PARTICIPANT AGREEMENT
FIRST TRUST EXCHANGE-TRADED FUND,
FIRST TRUST EXCHANGE-TRADED FUND II AND
FIRST TRUST EXCHANGE-TRADED ALPHADEX (TM) FUND
This Participant Agreement (this "Agreement") is entered into between
First Trust Portfolios, L.P. (the "Distributor"), ______________________________
(the "Participant") and The Bank of New York (the "Transfer Agent"). The
Transfer Agent serves as the Transfer Agent of the First Trust Exchange-Traded
Fund, First Trust Exchange-Traded Fund II and First Trust Exchange-Traded
AlphaDEX(TM) Fund (each, a "Trust" and, collectively, the "Trusts") and is an
Index Receipt Agent as that term is defined in the rules of the National
Securities Clearing Corporation ("NSCC"). The Distributor has been retained to
provide certain services with respect to acting as principal underwriter of each
Trust in connection with the sale and distribution of shares of beneficial
interest, par value $0.01 per share ("Shares"), of the Series of each Trust
(each a "Fund") on Schedule I attached hereto and incorporated herein, as the
same may be amended from time to time. Certain Funds (each, an "International
Fund") may include securities of issuers that are domiciled outside the United
States and listed on the foreign equivalent of a U.S. national securities
exchange (a "U.S. exchange"). The Distributor, the Transfer Agent and the
Participant acknowledge and agree that each Trust and Fund shall be a
third-party beneficiary of this Agreement and shall receive the benefits
contemplated by this Agreement to the extent specified herein. The prospectus
and statement of additional information for each Fund (collectively, the
"Prospectus") are incorporated herein and included as part of the respective
Trust's Registration Statement as amended on Form N-1A. Shares may be created or
redeemed only in aggregations of 50,000 (or such other aggregation as is
specified in the relevant Fund's Prospectus), referred to therein and herein as
a "Creation Unit." Capitalized terms not otherwise defined herein are used
herein as defined in the relevant Fund's Prospectus. All references to "cash"
shall refer to U.S. dollars.
This Agreement is intended to set forth certain premises and the
procedures by which the Participant may create and/or redeem Creation Units (i)
through the Continuous Net Settlement ("CNS") clearing processes of NSCC as such
processes have been enhanced to effect creations and redemptions of Creation
Units, such processes being referred to herein as the "Trusts' Clearing
Process," or (ii) outside the Trusts' Clearing Process (e.g., through the
facilities of the Depository Trust Company ("DTC")).
This Agreement supersedes any prior Participant Agreement entered into
by the parties with respect to the Trusts and any Fund from and after the date
hereof. Any and all prior Participant Agreements entered into by the parties are
deemed terminated upon execution of this Agreement.
The parties hereto in consideration of the premises and of the
agreements contained herein agree as follows:
SECTION 1. STATUS OF PARTICIPANT.
The Participant hereby represents, covenants and warrants that (i) with
respect to orders for the creation or redemption of Creation Units by means of
the Trusts' Clearing Process, it is a member of NSCC and a participant in the
CNS System of NSCC (as defined in the Prospectus, a "Participating Party"); and
(ii) with respect to orders for the creation or redemption of Creation Units
outside the Trusts' Clearing Process, it is a DTC Participant (as defined in the
Prospectus, a "DTC Participant"). The Participant may place orders for the
creation or redemption of Creation Units (a "Creation Order" and "Redemption
Order," respectively) either through the Trusts' Clearing Process or outside the
Trusts' Clearing Process, subject to the procedures for creation and redemption
referred to in Section 2 of this Agreement ("Execution of Orders") and the
procedures described in Attachment A attached hereto and incorporated herein and
made a part hereof, as the same may be amended from time to time ("Attachment
A"). Any change in the foregoing status of the Participant shall terminate this
Agreement, and the Participant shall give immediate notice to the Distributor
and the Transfer Agent of such change.
The Participant further represents that it is a broker-dealer registered
with the Securities and Exchange Commission and a member of the National
Association of Securities Dealers, Inc. (the "NASD") or is exempt from or
otherwise not required to be licensed as a broker-dealer or a member of the
NASD. The Participant is qualified as a broker or dealer, or otherwise, under
all applicable state laws where it is required to do so in order that Shares may
be sold in such states where the Participant intends to sell such Shares. The
Participant agrees to conform to the rules of the NASD (if it is a member of
NASD) and the securities laws of any jurisdiction in which it sells, directly or
indirectly, Shares, to the extent such laws, rules and regulations relate to the
Participant's transactions in, and activities with respect to, the Shares.
The Participant understands and acknowledges that the proposed method by
which Creation Units of Shares will be purchased and traded may raise certain
issues under applicable securities laws. For example, because new Creation Units
of Shares may be issued and sold by the Trusts and their respective Funds on an
ongoing basis, the offer and sale of Shares to investors may involve a
"distribution," as such term is used in the Securities Act of 1933 (the
"Securities Act"). The Participant understands and acknowledges that its offer
and sale of Shares to investors, depending on the circumstances, may result in
its being deemed a participant in a distribution in a manner which could render
it a statutory underwriter and subject it to the prospectus delivery and
liability provisions of the Securities Act. The Participant also understands and
acknowledges that dealers who are not "underwriters" but are effecting
transactions in Shares, whether or not participating in the distribution of
Shares, may be required to deliver a prospectus.
SECTION 2. EXECUTION OF ORDERS.
All orders for the creation or redemption of Creation Units shall be
handled in accordance with the terms of the respective Fund's Prospectus, and
the procedures described in Attachment A to this Agreement. In the event the
procedures include the use of recorded telephone lines, the Participant hereby
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consents to such use. Each Trust reserves the right to issue additional or other
procedures relating to the manner of creating or redeeming Creation Units (and
the procedures for the Trusts may, but need not be, identical), and the
Participant, the Distributor and the Transfer Agent agree to comply with such
procedures as may be issued from time to time, upon reasonable notice thereof.
The Participant understands and agrees that Creations Orders and
Redemption Orders may be submitted only on days that the U.S. exchange where the
Shares are principally listed (as specified in the Prospectus) is open for
trading or business.
SECTION 3. NSCC.
Solely with respect to orders for the creation or redemption of Creation
Units through the Trusts' Clearing Process, the Participant as a Participating
Party hereby authorizes the Distributor or the Transfer Agent, as the case may
be, to transmit to NSCC on behalf of the Participant such instructions,
including share and cash amounts as are necessary with respect to the creation
and redemption of Creation Units consistent with the instructions issued by the
Participant to the Trust telephone representative identified in Attachment A
hereto (the "Trust Telephone Representative"). The Participant agrees to be
bound by the terms of such instructions issued by the Distributor or the
Transfer Agent, as the case may be, and reported to NSCC as though such
instructions were issued by the Participant directly to NSCC.
With respect to any Redemption Order, the Participant also acknowledges
and agrees to use its best efforts to return to the applicable Fund any
dividend, distribution or other corporate action paid to it or to the party for
which it is acting in respect of any Deposit Securities that are transferred to
the Participant or any party for which it is acting that, based on the valuation
of such Deposit Securities at the time of transfer, should have been paid to the
Fund. With respect to any Redemption Order, the Participant also acknowledges
and agrees that the applicable Fund is entitled to reduce the amount of money or
other proceeds due to the Participant or any party for which it is acting that,
based on the valuation of such Deposit Securities at the time of transfer,
should be paid to the Fund. With respect to any Creation Order, the Distributor
shall cause the applicable Fund's Custodian to return to the Participant or any
party for which it is acting any dividend, distribution or other corporate
action paid to the Fund in respect of any Deposit Securities that are
transferred to a Fund that, based on the valuation of such Deposit Securities at
the time of transfer, should have been paid to the Participant or any party for
which it is acting.
SECTION 4. DEPOSIT SECURITIES.
