by the Distributor not later than 4:00 p.m. Eastern Time on such
Transmittal Date; and (ii) all other procedures set forth in this Participant
Agreement are properly followed. The delivery of Creation Units so purchased
will occur not later than the third (3rd) Business Day following the day on
which the purchase order is deemed received by the Distributor. In the event
that an Authorized Participant purchases or redeems Creation Units of the ETF on
the same Transmittal Date, the ETF reserves the right to settle these
transactions on a net basis.
13
Purchases Outside the Clearing Process.
An Authorized Participant who wishes to place an order to purchase
Creation Units outside the Clearing Process must state that it is not using the
Clearing Process and that the purchase of Creation Units will instead be
effected through a transfer of securities and cash directly through DTC and the
ETF's Custodian. The Portfolio Deposit transfer must be ordered by the DTC
participant on the Transmittal Date in a timely fashion so as to ensure the
delivery of the requisite number of Deposit Securities through DTC to the
account of the ETF by no later than 11:00 a.m. Eastern Time of the next Business
Day immediately following the Transmittal Date. In the event that an Authorized
Participant purchases or redeems Creation Units of the ETF on the same
Transmittal Date, the ETF reserves the right to settle these transactions on a
net basis.
All questions as to the number of Deposit Securities to be delivered, and
the validity, form and eligibility (including time of receipt) for the deposit
of any tendered securities, will be determined by the ETF, whose determination
shall be final and binding. The amount of cash equal to the Balancing Amount
must be transferred directly to the ETF's Custodian through the Federal Reserve
Bank wire transfer system in a timely manner so as to be received by the ETF's
Custodian no later than 2:00 p.m. Eastern Time on the next Business Day
immediately following such Transmittal Date. An order to purchase Creation Units
outside the Clearing Process is deemed received by the Distributor on the
Transmittal Date if (i) such order is received by the Distributor not later than
3:00 p.m. Eastern Time on such Transmittal Date; and (ii) all other procedures
set forth in this Participant Agreement are properly followed. However, if the
ETF's Custodian does not receive both the required Deposit Securities and the
Balancing Amount by 11:00 a.m. and 2:00 p.m., respectively, on the next Business
Day immediately following the Transmittal Date, such order will be deemed not in
proper form and canceled. Upon written notice to the Distributor, such canceled
order may be resubmitted the following Business Day using a Portfolio Deposit as
newly constituted to reflect the next calculated NAV of the ETF. The delivery of
Creation Units so purchased will occur not later than the third (3rd) Business
Day following the day on which the purchase order is deemed received by the
Distributor.
Creation Units may be created in advance of receipt by the ETF 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
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 Balancing Amount; plus (ii) 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 3:00 p.m. Eastern Time
on such date and federal funds in the appropriate amount are deposited with the
ETF's Custodian by 11:00 a.m. Eastern Time the following Business Day. If the
order is not placed in proper form by 3:00 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 rejected and the Authorized Participant shall be
liable to the ETF for losses, if any, resulting therefrom. An additional amount
of cash shall be required to be deposited with the ETF pending delivery of the
missing Deposit Securities to the extent necessary to maintain the Additional
Cash Deposit with the ETF in an amount at least equal to 115% of the daily
xxxx-to-market value of the missing Deposit Securities. To the extent that
missing Deposit Securities are not received by 11:00 a.m. Eastern Time on the
third (3rd) Business Day following the day on which the purchase order is deemed
received by the Distributor or in the event a xxxx-to-market payment is not made
within one Business Day following notification by the Distributor that such a
payment is required, the ETF may use the cash on deposit to purchase the missing
Deposit Securities. Authorized Participants will be liable to the ETF for the
costs incurred by the ETF in connection with any such purchases. These costs
will be deemed to include the amount by which the actual purchase price of the
Deposit Securities exceeds the market value of such Deposit Securities on the
day the purchase order was deemed received by the Distributor plus the brokerage
and related transaction costs associated with such purchases. The ETF will
return any unused portion of the Additional Cash Deposit once all of the missing
Deposit Securities have been properly received by the Distributor or purchased
by the ETF and deposited into the ETF. The delivery of Creation Units so
purchased will occur no later than the third (3rd) Business Day following the
day on which the purchase order is deemed received by the Distributor.
