Exhibit 99.1.1.1
SCHWAB TRUSTS
SCHWAB TEN TRUST, 2003 SERIES B
for all series formed on or subsequent to the effective
date specified below
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TRUST INDENTURE AND AGREEMENT
Among
XXXXXXX XXXXXX & CO., INC.
and
XXXXXXX & XXXXX, INC.
As Depositors
and
THE BANK OF NEW YORK
As Trustee
and
XXXXXXX & XXXXX ASSET MANAGEMENT, INC.
As Portfolio Supervisor
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Dated: August 26, 2003
SCHWAB TRUSTS
SCHWAB TEN TRUST, 2003 SERIES B
and Subsequent Series
TABLE OF CONTENTS
Page
INTRODUCTION.................................................................i
ARTICLE 1 DEFINITIONS; CERTIFICATES........................................2
Section 1.1. Definitions...........................................2
ARTICLE 2 DEPOSIT OF SECURITIES; DECLARATION OF TRUST;
FORM AND ISSUANCE OF CERTIFICATES................................5
Section 2.1. Deposit of Securities.................................5
Section 2.2. Declaration of Trust..................................5
Section 2.3. Issue of Units........................................5
Section 2.4. Certain Contracts Satisfactory........................6
Section 2.5. Deposit of Additional Securities......................6
ARTICLE 3 ADMINISTRATION OF TRUST..........................................9
Section 3.1. Initial Cost..........................................9
Section 3.2. Income Account.......................................10
Section 3.3. Principal Account....................................10
Section 3.4. Reserve Account......................................10
Section 3.5. Payments and Distributions...........................11
Section 3.6. Distribution Statements..............................13
Section 3.7. Substitute Securities................................15
Section 3.8. Sale of Securities...................................15
Section 3.9. Counsel..............................................16
Section 3.10. Notice and Sale by Trustee..........................16
Section 3.11. Reorganization and Similar Events...................17
Section 3.12. Notice of Actions...................................17
Section 3.13. Notice of Change in Principal Account...............17
Section 3.14. Extraordinary Distributions.........................17
Section 3.15. Grantor Trust Status................................18
Section 3.16. Deferred Sales Charge...............................18
ARTICLE 4 EVALUATION OF SECURITIES........................................19
Section 4.1. Evaluation of Securities.............................19
Section 4.2. Tax Reports..........................................19
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Section 4.3. Liability of Trustee with respect to Evaluations.....19
ARTICLE 5 TRUST EVALUATION, REDEMPTION, PURCHASE, TRANSFER,
INTERCHANGE OR REPLACEMENT OF CERTIFICATES......................20
Section 5.1. Trust Evaluation.....................................20
Section 5.2. Redemptions by Trustee; Purchases by Depositors......21
Section 5.3. Depositor Redemptions................................24
Section 5.4. Units to be Held Only Through the Depository
Trust Company or a Successor Clearing Agency.....24
ARTICLE 6 TRUSTEE; REMOVAL OF DEPOSITORS..................................25
Section 6.1. General Definition of Trustee's Liabilities,
Rights and Duties; Removal of Depositors.........25
Section 6.2. Books, Records and Reports...........................28
Section 6.3. Indenture and List of Securities on File.............29
Section 6.4. Compensation and Indemnification.....................29
Section 6.5. Removal and Resignation of the Trustee; Successor....30
Section 6.6. Qualifications of Trustee............................31
ARTICLE 7 DEPOSITORS AND PORTFOLIO SUPERVISOR.............................31
Section 7.1. Succession...........................................31
Section 7.2. Resignation of a Depositor...........................31
Section 7.3. Liability of Depositors and Indemnification..........32
Section 7.4. Compensation.........................................33
Section 7.5. Joint Position of Depositors; Power of Attorney......33
Section 7.6. Resignation and Removal of Portfolio Supervisor;
Successor.......................................34
Section 7.7. Liability of Portfolio Supervisor and
Indemnification.................................35
ARTICLE 8 RIGHTS OF UNITHOLDERS...........................................36
Section 8.1. Beneficiaries of Trust...............................36
Section 8.2. Rights, Terms and Conditions.........................36
ARTICLE 9 ADDITIONAL COVENANTS; MISCELLANEOUS PROVISIONS..................37
Section 9.1. Amendments...........................................37
Section 9.2. Termination..........................................37
Section 9.3. Construction.........................................40
Section 9.4. Registration of Units................................40
Section 9.5. Written Notice.......................................40
Section 9.6. Severability.........................................41
Section 9.7. Dissolution of Depositors Not to Terminate...........41
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SCHWAB TRUSTS
SCHWAB TEN TRUST, 2003 SERIES B
AND
SUBSEQUENT SERIES
TRUST INDENTURE AND AGREEMENT
DATED AUGUST 26, 2003
This Trust Indenture and Agreement ("Indenture") dated August 26, 2003,
among Xxxxxxx Xxxxxx & Co., Inc. and Xxxxxxx & Xxxxx, Inc., as Depositors, The
Bank of New York, as Trustee and Xxxxxxx & Xxxxx Asset Management, Inc. as
Portfolio Supervisor.
WITNESSETH THAT
In consideration of the premises and of the mutual agreements herein
contained, the Depositors and the Trustee agree as follows:
INTRODUCTION
The Depositors concurrently with the execution and delivery hereof are
establishing Schwab Trusts, Schwab Ten Trust, 2003 Series B (and subsequent
Series), wherein certain securities consisting of common stock and contracts and
funds for the purchase of such securities (collectively, the "Securities") will
be deposited by the Depositors, to be held by the Trustee in trust for the use
and benefit of the registered holders of certificates of ownership (the
"Unitholders") to be issued as hereinafter provided. The parties hereto are
entering into this Indenture for the purpose of establishing certain of the
terms, covenants and conditions of Schwab Trusts, Schwab Ten Trust, 2003 Series
B and of each additional series of Schwab Trusts which may be established from
time to time hereafter. For Schwab Trusts, Schwab Ten Trust, 2003 Series B and
each subsequent series of Schwab Trusts (sometimes referred to herein as the
"Trust") (as to which this Indenture is to be applicable) the parties hereto
shall execute a separate Reference Trust Agreement incorporating by reference
this Indenture and effecting any amendment, supplement or variation from or to
such incorporation by reference with respect to the related series and
specifying for that series (1) the Securities deposited in trust and the number
of Units delivered by the Trustee in exchange for the Securities pursuant to
Section 2.3; (2) the initial fractional undivided interest represented by each
Unit; (3) the first and subsequent Record Dates; (4) the first and subsequent
Distribution Dates; (5) the First Settlement Date;(6) the liquidation amount for
purposes of Section 6.1(g); (7) the Trustee's fee; (8) the Depositors' fee, if
any; (9) the portfolio supervisory fee pursuant to Section 7.4; (10) the
Termination Date; and (11) any other change or addition contemplated or
permitted by this Indenture.
ARTICLE 1
DEFINITIONS; CERTIFICATES
Section 1.1. Definitions: Whenever used in this Indenture the following
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words and phrases, unless the context clearly indicates otherwise, shall have
the following meanings:
(1) "Addendum to the Reference Trust Agreement" shall mean the addendum
which evidences the Additional Securities deposited into the Trust and the
number of Additional Units created.
(2) "Additional Securities" shall mean such Securities as are listed in
Supplementary Schedules to Addendums to the Reference Trust Agreement or a
Deposit Certificate and which have been deposited to effect an increase over the
number of Units initially specified in the Reference Trust Agreement.
(3) "Additional Units" shall mean such Units as are issued in respect of
Additional Securities.
(4) "Business Day" shall mean any day other than a Saturday, Sunday, or
other day on which the New York Stock Exchange is closed for trading, a legal
holiday in the City of New York, or a day on which banking institutions are
authorized by law to close.
(5) "Contract Securities" shall mean Securities which are to be acquired by
the Trust pursuant to contracts entered into by the Depositors, including (i)
Securities listed in Schedule A to the Reference Trust Agreement and (ii)
Securities which the Depositors have contracted to purchase for the Trust
pursuant to Sections 2.5 and 3.7.
(6) "Depositors" shall mean Xxxxxxx Xxxxxx & Co., Inc. ("Schwab") or its
successors in interest and Xxxxxxx and Xxxxx, Inc. ("Xxxxxxx & Xxxxx") or its
successors in interest, or any successor depositor or depositors appointed as
herein provided.
(7) "Distribution Agency Agreement" shall mean the Distribution Agency
Agreement among the Depositors, Trustee and the Distribution Agent dated as of
August 26, 2003.
(8) "Distribution Agent" shall mean the Distribution Agent appointed in the
Distribution Agency Agreement, or its successor as appointed pursuant to the
Distribution Agency Agreement.
(9) "Distribution Date" shall have the meaning assigned to it in Part II of
the Reference Trust Agreement.
(10) "DTC" shall mean Depository Trust Company, or its successors.
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(11) "Failed Security" shall have the meaning assigned to it in Section 3.7
hereof.
(12) "First Settlement Date" shall mean the date specified in Part II of
the Reference Trust Agreement.
(13) "Indenture" shall mean this Trust Indenture and Agreement as
originally executed or, if amended as herein provided, as so amended.
(14) "Original Issue" shall mean an issue of Securities deposited pursuant
to Section 2.1 or any Substitute Securities purchased to replace any Original
Issue which have become Failed Securities.
(15) "Original Proportionate Relationship" shall mean the proportionate
relationship among the number of shares of each Security established on the
deposit made pursuant to Section 2.1. The Original Proportionate Relationship
shall be adjusted, if appropriate, to reflect (1) the deposit of Substitute
Securities and (2) the occurrence of any stock dividend, stock splits,
redemptions, or similar events.
(16) "Portfolio Supervisor" shall mean Xxxxxxx & Xxxxx Asset Management,
Inc., or its successor or any successor Portfolio Supervisor appointed as herein
provided.
(17) "Prospectus" shall mean the prospectus included in the registration
statement, as amended, on Form S-6 under the Securities Act of 1933, as amended,
relating to the Trust on file with the Securities and Exchange Commission at the
time such registration statement, as amended, becomes effective, except that if
the prospectus filed pursuant to Rule 497(b) under the Securities Act of 1933,
as amended, differs from the prospectus on file at the time such registration
statement, as amended, becomes effective, the term Prospectus shall refer to the
Rule 497(b) prospectus from and after the time it is mailed or otherwise
delivered to the Securities and Exchange Commission for filing.
(18) "Record Date" shall have the meaning assigned to it in Part II of the
Reference Trust Agreement.
(19) "Redemption Form" shall mean the form provided by the Trustee at the
request of holders of Units for the purposes of redeeming such Units, as such
form may be reasonably acceptable to the Depositors and the Trustee from time to
time.
(20) "Reference Trust Agreement" shall mean the indenture for the
particular series of Schwab Trusts into which the terms of this Indenture are
incorporated.
(21) "Securities" shall mean such common stock, preferred stock, ADRs and
contracts and funds for the purchase of such securities as are (i) deposited in
irrevocable trust and listed in the Schedule to the Reference Trust Agreement
and (ii) received in exchange or substitution for any
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Securities pursuant to Section 3.7 hereof, as may from time to time be acquired
and continue to be held as a part of the Trust to which such Reference Trust
Agreement relates.
(22) "Substitute Security" shall mean a Security purchased by the Trustee
pursuant to Section 3.7 hereof.
(23) "Termination Date" shall have the meaning assigned to it in Part II of
the Reference Trust Agreement.
(24) "Trust" shall mean the Trust created by this Indenture, which shall
consist of the Securities held pursuant and subject to this Indenture together
with all dividends thereon, received but undistributed, any undistributed cash
realized from the sale, redemption, liquidation thereof, such amounts as may be
on deposit in the Reserve Accounts hereinafter established and all other
property and rights to which Unitholders may be entitled under the provisions of
this Indenture.
(25) "Trustee" shall mean The Bank of New York, or its successor or any
successor Trustee appointed as herein provided.
(26) "Unit" shall mean the fractional undivided interest in and ownership
of the Trust initially specified in Part II of the Reference Trust Agreement,
the denominator of which shall be decreased by the number of any such Units
redeemed as provided in Section 5.2 and increased by any Additional Units which
are specified in a Supplementary Schedule to an Addendum to the Reference Trust
Agreement or a Deposit Certificate as defined in Section 2.5.
(27) "Unitholder" shall mean the registered holder of units of beneficial
interest as recorded in book-entry form at DTC, such holder's legal
representatives and heirs and the successors of any corporation, partnership or
legal entity which is a registered holder of any Unit, and as such shall be
deemed a beneficiary of the trust created by the Indenture to the extent of such
xxxxxx's pro rata share thereof.
(28) The words "herein," "hereby," "herewith," "hereof," "hereinafter,"
"hereunder," "hereinabove," "hereafter," "heretofore" and similar words or
phrases of reference and association shall refer to this Indenture in its
entirety.
(29) Words importing singular number shall include the plural number in
each case and vice versa, and words importing person shall include corporations
and associations, as well as natural persons.
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ARTICLE 2
DEPOSIT OF SECURITIES; DECLARATION OF TRUST;
FORM AND ISSUANCE OF CERTIFICATES
Section 2.1. Deposit of Securities: The Depositors, concurrently with the
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execution and delivery of a Reference Trust Agreement, have deposited with the
Trustee in trust the Securities and contracts for the purchase of Contract
Securities listed in Schedule A to the Reference Trust Agreement in bearer form
or registered in the name of the Trustee, or its nominee, or duly endorsed in
blank or accompanied by all necessary instruments of assignment and transfer in
proper form to be held, managed and applied by the Trustee as herein provided.