The Participant understands that the number and names of the designated
portfolio of securities (each, a "Deposit Security" and, collectively, the
"Deposit Securities") and relevant cash amounts (the "Cash Component") to be
deposited in connection with the purchase of a Creation Unit (the current "Fund
Deposit") for each Fund will be made available each day that the New York Stock
Exchange (the "NYSE") is open for trading through the facilities of the NSCC.
The Participant will not be responsible for errors in the information relating
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to the Deposit Securities to be included in the current Fund Deposit to be
transmitted through the facilities of the NSCC in connection with Redemption
Orders and Creation Orders that are caused by the applicable Trust or Fund, the
Distributor or the Transfer Agent.
Under certain circumstances, a Trust may, in its discretion, permit or
require, with respect to one or more Funds a Participant to substitute cash in
lieu of depositing some or all of the requisite Deposit Securities. A Trust may
additionally permit, in its discretion, with respect to one or more
International Funds under certain circumstances, a Participant to substitute a
different security in lieu of depositing some or all of the Deposit Securities.
Substitution of cash or a different security might be permitted or required, for
example, because one or more Deposit Securities may be unavailable, may not be
available in the quantity needed, or may not be eligible for trading by the
Participant (or any party on whose behalf the Participant is acting) due to
local trading restrictions (including, for example, requirements that securities
be traded only for cash in local currency) or other circumstances.
SECTION 5. ROLE OF PARTICIPANT.
The Participant shall have no authority in any transaction to act as
agent of the Distributor, the Transfer Agent, any Trust or any Fund. (a) The
Participant agrees (i) subject to any privacy obligations or other obligations
arising under the federal or state securities laws it may have to it customers,
to assist the Distributor in ascertaining certain information regarding sales of
Shares made by or through Participant upon the request of a Trust or Fund or the
Distributor necessary for the applicable Trust or Fund to comply with its
obligation to distribute information to its shareholders as may be required from
time to time under applicable state or federal securities laws, or (ii) in lieu
thereof, and at the option of the Participant, the Participant may undertake to
deliver Prospectuses, as may be amended or supplemented from time to time, proxy
material, annual and other reports of a Fund or other similar information that
the applicable Trust or Fund is obligated to deliver to its shareholders to the
Participant's customers that custody Fund Shares with the Participant, after
receipt from the applicable Trust or Fund or the Distributor of sufficient
quantities to allow mailing thereof to such customers. The expenses associated
with such transmissions shall be borne by the Distributor or the applicable
Trust or Fund in accordance with usual custom and practice in respect of such
communications. None of the Distributor, the applicable Trust or Fund or any of
their respective affiliates shall use the names and addresses and other
information concerning Participant's customers for any purpose except in
connection with the performance of their duties and responsibilities hereunder
and except for servicing and informational mailings described in this clause (a)
of Section 5, or as may otherwise be required by applicable law.
(b) The Participant certifies that it has policies, procedures and internal
controls in place that are reasonably designed to comply with all applicable
anti-money laundering laws and regulations, including applicable provisions of
the USA Patriot Act of 2001 and the regulations administered by the U.S.
Department of the Treasury's Office of Foreign Assets Control as the same may in
effect from time to time.
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SECTION 6. PARTICIPANT REPRESENTATIONS.
(a) The Participant represents, warrants and agrees that it will not make
any representations concerning any Fund, the applicable Trust, the Creation
Units or the Shares other than those consistent with the Fund's then current
Prospectus or any promotional or sales literature furnished to the Participant
by the Distributor or the applicable Trust or Fund, or any such materials
permitted by clause (b) of this Section 6.
(b) The Participant agrees not to furnish or cause to be furnished by
Participant or its employees to any person or to display or publish any
information or materials relating to a Trust or any Fund (including, without
limitation, promotional materials and sales literature, advertisements, press
releases, announcements, statements, posters, signs or other similar materials,
but not including any materials prepared and used for Participant's internal use
only, any brokerage communications between employees of Participant and
customers or any communications prepared and directed to registered
broker-dealers) ("Marketing Materials"), except (i) such Marketing Materials as
may be furnished to the Participant by the Distributor or the applicable Trust
or Fund and (ii) such other Marketing Materials as are consistent with the
applicable Fund's then current Prospectus or otherwise approved by the
Distributor or the Trust; provided that such Marketing Materials clearly
indicate that such Marketing Materials are prepared and distributed by
Participant and, upon request, a copy is forwarded to the Distributor as soon as
practicable.
(c) Notwithstanding anything to the contrary in this Agreement, Participant
and its affiliates may prepare and circulate in the regular course of their
businesses (i) research reports that include information, opinions or
recommendations relating to Shares; and (ii) without reference to a Fund or its
Prospectus, data and information relating to the various indices to which the
Funds are benchmarked.
SECTION 7. SUBCUSTODIAN ACCOUNTS.
The Participant understands and agrees that in the case of an
International Fund, the relevant Trust has caused The Bank of New York acting in
its capacity as the Trust's custodian ("Custodian") to maintain with one or more
applicable subcustodians (each, a "Subcustodian") for such International Fund an
account in the relevant foreign jurisdiction(s) to which the Participant shall
deliver or cause to be delivered in connection with the purchase of a Creation
Unit the securities and any other cash amounts (or the cash value of all or a
part of such securities, in the case of a permitted or required cash purchase or
"cash in lieu" amount) on behalf of itself or any party for which it is acting
(whether or not a customer), with any appropriate adjustments as advised by the
Trust or such International Fund, in accordance with the terms and conditions
applicable to such account in such foreign jurisdiction.
SECTION 8. TITLE TO SECURITIES: RESTRICTED SHARES.
The Participant represents that upon delivery of a portfolio of Deposit
Securities to a Fund's custodian, the Fund will acquire good and unencumbered
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title to such securities, free and clear of all liens, restrictions, charges and
encumbrances and not subject to any adverse claims, including, without
limitation, any special restriction upon the sale or transfer of such securities
imposed by (i) any agreement or arrangement entered into by the Participant or
any party for which it is acting in connection with a Creation Order or (ii) any
provision of the Securities Act, and any regulations thereunder (except that
portfolio securities of issuers other than U.S. issuers shall not be required to
have been registered under the Securities Act if exempt from such registration),
or of the applicable laws or regulations of any other applicable jurisdiction.
SECTION 9. FEES.
In connection with the creation or redemption of Creation Units, the
Transfer Agent shall charge, and the Participant agrees to pay to the Transfer
Agent, (i) the Creation Transaction Fee or Redemption Transaction Fee (each also
sometimes referred to individually herein as the "Transaction Fee") prescribed
in the relevant Fund's Prospectus applicable to creations or redemptions through
the Trusts' Clearing Process, or (ii) the applicable Creation Transaction Fee or
Redemption Transaction Fee plus, in each case, such additional variable amounts
as may be prescribed in the relevant Fund's Prospectus for (a) creations or
redemptions outside the Trusts' Clearing Process and (b) creations through the
Trusts' Clearing Process where the cash equivalent value of one or more Deposit
Securities is being deposited in lieu of the inclusion of such Deposit
Securities in the securities portion of the Fund Deposit. The Transaction Fee
may be waived or otherwise adjusted from time to time subject to the provisions
relating thereto and any limitations as prescribed in the relevant Fund's
Prospectus. With respect to International Funds (for which creations and
redemptions are processed outside the Trusts' Clearing Process), such additional
variable amounts may include any expenses incurred by a Fund in the transfer of
Deposit Securities to the Fund in connection with a creation of Creation Units,
and in the transfer of Deposit Securities to the Participant in connection with
a redemption of Creation Units; such expenses may include operational processing
and brokerage costs, transfer fees, stamp taxes and the like. When an
International Fund permits a Participant to substitute cash or a different
security in lieu of depositing one or more of the requisite Deposit Securities,
the Participant may be assessed a higher Transaction Fee on the substitute
security portion of its investment to cover the cost of purchasing the Deposit
Securities and/or disposing of the substituted securities, including operational
processing and brokerage costs, transfer fees, stamp taxes, and part or all of
the spread between the expected bid and offer side of the market related to such
Deposit Securities and/or substitute securities.