14
Rejection of Purchase Orders.
The Trust, on behalf of the ETF, reserves the absolute right to reject a
purchase order transmitted to it by the Distributor if (i) the order is not in
proper form; (ii) the investor(s), upon obtaining the shares ordered, would own
80% or more of the currently outstanding shares of the ETF; (iii) the Deposit
Securities delivered are not as disseminated through the facilities of NSCC for
that date by the Distributor, as described above; (iv) acceptance of the Deposit
Securities would have certain adverse tax consequences to the ETF; (v)
acceptance of the Portfolio Deposit would, in the opinion of counsel, be
unlawful; (vi) acceptance of the Portfolio Deposit would otherwise, in the
discretion of the Trust or the Advisor, have an adverse effect on the ETF or the
rights of Beneficial Owners; or (vii) in the event that circumstances outside
the control of the Trust, the ETF, the Advisor, the Distributor and the transfer
agent make it impractical 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 ETF, the Advisor, the Distributor, DTC, NSCC,
the transfer agent or any other participant in the purchase process, and similar
extraordinary events. The ETF has the right to require information to determine
beneficial share ownership for purposes of (ii) above should it so choose or to
rely on a certification from a broker-dealer who is a member of the NASD as to
the cost basis of Deposit Securities. The Distributor shall notify a prospective
purchaser of a Creation Unit and/or the Authorized Participant acting on the
purchaser's behalf, of its rejection of the purchaser's order. The Trust, the
ETF, the transfer agent, the Custodian and the Distributor are under no duty,
however, to give notification of any defects or irregularities in the delivery
of a Portfolio Deposit, nor shall any of them incur any liability for the
failure to give any such notification.
Transaction Fees on Purchases of Creation Units.
A fixed transaction fee of $1,000 is applicable to each purchase,
regardless of the number of Creation Units purchased. An additional transaction
charge of $3,000 will be imposed for purchases effected outside the Clearing
Process, which would include purchases of Creation Units for cash and in-kind
purchases where the investor is allowed to substitute cash in lieu of depositing
a portion of the Deposit Securities. Accordingly, the maximum transaction fee
charge may be $4,000. Purchasers of shares in Creation Units are responsible for
the costs of transferring the securities constituting the Deposit Securities to
the account of the ETF. The transaction fees are charged to cover the estimated
costs associated with the issuance of Creation Units.
15
Redemption of Creation Units Generally.
Shares may be redeemed only in Creation Units at their NAV next determined
after receipt of a redemption request in proper form by the ETF through the
Distributor and only on a Business Day. The ETF will not redeem shares in
amounts less than Creation Unit-size aggregations. Beneficial Owners must
accumulate enough shares in the secondary market to constitute a Creation Unit
in order to have such shares redeemed by the ETF.
Unless cash redemptions are available or specified for the ETF, the
redemption proceeds for a Creation Unit generally consists of Fund Securities -
as announced by the Advisor on the Business Day of the request for redemption
received in proper form - plus cash in an amount equal to the difference between
the NAV of the shares being redeemed, as next determined after a receipt of the
request in proper form, and the value of the Fund Securities (the "Cash
Redemption Amount"), less a redemption transaction fee as listed below. In the
event that the Fund Securities have a value greater than the NAV of the shares,
a compensating cash payment equal to the differential is required to be made by
or through an Authorized Participant by the redeeming shareholder.
As permitted by federal securities laws, the right of redemption may be
suspended or the date of payment postponed with respect to the ETF (i) for any
period during which The NYSE is closed (other than the customary weekend and
holiday closings); (ii) for any period during which trading of NYSE is suspended
or restricted; (iii) for any period during which an emergency exists as a result
of which disposal of the shares or determination of the ETF's NAV is not
reasonably practicable; or (iv) in such other circumstances as is permitted by
the SEC.