In the event that the purchase of Securities represented by contracts shall not
be consummated in accordance with said contracts, the Trustee shall credit to
the Principal Account pursuant to Section 3.3 hereof the cash or cash
equivalents (including such portion of any letter of credit applicable to such
contracts) deposited by the Depositors, for the purpose of such purchase. Such
moneys, unless invested in Substitute Securities in accordance with Section 3.7
hereof, shall be distributed to Unitholders pursuant to Section 3.5 hereof on
the Distribution Date following the failure of consummation of such purchase.
The Depositors shall deliver the Securities listed on said Schedule A or
Schedules to the Trustee which were not actually delivered concurrently with the
execution and delivery of the Reference Trust Agreement within 90 days after
said execution and delivery or, if Section 3.7 applies, within such shorter
period as is specified in Section 3.7.
The Trustee is irrevocably authorized hereby to effect registration of
transfer of the Securities in fully registered form in the name of the Trustee
or its nominee.
When and as directed by the Depositors, the Trustee or Distribution Agent
shall accept securities and cash to be deposited in a New Series in exchange for
Units of the New Series from persons other than Unitholders participating in a
rollover option. Notwithstanding the fact that any Unitholder may acquire Units
of the Trust by purchase or by in-kind contribution, the Depositors will not
deposit Securities received by the Depositors on termination, or through a
redemption of Units, of a series of the Trust to a subsequent series of the
Trust.
Section 2.2. Declaration of Trust: The Trustee declares that it holds and
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will hold the Trust as Trustee in trust upon the terms herein set forth for the
use and benefit of all present and future Unitholders.
Section 2.3. Issue of Units: By executing the Reference Trust Agreement,
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the Trustee will thereby acknowledge receipt of the deposit relating to the
Trust to which such Reference Trust Agreement relates, referred to in Section
2.1, and simultaneously with the receipt of said deposit, pursuant to the
Depositors' written direction, will register on the registration books of the
Trust the ownership by the Depositors of such Units or, if requested by the
Depositors, the ownership by DTC of all of such Units and will cause such Units
to be credited at DTC to the account of the Depositors or, pursuant to the
Depositors' direction and as hereafter provided, the account of the issuer of
the
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letter of credit referred to in Section 2.01. The Depositors shall not sell,
pledge, hypothecate or otherwise transfer such Units, prior to the effectiveness
of the registration statement covering the Units filed with the Securities and
Exchange Commission under the Securities Act of 1933, except that the Depositors
may place the Units as security for any letter of credit provided in connection
with the deposit of contracts described in Section 2.1.
The number of Units may be increased through a split of the Units or
decreased through a reverse split thereof, as directed by the Depositors, on any
day on which the Depositors are the only Unitholders, which revised number of
Units shall be recorded by the Trustee on its books.
Section 2.4. Certain Contracts Satisfactory: The Depositors approve as
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satisfactory in form and substance the contracts to be assumed by the Trustee
with regard to any Securities listed in Schedule A to the Reference Trust
Agreement and authorizes the Trustee on behalf of the Trust to assume such
contracts and otherwise to carry out the terms and provisions thereof or to take
other appropriate action in order to complete the deposit of the Securities
covered thereby into the Trust.
Section 2.5. Deposit of Additional Securities.
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(a) Subject to the requirements set forth below in this Section, the
Depositor may, on any Business Day (the "Trade Date"), subscribe for Additional
Units as follows:
(1) Prior to the Evaluation Time defined in Section 5.1 on the Trade
Date, the Depositor shall provide notice (the "Subscription Notice")
to the Trustee, by telecopy or by written communication, of the
Depositor's intention to subscribe for Additional Units. The
Subscription Notice shall identify the Additional Securities to be
acquired (unless such Additional Securities are a precise replication
of the then existing portfolio) and shall either (i) specify the
quantity of Additional Securities to be deposited by the Depositor on
the settlement date for such subscription or (ii) instruct the Trustee
to purchase Additional Securities with an aggregate cost as specified
in the Subscription Notice.
(2) Promptly following the Evaluation Time on such Business Day, the
Depositor shall verify with the Trustee, by telecopy, the number of
Additional Units to be created.
(3) Not later than the time on the settlement date for such
subscription when the Trustee is to deliver the Additional Units
created thereby (which time shall not be later than the time by which
the Trustee is required to settle any contracts for the purchase of
Additional Securities entered into by the Trustee pursuant to the
instruction of the Depositor referred to in subparagraph (1) above),
the Depositor shall deposit with the Trustee (i) any Additional
Securities specified in the Subscription Notice (or contracts to
purchase such Additional Securities together
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with cash or a letter of credit in the amount necessary to settle such
contracts) or (ii) cash or a letter of credit in the amount equal to
the aggregate cost of the Additional Securities to be purchased by the
Trustee, as specified in the Subscription Notice, together with, in
each case, Cash as defined below. "Cash" means, as to the Principal
Account, cash or other property (other than Securities) on hand in the
Principal Account or receivable and to be credited to the Principal
Account as of the Evaluation Time on the Business Day preceding the
Trade Date (other than amounts to be distributed solely to persons
other than persons receiving the distribution from the Principal
Account as holders of Additional Units created by the deposit), and,
as to the Income Account, cash or other property (other than
Securities) received by the Trust as of the Evaluation Time on the
Business Day preceding the Trade Date or receivable by the Trust in
respect of dividends or other distributions declared but not received
as of the Evaluation Time on the Business Day preceding the Trade
Date, reduced by the amount of any cash or other property received or
receivable on any Security allocable (in accordance with the Trustee's
calculation of the monthly distribution from the Income Account
pursuant to Section 3.5) to a distribution made or to be made in
respect of a Record Date occurring prior to the Trade Date. Each
deposit made pursuant to this Section 2.5 during the 90 days following
the initial date of deposit shall replicate, to the extent
practicable, as specified in subparagraph (b), the Original
Proportionate Relationship, adjusted, if appropriate, to reflect (1)
the deposit of Substitute Securities pursuant to Section 3.7, (2) the
sale of securities pursuant to Section 3.8, 3.10 or 5.2 and (3) the
occurrence of any stock dividends, stock splits, redemptions,
acquisition of shares through dividend reinvestment plans or similar
events. Each deposit made pursuant to this Section 2.5 after the 90
days following the initial date of deposit made pursuant to Section
2.1 hereof (except for deposits made to replace Failed Securities if
such deposits occur within 20 days from the date of a failure
occurring within such initial 90 day period) shall maintain exactly
the proportionate relationship existing among the Securities as of the
expiration of such 90 day period. Each such deposit shall exactly
replicate Cash.
(4) On the settlement date for a subscription, the Trustee shall, in
exchange for the Securities and cash or letter of credit described
above, issue and deliver to or on the order of the Depositor the
number of Units verified by the Depositor with the Trustee. No Unit to
be issued pursuant to this paragraph shall be issued or delivered
unless and until Securities, cash or a letter of credit is received in
exchange therefor and no person shall have any claim to any Unit not
so issued and delivered or any interest in the Trust in respect
thereof.
(5) Each deposit of Additional Securities, shall be listed in a
Supplementary Schedule to an Addendum to the Reference Trust Agreement
or a certificate (a "Deposit Certificate") stating the date of such
deposit and the number of
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Additional Units being issued therefor. The Trustee shall acknowledge
in such Addendum or in such Deposit Certificate the receipt of the
deposit and the number of Additional Units issued in respect thereof.
The Additional Securities shall be held, administered and applied by
the Trustee in the same manner as herein provided for the Securities.
(6) The acceptance of Additional Units by the Depositor in accordance
with the provisions of paragraph (a) of this Section shall be deemed a
certification by the Depositor that the deposit or purchase of
Additional Securities associated therewith complies with the
conditions of this Section 2.5.
(7) Notwithstanding the preceding, in the event that the Depositors'
Subscription Notice shall instruct the Trustee to purchase Additional
Securities in an amount which, when added to the purchase amount of
all other unsettled contracts entered into by the Trustee, exceeds 25%
of the value of the Securities then held (taking into account the
value of contracts to purchase Securities only to the extent that
there has been deposited with the Trustee cash or an irrevocable
letter of credit in an amount sufficient to settle their purchase),
the Depositors shall deposit with the Trustee concurrently with the
Subscription Notice cash or a letter of credit in an amount such that,
when added to 25% of the value of the Securities then held (determined
as above) the aggregate value shall be not less than the purchase
amount of the securities to be purchased pursuant to such Subscription
Notice.
(b) Additional Securities deposited during the 90 days following the
initial deposit made pursuant to Section 2.1 hereof shall maintain as closely as
practicable the Original Proportionate Relationship, except as provided in this
Section 2.5. Additional Securities may be deposited or purchased in round lots;
if the amount of the deposit is insufficient to acquire round lots of each
Security to be acquired, the Additional Securities shall be deposited or
purchased in the order of the Security in the Trust most under represented
immediately before the deposit with respect to the Original Proportionate
Relationship. Instructions to purchase Additional Securities under this Section
shall be in writing and shall direct the Trustee to purchase, or enter into
contracts to purchase, Additional Securities; such instructions shall also
specify the name, CUSIP number, if any, aggregate amount of each such Additional
Security and price or range of price. If, at the time of a subsequent deposit
under this Section, Securities of an Original Issue are unavailable, cannot be
purchased at reasonable prices or their purchase is prohibited or restricted by
applicable law, regulation or policies, in lieu of the portion of the deposit
that would otherwise be represented by those Securities, the Depositors may (A)
deposit (or instruct the Trustee to purchase) Securities of another Original
Issue or replacement securities, or (B) deposit cash or a letter of credit with
instructions to acquire the Securities of such Original Issue when they become
available.
(c) The Trustee shall have no responsibility for the selection of
Securities deposited hereunder or for maintaining the composition of the Trust
portfolio or for any loss or depreciation resulting from any purchase of
Additional Securities pursuant to the Depositors' direction or from
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the Depositors' failure to settle any subscription for Units. The Trustee shall
be indemnified against any loss or liability arising from purchases contracted
for pursuant to this Section in accordance with Section 6.4.
ARTICLE 3
ADMINISTRATION OF TRUST
Section 3.1. Initial Cost: Subject to reimbursement as hereinafter
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provided, the cost of organizing the Trust and sale of the Trust Units shall be
borne by the Depositors, provided, however, that the liability on the part of
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the Depositors under this section shall not include any fees or other expenses
incurred in connection with the administration of the Trust subsequent to the
deposit referred to in Section 2.1. Upon notification from the Depositors that
the primary offering period is concluded, the Trustee shall withdraw from the
Account or Accounts specified in the Prospectus or, if no Account is therein
specified, from the Principal Account, and pay to the Depositors the Depositors'
reimbursable expenses of organizing the Trust and sale of the Trust Units in an
amount certified to the Trustee by the Depositors but not in excess of the
estimated per-Unit amount set forth in the Prospectus multiplied by the number
of Units outstanding as of the conclusion of the primary offering period. If the
cash balance of the Principal Account is insufficient to make such withdrawal,
the Trustee shall, as directed by the Depositors, sell Securities identified by
the Depositors, or distribute to the Depositors Securities having a value, as
determined under Section 4.1 as of the date of distribution, sufficient for such
reimbursement. The reimbursement provided for in this section shall be for the
account of the Unitholders of record at the conclusion of the primary offering
period. Any assets deposited with the Trustee in respect of the expenses
reimbursable under this section shall be held and administered as assets of the
Trust for all purposes hereunder. The Depositors shall deliver to the Trustee
any cash identified in the Statement of Net Assets of the Trust included in the
Prospectus not later than the First Settlement Date and the Depositors'
obligation to make such delivery shall be secured by the letter of credit
deposited pursuant to sections 2.1 and 2.5. Any cash which the Depositors have
identified as to be used for reimbursement of expenses pursuant to this Section
shall be held by the Trustee, without interest, and reserved for such purpose
and, accordingly, prior to the conclusion of the primary offering period, shall
not be subject to distribution or, unless the Depositors otherwise direct, used
for payment of redemptions in excess of the per Unit amount payable pursuant to
the next sentence. If a Unitholder redeems Units prior to the conclusion of the
primary offering period, the Trustee shall pay to the Unitholder, in addition to
the Redemption Price of the tendered Units, an amount equal to the estimated
per-Unit cost of organizing the Trust and the sale Trust Units set forth in the
Prospectus multiplied by the number of Units tendered for redemption; to the
extent the cash on hand in the Trust is insufficient for such payment, the
Trustee shall have the power to sell Securities in accordance with Section 5.2.
As used herein, the Depositors' reimbursable expenses of organizing the Trust
and sale of the Trust Units shall include the cost of the initial preparation
and typesetting of the registration statement, prospectuses (including
preliminary prospectuses), the indenture, and other documents relating to the
Trust, SEC and state blue sky registration fees, the cost of the initial
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valuation of the portfolio and audit of the Trust, the initial fees and expenses
of the Trustee, and legal and other out-of-pocket expenses related thereto but
not including the expenses incurred in the printing of preliminary prospectuses
and prospectuses, expenses incurred in the preparation and printing of brochures
and other advertising materials and any other selling expenses.
Section 3.2. Income Account: The Trustee shall collect the dividends or
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other like cash distributions on the Securities in the Trust as such are paid,
and credit such amounts, as collected, to a separate account to be known as the
"Income Account."
Section 3.3. Principal Account: (a) The Securities and all cash, other than
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amounts credited to the Income Account, received by the Trustee in respect of
the Securities shall be credited to a separate account to be known as the
"Principal Account".