SECTION 10. AUTHORIZED PERSONS.
Concurrently with the execution of this Agreement and from time to time
thereafter, the Participant shall deliver to the Distributor and the Transfer
Agent, duly certified as appropriate by its secretary or other duly authorized
person, a certificate setting forth the names and signatures of all persons
authorized to give instructions relating to activity contemplated hereby or any
other notice, request or instruction on behalf of the Participant (each, an
"Authorized Person"). Such certificate may be accepted and relied upon by the
Distributor and the Transfer Agent as conclusive evidence of the facts set forth
therein and shall be considered to be in full force and effect until delivery to
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the Distributor and the Transfer Agent of a superseding certificate bearing a
subsequent date. The Transfer Agent shall issue to each Authorized Person a
unique personal identification number ("PIN Number") by which such Authorized
Person and the Participant shall be identified and instructions issued by the
Participant hereunder shall be authenticated. Upon the termination or revocation
of authority of such Authorized Person by the Participant, the Participant shall
give prompt written notice of such fact to the Distributor and the Transfer
Agent and such notice shall be effective upon receipt by both the Distributor
and the Transfer Agent.
SECTION 11. REDEMPTION.
The Participant represents and warrants that it will not obtain a
Submission Number (as defined in Attachment A) from the Transfer Agent for the
purpose of redeeming a Creation Unit unless it first ascertains that (a) it or
its customer, as the case may be, owns outright or has full legal authority and
legal beneficial right to tender for redemption the requisite number of Shares
of any Fund to be redeemed, and the entire proceeds of the redemption, (b) the
delivery of such Shares to the Transfer Agent in accordance with the Prospectus
or as otherwise required by the Trust or Fund would not be precluded as the
result of their being subject to or the subject of a loan, repurchase agreement,
securities lending agreement or other arrangement and (c) upon delivery to the
Fund's custodian, the Shares will be free and clear of all liens.
A Trust may make redemptions in cash in lieu of transferring one or more
Deposit Securities if the Trust or Fund determines, in its discretion, that such
method is warranted because a Participant who has placed the Redemption Order is
restrained by regulation or policy from transacting in the Deposit Securities,
delivery of the Deposit Securities is not permissible under applicable law or
foreign stock exchange regulations, or for other reasons.
In connection with an International Fund, a Participant must maintain
appropriate securities broker-dealer, bank or other custody arrangements to
which account Deposit Securities will be delivered in connection with a
redemption. If a redeeming Participant, or any party on whose behalf the
Participant is acting, does not have appropriate arrangements to take delivery
of the Deposit Securities in the relevant foreign jurisdiction(s) and it is not
possible to make other such arrangements, or if it is not possible to effect
deliveries of the Deposit Securities in such foreign jurisdiction(s) and in
certain other circumstances, the Trust or Fund may in its discretion redeem
Shares for cash, and the redeeming Participant, on behalf of itself or any part
for which it is acting, will be required to receive redemption proceeds in cash.
In such case, the Participant will receive a cash payment equal to the net asset
value (next determined after receipt of the Redemption Order) times the number
of Shares in a Creation Unit of the relevant International Fund, minus the
Transaction Fee and other costs specified in Section 9.
In the case of a beneficial owner of an International Fund who is a
resident of Australia or New Zealand, the Participant understands and agrees
that such beneficial owner is only entitled to receive cash upon its redemption
of Creation Units. In a Redemption Order, the Participant will be required to
confirm that an in-kind redemption request has not been submitted on behalf of a
beneficial owner who is an Australian or New Zealand resident.
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SECTION 12. FUND'S TAX BASIS.
The Participant represents and warrants to the Distributor and each
Trust and Fund that with respect to any Creation Units it shall only deliver or
transfer, or cause to be delivered or transferred, Deposit Securities (or
contracts therefor) that, should Section 351 of the Internal Revenue Code of
1986, as amended, apply to such delivery or transfer, will have a tax basis in
the hands of the Fund receiving the Deposit Securities equal to the closing
market price of such Deposit Securities on the date the Creation Order with
respect thereto is Deemed Received (as such term is defined in Attachment A
hereto). Such representation and warranty shall be deemed repeated with respect
to each Creation Order.
SECTION 13. INDEMNIFICATION.
(a) The Participant hereby agrees to indemnify and hold harmless the
Distributor in its capacity as principal underwriter, each Trust, each Fund, the
Transfer Agent, their respective affiliates, directors, officers, employees and
agents, and each person, if any, who controls such persons within the meaning of
Section 15 of the Securities Act (each, for purposes of this paragraph, an
"Indemnified Party") from and against any loss, liability, cost and expense
(including reasonable attorneys' fees) incurred by such Indemnified Party as a
result of (i) any breach by the Participant of any provision of this Agreement
that relates to the Participant; (ii) any failure on the part of the Participant
to perform any of its obligations set forth in this Agreement; (iii) any failure
by the Participant to comply with applicable laws, including rules and
regulations of self-regulatory organizations in relation to the sales, trading
or marketing of Shares and the creation or redemption of or investment in a Fund
or Funds, except that the Participant shall not be required to indemnify an
Indemnified Party to the extent that such failure was caused by Participant's
adherence to instructions given or representations made by the Distributor, the
Transfer Agent or any Indemnified Party, as applicable; or (iv) actions of such
Indemnified Party in reliance upon any instructions issued or representations
made in accordance with Attachment A (as it may be amended from time to time)
reasonably believed by the Distributor or the Transfer Agent, as applicable, to
be genuine and to have been given by the Participant except to the extent that
the Participant had previously revoked a PIN Number used in giving such
instructions or representations (where applicable) and such revocation was given
by the Participant and received by the Distributor and the Transfer Agent in
accordance with the terms of Section 10 hereto. The Participant and the
Distributor understand and agree that each Trust and Fund as a third party
beneficiary of this Agreement is entitled and intends to proceed directly
against the Participant in the event that the Participant fails to honor any of
its obligations pursuant to this Agreement that benefit each such Trust and
Fund.
(b) The Distributor hereby agrees to indemnify and hold harmless the
Participant, its respective subsidiaries, affiliates, directors, officers,
employees and agents, and each person, if any, who controls such persons within
the meaning of Section 15 of the Securities Act (each, for purposes of this
paragraph, an "Indemnified Party") from and against any loss, liability, cost
and expense (including reasonable attorneys' fees) incurred by such Indemnified
Party as a result of (i) any breach by the Distributor of any provision of this
Agreement that relates to the Distributor; (ii) any failure on the part of the
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Distributor to perform any of its obligations set forth in this Agreement; (iii)
any failure by the Distributor to comply with applicable laws, including rules
and regulations of self-regulatory organizations in relation to its role as
Distributor of the Funds; or (iv) actions of such Indemnified Party in reliance
upon any instructions issued or representations made in accordance with
Attachment A (as it may be amended from time to time) reasonably believed by the
Participant to be genuine and to have been given by the Distributor or the
Transfer Agent.
(c) Each of the Distributor and Participant agrees to jointly and severally
indemnify Transfer Agent and hold Transfer Agent harmless from and against any
and all losses sustained or incurred by or asserted against Transfer Agent by
reason of or as a result of any action or inaction, or arising out of Transfer
Agent's performance hereunder, including reasonable fees and expenses of counsel
incurred by Transfer Agent in a successful defense of claims by the Distributor
and/or Participant; provided however, Distributor and/or Participant shall not
indemnify Transfer Agent for those losses arising out of Transfer Agent's own
negligence or willful misconduct or that of its employees. This indemnity shall
be a continuing obligation of the Distributor and/or Participant, and their
respective successors and assigns, notwithstanding the termination of this
Agreement.