Redemption Through the Clearing Process.
An order to redeem Creation Units using the Clearing Process is deemed
received on the Transmittal Date if (i) such order is received in proper form by
the Distributor not later than 4:00 p.m. Eastern Time on such Transmittal Date;
and (ii) all other procedures set forth in this Participant Agreement are
properly followed, such order will be effected based on the NAV of the ETF as
next determined. An order to redeem Creation Units using the Clearing Process
made in proper form but received by the ETF after 4:00 p.m. Eastern Time will be
deemed received on the next Business Day immediately following the Transmittal
Date and will be effected at the NAV next determined on such Business Day. The
requisite Fund Securities and the Cash Redemption Amount will be transferred by
the third (3rd) Business Day following the date on which such request for
redemption is deemed received, which in no event shall be more than seven (7)
days after such request for redemption. In the event that an Authorized
Participant purchases or redeems Creation Units of the ETF on the same
Transmittal Date, the ETF reserves the right to settle these transactions on a
net basis.
16
Redemptions Outside the Clearing Process.
An Authorized Participant who wishes to place an order for redemption of
Creation Units to be effected outside the Clearing Process must state that it is
not using the Clearing Process and that redemption of Creation Units will
instead be effected through a transfer of shares directly through DTC. An order
to redeem Creation Units outside the Clearing Process is deemed received by the
ETF on the Transmittal Date if (i) such order is received in proper form by the
Distributor not later than 3:00 p.m. Eastern Time on such Transmittal Date; (ii)
such order is accompanied or followed by the requisite number of shares of the
ETF and the Cash Redemption Amount specified in such order, which delivery must
be made through DTC to the ETF's Custodian no later than 11:00 a.m., for the
shares, and 2:00 p.m., for the Cash Redemption Amount Eastern Time on the next
Business Day following such Transmittal Date (the "DTC Cut-Off Time"); and (iii)
all other procedures set forth in this Participant Agreement are properly
followed. The requisite Fund Securities and the Cash Redemption Amount will be
transferred by the third (3rd) Business Day following the date on which such
request for redemption is deemed received, which in no event shall be more than
seven (7) days after such request for redemption. In the event that an
Authorized Participant purchases or redeems Creation Units of the ETF on the
same Transmittal Date, the ETF reserves the right to settle these transactions
on a net basis.
In the event the Authorized Participant has submitted a redemption request
in proper form but is unable to transfer all or part of the Creation Units to be
redeemed by the Distributor, on behalf of the ETF, at or prior to the time
required above on the date such redemption request is submitted, the Distributor
will nonetheless accept the redemption request in reliance on the undertaking by
the Authorized Participant to deliver the missing ETF shares as soon as
possible, which undertaking shall be secured by the Authorized Participant's
delivery and maintenance of collateral consisting of cash having a value
(xxxx-to-market daily) at least equal to 115% of the value of the missing ETF
shares. The current procedures for collateralization of missing shares require,
among other things, that any cash collateral shall be in the form of U.S.
dollars in immediately available funds and shall be held by the ETF and
xxxx-to-market daily, and that the fees of the ETF and any sub-custodians in
respect of the delivery, maintenance and redelivery of the cash collateral shall
be payable by the Authorized Participant. The Authorized Participant agrees that
the ETF may purchase the missing ETF shares or acquire the Deposit Securities
and the Balancing Amount underlying such share at any time and will subject the
Authorized Participant to liability for any shortfall between the cost to the
ETF of purchasing such shares, Deposit Securities or Balancing Amount and the
value of the collateral.
The calculation of the value of the Fund Securities and the Cash
Redemption Amount to be delivered upon redemption will be made by the Custodian
according to the procedures set forth in the ETF's prospectus computed on the
Business Day on which a redemption order is deemed received by the Distributor.