(b) Moneys and/or irrevocable letters of credit required to purchase
Contract Securities or deposited to secure such purchases are hereby declared to
be held specially by the Trustee for such purchases and shall not be deemed to
be part of the Principal Account until (i) the Depositors fail to timely
purchase Contract Securities and have not given the Failed Contract Notice (as
defined in Section 3.7) at which time the moneys and/or letters of credit
attributable to the Contract Securities not purchased by the Depositors shall be
credited to the Principal Account; or (ii) the Depositors have given the Trustee
the Failed Contract Notice at which time the moneys and/or letters of credit
attributable to failed contracts referred to in such Notice shall be credited to
the Principal Account; provided, however, that if the Depositors also notify the
Trustee in the Failed Contract Notice that they have purchased or entered into a
contract to purchase Substitute Securities (as defined in Section 3.7), the
Trustee shall not credit such moneys and/or letters of credit to the Principal
Account unless the Substitute Securities shall also have failed or are not
delivered by the Depositors within two business days after the settlement date
of such Substitute Securities, in which event the Trustee shall forthwith credit
such moneys and/or letters of credit to the Principal Account. To the extent of
moneys, and/or moneys drawn under a letter of credit, deposited by the
Depositors and then held by the Trustee, the Trustee shall credit to the
Principal Account, and to the extent such moneys are insufficient the Depositors
shall deposit in the Principal Account, the difference, if any, between the
purchase price of the failed Contract Securities and the purchase price of the
Substitute Securities, together with any sales charge and accrued dividends
applicable to such difference and distribute such moneys to Unitholders pursuant
to Section 3.5. Cash held or receivable from the Depositors pursuant to Section
2.5 in respect of contracts for purchase of Additional Securities entered into
by the Trustee shall be credited to the Principal Account upon the Trustee's
entering into such contracts.
Section 3.4. Reserve Account: From time to time the Trustee shall withdraw
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from the cash on deposit in the Income Account or the Principal Account such
amounts as it, in its sole discretion, shall deem requisite to establish a
reserve for any applicable taxes or other governmental charges that may be
payable out of or by the Trust. Such amounts so withdrawn shall be credited to a
separate account which shall be known as the "Reserve Account". The Trustee
shall not be required to distribute to the Unitholders any of the amounts in the
Reserve Account; provided,
-10-
however, that if it shall, in its sole discretion, determine that such amounts
are no longer necessary for payment of any applicable taxes or other
governmental charges, then it shall promptly deposit such amounts in the
appropriate account from which withdrawn or, if the Trust has been terminated or
is in the process of termination, the Trustee shall distribute to each
Unitholder such holder's interest in the Reserve Account in accordance with
Section 9.2.
Section 3.5. Payments and Distributions: Distributions to each Unitholder
--------------------------
from the Income Account are computed as of the close of business on each Record
Date for the following Distribution Date. Distributions from the Principal
Account of the Trust (other than amounts representing failed contracts, as
discussed in Section 3.3.(b)) will be computed as of each Record Date, and will
be made to the Unitholders of the Trust on or shortly after the next
Distribution Date. Proceeds representing principal received from the disposition
of any of the Securities between a Record Date and a Distribution Date which are
not used for redemptions of Units will be held in the Principal Account and not
distributed until the second succeeding Distribution Date or such later time as
hereinafter provided. If a Unitholder is participating in a Reinvestment Plan,
distributions to such Unitholder shall be applied by the Trustee to purchase
Units from the Depositors at the applicable reinvestment price on the
Distribution Date. Persons who purchase Units between a Record Date and a
Distribution Date will receive their first distribution on the second
Distribution Date after such purchase.
As of each Record Date the Trustee shall:
(a) deduct from the Income Account or, to the extent funds are not
available in such Account, from the Principal Account, and pay to itself
individually the amounts that it is at the time entitled to receive pursuant to
Section 6.4 or otherwise pursuant to the provisions hereof;
(b) deduct from the Income Account of the Trust, and, to the extent funds
are not sufficient therein, from the Principal Account of the Trust, amounts
necessary to pay any unpaid expenses of the Trust, including registration
charges, Blue Sky fees, printing costs, attorneys' fees, auditing costs and
other miscellaneous out-of-pocket expenses, as certified by the Depositors,
incurred in keeping the registration of the Units and the Trust on a current
basis pursuant to Section 9.4, provided, however, that no portion of such amount
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shall be deducted or paid unless the payment thereof from the Trust is at that
time lawful;
(c) deduct from the Income Account, or, to the extent funds are not
available in such Account, from the Principal Account, and pay an amount equal
to the unpaid fees and expenses, if any, of counsel pursuant to Section 3.9 as
certified to it by the Depositors; and
(d) deduct from the Income Account, or, to the extent funds are not
available in such Account, from the Principal Account the estimated amount that
the Portfolio Supervisor and Schwab are then entitled to receive pursuant to
Section 7.4 and hold such amount without interest until such time as it is
payable to the Portfolio Supervisor and Schwab as set forth below.
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On or before the first Distribution Date after the conclusion of each
calendar year, the Trustee shall, upon certification in satisfactory form to the
Trustee, upon which the Trustee may rely, distribute to the Portfolio Supervisor
and Schwab from the amount so held pursuant to the immediately preceding
paragraph the amounts that the Portfolio Supervisor and Schwab are at the time
entitled to receive pursuant to Section 7.4 on account of services theretofore
performed and expenses theretofore incurred.
The Trustee also may withdraw from said accounts such amounts, if any, as
it deems necessary to establish a reserve for any applicable taxes or other
governmental charges that may be payable out of the Trust. Amounts so withdrawn
shall not be considered a part of such Trust's assets until such time as the
Trustee shall return all or any part of such amounts to the appropriate
accounts. In addition, the Trustee may withdraw from the Income and Principal
Accounts such amounts as may be necessary to cover redemptions of Units by the
Trustee.
The Principal Account shall be reimbursed for any amount withdrawn from the
Principal Account under this Indenture in order to satisfy obligations which,
pursuant to the terms hereof, are first to be paid out of the Income Account to
the extent funds are available therein, when sufficient funds are not available
in the Income Account after giving effect to the payment from the Income Account
of all amounts otherwise required to be deducted therefor at that time when
sufficient funds are next available in the Income Account after giving effect to
the payment from the Income Account of all amounts otherwise required to be
deducted therefrom at that time.
On each Distribution Date or within a reasonable period of time thereafter,
the Trustee shall distribute by mail to each Unitholder of record at the close
of business on the preceding Record Date, at the post office address appearing
on the registration books of the Trustee (or, if a Clearing Agency as defined in
Section 5.4 is the registered Unitholder, the Trustee shall make distributions
to such Clearing Agency in accordance with its applicable procedures), such
holder's pro rata share of the balance in the Income Account calculated as set
forth in the next paragraph, plus such holder's pro rata share of the
distributable cash balance of the Principal Account, as of the preceding Record
Date; provided, however, the Depositors are authorized to direct that funds
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credited to the Principal Account in the event of the failure of consummation of
a contract to purchase Securities pursuant to Section 2.1 hereof, funds
representing the proceeds of the sale of Securities pursuant to Section 3.8 or
3.10 hereof, and funds representing the proceeds of the sale of Securities under
Section 5.2, 6.4 or this Section 3.5 in excess of the aggregate of (i) the
amounts needed for the purposes of said Sections and (ii) such amount as the
Depositors have informed the Trustee is to be used to purchase securities
pursuant to Section 3.7 hereof, shall not be distributed until the following
Distribution Date or at such earlier date as shall be determined by the Trustee.
The Trustee shall not be required to make a distribution from the Principal or
Income Account unless the cash balance on deposit therein available for
distribution shall be sufficient to distribute at least $1.00 per Unit in the
case of Units initially offered at approximately $1,000, or a proportionately
lower amount in the case of Units initially offered at less than $1,000 (e.g.,
----
..001 per Unit in the case of Units initially offered at approximately $1.00).
-12-
The Trustee shall compute the amount of the Distribution from the Income
Account (i) by subtracting from the cash balance of the Income Account computed
as of the close of business on such Record Date (a) any unpaid fees and expenses
then deductible pursuant to the foregoing provisions of Section 3.5 and (b) the
Trustee's estimate of other expenses chargeable to the Income Account pursuant
to the Indenture which have accrued as of such Record Date, or are otherwise
properly attributable to the period to which such Income Distribution relates
and (ii) by dividing the result of such calculation by the number of Units
outstanding on the applicable Record Date.
The amounts to be so distributed to each Unitholder of the Trust of record
as of each Record Date shall be that pro rata share of the cash balance as of
such Record Date of the Income and Principal Accounts of the Trust, computed as
set forth above, as shall be represented by a notation of the Units owned by
such Unitholder on the registration or other record books of the Trustee.
In the computation of each such share, fractions of less than one cent
shall be omitted. After any such distribution provided for above, any cash
balance remaining in the Income Account or the Principal Account shall be held
in the same manner as other amounts subsequently deposited in each of such
Accounts, respectively.
For the purpose of distribution as herein provided, the holders of record
on the registration books of the Trustee at the close of business on each Record
Date shall be conclusively entitled to such distribution, and no liability shall
attach to the Trustee by reason of payment to any such registered Unitholder of
record. Nothing herein shall be construed to prevent the payment of amounts from
the Income Account and the Principal Account to individual Unitholders by means
of one check, draft or other proper instrument, provided that the appropriate
statement of such distribution shall be furnished therein as provided in Section
3.6 hereof.
The Trustee shall withhold from a Unitholder's income distribution any
portion of the Deferred Sales Charge deductible therefrom pursuant to Section
3.16.
Section 3.6. Distribution Statements: With each distribution from the
-----------------------
Income or Principal Accounts the Trustee shall set forth, either in the
instrument by means of which payment of such distribution is made or in any
accompanying statement the amount being distributed from each such account
expressed as a dollar amount per Unit.
Within a reasonable period of time after the last business day of each
calendar year, the Trustee shall furnish to each person who at any time during
such calendar year was a Unitholder a statement setting forth, with respect to
such calendar year:
(A) as to the Income Account:
(1) the amount of dividends received on the Securities,
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(2) the amounts paid from the Income Account for redemptions pursuant
to Section 5.2,
(3) the deductions for applicable taxes and fees and expenses of the
Trustee and counsel pursuant to Section 3.9, accrued organization expenses,
Deferred Sales Charge, the annual audit fees referred to in Section 6.2,
and the annual fees for portfolio supervisory services pursuant to Section
7.4,
(4) the amount distributed from the Income Account, identifying
separately amounts distributed as dividends and as other income,
(5) any other amount credited to or deducted from the Income Account,
and
(6) the balance remaining after such distributions and deductions,
expressed both as a total dollar amount and as a dollar amount per Unit
outstanding on the last business day of such calendar year;
(B) as to the Principal Account:
(1) The number of shares of each issue of Securities sold or
liquidated, and the aggregate net proceeds received with respect to each
issue, excluding any portion thereof credited to the Income Account,
(2) the amounts paid from the Principal Account for redemption
pursuant to Section 5.2,
(3) the deductions for payment of applicable taxes and fees and
expenses of the Trustee and counsel pursuant to Section 3.9, organizational
expenses, the annual audit fees referred to in Section 6.2, and the annual
fee for portfolio supervisory services pursuant to Section 7.4, and
(4) the balance remaining after such distributions and deductions,
expressed both as a total dollar amount and as a dollar amount per Unit
outstanding on the last Business Day of such calendar year; and
(C) the following information:
(1) a list of Securities held in the Trust as of the last Business Day
of such calendar year,
(2) the number of Units outstanding on the last Business Day of such
calendar year,
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(3) the Unit Value based on the last trust evaluation pursuant to
Section 5.1 made during such calendar year, and
(4) the amounts actually distributed to Unitholders during such
calendar year from the Income and Principal Accounts, separately stated,
expressed both as total dollar amounts and as dollar amounts per Unit
outstanding on the Record Dates for such distributions and the status of
such distributions for federal income tax purposes.
Section 3.7. Substitute Securities: In the event that any Contract Security
---------------------
or Security to be purchased pursuant to a contract entered into by the Trustee
in accordance with Section 2.5 is not delivered due to any occurrence, act or
event beyond the control of the Depositors and of the Trustee (such a Contract
Security being herein called a "Failed Security"), the Depositors may instruct
the Trustee to purchase Substitute Securities which have been selected by the
Depositors having a cost not in excess of the cost of the Failed Securities. To
be eligible for inclusion in the Trust, the Substitute Securities which the
Depositors select must: (a) be of the same type as that replaced (e.g., both
will be common stock or preferred stock); (b) in the Depositors' judgment, be
substantially similar to the Failed Security, as the case may be, as respects
the investment characteristics which led the Depositors to select the Failed
Security for inclusion in the Trust; and (c) be purchased prior to,
simultaneously with, or no more than twenty days after delivery of written
notice to the Trustee or Depositors, as appropriate, of the failed contract (the
"Failed Contract Notice").
Any Substitute Securities received by the Trustee shall be deposited
hereunder and shall be subject to the terms and conditions of this Indenture to
the same extent as other Securities deposited hereunder. No such deposit of
Substitute Securities shall be made after the earlier of (i) 90 days after the
date of execution and delivery of the applicable Reference Trust Agreement or
(ii) the first Distribution Date to occur after the date of execution and
delivery of the applicable Reference Trust Agreement.
Whenever a Substitute Security is acquired by the Trust pursuant to the
provisions of this Section 3.7, the Trustee shall, within five days thereafter,
mail to all Unitholders notices of such acquisition, including an identification
of the Failed Security and the Substitute Security acquired. The purchase price
of a Substitute Security shall be paid out of the funds in the Principal Account
attributable to the Failed Security which it replaces. The Trustee shall not be
liable or responsible in any way for depreciation or loss incurred by reason of
any purchase made pursuant to any such instructions from the Depositors and in
the absence of such instructions the Trustee shall have no duty to purchase any
Substitute Securities under this Indenture. The Depositors shall not be liable
for any failure to instruct the Trustee to purchase any Substitute Security or
for errors of judgment in selecting any Substitute Security.