(d) Except to the extent that the Transfer Agent is to be indemnified as
provided in this Section 13, no party to this Agreement shall be liable to the
other party or to any other person for any damages arising out of mistakes or
errors in data provided to such Indemnified Party by a third party, or out of
interruptions or delays of electronic means of communications with the
Indemnified Parties.
SECTION 14. STANDARD OF CARE.
Transfer Agent shall have no responsibility and shall not be liable for
any loss or damage unless such loss or damage is caused by its own negligence or
willful misconduct or that of its employees, or its breach of any of its
obligations hereunder. In no event shall the Transfer Agent be liable for
special, indirect or consequential damages regardless of the form of action and
even if the same were foreseeable.
SECTION 15. FORCE MAJEURE.
Transfer Agent shall establish and maintain a disaster recovery plan and
back-up system at all times satisfying the requirements of all laws, rules and
regulations (the "Disaster Recovery Plan and Back-Up System") applicable to the
Transfer Agent for providing services as such. Transfer Agent shall not be
responsible or liable for any failure or delay in the performance of its
obligations under this Agreement arising out of or caused, directly or
indirectly, by circumstances beyond its control which are not a result of its
negligence, including without limitation, acts of God; earthquakes; fires;
floods; wars; civil or military disturbances; sabotage; epidemics; riots;
interruptions, loss or malfunctions of utilities, transportation, computer
(hardware or software) or communications service; accidents; labor disputes;
acts of civil or military authority; governmental actions; or inability to
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obtain labor, material, equipment or transportation, provided that Transfer
Agent has established and is maintaining the Disaster Recovery Plan and Back-Up
System, or if not, that such delay or failure would have occurred even if
Transfer Agent had established and was maintaining the Disaster Recovery Plan
and Back-Up System. Upon the occurrence of any such delay or failure, Transfer
Agent shall use commercially reasonable best efforts to resume performance as
soon as practicable under the circumstances.
SECTION 16. ACKNOWLEDGMENT.
The Participant acknowledges receipt of each relevant Fund's Prospectus
and represents it has reviewed such document and understands the terms thereof.
SECTION 17. NOTICES.
Except as otherwise specifically provided in this Agreement, all notices
required or permitted to be given pursuant to this Agreement shall be given in
writing and delivered by personal delivery or by postage prepaid registered or
certified United States first class mail, return receipt requested, or by telex,
telegram or facsimile or similar means of same day delivery (with a confirming
copy by mail as provided herein). Unless otherwise notified in writing, all
notices to the Transfer Agent shall be given or sent as follows: The Bank of New
York, 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attn: ETF Services Group.
All notices to the Participant and the Distributor shall be directed to the
address or telephone, facsimile or telex numbers indicated below the signature
line of such party.
SECTION 18. TERMINATION.
This Agreement shall become effective in this form as of the date
accepted by the Transfer Agent and may be terminated at any time by any party
upon thirty (30) days prior notice to the other parties (i) unless earlier
terminated by the Transfer Agent in the event of a breach of this Agreement or
the procedures described herein by the Participant or (ii) in the event that a
Trust is terminated pursuant to its Declaration of Trust. This Agreement
supersedes any prior Participant Agreement entered into by the parties. Any and
all prior Participant Agreements entered into by the parties are deemed
terminated upon execution of this Agreement.
SECTION 19. PROSPECTUS.
(a) The Distributor will provide to the Participant copies of the then
current Prospectus for each Fund and any printed supplemental information in
reasonable quantities upon request. The Distributor represents, warrants and
agrees that it will notify the Participant when a revised, supplemented or
amended Prospectus for any Shares is available and deliver or otherwise make
available to the Participant copies of such revised, supplemented or amended
Prospectus at such time and in such numbers as to enable the Participant to
comply with any obligation it may have to deliver such Prospectus to customers.
As a general matter, the Distributor will make such revised, supplemented or
amended Prospectus available to the Participant no later than its effective
date. The Distributor shall be deemed to have complied with this Section 19 when
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the Participant has received such revised, supplemented or amended Prospectus by
email at _____________________, in printable form, with such number of hard
copies as may be agreed from time to time by the parties promptly thereafter.
(b) Distributor represents and warrants that (i) the registration
statement(s) for First Trust Exchange-Traded Fund on Form N-1A (No. 333-125751)
and the Prospectus(es) contained therein, the registration statement(s) for
First Trust Exchange-Traded Fund II on Form N-1A (No. 333-137036) and the
Prospectus(es) contained therein, and the registration statement(s) for First
Trust Exchange-Traded AlphaDEX(TM) Fund (No. 333-140895) conform in all material
respects to the requirements of the Securities Act, and the rules and
regulations of the Securities and Exchange Commission thereunder and do not and
will not, as of the applicable effective date as to the registration statement
and any amendment thereto and as of the applicable filing date as to the
Prospectus and any amendment or supplement thereto, contain an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading; (ii) the
sale and distribution of the Shares as contemplated herein will not conflict
with or result in a breach or violation of any statute or any order, rule or
regulation of any court or governmental agency or body having jurisdiction over
the Trusts, any Fund or the Distributor; and (iii) no consent, approval,
authorization, order, registration or qualification of or with any such court or
governmental agency or body is required for the issue and sale of the Shares,
except the registration under the Securities Act of the Shares.
SECTION 20. COUNTERPARTS.
This Agreement may be simultaneously executed in several counterparts,
each of which shall be an original and all shall constitute but one and the same
instrument.
SECTION 21. NO WAIVER.
Each and every right granted to any party hereunder or under any other
document delivered hereunder or in connection herewith, or allowed it by law or
equity, shall be cumulative and may be exercised from time to time. No failure
on the part of any party hereto to exercise, and no delay in exercising, any
right will operate as a waiver thereof, nor will any single or partial exercise
by any party hereto of any right preclude any other or future exercise thereof
or the exercise of any other right.
SECTION 22. ENFORCEABILITY; AMENDMENT.
In case any provision in or obligation under this Agreement shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
thereby. This Agreement may not be amended or modified in any manner except by a
written agreement executed by the parties hereto, except that any amendment to
Schedule I approved in writing by the Distributor (upon which written approval
the Transfer Agent may conclusively rely) and any amendment to Attachment A
hereto need be signed only by the Transfer Agent. The Transfer Agent shall
provide the Participant a copy of any such amendment in the manner provided in
-11-
Section 17. This Agreement shall extend to and shall be binding upon the parties
hereto, and their respective successors and assigns; provided, however, that
this Agreement shall not be assignable by any party without the written consent
of the others.
SECTION 23. GOVERNING LAW; CONSENT TO JURISDICTION.
This Agreement shall be construed in accordance with the substantive
laws of the State of New York, without regard to conflicts of laws principles
thereof. The parties hereby consent to the jurisdiction of a state or federal
court situated in New York City, New York in connection with any dispute arising
hereunder. Each party hereby irrevocably waives, to the fullest extent permitted
by applicable law, any objection which it may now or hereafter have to the
laying of venue of any such proceeding brought in such a court and any claim
that such proceeding brought in such a court has been brought in an inconvenient
forum. Each party hereby irrevocably waives any and all rights to trial by jury
in any legal proceeding arising out of or relating to this Agreement.
SECTION 24. STATUS OF FUND
The Distributor hereby represents that each Series (i) of the First Trust
Exchange-Traded Fund (ii) of the First Trust Exchange-Traded Fund II, and (iii)
of the First Trust Exchange-Traded AlphaDEX (TM) Fund is a registered open ended
investment company operating in accordance with the exemptive order granted
under 812-13000 and I.C. Release No. 27068 dated September 20, 2005, as the same
may be amended from time to time, and I.C. Release No. 27051 dated August 26,
2005 and any additional I.C. Releases related to such amendments.