Therefore, if a conforming redemption order in proper form is submitted to the
Distributor by a DTC participant not later than 4:00 p.m. Eastern Time, or 3:00
p.m. Eastern Time in the case of nonconforming orders, on the Transmittal Date,
and the requisite number of shares of the ETF are delivered to the ETF's
Custodian prior to the DTC Cut-Off Time, then the value of the Fund Securities
and the Cash Redemption Amount to be delivered will be determined by the
Custodian on such Transmittal Date. If, however, a conforming redemption order
is submitted to the Distributor by an Authorized Participant not later than 4:00
p.m. Eastern Time on the Transmittal Date but either (i) the requisite number of
shares of the ETF and the Cash Redemption Amount are not delivered by the DTC
Cut-Off Time as described above on the next Business Day following the
Transmittal Date; or (ii) the redemption order is not submitted in proper form,
then the redemption order will not be deemed received as of the Transmittal
Date. In such case, the value of the Fund Securities and the Cash Redemption
Amount to be delivered will be computed on the Business Day that such order is
deemed received by the Distributor (i.e., the Business Day on which the shares
of the ETF are delivered through DTC to the Custodian by the DTC Cut-Off Time on
such Business Day pursuant to a properly submitted redemption order).
17
If it is not possible to effect deliveries of the Fund Securities, the ETF
may in its discretion exercise its option to redeem such shares in cash, and the
redeeming Beneficial Owner will be required to receive its redemption proceeds
in cash. In such a case, the investor will receive a cash payment equal to the
NAV of its shares based on the NAV of shares of the ETF next determined after
the redemption request is received in proper form (minus a redemption
transaction fee and additional charge for requested cash redemptions specified
above, to offset the ETF's brokerage and other transaction costs associated with
the disposition of Fund Securities).
Redemption of shares for Fund Securities will be subject to compliance
with applicable federal and state securities laws and the ETF (whether or not it
otherwise permits cash redemptions) reserves the right to redeem Creation Units
for cash to the extent that the ETF could not lawfully deliver specific Fund
Securities upon redemptions or could not do so without first registering the
Fund Securities under such laws. An Authorized Participant or a Beneficial Owner
for which it is acting subject to a legal restriction with respect to a
particular stock included in the Fund Securities is applicable to the redemption
of a Creation Unit may be paid an equivalent amount of cash.
Transaction Fees on Redemption of Creation Units.
A fixed transaction fee of $1,000 is applicable to each redemption,
regardless of the number of Creation Units redeemed. An additional charge of
$3,000 will be imposed for redemptions effected outside the Clearing Process,
which would include cash redemptions. Accordingly, the maximum transaction fee
charge may be $4,000. Investors will also bear the costs of transferring the
Fund Securities from the ETF to their account or on their order. Investors who
use the services of a broker or other such intermediary may be charged a fee for
such services. The transaction fees are charged to cover the estimated costs
associated with the redemption of Creation Units.
18
ANNEX III
Form of Certified Authorized Persons of Participant
The following are the names, titles and signatures of all persons (each an
"Authorized Person") authorized to give instructions relating to any activity
contemplated by this Authorized Participant Agreement, or any other notices,
request or instruction on behalf of Participant pursuant to this Authorized
Participant Agreement.
For each Authorized Person:
---------------------------
Name:
Title:
Signature:
E-Mail Address:
Telephone:
Facsimile:
Name:
Title:
Signature:
E-Mail Address:
Telephone:
Facsimile:
19
The undersigned [name], [title], [company] does hereby certify that the persons
listed above have been duly elected to the offices set forth beneath their
names, that they presently hold such offices, that they have been duly
authorized to act as Authorized Persons pursuant to the Authorized Participant
Agreement by and among X.X. Xxxxxxx and Company and [Participant] dated [date]
and that their signatures set forth above are their own true and genuine
signatures.
By:
-----------------------------------------------------------
Date:
Name:
Title: [Participant's] Secretary or Other Duly Authorized Officer
20