Section 3.8. Sale of Securities: In order to maintain the sound investment
------------------
character of the Trust, the Depositors may direct the Trustee to sell or
liquidate Securities at such price and time and in such manner as shall be
determined by the Depositors, provided that the Depositors have
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determined with the advice of the Portfolio Supervisor, if appropriate, that any
one or more of the following conditions exist:
(1) default in payment of amounts due on any of the Securities;
(2) institution of legal proceedings in law or equity seeking to
restrain or enjoin the payment of amounts due or declaration or payment of
regular dividends;
(3) default under certain documents materially and adversely affecting
future declaration or payment of amounts due or expected;
(4) determination of the Depositors that the tax treatment of the
Trust as a grantor trust would otherwise be jeopardized;
(5) decline in price that is a direct result of serious adverse credit
factors affecting the issuer of a Security which, in the opinion of the
Depositors, would make the retention of the security detrimental to the
Trust or the Unitholders; or
(6) that there has been a public tender offer made for a Security or a
merger or acquisition is announced affecting a Security, and that in the
opinion of the Depositors the sale or tender of the Security is in the best
interest of the Unitholders.
Upon receipt of such direction from the Depositors, upon which the Trustee
shall rely, the Trustee shall proceed to sell the specified Security in
accordance with such direction. The Trustee shall not be liable or responsible
in any way for depreciation or loss incurred by reason of any sale made pursuant
to any such direction or by reason of the failure of the Depositors to give any
such direction, and in the absence of such direction the Trustee shall have no
duty to sell any Securities under this Section 3.8.
Section 3.9. Counsel: The Depositors may employ from time to time as it may
-------
deem necessary a firm of attorneys for any legal services that may be required
in connection with the disposition of Securities pursuant to Section 3.8. The
fees and expenses of such counsel shall be paid by the Trustee from the Interest
and Principal Accounts as provided for in Section 3.5(c) hereof.
Section 3.10. Notice and Sale by Trustee: If at any time there has been a
--------------------------
failure by the issuer to pay a dividend that is due and payable, the Trustee
shall notify the Depositors thereof. If within thirty days after such
notification the Trustee has not received any instruction from the Depositors to
sell or to hold or to take any other action in connection with such Securities,
the Trustee shall sell such Securities forthwith, and the Trustee shall not be
liable or responsible in any way for depreciation or loss incurred by reason of
such sale or by reason of any action or inaction in accordance with such written
instructions of the Depositors. The Trustee shall promptly notify the Depositors
of such action in writing and shall set forth therein the Securities sold and
the proceeds received therefrom.
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Section 3.11. Reorganization and Similar Events: In the event that an offer
---------------------------------
by the issuer of any of the Securities or any other party shall be made to issue
new Securities, the Trustee shall reject such offer. However, should any
exchange or substitution be effected notwithstanding such rejection or without
an initial offer, any Securities, cash and/or property received in exchange
shall be deposited hereunder and shall be promptly sold, if securities or
property, by the Trustee pursuant to the Depositors' direction, unless the
Depositors advise the Trustee to retain such securities or property. The
Depositors may rely on the Portfolio Supervisor in so advising the Trustee. The
cash received in such exchange and cash proceeds of any such sales shall be
distributed to Unitholders on the next Distribution Date in the manner set forth
in Section 3.5 regarding distributions from the Principal Account. This section
shall apply, but its application shall not be limited, to public tender offers,
mergers, acquisitions, reorganizations and recapitalizations. Unless the
Depositors direct that notice be otherwise provided, the Trustee shall include
notice of any Security so acquired in the annual statement provided to
Unitholders pursuant to Section 3.6. Neither the Depositors nor the Trustee
shall be liable to any person for action or failure to take action pursuant to
the terms of this Section 3.11.
Section 3.12. Notice of Actions: In the event that the Trustee shall have
-----------------
been notified at any time of any action to be taken or proposed to be taken by
holders of any Securities held by the Trust (including, but not limited to, the
making of any demand, direction, request, giving of any notice, consent or
waiver or the voting with respect to election of directors or any amendment or
supplement to any corporate resolution, agreement or other instrument under or
pursuant to which such Securities have been issued) the Trustee shall promptly
notify the Depositors and shall thereupon take such action or refrain from
taking any action as the Depositors shall in writing direct; provided, however,
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that if the Depositors shall not within five business days of the giving of such
notice to the Depositors direct the Trustee to take or refrain from taking any
action, the Trustee shall take such action as it, in its sole discretion, shall
deem advisable. Neither the Depositors nor the Trustee shall be liable to any
person for any action or failure to take action with respect to this section.
Section 3.13. Notice of Change in Principal Account: The Trustee shall give
-------------------------------------
prompt written notice to the Depositors of all amounts credited to or withdrawn
from the Principal Account pursuant to any provisions of this Article III, and
the balance of such account after giving effect to such credit or withdrawal.
Section 3.14. Extraordinary Distributions: Any property received by the
---------------------------
Trustee after the initial date of Deposit in a form other than cash or
additional shares of the Securities listed in the Reference Trust Agreement or
of a Substitute Security, which shall be retained by the Trust, shall be dealt
with in the manner described in Section 3.11 and shall be retained or disposed
by the Trustee according to those provisions, provided, however, that no
property shall be retained which the Trustee determines shall adversely affect
its duties hereunder. The proceeds of any disposition shall be credited to the
Income or Principal Account of the Trust, as the Depositors may direct.
-17-
Section 3.15. Grantor Trust Status: The Trust is intended to be treated as
--------------------
a fixed investment (i.e., grantor) trust for income tax purposes, and its powers
shall be limited in accordance with the restrictions imposed on such trusts by
Xxxxx. Reg. Section 301.7701-4.
Section 3.16. Deferred Sales Charge: If the Reference Trust Agreement and
---------------------
Prospectus for a Trust specify a Deferred Sales Charge, the Trustee shall, on
the dates specified in and as permitted by the prospectus, withdraw from the
Income Account, the Principal Account and/or distributions to be made therefrom,
as such accounts or distributions are designated in the Prospectus as the source
of the payments of the Deferred Sales Charge, an amount per Unit specified in
the Prospectus and credit such amount to a special, non-Trust account maintained
by the Trustee out of which the Deferred Sales Charge will be distributed to the
Depositors. If the balances in the Income and Principal Accounts are
insufficient to make any withdrawal designated to be made therefrom, the Trustee
shall, as directed by the Depositors, either advance funds in an amount equal to
the proposed withdrawal and be entitled to reimbursement of such advance upon
the deposit of additional monies in the Income Account or the Principal Account,
sell Securities and credit the proceeds thereof to such special Depositors'
account or credit Securities in kind to such special Depositors' account
provided, however, that the Trustee shall not be required to advance an
aggregate amount in excess of $15,000 pursuant to this Section. Such directions
shall identify the Securities, if any, to be sold or distributed in kind and
shall contain, if the Trustee is directed by the Depositors to sell a Security,
instructions as to execution of such sales. If a Unitholder redeems Units prior
to full payment of the Deferred Sales Charge, the Trustee shall, if so provided
in the Reference Trust Agreement and Prospectus, on the Redemption Date,
withhold from the Redemption Price payment to such Unitholder an amount equal to
the unpaid portion of the Deferred Sales Charge and distribute such amount to
such special Depositors' account or, if the Depositors shall purchase such Unit
pursuant to the terms of Section 5.02 hereof, the Depositors shall pay the
Redemption Price for such Unit less the unpaid portion of the Deferred Sales
Charge. If the Prospectus provides for a waiver or refund of any portion of the
Deferred Sales Charge under specified circumstances (such as, for example, in
connection with a redemption or sale of Units following the death or disability
of the Unitholder), the Trustee shall deduct and pay to the Depositors the full
amount of the Deferred Sales Charge chargeable upon the redemption in the
absence of such waiver or refund and the Depositors shall pay to the affected
Unitholder the amount of such waiver or refund; the Trustee shall have no
responsibility to the affected Unitholder with respect to the amount to be so
refunded. The Depositors may at any time instruct the Trustee to distribute to
the Depositors cash or Securities previously credited to the special Depositors'
account. The Depositors represent that the price paid by any Unitholder for
Units acquired through reinvestment of Trust distributions will be reduced by
the aggregate amount of unpaid Deferred Sales Charge at the time of the purchase
such that the subsequent collection by the Depositors of the Deferred Sales
Charge in respect of the Units so acquired will be permissible under applicable
NASD rules.
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ARTICLE 4
EVALUATION OF SECURITIES
Section 4.1. Evaluation of Securities: The Trustee shall determine
------------------------
separately and promptly furnish to the Depositors upon request the value of each
issue of the Securities in the Trust (determined as set forth below) as of the
Evaluation Time on each of the days on which the Trustee shall make the Trust
Evaluation required by Section 5.1. The value of each issue of Securities shall
be determined in good faith by the Trustee in accordance with the following
procedures: If the Securities are listed on one or more national securities
exchanges, such valuation shall be based on the closing sale price on such
exchange which is the principal market thereof, deemed to be the New York Stock
Exchange if the Securities are listed thereon (unless the Trustee deems such
price inappropriate as a basis for valuation). If the Securities are not so
listed, or, if so listed and the principal market therefor is other than such
exchange or there is no closing sale price on such exchange, such valuation
shall be based on the closing sale price in the over-the-counter market (unless
the Trustee deems such price inappropriate as a basis for valuation) or if there
is no such closing sale price, then the Trustee may utilize, at the Trust's
expense, an independent evaluation service or services approved by the
Depositors to ascertain the values of the Securities. The independent evaluation
service shall use any of the following methods, or a combination thereof, which
it deems appropriate: (a) on the basis of current bid prices of such Securities
as obtained from investment dealers or brokers (including the Depositors) who
customarily deal in securities comparable to those held by the Trust, or (b) if
bid prices are not available for any of such Securities, on the basis of bid
prices for comparable securities, or (c) by appraisal of the value of the
Securities on the bid side of the market or by such other appraisal as is deemed
appropriate, or (d) by any combination of the above. As used herein, the closing
sale price is deemed to mean the most recent closing sale price on the relevant
securities exchange prior to the Evaluation Time. The Trustee shall be permitted
to rely on these evaluations when determining the Unit Value. The Trustee shall
have no responsibility or liability for the valuations supplied to it by the
independent evaluation service. The Trustee shall also make an evaluation of the
Securities deposited in the Trust as of the time said Securities are deposited
under this Indenture pursuant to Section 2.1. Such evaluation shall be made on
the same basis as set forth above and shall be included in the Schedules
attached to the Reference Trust Agreement.
Section 4.2. Tax Reports: For the purpose of permitting Unitholders to
-----------
satisfy any reporting requirements of applicable federal or state tax law, the
Trustee shall transmit to any Unitholder upon written request any determinations
made by the Trustee pursuant to Section 4.1.
Section 4.3. Liability of Trustee with respect to Evaluations: The
------------------------------------------------
Depositors and the Unitholders may rely on any evaluation furnished by the
Trustee and shall have no responsibility for the accuracy thereof. The
determinations made by the Trustee hereunder shall be made in good faith upon
the basis of, and shall have no liability for errors in, the information
reasonably available to it. The Trustee shall be under no liability to the
Depositors or the Unitholders for errors in information obtained from any
pricing service or similar source of information used to obtain closing sale
prices
-19-
which is selected by the Trustee with reasonable care. With respect to any
evaluation made hereunder, the Trustee shall not be liable for errors in
judgment or any action taken in good faith, provided, however, that this
provision shall not protect the Trustee against any liability to which it would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of its reckless
disregard of its obligations and duties hereunder.
ARTICLE 5
TRUST EVALUATION, REDEMPTION, PURCHASE, TRANSFER,
INTERCHANGE OR REPLACEMENT OF CERTIFICATES
Section 5.1. Trust Evaluation: The Trustee shall make an evaluation of the
----------------
Trust as of the close of trading on the New York Stock Exchange (sometimes
referred to herein as the "Evaluation Time") (1) on the last Business Day of
each of the months of June and December, (2) on the day on which any Unit of the
Trust is tendered for redemption (unless tender is made after the Evaluation
Time on such day, in which case tender shall be deemed to have been made on the
next day subsequent thereto on which the New York Stock Exchange is open for
trading), and (3) on any other day desired by the Trustee or requested by the
Depositors. Such evaluations shall take into account and itemize separately
(a)(1) the cash on hand in the Trust (other than moneys on deposit in the
Reserve Account, funds deposited on the date thereof by the Depositors for the
purchase of Securities and not theretofore credited to the Principal Account
pursuant to Section 3.3 and funds in the Principal Account with respect to which
contracts for the purchase of the Substitute Securities have been entered into
pursuant to Section 3.7 hereof), including dividends receivable on stocks
trading ex dividend, (a)(2) the value of each issue of the Securities in the
Trust as determined by the Trustee pursuant to Section 4.1 and (a)(3) all other
assets of the Trust. For each such evaluation there shall be deducted from the
sum of the above (b)(1) amounts representing any applicable taxes or other
governmental charges payable out of the Trust and for which no deductions shall
have previously been made for the purpose of addition to the Reserve Account,
(b)(2) amounts representing accrued fees of the Trustee and expenses of the
Trust including but not limited to unpaid fees of the Trustee and expenses of
the Trust (including legal and auditing expenses), accrued fees and expenses of
the Depositors, the Portfolio Supervisor and their successors, if any, (b)(3)
cash held for distribution to Unitholders of record as of a date on or prior to
the evaluation then being made and (b)(4) unpaid organizational and offering
costs in the estimated amount per Unit set forth in the Prospectus. The value of
the pro rata share of each Unit of the Trust determined on the basis of any such
evaluation shall be referred to herein as the "Unit Value."