-12-
FIRST TRUST PORTFOLIOS, L.P.
By
Name:_______________________________________
Title:______________________________________
Address: 0000 Xxxxxxxxxxx Xxxx
Xxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
-----------------------------
By
Name:_______________________________________
Title:______________________________________
Address: _______________________________
_______________________________
Telephone:_____________________________________
Facsimile:_____________________________________
THE BANK OF NEW YORK, as Transfer Agent
By
Name:_______________________________________
Title:______________________________________
Address: 000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Dated: _________________________________
-13-
SCHEDULE I
Series of First Trust Exchange-Traded Fund
First Trust Dow Xxxxx Select MicroCap IndexSM Fund
First Trust Morningstar(R) Dividend LeadersSM Index Fund
First Trust NASDAQ-100 Equal Weighted IndexSM Fund
First Trust NASDAQ-100-Technology Sector IndexSM Fund
First Trust IPOX-100 Index Fund
First Trust AMEX(R) Biotechnology Index Fund
First Trust DB Strategic Value Index Fund
First Trust Dow Xxxxx Internet IndexSM Fund
First Trust NASDAQ(R) Clean Edge(R) U.S. Liquid Series Index Fund
First Trust NASDAQ-100 Ex-Technology Sector IndexSM Fund
First Trust Value Line(R) Dividend Index Fund
First Trust Value Line(R) Equity Allocation Index Fund
Participant shall be a participant with respect to, and this Agreement shall be
applicable to, the following additional Funds if and when they shall become
Series of First Trust Exchange-Traded Fund:
First Trust Value Line(R) Arithmetic Index Fund
First Trust Ibbotson Core U.S. Equity Allocation Index Fund
First Trust S&P REIT Index Fund
First Trust ISE Water Index Fund
First Trust ISE-Revere Natural Gas Index Fund
First Trust ISE Chindia Index Fund
First Trust Value Line(R) 100 Exchange-Traded Fund
Series of First Trust Exchange-Traded Fund II
Series of First Trust Exchange-Traded AlphaDEX(TM) Fund
First Trust Consumer Discretionary AlphaDEX(TM) Fund
First Trust Consumer Staples AlphaDEX(TM) Fund
Sch. I
First Trust Energy AlphaDEX(TM) Fund
First Trust Financials AlphaDEX(TM) Fund
First Trust Health Care AlphaDEX(TM) Fund
First Trust Industrials AlphaDEX(TM) Fund
First Trust Materials AlphaDEX(TM) Fund
First Trust Technology AlphaDEX(TM) Fund
First Trust Utilities AlphaDEX(TM) Fund
First Trust Large Cap Core AlphaDEX(TM) Fund
First Trust Mid Cap Core AlphaDEX(TM) Fund
First Trust Small Cap Core AlphaDEX(TM) Fund
First Trust Large Cap Growth Opportunities AlphaDEX(TM) Fund
First Trust Large Cap Value Opportunities AlphaDEX(TM) Fund
First Trust Multi Cap Growth AlphaDEX(TM) Fund
First Trust Multi Cap Value AlphaDEX(TM) Fund
-2-
ATTACHMENT A
Subject to the terms and conditions of the attached Participant
Agreement, this document supplements the Prospectuses for the Series of First
Trust Exchange-Traded Fund, for the Series of First Trust Exchange-Traded Fund
II, and for the Series of First Trust Exchange-Traded AlphaDEX(TM) Fund and is
an attachment to, and incorporated into and made a part of, the Participant
Agreement with respect to the procedures to be used by (i) the Transfer Agent in
processing an order for the creation of Shares, and (ii) the Transfer Agent in
processing a request for the redemption of Shares, and (iii) the Participants
and the Transfer Agent in delivering or arranging for the delivery of requisite
cash payments, Fund Deposit or Shares, as the case may be, in connection with
the submission of orders for creation or requests for redemption. Capitalized
terms not otherwise defined have the meaning assigned to them in the Participant
Agreement.
A Participant is first required to have signed the Participant
Agreement. Upon acceptance of the Participant Agreement by the Distributor, the
Transfer Agent will assign a unique personal identification number ("PIN
Number") to each Authorized Person authorized to act for the Participant. This
will allow a Participant through its Authorized Person(s) to place orders for
either creation or redemption of Shares.
SECTION I. TO PLACE AN ORDER FOR CREATION OR REDEMPTION OF SHARES
1. Call to Receive a Submission Number. An Authorized Person for the
Participant will call the Trust Telephone Representative at (000) 000-0000 not
later than the closing time of the regular trading session on The New York Stock
Exchange (the "NYSE Closing Time") (ordinarily 4:00 p.m. New York time) to
receive a submission number ("Submission Number"). In the case of custom orders,
the order must be received by the Transfer Agent no later than 3:00 p.m. Eastern
time on the trade date. Upon verifying the authenticity of the caller (as
determined by the use of the appropriate PIN Number) and the terms of the order
for creation or request for redemption, the Trust Telephone Representative will
issue a unique Submission Number. All orders with respect to the creation or
redemption of Shares are required to be in writing and accompanied by the
designated Submission Number. Incoming telephone calls are queued and will be
handled in the sequence received. Calls placed before the NYSE Closing Time will
be processed even if the call is taken after this cut-off time. ACCORDINGLY, DO
NOT HANG UP AND REDIAL. INCOMING CALLS THAT ARE ATTEMPTED LATER THAN THE NYSE
CLOSING TIME WILL NOT BE ACCEPTED.
2. Assemble the Submission. The Authorized Person submitting an order to
create or a request to redeem shall assemble (a) written instructions regarding
such creation order or redemption request and (b) the designated Submission
Number in one document and transmit such document by facsimile or telex to the
Trust Telephone Representative and the Distributor, as applicable, according to
the
Attachment 1 -1-
procedures set forth below in subsection 3. The document so transmitted is
hereinafter referred to as the "Submission," and the Business Day on which a
Submission is made is hereinafter referred to as the "Transmittal Date." As used
herein, a Business Day ("Business Day") is any day on which The New York Stock
Exchange is open. NOTE THAT THE TELEPHONE CALL IN WHICH THE SUBMISSION NUMBER IS
ISSUED INITIATES THE ORDER PROCESS BUT DOES NOT ALONE CONSTITUTE THE ORDER. AN
ORDER OR REQUEST IS ONLY COMPLETED AND PROCESSED UPON RECEIPT OF THE SUBMISSION.
3. Transmit the Submission. A Submission Number is only valid for a limited
time. The Submission for either creations or redemptions of Shares must be sent
by facsimile or telex to the Trust Telephone Representative, as applicable,
within fifteen (15) minutes of the issuance of the Submission Number. In the
event that the Submission is not received within such time period, the Trust
Telephone Representative will attempt to contact the Participant to request
immediate transmission of the Submission.
(a) In the case of a Submission for creation, unless the Submission is
received by the Trust Telephone Representative upon the earlier of within (i)
fifteen (15) minutes of contact with the Participant or (ii) forty-five (45)
minutes after the NYSE Closing Time, the Submission will be deemed invalid. (b)
In the case of a Submission for redemption, unless such Submission is received
by the Trust Telephone Representative within (i) fifteen (15) minutes of contact
with the Participant or (ii) forty-five (45) minutes after the NYSE Closing
Time, whichever is earlier, such order for redemption contained therein shall be
deemed invalid.
4. Await Receipt of Confirmation.
(a) Trusts' Clearing Process-Creation Orders. The Transfer Agent shall
issue to the Participating Party a confirmation of acceptance of an order to
create Shares in Creation Unit size aggregations ("Creation Order") through the
Trusts' Clearing Process within fifteen (15) minutes of its receipt of a
Submission received in good form. In the event the Participating Party does not
receive a timely confirmation from the Transfer Agent, it should contact the
Distributor and the Trust Telephone Representative at the business numbers
indicated.