The sum of (a)(1) and (a)(3) reduced by the sum of (b)(1), (b)(2), (b)(3)
and (b)(4) shall be referred to herein as the "Unit Cash Value".
The Trustee shall promptly advise the Depositors of each determination of
Unit Value made by it as above provided, and, in addition, upon each valuation
by the Trustee under Section 4.1
-20-
other than those involved in such calculations of Unit Value, the Trustee shall
promptly furnish to the Depositors, for purposes of assisting them in
maintaining a market in the Units, with such information regarding the
Principal, Income and Reserve Accounts as the Depositors may reasonably request.
Section 5.2. Redemptions by Trustee; Purchases by Depositors: In connection
-----------------------------------------------
with each redemption of Units, the Depositors shall direct the Trustee to redeem
Units in accordance with the procedures set forth in either (a) or (b) of this
Section 5.2.
(a) Trustee. Any Unit tendered for redemption by a Unitholder or his duly
authorized attorney to the Trustee at its unit investment trust office by the
registered holder thereof pursuant to the Redemption Form, shall be redeemed by
the Trustee on the third Business Day following the day on which tender for
redemption is made (such third Business Day being herein called the "Redemption
Date"). Subject to payment by such Unitholder of any tax or other governmental
charges which may be imposed thereon, such redemption is to be made by payment
on the Redemption Date of cash equivalent to the Unit Value determined by the
Trustee as of the Evaluation Time on the date of tender, multiplied by the
number of Units being tendered for redemption (herein called the "Redemption
Price"). Units received for redemption by the Trustee on any day after the
Evaluation Time will be held by the Trustee until the next day on which the New
York Stock Exchange is open for trading and will be deemed to have been tendered
on such day for redemption at the Redemption Price computed on that day.
The Trustee may in its discretion, and shall when so directed by the
Depositors in writing, suspend the right of redemption or postpone the date of
payment of the Redemption Price for more than three Business Days following the
day on which tender for redemption is made:
(1) for any period during which the New York Stock Exchange is closed
other than customary weekend and holiday closings or during which trading
on the New York Stock Exchange is restricted;
(2) for any period during which an emergency exists as a result of
which disposal by the Trust of the Securities is not reasonably practicable
or it is not reasonably practicable fairly to determine in accordance
herewith the value of the Securities; or
(3) for such other periods as the Securities and Exchange Commission
may by order permit,
and the Trustee shall not be liable to any person or in any way for any loss or
damage which may result from any such suspension or postponement.
Not later than the close of business on the day of tender of a Unit for
redemption by a Unitholder other than the Depositors, the Trustee shall notify
the Depositors of such tender. The Depositors shall have the right to purchase
such Unit by notifying the Trustee of their election to
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make such purchase as soon as practicable thereafter, but in no event subsequent
to the close of business on the Business Day on which such Unit was tendered for
redemption. Such purchase shall be made by payment for such Unit by the
Depositors to the Unitholder not later than the close of business on the
Redemption Date of an amount equal to the Redemption Price which would otherwise
be payable by the Trustee to such Unitholder.
Any Unit so purchased by the Depositors may, at the option of the
Depositors, be tendered to the Trustee for redemption at the corporate trust
office of the Trustee in the manner provided in the first paragraph of this
Section 5.2.
If the Depositors do not elect to purchase any Unit tendered to the Trustee
for redemption, or if a Unit is being tendered by the Depositors for redemption,
that portion of the Redemption Price which represents dividends shall be
withdrawn from the Income Account to the extent funds are available. The balance
paid on any redemption, including accrued dividends, if any, shall be withdrawn
from the Principal Account to the extent that funds are available for such
purpose. If such available balance shall be insufficient, the Trustee shall sell
such Securities from among those designated on the current list for such purpose
by the Depositors as provided below and in the manner, in its discretion, as it
shall deem advisable or necessary in order to fund the Principal Account for
purposes of such redemption. Sales of Securities by the Trustee shall be made in
such manner as the Trustee shall determine, subject to any minimum amount
limitations on sale which shall have been specified by the Depositors and agreed
to by the Trustee. In the event that funds are withdrawn from the Principal
Account or Securities are sold for payment of any portion of the Redemption
Price representing accrued dividends, the Principal Account shall be reimbursed
when sufficient funds are next available in the Income Account for such funds so
applied.
The Depositors shall maintain with the Trustee a current list of Securities
designated to be sold for the purpose of redemption of Units tendered for
redemption and not purchased by the Depositors, and for payment of expenses
hereunder, provided that if the Depositors shall for any reason fail to maintain
such a list, the Trustee, in its sole discretion, may designate a current list
of Securities for such purposes. The net proceeds of any sales of Securities
from such list representing principal shall be credited to the Principal Account
and the proceeds of such sales representing accrued interest shall be credited
to the Income Account.
Neither the Trustee nor the Depositors shall be liable or responsible in
any way for depreciation or loss incurred by reason of any sale of Securities
made pursuant to this Section 5.2.
Units redeemed pursuant to this Section 5.2 shall be canceled by the
Trustee and the Units tendered by Redemption Forms shall be terminated by such
redemptions.
If the related Prospectus for the Trust so provides, a Unitholder who
tenders for redemption Units in an aggregate amount of at least the amount
specified in the Prospectus may request, at the time of tender, to receive an
"In Kind Distribution" in lieu of cash. Such In Kind Distribution shall consist
of (i) such Unitholder's pro rata portion of each of the Securities, to the
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extent of whole shares, and (ii) cash equal to such Unitholder's pro rata
portion of the Income and Principal Accounts follows: (x) a pro rata portion of
the net proceeds of sale of the Securities representing any fractional shares
included in such Unitholder's pro rata share of the Securities and (y) such
other cash as may properly be included in such Unitholder's pro rata share of
the sum of the cash balances of the Income and Principal Accounts in an amount
equal to the Redemption Price on the date of tender less amounts specified in
clauses (i) and (ii)(x) of this sentence. The Trustee shall distribute the
Unitholder's Securities to the account of the Unitholder's bank or broker dealer
at the DTC. An In Kind Distribution shall be reduced by customary transfer and
registration charges incurred by the Trustee.
(b) Distribution Agent. On any Business Day on which any Unit or Units are
tendered for redemption (the "Redemption Day") by a Unitholder or his duly
authorized attorney to the Trustee at its unit investment trust office in the
City of New York not later than the Evaluation Time, such Units shall be
redeemed by the Trustee on that Redemption Day. Units in uncertificated form
shall be tendered by means of an appropriate request for redemption in form
approved by the Trustee. Unitholders must sign exactly as their name appears on
the register with the signature guaranteed by a participant in a signature
guarantee program acceptable to the Trustee, or in such other manner as may be
acceptable to the Trustee. The Trustee may also require additional documents
such as, but not limited to, trust instruments, certificates of death,
appointments as executor or administrator or certificates of corporate
authority. Subject to payment by such Unitholder of any tax or other
governmental charges which may be imposed thereon, such redemption is to be made
by distribution to the Distribution Agent on behalf of the redeeming Unitholder
on the Redemption Day of (i) the Unitholder's pro rata portion as of the
Redemption Day of the Securities in the Trust as designated by the Depositor and
(ii) the Unitholder's pro rata portion of the cash in the Trust as of the
Redemption Day (herein called the "Redemption Distribution"). The Distribution
Agent will dispose of such assets in accordance with the provisions of the
Distribution Agent Agreement. Fractional interests in shares distributed to the
Distribution Agent, which are not included in the Redemption Distribution, shall
be held in trust by the Distribution Agent, which is hereby designated a
subcustodian of the Trustee with respect to such fractional interests, and shall
be subject to such disposition as the Depositor shall direct. Units received for
redemption by the Trustee on any date after the Evaluation Time will be held by
the Trustee until the next Business Day on which the New York Stock Exchange is
open for trading and will be deemed to have been tendered on such day for
redemption at the Redemption Price computed on that day. Units tendered for
redemption by the Depositors on any Business Day shall be deemed to have been
tendered before the Evaluation Time on such Business Day provided that the
Depositors advise the Trustee before the later of the Trustee's close of
business and 5:00 p.m. Eastern time. By such advice, the Depositors will be
deemed to certify that all Units so tendered were either (a) tendered to the
Depositors or to a retail dealer between the Evaluation Time on the preceding
Business Day and the Evaluation Time on such Business Day or (b) acquired
previously by the Depositors but which the Depositors determined to redeem prior
to the Evaluation Time on such Business Day.
The portion of the Redemption Distribution which represents the
Unitholder's interest in the Income Account shall be withdrawn from the Income
Account to the extent available. The
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balance paid on any redemption, including dividends receivable on stocks trading
ex dividend, if any, shall be withdrawn from the Principal Account to the extent
that funds are available for such purpose. If such available balance shall be
insufficient, the Trustee shall advance funds sufficient to pay such amount to
the Unitholder and shall be entitled to reimbursement of such advance upon the
deposit of additional monies in the Income Account or Principal Account,
whichever happens first. Should any amounts so advanced with respect to declared
but unreceived dividends prove uncollectible because of default in payment of
such dividends, the Trustee shall have the right immediately to liquidate
Securities in amount sufficient to reimburse itself for such advances, without
interest. In the event that funds are withdrawn from the Principal Account for
payment of any portion of the Redemption Distribution representing dividends
receivable on stocks trading ex dividend, the Principal Account shall be
reimbursed when sufficient funds are next available in the Income Account for
such funds so applied.
Unitholders requesting or required to receive a cash distribution shall
receive such distribution in accordance with the applicable provisions of the
Distribution Agency Agreement.
Notwithstanding the foregoing provisions of this Section 5.2, the Trustee
is hereby irrevocably authorized in its discretion, in the event that the
Depositors do not elect to purchase any Unit tendered to the Trustee for
redemption (other than Units as to which a valid request for In Kind Redemption
has been made), or in the event that a Unit is being tendered by the Depositors
for redemption, in lieu of redeeming Units tendered for redemption, to sell such
Units in the over-the- counter market or by private sale for the account of
tendering Unitholders at prices which will return to the Unitholders amounts in
cash, net after deducting brokerage commissions, transfer taxes and other
charges, equal to or in excess of the Redemption Prices which such Unitholders
would otherwise be entitled to receive on redemption pursuant to this Section
5.2. The Trustee shall pay to the Unitholders the net proceeds of any such sale
on the day they would otherwise be entitled to receive payment of the Redemption
Price hereunder.
Section 5.3. Depositor Redemptions: Units tendered for redemption by the
---------------------
Depositors on any Business Day shall be deemed to have been tendered before the
Evaluation Time on such Business Day provided that the tendering Depositor
advises the Trustee in writing (which may be electronic transmission) of such
tender before the later of 5:00 p.m. Eastern time and the Trustee's close of
business on such Business day. By such advice, the Depositor will be deemed to
certify that all Units so tendered were either(a) tendered to the Depositors or
to a retail dealer between the Evaluation Time on the preceding Business Day and
the Evaluation Time on such Business Day or (b) acquired previously but which
the Depositor determined to redeem prior to the Evaluation Time on such Business
Day. On or before payment of the Redemption Price, the Depositor shall assign or
deliver to the Trustee such documents which the Trustee shall reasonably require
to effect the redemption of those Units.
Section 5.4. Units to be Held Only Through the Depository Trust Company or
-------------------------------------------------------------
a Successor Clearing Agency: No Unit may be registered in the name of any person
---------------------------
other than DTC or its nominee (or such other clearing agency registered as such
pursuant to Section 17A of the
-24-
Exchange Act of 1934 designated as successor to DTC by the Depositors, or the
Trustee or the nominee thereof) (DTC and any such successor clearing agency are
herein referred to as the "Clearing Agency") unless the Clearing Agency advises
the Trustee that it is no longer willing or able properly to discharge its
responsibilities with respect to the Units and the Trustee is unable to locate a
qualified successor clearing agency, in which case the Trustee shall notify the
Clearing Agency and instruct it to provide the Trustee with the name and address
of all persons who are the beneficial owners of Units as registered on the books
of the Clearing Agency (the "Owners"). So long as a Clearing Agency is the
registered holder of the Units, it shall be the registered holder of the Units
for all purposes under this Indenture and the Owners shall hold their interest
in the Units pursuant to such Clearing Agency's applicable procedures. The
Trustee shall be entitled to deal with any Clearing Agency for all purposes of
this Indenture (including the payment of distributions on the Units and giving
of instructions or directions by or to the Owners) as the sole Unitholder of the
Units and shall have no obligations to the Owners. The rights of the Owners
shall be exercised only through the Clearing Agency and shall be limited to
those established by law, the applicable procedures of the Clearing Agency and
the agreements between the Owners and the Clearing Agency and its participants.
None of the Depositors nor the Trustee shall have any liability in respect of
any transfers of Units effected by any Clearing Agency. All provisions of this
Indenture relating to the ownership and transfer of Units shall be construed to
effectuate the provisions of this Section.
ARTICLE 6
TRUSTEE; REMOVAL OF DEPOSITORS
Section 6.1. General Definition of Trustee's Liabilities, Rights and
-------------------------------------------------------
Duties; Removal of Depositors: In addition to and notwithstanding the other
-----------------------------
duties, rights, privileges and liabilities of the Trustee otherwise set forth
herein, the liabilities of the Trustee are further defined as follows:
(a) All moneys deposited with or received by the Trustee hereunder shall be
held by the Trustee without interest in trust as part of the Trust or the
Reserve Account until required to be disbursed in accordance with the provisions
of this Indenture and such moneys will be segregated by separate recordation on
the trust ledgers of the Trustee so long as such practice preserves a valid
preference under applicable law, or if such preference is not so preserved the
Trustee shall handle such moneys in such other manner as shall constitute the
segregation and holding thereof in trust within the meaning of the Investment
Company Act of 1940.
(b) The Trustee shall be under no liability for any action taken in good
faith on any appraisal, paper, order, list, demand, request, consent, affidavit,
notice, opinion, direction, endorsement, assignment, resolution, draft or other
document, whether or not of the same kind, prima facie properly executed, or for
the purchase, retention or disposition of moneys, Securities or Units pursuant
to this Indenture or the Depositors' direction, or in respect of any evaluation
which the Trustee is required to make or is required or permitted to have made
by others under this Indenture or otherwise except by reason of its gross
negligence, lack of good faith or willful
-25-
misconduct, provided that the Trustee shall not in any event be liable or
responsible for any evaluation made by any independent evaluation service
employed by it pursuant to Section 4.1. The Trustee may construe any of the
provisions of this Indenture, insofar as the same may appear to be ambiguous or
inconsistent with any other provisions hereof, and any construction of any such
provisions hereof by the Trustee in good faith shall be binding upon the parties
hereto. The Trustee shall in no event be deemed to have assumed or incurred any
liability, duty or obligation to any Unitholder or the Depositors, other than as
expressly provided for herein.
(c) The Trustee shall not be responsible for or in respect of the recitals
herein, the validity or sufficiency of this Indenture or for the due execution
hereof by the Depositors, or for the form, character, genuineness, sufficiency,
value or validity of any letter of credit held hereunder or any Securities or
for or in respect of the validity or sufficiency of the Units or of the due
execution thereof by the Depositors, and the Trustee shall in no event assume or
incur any liability, duty or obligation to any Unitholder or the Depositors
other than as expressly provided for herein. The Trustee shall not be
responsible for or in respect of the validity of any signature by or on behalf
of the Depositors.
(d) The Trustee shall not be under any obligation to appear in, prosecute
or defend any action, which in its opinion may involve it in expense or
liability, unless as often as required, it shall be furnished with reasonable
security and indemnity against such expense or liability as it may require, and
any pecuniary cost of the Trustee from such actions shall be deductible from and
a charge against the Income and Principal Accounts. Subject to the foregoing,
the Trustee shall in its discretion undertake such action as it may deem
necessary at any and all times to protect the Trust and the rights and interests
of the Unitholders pursuant to the terms of this Indenture, provided, however,
that the expenses and costs of such actions, undertakings or proceedings shall
be reimbursable to the Trustee from the Income and Principal Accounts, and the
payment of such costs and expenses shall be secured by a lien on the Trust prior
to the interests of the Unitholders.
(e) The Trustee may employ agents, attorneys, accountants and auditors and
shall not be answerable for the default or misconduct of any such agents,
attorneys, accountants or auditors if such agents, attorneys, accountants or
auditors shall have been selected with reasonable care; provided, however, that
if the Trustee chooses to employ DTC in connection with the storage and handling
of, and the furnishing of administrative services in connection with the
Securities, the Trustee will be answerable for any default or misconduct of DTC
and its employees and agents as fully and to the same extent as if such default
or misconduct had been committed or occasioned by the Trustee. The Trustee shall
be fully protected in respect of any action under this Indenture taken, or
suffered, in good faith by the Trustee, in accordance with the opinion of its
counsel, which may be counsel to the Depositors acceptable to the Trustee. The
fees and expenses charged by such agents, attorneys, accountants or auditors
shall constitute an expense of the Trustee reimbursable from the Income and
Principal Accounts as set forth in Section 3.5 hereof.
(f) Other than as provided in Article 7 hereunder, if at any time there is
only one Depositor acting hereunder and said Depositor shall resign or fail to
undertake or perform or become
-26-
incapable of undertaking or performing any of the duties which by the terms of
this Indenture are required by it to be undertaken or performed and no express
provision is made for action to be taken by the Trustee in such event, or said
Depositor shall be adjudged bankrupt or insolvent, or a receiver of such
Depositor or of its property shall be appointed, or any public officer shall
take charge or control of such Depositor or of its property or affairs for the
purpose of rehabilitation, conservation or liquidation, then in any such case,
the Trustee may, in its sole discretion, do any one or more of the following:
(1) appoint a successor Depositor who shall act hereunder in all respects in
place of the Depositor, who shall be compensated semi-annually, at rates deemed
by the Trustee to be reasonable under the circumstances, by deduction from the
Income Account or from the Principal Account, but no such deduction shall be
made exceeding such reasonable amount as the Securities and Exchange Commission
may prescribe in accordance with Section 26(a)(2)(C) of the Investment Company
Act of 1940; (2) terminate this Indenture and the Trust created hereby and
liquidate the Trust, all in the manner provided in Section 9.2.; or (3) continue
to act as Trustee hereunder without terminating this Indenture, acting in its
own absolute discretion without appointing any successor Depositor and assuming
such of the duties and responsibilities of the Depositor hereunder as the
Trustee determines, in its absolute discretion, are necessary or desirable for
the administration and preservation of the Trust, and receiving additional
compensation at rates determined as provided in clause (1). If the Trustee
continues so to act, it is authorized to employ one or more agents to perform
portfolio supervisory services and such other of the services of the Depositors
hereunder as the Trustee determines, in its sole discretion, to be necessary or
desirable. The fees and expenses of such agent or agents shall be charged to the
Trust in accordance with Section 6.4. All provisions of this Indenture relating
to the liability and indemnification of the Trustee, including, without
limitation, subparagraph (e) of this Section, shall apply to any responsibility
assumed or action taken by the Trustee pursuant to this subparagraph.
(g) If the value of the Trust as shown by any evaluation by the Trustee
pursuant to Section 5.1 hereof shall be less than the liquidation amount
specified in Part II of the Reference Trust Agreement, the Trustee may in its
discretion, and shall, when so directed by the Depositors, terminate this
Indenture and the Trust created hereby and liquidate the Trust, all in the
manner provided in Section 9.2.
(h) In no event shall the Trustee be liable for any taxes or other
governmental charges imposed upon or in respect of the Securities or upon the
dividends thereon or upon it as Trustee hereunder or upon or in respect of the
Trust which it may be required to pay under any present or future law of the
United States of America or any other taxing authority having jurisdiction in
the premises. For all such taxes and charges and for any expenses, including
counsel fees, which the Trustee may sustain or incur with respect to such taxes
or charges, the Trustee shall be reimbursed and indemnified out of the Income
and Principal Accounts of the Trust, and the payment of such amounts so paid by
the Trustee shall be secured by a lien on the Trust prior to the interests of
the Unitholders.
(i) The Trustee, except by reason of its gross negligence, lack of good
faith, reckless disregard of its obligations hereunder or willful misconduct,
shall not be liable for any action taken
-27-
or suffered to be taken by it in good faith and believed by it to be authorized
or within the discretion or rights or powers conferred upon it by this
Indenture.
(j) Notwithstanding anything in this Indenture to the contrary, the Trustee
is authorized and empowered to enter into any safekeeping arrangement or
arrangements it deems necessary or appropriate for holding the Securities then
owned by the Trust and the Trustee is authorized and empowered in its sole right
to amend, supplement or terminate any safekeeping arrangement or arrangements
made under this provision. In addition, the Trustee is authorized and empowered,
at the request and written discretion of the Depositors, to execute and file on
behalf of the Trust any and all documents, in connection with consents to
service of process, required to be filed under the securities laws of the
various States in order to permit the sale of Units of the Trust in such States
by the Depositors.
(k) The Trustee in its individual or any other capacity may become owner or
pledgee or, or be an underwriter or dealer in respect of, stock, bonds or other
obligations issued by the same issuer (or an affiliate of such issuer) or any
obligor of any Securities at any time held as part of the Trust and may deal in
any manner with the same or with the issuer (or an affiliate of the issuer) with
the same rights and powers as if it were not the Trustee hereunder.
(l) The Trust may include a letter or letters of credit for the purchase of
Contract Securities or Additional Securities issued by the Trustee in its
individual capacity for the account of the Depositors, and the Trustee may
otherwise deal with the Depositors with the same rights and powers as if it were
not the Trustee hereunder.
Section 6.2. Books, Records and Reports: The Trustee shall keep proper
--------------------------
books of record and account of all the transactions under this Indenture at its
unit investment trust office including a record of the name and address of, and
the Units issued by the Trust and held by, every Unitholder, and such books and
records shall be open to inspection by any Unitholder at all reasonable times
during the usual business hours, and such books and records shall be made
available to the Depositors upon the written request of the Depositors
including, but not limited to, a record of the name and address of every
Unitholder.
Unless the Depositors otherwise direct, the Trustee shall cause audited
statements as to the assets and income of the Trust to be prepared on an annual
basis by independent public accountants selected by the Depositors. Such audited
statement will be made available to Unitholders upon request. The Trustee shall
maintain and provide, upon the request of a Unitholder or the Depositors, the
Unitholders or the Unitholder's designated representative with the cost basis of
the Securities represented by the Unitholder's Units.
To the extent permitted under the Investment Company Act of 1940 as
evidenced by an opinion of counsel to the Depositors, reasonably acceptable to
the Trustee, the Trustee shall pay, or reimburse to the Depositors or others,
the costs of the preparation of documents and information with respect to the
Trust required by law or regulation in connection with the maintenance of a
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secondary market in units of the Trust. Such costs may include but are not
limited to accounting and legal fees, blue sky registration and filing fees,
printing expenses and other reasonable expenses related to documents required
under federal and state securities laws.
The Trustee shall make such annual or other reports as may from time to
time be required under any applicable state or federal statute or rule or
regulation thereunder.
Section 6.3. Indenture and List of Securities on File: The Trustee shall
----------------------------------------
keep a certified copy or duplicate original of this Indenture on file at its
unit investment trust office available for inspection at all reasonable times
during the usual business hours by any Unitholder and the Trustee shall keep and
so make available for inspection a current list of the Securities.
Section 6.4. Compensation and Indemnification: For services performed under
--------------------------------
this Indenture the Trustee shall be paid at the rate per annum set forth in Part
II of the Reference Trust Agreement which shall be computed on the basis set
forth in such Reference Trust Agreement. The Trustee may from time to time
adjust its compensation as set forth above provided that the total adjustment
upward does not, at the time of such adjustment, exceed the percentage of the
total increase, after the date hereof, in consumer prices for services as
measured by the United States Department of Labor Consumer Price Index entitled
"All Services Less Rent," or, if such index shall cease to be published, then as
measured by the available index most nearly comparable to such index. The
consent or concurrence of any Unitholder hereunder shall not be required for any
such adjustment or increase, however, the consent of the Depositors shall be
required. Such compensation shall be charged by the Trustee against the Income
and Principal Accounts at the time provided in Section 3.5 provided, however,
that such compensation shall be deemed to provide only for the usual normal and
recurring functions undertaken as Trustee pursuant to this Indenture.
The Trustee shall charge the Income and Principal Accounts at such times as
shall be convenient in its administration of the Trust any and all expenses,
including, but not limited to, the fees of counsel which may be retained by the
Trustee in connection with its activities hereunder, and disbursements incurred
hereunder and any extraordinary services performed by the Trustee hereunder. The
Trustee shall be indemnified and held harmless against any loss or liability
accruing to it without gross negligence, bad faith or willful misconduct on its
part, arising out of or in connection with the acceptance or administration of
this trust, including the costs and expenses (including counsel fees) of
defending itself against any claim of liability in the premises. If the cash
balances in the Income and Principal Accounts shall be insufficient to provide
for amounts payable pursuant to this Section 6.4, the Trustee shall have the
power to sell (1) Securities from the current list of Securities designated to
be sold pursuant to Section 5.2 hereof, or (2) if no such Securities have been
so designated, such Securities as the Trustee may see fit to sell in its own
discretion, and to apply the proceeds of any such sale in payment of the amounts
payable pursuant to this Section 6.4. The Trustee shall not be liable or
responsible in any way for depreciation or loss incurred by reason of any sale
of Securities made pursuant to this Section 6.4. Any moneys payable to the
Trustee pursuant to this section shall be secured by a lien on the Trust prior
to the interests of the Unitholders.