(b) Trusts' Clearing Process-Requests for Redemptions. The Transfer
Agent shall issue to the Participating Party a confirmation of acceptance of a
request to redeem Shares in Creation Unit size aggregations ("Redemption Order")
through the Trusts' Clearing Process within fifteen (15) minutes of its receipt
of a Submission received in good form. In the event the Participating Party does
not receive a timely confirmation from the Transfer Agent, it should contact the
Transfer Agent directly at the business number indicated.
(c) Outside the Trusts' Clearing Process--Creation Orders. The Transfer
Agent shall issue to the DTC Participant an acknowledgment of receipt of a
Creation Order outside the Trusts' Clearing Process within fifteen (15) minutes
of its receipt of a Submission received in good form. In the event the DTC
Participant does not receive a timely acknowledgment from the Transfer Agent, it
should contact the Transfer Agent at the business numbers indicated.
Attachment 1 -2-
(d) Outside the Trusts' Clearing Process--Redemption Orders. The Transfer
Agent shall issue to the DTC Participant an acknowledgment of receipt of a
Redemption Order outside the Trusts' Clearing Process within fifteen (15)
minutes of its receipt of a Submission received in good form. In the event the
DTC Participant does not receive a timely acknowledgment from the Transfer
Agent, it should contact the Transfer Agent directly at the business number
indicated.
SECTION II. PARTICIPANTS' RESPONSIBILITY FOR DELIVERING OR EFFECTING THE
DELIVERY OF REQUISITE FUND DEPOSIT OR SHARES AND CASH PAYMENTS
IN CONNECTION WITH CREATION ORDERS OR REDEMPTION ORDERS
1. Trusts' Clearing Process -- Creation Orders. The Participating Party
notified of confirmation of a Creation Order to create Shares through the
Trusts' Clearing Process shall be required to transfer or arrange for the
transfer of (a) the requisite Deposit Securities (or contracts to purchase such
Deposit Securities expected to be delivered through NSCC by the "regular way"
settlement date) and (b) the Cash Component, if any, to the Transfer Agent by
means of the Trusts' Clearing Process so as to be received no later than on the
"regular way" settlement date following the Business Day on which such order is
Deemed Received by the Transfer Agent as set forth below in Section IV.
2. Trusts' Clearing Process -- Redemption Orders. The Participating Party
notified of confirmation of a Redemption Order to redeem Shares through the
Trusts' Clearing Process shall be required to transfer or arrange for the
transfer of the requisite Shares and the Cash Redemption Amount, as defined in
the applicable Fund's Prospectus ("Cash Redemption Amount"), if any, to the
Transfer Agent by means of the Trusts' Clearing Process so as to be received no
later than on the "regular way" settlement date following the Business Day on
which such order is Deemed Received by the Transfer Agent as set forth below in
Section IV.
3. Outside the Trusts' Clearing Process -- Creation Orders. The DTC
Participant notified of acknowledgment of a Creation Order to create Shares
outside the Trusts' Clearing Process shall be required to effect a transfer to
the Transfer Agent of (a) the requisite Deposit Securities through DTC so as to
be received by the Transfer Agent no later than 11:00 a.m., Eastern Time, on the
next Business Day immediately following the Business Day on which such order is
Deemed Received by the Distributor as set forth below in Section IV, in such a
way as to replicate the Fund Deposit established on the Transmittal Date by the
Transfer Agent and (b) the Cash Component, if there is a positive Cash
Component, through the Federal Reserve Bank wire system so as to be received by
the Transfer Agent by 2:00 p.m., Eastern Time, on the next Business Day
immediately following the day such order is Deemed Received. If the Transfer
Agent does not receive the Deposit Securities by 11:00 a.m. Eastern Time and the
Cash Component, if any, by 2:00 p.m., Eastern Time, on the Business Day
immediately following the day such order is Deemed Received, the Creation Order
contained in such Submission shall be canceled. Upon written notice to the
Transfer Agent, the DTC Participant may resubmit such canceled order on the
following Business Day using a Fund Deposit as newly constituted.
Attachment 1 -3-
4. Purchase of Creation Unit Aggregations Prior to Receipt of Deposit
Securities. Creation Unit Aggregations may be created in advance of receipt by a
Fund of all or a portion of the applicable Deposit Securities as described
below. In these circumstances, the initial deposit will have a value greater
than the NAV of the applicable Fund's Shares on the date the Creation Order is
placed in proper form since, in addition to available Deposit Securities, cash
must be deposited in an amount equal to the sum of (i) the Cash Component, plus
(ii) one hundred fifteen percent (115%) of the market value of the undelivered
Deposit Securities (the "Additional Cash Deposit"). The Creation Order shall be
deemed to be received on the Business Day on which the order is placed provided
that the Creation Order is placed in proper form prior to 4:00 p.m., Eastern
time, on such date, and federal funds in the appropriate amount are deposited
with the Transfer Agent by 11:00 a.m., Eastern time, the following Business Day.
If the Creation Order is not placed in proper form by 4:00 p.m., Eastern time,
or federal funds in the appropriate amount are not received by 11:00 a.m.,
Eastern time, the next Business Day, then the Creation Order may be deemed to be
canceled and the Authorized Participant shall be liable to the Fund for losses,
if any, resulting therefrom. An additional amount of cash shall be required to
be deposited with the applicable Fund, pending delivery of the missing Deposit
Securities to the extent necessary to maintain the Additional Cash Deposit with
the Fund in an amount at least equal to one hundred fifteen percent (115%) of
the daily marked to market value of the missing Deposit Securities. The parties
hereto further agree that the Trust may purchase the missing Deposit Securities
at any time and the Participant agrees to accept liability for any shortfall
between the cost to the Trust of purchasing such securities and the amount of
the Additional Cash Deposit maintained with the Fund, as the Trust may determine
in its sole discretion.
5. Outside the Trusts' Clearing Process -- Redemption Orders. The DTC
Participant notified of acknowledgment of a Redemption Order to redeem Shares
outside the Trusts' Clearing Process shall be required to effect a transfer to
the Transfer Agent (a) the requisite number of Shares through DTC no later than
the NYSE Closing Time on the Business Day on which such Redemption Order is
Deemed Received by the Transfer Agent and (b) the Cash Redemption Amount, if
any, through the Federal Reserve Bank wire system by no later than 2:00 p.m. on
the next Business Day immediately following the Business Day on which such order
is Deemed Received by the Transfer Agent.
6. Transaction Fee. In connection with the creation or redemption of
Creation Units, the Transfer Agent shall charge, and the Participant agrees to
pay to the Transfer Agent, (i) the Creation Transaction Fee or Redemption
Transaction Fee prescribed in the relevant Fund's Prospectus applicable to
creations or redemptions through the Trusts' Clearing Process, or (ii) the
applicable Creation Transaction Fee or Redemption Transaction Fee plus, in each
case, such additional variable amounts as may be prescribed in the relevant
Fund's Prospectus for (a) creations or redemptions outside the Trusts' Clearing
Process and (b) creations through the Trusts' Clearing Process where the cash
equivalent value of one or more Deposit Securities is being deposited in lieu of
the inclusion of such Deposit Securities in the securities portion of the Fund
Deposit. The Cash Component or Cash Redemption Amount payable or to be received,
as the case may be, by the Participant in connection with the Creation Order or
Redemption Order shall be adjusted by the amount of such applicable Transaction
Fee and additional variable amounts, if any.
Attachment 1 -4-
7. International Funds -- Creation Orders.
(a) Except as provided below, Deposit Securities must be
delivered to an account maintained at the applicable local Subcustodian
of the Trust on or before the International Contractual Settlement Date
(defined below). The Participant must also pay on or before the
International Contractual Settlement Date immediately available or same
day funds estimated by Trust to be sufficient to pay the Cash Component
next determined after acceptance of the Creation Order, together with
the applicable Creation Transaction Fee and additional variable amounts
(as described below and in the Prospectus). The "International
Contractual Settlement Date" with respect to each International Fund is
the earlier of (i) the date upon which all of the required Deposit
Securities, the Cash Component and any other cash amounts which may be
due are delivered to the Fund and (ii) the latest day for settlement on
the customary settlement cycle in the jurisdiction(s) where any of the
securities of such International Fund are customarily traded.