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Section 6.5. Removal and Resignation of the Trustee; Successor: The
-------------------------------------------------
following provisions shall provide for the removal and resignation of the
Trustee and the appointment of any successor Trustee:
(a) any resignation or removal of the Trustee and appointment of a
successor pursuant to this section shall not become effective until acceptance
of appointment by the successor Trustee as provided in subsection (b) hereof;
(b) the Trustee or any trustee hereafter appointed may resign and be
discharged of the trust created by this Indenture by executing an instrument in
writing resigning as such Trustee, filing the same with the Depositors and
mailing a copy of a notice of resignation to all Unitholders then on record not
less than sixty days before the date specified in such instrument when, subject
to Section 6.5(d), such resignation is to take effect. Upon receiving such
notice of resignation, the Depositors shall use their best efforts to promptly
appoint a successor Trustee as hereinafter provided, by written instrument, in
duplicate, one copy of which shall be delivered to the resigning Trustee and one
copy to the successor Trustee. The Depositors may remove the Trustee at any time
with or without cause and appoint a successor Trustee by written instrument, in
duplicate, one copy of which shall be delivered to the Trustee so removed and
one copy to the successor Trustee. Notice of such removal and appointment of a
successor shall be mailed by the successor Trustee, promptly after its
acceptance of such appointment, to each Unitholder then of record;
(c) any successor Trustee appointed hereunder shall execute, acknowledge
and deliver to the Depositors and the retiring Trustee an instrument accepting
such appointment hereunder, and such successor Trustee without any further act,
deed or conveyance shall become vested with all the rights, powers, duties and
obligations of its predecessor hereunder with like effect as if originally named
Trustee herein and shall be bound by all the terms and conditions of this
Indenture provided, however, that no successor trustee shall be under any
liability hereunder for occurrences or omissions prior to the execution of such
instrument. Upon the request of such successor Trustee, the Depositors and the
retiring Trustee shall, upon payment of any amounts due the retiring Trustee or
provision therefor to the satisfaction of such retiring Trustee, execute and
deliver an instrument acknowledged by it transferring to such successor trustee
all the rights and powers of the retiring Trustee; and the retiring Trustee
shall transfer, deliver and pay over to the successor Trustee all Securities and
moneys at the time held by it hereunder, together with all necessary instruments
of transfer and assignment or other documents properly executed necessary to
effect such transfer and such of the records or copies thereof maintained by the
retiring Trustee in the administration hereof as may be requested by the
successor Trustee, and shall thereupon be discharged from all duties and
responsibilities under this Indenture. The retiring Trustee shall, nevertheless,
retain a lien upon all Securities and moneys at the time held by it hereunder to
secure any amounts then due the retiring Trustee hereunder;
(d) in case at any time the Trustee shall resign and no successor Trustee
shall have been appointed and have accepted appointment within thirty days after
notice of resignation has been received by the Depositors, the retiring Trustee
may forthwith apply to a court of competent
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jurisdiction for the appointment of a successor Trustee. Such court may
thereupon, after such notice, if any, as it may deem proper and prescribe,
appoint a successor Trustee; and
(e) any corporation into which any Trustee hereunder may be merged or with
which it may consolidate, or any corporation resulting from any merger or
consolidation to which any Trustee hereunder shall be a party or any corporation
succeeding to all or substantially all of the business of the Trustee, shall be
the successor Trustee under this Indenture without the execution or filing of
any paper, instrument or further act to be done on the part of the parties
hereto, anything herein, or in any agreement relating to such merger or
consolidation, by which any such Trustee may seek to retain certain powers,
rights and privileges theretofore obtaining for any period of time following
such merger or consolidation, to the contrary notwithstanding.
Section 6.6. Qualifications of Trustee: The Trustee, or any successor
-------------------------
thereof, shall be a corporation organized and doing business under the laws of
the United States or any state thereof, which is authorized under such laws to
exercise corporate trust powers and having at all times an aggregate capital,
surplus, and undivided profits of not less than $2,500,000.
ARTICLE 7
DEPOSITORS AND PORTFOLIO SUPERVISOR
Section 7.1. Succession: The covenants, provisions and agreements herein
----------
contained shall in every case be binding upon any successor to the business of
the Depositors. In the event of the death, resignation or withdrawal of any
partner of a Depositor or of any successor Depositor which may be a partnership,
the deceased, resigning or withdrawing partner shall be relieved of all further
liability hereunder if at the time of such death, resignation or withdrawal such
Xxxxxxxxx maintains a net worth (determined in accordance with generally
accepted accounting principles) of at least $1,000,000. In the event of an
assignment by a Depositor to a successor corporation or partnership as permitted
by the next following sentence, such Depositors and, if such Depositor is a
partnership, its partners, shall be relieved of all further liability under this
Indenture. The Depositors may transfer all or substantially all of their assets
to a corporation or partnership which carries on the business of that Depositor,
if at the time of such transfer such successor duly assumes all the obligations
of said Depositor under this Indenture and if at such time such successor
maintains a net worth of at least $1,000,000 (determined in accordance with
generally accepted accounting principles).
Section 7.2. Resignation of a Depositor: If at any time any Depositor
--------------------------
desires to resign its position as Depositor hereunder, it may resign by
delivering to the Trustee an instrument of resignation executed by such
Depositor. Such resignation shall become effective upon the expiration of thirty
days from the date on which such instrument is delivered to the Trustee. Upon
effective resignation hereunder, the resigning Depositor shall be discharged and
shall no longer be liable in any manner hereunder except as to acts or omissions
occurring prior to such resignation and
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any successor Depositor appointed by the Trustee pursuant to Section 6.1(f)
shall thereupon perform all duties and be entitled to all rights under this
Indenture. The successor Depositor shall not be under any liability hereunder
for occurrences or omissions prior to the execution of such instrument.
Section 7.3. Liability of Depositors and Indemnification: (a) No Depositor
-------------------------------------------
shall be under any liability to any other Depositor, the Trust or the
Unitholders for any action or for refraining from the taking of any action in
good faith pursuant to this Indenture, or for errors in judgment or for
depreciation or loss incurred by reason of the purchase or sale of any
Securities, provided, however, that this provision shall not protect the
Depositors against any liability to which they would otherwise be subject by
reason of willful misfeasance, bad faith or gross negligence in the performance
of their duties or by reason of their reckless disregard of their obligations
and duties hereunder. The Depositors may rely in good faith on any paper, order,
notice, list, affidavit, receipt, evaluation, opinion, endorsement, assignment,
draft or any other document of any kind prima facie properly executed and
submitted to them by the Trustee, the Trustee's counsel or any other person for
any matters arising hereunder. The Depositors shall in no event be deemed to
have assumed or incurred any liability, duty, or obligation to any Unitholder or
the Trustee other than as expressly provided for herein.
(b) The Trust shall pay and hold the Depositors harmless from and against
any loss, liability or expense incurred in acting as Depositors of the Trust
other than by reason of willful misfeasance, bad faith or gross negligence in
the performance of their duties or by reason of their reckless disregard of
their obligations and duties hereunder, including the costs and expenses of the
defense against any claim or liability in the premises. The Depositors shall not
be under any obligation to appear in, prosecute or defend any legal action which
in their opinion may involve them in any expense or liability, provided,
however, that the Depositors may in their discretion undertake any such action
which they may deem necessary or desirable in respect of this Indenture and the
rights and duties of the parties hereto and the interests of the Unitholders
hereunder and, in such event, the legal expenses and costs of any such action
and any liability resulting therefrom shall be expenses, costs and liabilities
of the Trust and shall be paid directly by the Trustee out of the Income and
Principal Accounts as provided by Section 3.5.
(c) None of the provisions of this Indenture shall be deemed to protect or
purport to protect the Depositors against any liability to the Trust or to the
Unitholders to which the Depositors would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the performance of their
duties, or by reason of the Depositors' reckless disregard of their obligations
and duties under this Indenture.
(d) Notwithstanding the discharge of a Depositor of the Trust, such
Depositor shall continue to be fully liable in accordance with the provisions
hereof in respect of action taken or refrained from under this Indenture by the
Depositors before the date of such discharge or by the undischarged Depositors
before or after the date of such discharge, as fully and to the same extent as
if no discharge has occurred.
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Section 7.4. Compensation: The Portfolio Supervisor and Schwab shall
------------
receive at the times set forth in Section 3.5 as compensation for performing
portfolio supervisory services, such amount and for such periods as specified in
Part II of the Reference Trust Agreement. The computation of such compensation
shall be made on the basis of the largest number of units outstanding at any
time during the period for which such compensation is being computed. At no
time, however, will the total amount received by the Portfolio Supervisor and
Schwab for services rendered to all series of Schwab Trusts in any calendar year
exceed the aggregate cost to them of supplying such services in such year. Such
rate may be increased by the Trustee from time to time, without the consent or
approval of any Unitholder, Schwab or the Portfolio Supervisor, by amounts not
exceeding the proportionate increase during the period from the date of such
Reference Trust Agreement to the date of any such increase, in consumer prices
as published either under the classification "All Services Less Rent" in the
Consumer Price Index published by the United States Department of Labor or, if
such Index is no longer published, a similar index.
In the event that any amount of the compensation paid to the Portfolio
Supervisor and Schwab pursuant to Section 3.5 is found to be an improper charge
against the Trust, the Portfolio Supervisor and Schwab shall reimburse the Trust
in such amount. An improper charge shall be established if a final judgment or
order for reimbursement of the Trust shall be rendered against the Portfolio
Supervisor and Schwab and such judgment or order shall not be effectively stayed
or a final settlement is established in which the Portfolio Supervisor and
Schwab agree to reimburse the Trust for amounts paid to the Portfolio Supervisor
and Schwab pursuant to this Section 7.4.
Section 7.5. Joint Position of Depositors; Power of Attorney: (a) The
-----------------------------------------------
Depositors shall be jointly and severally liable for the obligations imposed
upon and undertaken by the Depositors hereunder. At all times prior to the
termination of the Trust and while more than one Depositor shall be acting
hereunder, there shall be maintained on file with the Trustee a power of
attorney (which, initially, constitutes part of the Closing Memorandum delivered
by the Trustee and the Depositor in connection with the deposit made pursuant to
Section 2.1) executed in favor of one Depositor by the other Depositor
constituting and appointing the non-executing Depositor the trust and lawful
agent and attorney-in-fact of the executing Depositor to execute and deliver for
and on behalf of the executing Depositor any and all notices, opinions,
certificates, lists, demands, directions, instruments or other documents
provided or permitted to be executed or delivered by the Depositors hereunder or
to take any other action in respect hereof. Such power of attorney shall
continue in effect as to the executing Depositor until written notice of
revocation thereof has been given by such executing Depositor to the Trustee and
the non-executing Depositor. Prior to receipt of such notice of revocation, the
Trustee shall be entitled to rely conclusively upon such power of attorney as
authorizing the non-executing Depositor to give any notice, opinion,
certificate, list, demand, direction, instrument or other document provided for
or permitted hereunder or to take any other action in respect hereof on behalf
of the executing Depositor as to which such power of attorney is in effect.
(b) In the event that the power of attorney referred to in paragraph (a)
shall be revoked by written notice given by an executing Depositor and it shall
not be replaced within one Business
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Day by another power of attorney conforming with the requirements of said
paragraph, the Depositors shall be deemed to have been unable to reach agreement
with respect to an action to be taken jointly by them hereunder and thereupon
the Depositor which has revoked the power of attorney executed by it shall be
discharged hereunder upon the expiration of such one-day period and thereupon
the other Depositor shall act hereunder without the necessity of any other or
further action on the part of the Depositors or of the Trustee.
Section 7.6. Resignation and Removal of Portfolio Supervisor; Successor:
----------------------------------------------------------
(a) The Portfolio Supervisor may resign and be discharged hereunder, by
executing an instrument in writing resigning as Portfolio Supervisor and filing
the same with the Depositors and the Trustee, not less than 60 days before the
date specified in such instrument when, subject to paragraph (e), such
resignation is to take effect. Upon receiving such notice of resignation, the
Depositors and the Trustee shall use their best efforts to appoint a successor
portfolio supervisor having qualifications and at a rate of compensation
satisfactory to the Depositors and the Trustee. Such appointment shall be made
by written instrument executed by the Depositors and the Trustee, in duplicate,
one copy of which shall be delivered to the resigning Portfolio Supervisor and
one copy to the successor portfolio supervisor. The Depositors or the Trustee
may remove the Portfolio Supervisor at any time upon 30 days' written notice and
appoint a successor portfolio supervisor having qualifications and at a rate of
compensation satisfactory to the Depositors and the Trustee, provided, however,
that so long as Xxxxxxx & Xxxxx is acting as Depositor, the Trustee shall have
no power to remove the Portfolio Supervisor. Such appointment shall be made by
written instrument executed by the Depositors and the Trustee, in duplicate, one
copy of which shall be delivered to the Portfolio Supervisor so removed and one
copy to the successor portfolio supervisor. Notice of such resignation or
removal and appointment of a successor portfolio supervisor shall be mailed by
the Trustee to each Unitholder then of record.
(b) Any successor portfolio supervisor appointed hereunder shall execute,
acknowledge and deliver to the Depositors and the Trustee an instrument
accepting such appointment hereunder, and such successor portfolio supervisor
without any further act, deed or conveyance shall become vested with all the
rights, powers, duties and obligations of its predecessor hereunder with the
like effect as if originally named Portfolio Supervisor herein and shall be
bound by all the terms and conditions of this Indenture.
(c) In case at any time the Portfolio Supervisor shall resign and no
successor portfolio supervisor shall have been appointed and have accepted
appointment within 30 days after notice of resignation has been received by the
Depositors and the Trustee, the Portfolio Supervisor may forthwith apply to a
court of competent jurisdiction for the appointment of a successor portfolio
supervisor. Such court may thereupon after such notice, if any, as it may deem
proper and prescribe, appoint a successor portfolio supervisor.
(d) Any corporation into which the Portfolio Supervisor hereunder may be
merged or with which it may be consolidated, or any corporation resulting from
any merger or consolidation to which the Portfolio Supervisor hereunder shall be
a party, shall be the successor portfolio
-34-
supervisor under this Indenture without the execution or filing of any paper,
instrument or further act to be done on the part of the parties hereto, anything
herein, or in any agreement relating to such merger or consolidation, by which
the Portfolio Supervisor may seek to retain certain powers, rights and
privileges theretofore obtaining for any period of time following such merger or
consolidation, to the contrary notwithstanding.
(e) Any resignation or removal of the Portfolio Supervisor and appointment
of a successor portfolio supervisor pursuant to this Section shall become
effective upon acceptance of appointment by the successor portfolio supervisor
as provided in subsection (b) hereof.