(b) Except as provided in the next two paragraphs, a Creation
Unit of Shares will not be issued until the transfer of good title to
the Trust of the portfolio of Deposit Securities, the payment of the
Cash Component, the payment of any other cash amounts and the Creation
Transaction Fee have been completed. When the Subcustodian confirms to
Custodian that the required Deposit Securities (or, when permitted in
the sole discretion of Trust, the cash in lieu thereof) have been
delivered to the account of the relevant Subcustodian, the Custodian
shall notify Distributor and the Transfer Agent which, acting on behalf
of the Trust, will issue and cause the delivery of the Creation Unit of
Shares.
(c) The Trust may in its sole discretion permit or require the
substitution of an amount of cash (i.e., a "cash in lieu" amount) to be
added to the Cash Component to replace any Deposit Security which may
not be available in sufficient quantity for delivery or for other
similar reasons. If the Distributor, acting on behalf of the Trust,
determines that a "cash in lieu" amount will be accepted, Distributor
will notify the Participant and the Transfer Agent, and the Participant
shall deliver, on behalf of itself or the party on whose behalf it is
acting, the "cash in lieu" amount, with any appropriate adjustments as
advised by the Trust.
(d) In the event that a Fund Deposit is incomplete on the
International Contractual Settlement Date for a Creation Order because
certain or all of the Deposit Securities are missing, the Trust may
issue a Creation Unit of Shares notwithstanding such deficiency in
reliance on the undertaking of the Participant to deliver the missing
Deposit Securities as soon as possible, which undertaking shall be
secured by an Additional Cash Deposit with respect undelivered Deposit
Securities as described above in Section 4.
(e) Cash shall be delivered in the manner provided above for
Creation Orders outside the Trusts' Clearing Process.
Attachment 1 -5-
(f) In addition to the Creation Transaction Fee, the Participant
shall pay additional variable amounts which may include expenses
incurred by the Fund in the transfer of Deposit Securities to the Fund
in connection with a creation of Creation Units. These expenses may
include operational processing and brokerage costs, transfer fees, stamp
taxes and the like. When an International Fund permits a Participant to
substitute cash or a different security in lieu of depositing one or
more of the requisite Deposit Securities, the Participant may also be
assessed an amount to cover the cost of purchasing the Deposit
Securities and/or disposing of the substituted securities, including
operational processing and brokerage costs, transfer fees, stamp taxes,
and part or all of the spread between the expected bid and offer side of
the market related to such Deposit Securities and/or substitute
securities.
8. International Funds -- Redemption Orders.
(a) A Participant must maintain appropriate securities
broker-dealer, bank or other custody arrangements to which account
Deposit Securities will be delivered in connection with a Redemption
Order. If the Participant, or any party on whose behalf the Participant
is acting, does not have appropriate arrangements to take delivery of
the Deposit Securities in the relevant foreign jurisdiction(s) and it is
not possible to make other such arrangements, the Participant will be
required to receive redemption proceeds in cash, as described in
paragraph (d) below.
(b) The delivery of redemption proceeds will be made within
twelve calendar days after the Redemption Order is received in proper
form, except to the extent that a delivery is delayed due to the
introduction of new or special holidays, the treatment by participants
in the local market of certain days as "informal holidays" (e.g., days
on which no or limited securities transactions occur, as a result of
substantially shortened trading hours), or changes in local securities
delivery practices. Under these circumstances, the Fund will notify the
Participant as soon as reasonably practicable
(c) The Trust may in its sole discretion permit or require the
substitution of an amount of cash (i.e., a "cash in lieu" amount) to be
added to the Cash Component to replace any Deposit Security which may
not be available in sufficient quantity for delivery or for other
similar reasons. If the Distributor, acting on behalf of the Trust,
determines that a "cash in lieu" amount will be delivered, Distributor
will notify the Participant and the Transfer Agent and the Participant
shall receive the "cash in lieu" amount, with any appropriate
adjustments as advised by Trust.
(d) If a redeeming Participant, or any party on whose behalf the
Participant is acting, does not have appropriate arrangements to take
delivery of the Deposit Securities in the relevant foreign
jurisdiction(s) and it is not possible to make other such arrangements,
or if it is not possible to effect deliveries of the Deposit Securities
in such foreign jurisdiction(s) and in certain other circumstances, the
Trust may in its discretion redeem Shares for cash, and the redeeming
Participant, on behalf of itself or any party for which it is acting,
will be required to receive redemption proceeds in cash. In such case,
Attachment 1 -6-
the Participant will receive a cash payment equal to the net asset value
(next determined after receipt of the Redemption Order) times the number
of Shares in a Creation Unit of the relevant International Fund, minus
the Transaction Fee.
(e) Cash shall be delivered in the manner provided above for
Redemption Orders outside the Trusts' Clearing Process.
(f) In addition to the Redemption Transaction Fee, the
Participant shall pay additional variable amounts which may include
expenses incurred by the Fund in the transfer of Deposit Securities to
the Participant. These expenses may include operational processing and
brokerage costs, transfer fees, stamp taxes and the like. When an
International Fund redeems Shares for cash, the Participant may also be
assessed an amount to cover the cost of selling the Deposit Securities,
including operational processing and brokerage costs, transfer fees and
stamp taxes.
SECTION III. TRANSFER AGENT'S RESPONSIBILITY FOR EFFECTING DELIVERY OF
REQUISITE SHARES OR SECURITIES AND CASH PAYMENTS IN CONNECTION
WITH ORDERS FOR CREATION OR REQUESTS FOR REDEMPTION
1. Trusts' Clearing Process -- Creation Orders. After the Transfer Agent
has received notification of a Submission from the Participant for a Creation
Order for Shares through the Trusts' Clearing Process which has been Deemed
Received by the Transfer Agent as set forth below in Section IV, the Transfer
Agent shall initiate procedures to transfer the requisite Shares and the Cash
Component, if any, through the Trusts' Clearing Process so as to be received by
the creator no later than on the "regular way" settlement date following the
Business Day on which the Submission is Deemed Received by the Transfer Agent.
2. Trusts' Clearing Process -- Redemption Orders. After the Transfer Agent
has received a Submission for a Redemption Order for Shares through the Trusts'
Clearing Process which has been Deemed Received by the Transfer Agent as set
forth below in Section IV, the Transfer Agent shall initiate procedures to
transfer the requisite securities (or contracts to purchase such securities
expected to be delivered through NSCC by the "regular way" settlement date) and
the Cash Redemption Amount, if any, through the Trusts' Clearing Process so as
to be received by the beneficial owner no later than on the "regular way"
settlement date following the Business Day on which the Submission is Deemed
Received by the Transfer Agent.
3. Outside the Trusts' Clearing Process -- Creation Orders. After the
Transfer Agent has received notification of a Submission from the Participant
for a Creation Order for Shares outside the Trusts' Clearing Process which has
been Deemed Received by the Transfer Agent as set forth below in Section IV, the
Transfer Agent shall initiate procedures to transfer the requisite Shares
through DTC and the DTC Participants and the Cash Component, if any, through the
Federal Reserve Bank wire system so as to be received by the creator no later
than the same Business Day on which the transfer of Deposit Securities is
required to be made pursuant to Section IV (3) in order for the Deemed Received
Attachment 1 -7-
order to continue to be Deemed Received. A Creation Order relating to Shares of
an International Fund will be processed in the manner provided in this
paragraph.
4. Outside the Trusts' Clearing Process -- Redemption Orders. After the
Transfer Agent has received a Submission for a Redemption Order for Shares
outside the Trusts' Clearing Process which has been Deemed Received by the
Transfer Agent as set forth below in Section IV, the Transfer Agent shall
initiate procedures to transfer the requisite securities (or contracts to
purchase such securities expected to be delivered within three Business Days)
through DTC and the DTC Participants and the Cash Redemption Amount, if any,
through the Federal Reserve Bank wire system so as to be received by the
Participant no later than the same Business Day on which the transfer of Shares
is required to be made pursuant to Section IV (4) in order for the Deemed
Received order to continue to be Deemed Received. A Redemption Order relating to
Shares of an International Fund will be processed in the manner provided in this
paragraph, except as otherwise provided in Section II 8 (b).
SECTION IV. PROCEDURES BY WHICH AN ORDER TO CREATE OR A REQUEST TO REDEEM SHALL
BE "DEEMED RECEIVED"
1. Trusts' Clearing Process -- Creation Orders. A Creation Order to create
Shares through the Trusts' Clearing Process shall be "Deemed Received" by the
Transfer Agent on the Transmittal Date only if (a) the Submission containing
such order is in proper form and (b) such Submission is received by the Transfer
Agent no later than the time on such Transmittal Date as set forth in Section I
(3) (a) hereof. Orders to create Shares contained in Submissions transmitted
after such time on a Transmittal Date shall be deemed invalid.
2. Trusts' Clearing Process -- Redemption Orders. A Redemption Order to
redeem Shares through the Trusts' Clearing Process shall be Deemed Received by
the Transfer Agent on the Transmittal Date only if (a) the Submission containing
such request is in proper form and (b) such Submission is received by the
Transfer Agent no later than the time on such Transmittal Date as set forth in
Section I(3)(b) hereof. Requests to redeem Shares contained in Submissions
transmitted after such time on a Transmittal Date shall be "Deemed Received" by
the Transfer Agent on the next Business Day immediately following such
Transmittal Date.
3. Outside the Trusts' Clearing Process -- Creation Orders. An Creation
Order to create Shares outside the Trusts' Clearing Process shall be Deemed
Received by the Transfer Agent on the Transmittal Date only if: (a) the
Submission containing such order is in proper form, and (b) such Submission is
received by the Transfer Agent no later than the time on such Transmittal Date
as set forth in Section I(3)(a) hereof, provided, however, that such order shall
cease to be Deemed Received unless (a) the requisite number of Deposit
Securities is transferred through DTC to the account of the applicable Fund no
later than 11:00 a.m., Eastern Time, on the Business Day next following the
Transmittal Date and (b) the cash equal to the Cash Component, if any, is
transferred via the Federal Reserve Bank wire system to the account of the
applicable Fund by no later than 2:00 p.m., Eastern Time, on the Business Day
next following the Transmittal Date. If either the Submission, the requisite
Attachment 1 -8-
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 Trusts' Clearing Process -- Redemption Orders. A request to
redeem Shares outside the Trusts' Clearing Process shall be Deemed Received by
the Transfer Agent on the Transmittal Date only if (a) the Submission containing
such request is in proper form, and (b) such Submission is received by the
Transfer Agent no later than the time as set forth in Section I(3)(b) hereof,
provided, however, that such order shall cease to be Deemed Received unless (a)
the requisite number of Shares is transferred via DTC to the account of the
Transfer Agent by the NYSE Closing Time on such Transmittal Date and (b) the
Cash Redemption Amount owed to the applicable Fund, if any, is received by the
Transfer Agent no later than 2:00 p.m., Eastern Time, of the Business Day next
following such Transmittal Date. If either the Submission, the Shares or cash
equal to the Cash Redemption Amount, if any, is not received by the applicable
Fund within the time periods set forth above, such redemption request shall be
Deemed Received by the Transfer Agent on the Business Day on which both the
Submission and the requisite number of Shares are delivered to the Transfer
Agent within the proper time periods as set forth above; provided that the Cash
Redemption Amount, if any, is then paid on the next Business Day within the time
period set forth above.
5. Ambiguous Instructions. In the event that a Submission contains terms
that differ from the information provided in the telephone call at the time of
issuance of the Submission Number, the Trust Telephone Representative will
attempt to contact the Participant to request confirmation of the terms of the
order. If an Authorized Person confirms the terms as they appear in the
Submission then the Submission will be accepted and processed. If an Authorized
Person contradicts its terms, the Submission will be deemed invalid, and a
corrected Submission must be received by the Transfer Agent, as applicable, not
later than the earlier of (i) within fifteen (15) minutes of such contact with
the Participant or (ii) forty-five (45) minutes after the NYSE Closing Time. For
the avoidance of doubt, notwithstanding the invalidation of the initial
Submission pursuant to this paragraph, a Submission that is otherwise in proper
form shall be deemed submitted at the time of its initial Submission for
purposes of determining when orders are Deemed Received hereunder. If the Trust
Telephone Representative is not able to contact an Authorized Person, then the
Submission shall be accepted and processed in accordance with its terms
notwithstanding any inconsistency from the terms of the telephone information.
In the event that a Submission contains terms that are illegible, the Submission
will be deemed invalid and the Trust Telephone Representative will attempt to
contact the Participant to request retransmission of the Submission. A corrected
Submission must be received by the Transfer Agent, as applicable, not later than
the earlier of (i) within fifteen (15) minutes of such contact with the
Participant or (ii) forty-five (45) minutes after the NYSE Closing Time.
6. Suspension or Rejection of an Order. Each Trust reserves the absolute
right to reject a Creation Order transmitted to it by the Distributor in respect
of a Fund if: (i) the order is not in proper form; (ii) the Deposit Securities
delivered are not as disseminated for that date by the Custodian, as described
above; (iii) acceptance of the Fund Deposit would, in the opinion of counsel, be
Attachment 1 -9-
unlawful; (iv) acceptance of the Fund Deposit would otherwise, in the reasonable
opinion of the applicable Trust or its investment adviser (the "Adviser"), have
an adverse effect on the Trust, the applicable Fund or the rights of beneficial
owners; or (v) in the event that circumstances exist outside the control of the
applicable Trust or Fund, the Transfer Agent, the Distributor and the Adviser
that, in their reasonable judgment, make it for all practical purposes
impossible to process Creation Orders. Examples of such circumstances include
acts of God; public service or utility problems such as fires, floods, extreme
weather conditions and power outages resulting in telephone, telecopy and
computer failures; market conditions or activities causing trading halts;
systems failures involving computer or other information systems affecting a
Trust or Fund, the Adviser, the Distributor, DTC, NSCC, the Transfer Agent, the
Custodian or sub-custodian or any other participant in the creation process, and
similar extraordinary events. The applicable Trust shall notify immediately a
prospective creator of a Creation Unit and/or the Authorized Participant acting
on behalf of such prospective creator of its rejection of the order of such
person. Each Trust and Fund, the Custodian, any sub-custodian and the
Distributor are under no duty, however, to give notification of any defects or
irregularities in the delivery of Fund Deposits, and shall not incur any
liability for the failure to give any such notification.
SECTION V. TELEPHONE, FACSIMILE, AND TELEX NUMBERS
FIRST TRUST EXCHANGE-TRADED FUND, FIRST TRUST EXCHANGE-TRADED FUND II
AND FIRST TRUST EXCHANGE-TRADED ALPHADEX (TM) FUND:
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
TRANSFER AGENT:
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
PARTICIPANT::
Telephone: ______________
Facsimile: ______________
FIRST TRUST PORTFOLIOS, L.P.
By
Title:______________________________________
Attachment 1 -10-
PARTICIPANT:
-----------------------------
By
Title:______________________________________
ACCEPTED BY:
THE BANK OF NEW YORK, as Transfer Agent
By__________________________________________
Title:__________________________________
Dated:______________________________________
Attachment 1 -11-