Section 7.7. Liability of Portfolio Supervisor and Indemnification: (a) The
-----------------------------------------------------
Portfolio Supervisor shall be under no liability to the Depositors, the Trust or
the Unitholders for any action or for refraining from the taking of any action
in good faith pursuant to this Indenture, or for errors in judgment or for
depreciation or loss incurred by reason of the purchase or sale of any
Securities, provided, however, that this provision shall not protect the
Portfolio Supervisor against any liability to which it would otherwise be
subject by reason of willful misfeasance, bad faith or gross negligence in the
performance of its duties or by reason of its reckless disregard of its
obligations and duties hereunder. The Portfolio Supervisor may rely in good
faith on any paper, order, notice, list, affidavit, receipt, evaluation,
opinion, endorsement, assignment, draft or any other document of any kind prima
facie properly executed and submitted to it by the Trustee, the Trustee's
counsel or any other person for any matters arising hereunder. The Portfolio
Supervisor shall in no event be deemed to have assumed or incurred any
liability, duty, or obligation to any Unitholder or the Trustee other than as
expressly provided for herein.
(b) The Trust shall pay and hold the Portfolio Supervisor harmless from and
against any loss, liability or expense incurred in acting as Portfolio
Supervisor of the Trust other than by reason of willful misfeasance, bad faith
or gross negligence in the performance of its duties or by reason of its
reckless disregard of its obligations and duties hereunder, including the costs
and expenses of the defense against any claim or liability in the premises. The
Portfolio Supervisor shall not be under any obligation to appear in, prosecute
or defend any legal action which in its opinion may involve it in any expense or
liability, provided, however, that the Portfolio Supervisor may in its
discretion undertake any such action which it may deem necessary or desirable in
respect of this Indenture and the rights and duties of the parties hereto and
the interests of the Unitholders hereunder and, in such event, the legal
expenses and costs of any such action and any liability resulting therefrom
shall be expenses, costs and liabilities of the Trust and shall be paid directly
by the Trustee out of the Income and Principal Accounts as provided by Section
3.5.
(c) None of the provisions of this Indenture shall be deemed to protect or
purport to protect the Portfolio Supervisor against any liability to the Trust
or to the Unitholders to which the Portfolio Supervisor would otherwise be
subject by reason of willful misfeasance, bad faith or gross negligence in the
performance of its duties, or by reason of the Portfolio Supervisor's reckless
disregard of its obligations and duties under this Indenture.
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(d) Notwithstanding the discharge of the Portfolio Supervisor of the Trust,
the Portfolio Supervisor shall continue to be fully liable in accordance with
the provisions hereof in respect of action taken or refrained from under this
Indenture by the Portfolio Supervisor before the date of such discharge or by
the undischarged Portfolio Supervisor before or after the date of such
discharge, as fully and to the same extent as if no discharge has occurred.
ARTICLE 8
RIGHTS OF UNITHOLDERS
Section 8.1. Beneficiaries of Trust: By the purchase and acceptance or
----------------------
other lawful delivery and acceptance of any Unit the Unitholder shall be deemed
to be a beneficiary of the Trust created by this Indenture and vested with all
right, title and interest in the Trust to the extent of the Unit or Units,
subject to the terms and conditions of this Indenture.
Section 8.2. Rights, Terms and Conditions: In addition to the other rights
----------------------------
and powers set forth in the other provisions and conditions of this Indenture
the Unitholders shall have the following rights and powers and shall be subject
to the following terms and conditions:
(a) A Unitholder may at any time prior to the Evaluation Time on the
date the Trust is terminated tender his or her Unit or Units to the Trustee
for redemption in accordance with Section 5.2.
(b) The death or incapacity of any Unitholder shall not operate to
terminate this Indenture or the Trust, nor entitle his or her legal
representatives or heirs to claim an accounting or to take any action or
proceeding in any court of competent jurisdiction for a partition or
winding up of the Trust, nor otherwise affect the rights, obligations and
liabilities of the parties hereto or any of them. Each Unitholder expressly
waives any right he or she may have under any rule of law, or the
provisions of any statute, or otherwise, to require the Trustee at any time
to account, in any manner other than as expressly provided in this
Indenture, in respect of the Securities or moneys from time to time
received, held and applied by the Trustee hereunder.
(c) No Unitholder shall have any right to vote or in any manner
otherwise control the operation and management of the Trust, or the
obligations of the parties hereto, nor shall anything herein set forth, be
construed so as to constitute the Unitholders from time to time as
partners; nor shall any Unitholder ever be under any liability to any third
persons by reason of any action taken by the parties to this Indenture for
any other cause whatsoever.
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ARTICLE 9
ADDITIONAL COVENANTS; MISCELLANEOUS PROVISIONS
Section 9.1. Amendments: This Indenture may be amended from time to time by
----------
the parties hereto or their respective successors, without the consent of any of
the Unitholders (a) to cure any ambiguity or to correct or supplement any
provision contained herein which may be defective or inconsistent with any other
provision contained herein; (b) to change any provision required by Securities
and Exchange Commission or any successor governmental agency to be changed; or
(c) to make such other provision in regard to matters or questions arising
hereunder as shall not adversely affect the interests of the Unitholders (as
determined by the Depositors); provided, however, that the parties hereto may
not amend this Indenture so as to (1) increase the number of Units above the
number set forth in Part II of the Reference Trust Agreement or such lesser
amount as may be outstanding at any time during the term of this Indenture,
except as the result of the deposit of Additional Securities as herein provided,
or (2) except in the manner permitted by the Indenture as in effect on the date
of the first deposit of Securities under a particular Indenture, permit the
deposit or acquisition hereunder of securities either in addition to or in
replacement of any of the Securities.
This Indenture may also be amended from time to time by the Depositors and
the Trustee (or the performance of any of the provisions or this Indenture may
be waived) with the expressed written consent of Unitholders evidencing 66-2/3%
of the Units at the time outstanding under the Indenture for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Indenture or of modifying in any manner the rights of the
Unitholders; provided, however, that no such amendment or waiver shall (i)
reduce the interest in the Trust represented by such Units without the consent
of the Unitholder, (ii) reduce the aforesaid percentage of Units, the holders of
which are required to consent to any such amendment, without the consent of the
holders of all Units then outstanding, (iii) affect the duties, obligations and
responsibilities of the Trustee without its consent or (iv) affect the Trust's
status as a grantor trust as set forth in Section 3.15.
Unless the Depositors otherwise direct, notice of any such amendment shall
be included in the annual statement provided pursuant to Section 3.07.
Section 9.2. Termination: Unless previously terminated pursuant to the
-----------
provisions hereof, this Indenture and the Trust created hereby shall terminate
as of the Evaluation Time on the Termination Date or upon the date of the
earlier maturity, redemption, sale or other disposition as the case may be of
the last Security held hereunder; provided that in no event shall the Trust
continue beyond the "Mandatory Termination Date" specified in the Prospectus for
the Trust.
Written notice of any termination shall be given by the Trustee to each
Unitholder at his or her address appearing on the registration books of the
Trustee.
-37-
In the event of any termination of the Trust prior to the Termination Date,
the Trustee shall proceed to liquidate the Securities then held and make the
payments and distributions provided for hereinafter in this Section 9.2 except
that in such event, the distribution to each Unitholder shall be made in cash
and shall be such Unitholder's pro rata interest in the balance of the Principal
and Income Account after the deductions herein provided.
In the event that the Trust terminates on the Termination Date, the Trustee
shall, not less than 30 days prior to the Termination Date, send a written
notice to each Unitholder. Such notice shall allow each Unitholder of record, to
elect to redeem his Units at the net asset value on the Termination Date and to
receive, in partial payment of the Redemption Price per Unit, an in-kind
distribution of such Unitholder's pro rata share of the Securities, to the
extent of whole shares. The Trustee will honor duly executed requests for such
in-kind distribution received by the close of business on the Termination Date.
Redemption of the Units of Unitholders electing such in-kind distribution shall
be made on the third business day following the Termination Date and shall
consist of (1) such Unitholder's pro rata share of Securities (valued as of the
Termination Date) to the extent of whole shares and (2) cash equal to the
balance of such Unitholder's Redemption Price. Unitholders who do not
effectively request an in-kind distribution shall receive their distribution
upon termination in cash. The Trustee shall distribute the Unitholder's
Securities to the account of the Unitholder's bank or broker-dealer at
Depositary Trust Company. An in-kind distribution shall be reduced by customary
transfer and registration charges incurred by the Trustee.
The balance of the Securities shall be sold over a period described in the
Prospectus of the Trust. The Depositors shall direct the Trustee to sell the
Securities in such manner as the Depositors determine will produce the best
price for the Trust. If so directed, the Trustee shall use the services of the
Depositors to effect such sales.
In the event that the Depositors direct the Trustee that certain Securities
will be sold to a new series of the Trust (a "New Series"), the Depositors will
certify to the Trustee, within five days of each sale from a Trust to a New
Series, (1) that the transaction is consistent with the policy of both the Trust
and the New Series, as recited in their respective registration statements and
reports filed under the Investment Company Act of 1940, (2) the date of such
transaction and (3) the closing sales price on the national securities exchange
for the sale date of the securities subject to such sale. The Trustee will then
countersign the certificate, unless the Trustee disagrees with the closing sales
price listed on the certificate, whereupon the Trustee will promptly inform the
Depositors orally of any such disagreement and return the certificate within
five days to the Depositors with corrections duly noted. Upon the Depositors'
receipt of a corrected certificate, if the Depositors verify the corrected price
by reference to an independently published list of closing sales prices for the
date of the transactions, the Depositors will ensure that the price of Units of
the New Series, and distributions to holders of the Trust with regard to
redemption of their Units or termination of the Trust, accurately reflect the
correct price. To the extent that the Depositors disagree with the Trustee's
corrected price, the Depositors and the Trustee will jointly determine the
correct sales price by reference to a mutually agreeable, independently
published list of closing sales prices for the date of the transaction. The
Depositors and Trustee will periodically review the procedures for sales and
-38-
make such changes as they deem necessary, consistent with Rule 17a-7(e)(2). The
Depositors will maintain records of the procedures and of each transaction will
be maintained as provided in Rule 17a-7(f). The Trustee shall bear no
responsibility for any sale made pursuant to the Depositors' instruction as
provided in this paragraph.
Within a reasonable period of time after such termination and liquidation
of Securities, the Trustee shall:
(a) deduct from the Income Account or, to the extent that funds are not
available in such account, from the Principal Account and pay to itself
individually an amount equal to the sum of
(1) its accrued compensation for its ordinary recurring services,
(2) any compensation due it for its extraordinary services, and
(3) any other costs, expenses, advances or indemnities as provided
herein.
(b) deduct from the Income Account or, to the extent that funds are not
available in such account, from the Principal Account and pay accrued and unpaid
fees of counsel pursuant to Section 3.9;
(c) deduct from the Income Account or the Principal Account any amounts
which may be required to be deposited in the Reserve Account to provide for
payment of any applicable taxes or other governmental charges and any other
amounts which may be required to meet expenses incurred under this Indenture;
(d) make a final distribution from the Trust of such Unitholder's pro rata
share of the cash balances of the Income and Principal Accounts and, on the
conditions set forth in Section 3.4 hereof, the balance of the Reserve Account,
if any;
(e) together with such distribution to each Unitholder as provided for in
(d), furnish to each such Unitholder a final distribution statement as of the
date of the computation of the amount distributable to Unitholders, setting
forth the data and information in substantially the form and manner provided for
in Section 3.6 hereof; and
(f) distribute to each Unitholder receiving the distribution provided in
paragraph (d) any dividends, which on the Termination Date were declared, but
not received, net of any and all expenses not previously deducted, within a
reasonable time of their receipt.
The amounts to be so distributed to each Unitholder shall be that pro rata
share of the balance of the total Income and Principal Accounts as shall be
represented by the Units held of record by such Unitholder.
-39-
The Trustee shall be under no liability with respect to moneys held by it
in the Income, Reserve and Principal Accounts upon termination except to hold
the same in trust without interest until disposed of in accordance with the
terms of this Indenture.
Upon the Depositors' request, the Trustee will include in the written
notice to be sent to Unitholders referred to in the fourth paragraph of this
section a form of election whereby Unitholders may express interest in investing
their terminating distribution in units of another series of the Schwab Trusts
(the "New Series"). The Trustee will inform the Depositors of all Unitholders
who, within the time period specified in such notice, express such interest. The
Depositors will provide to such Unitholders applicable sales material with
respect to the New Series and a form, acceptable to the Trustee, whereby a
Unitholder may appoint the Distribution Agent the Unitholder's agent to apply
the Unitholder's distribution for the acquisition of a unit or units of the New
Series (a "Rollover"). Such form will specify, among other things, the time by
which it must be returned to the Trustee in order to be effective and the manner
in which such purchase shall be made. Redemption of the Units of the Unitholders
electing such Rollover shall be made by distribution to the Distribution Agent
on behalf of redeeming Unitholder on a date on or prior to the Termination Date
selected by the Depositors and specified in the notice (the "Rollover Date") and
shall consist of (1) such Unitholder's pro rata share of Securities (valued as
of the Rollover Date) and (2) cash equal to the balance of the Unitholder's
Redemption Price. The Distribution Agent will dispose of such assets in
accordance with the provisions of the Distribution Agency Agreement. In the
event that the Depositors determine that an in-kind deposit into the New Series
pursuant to Section 1.02 of the Distribution Agency Agreement will not be
permitted, the Units owned by the Unitholders electing investment in a New
Series will be redeemed pursuant to Section 5.2(a) and the above- described
notice will include a form, acceptable to the Trustee, whereby a Unitholder may
appoint the Trustee the Unitholder's agent to apply the Unitholder's cash
distribution for the purchase of a unit or units of the New Series. This
paragraph shall not obligate the Depositors to create any New Series or to
provide any such investment election.
Section 9.3. Construction: This Indenture is executed and delivered in the
------------
State of New York, and all local laws or rules of construction of such State
shall govern the rights of the parties hereto and the Unitholders and the
interpretation of the provisions hereof.
Section 9.4. Registration of Units: The Depositors agree and undertake to
---------------------
register the Units with the Securities and Exchange Commission or other
applicable governmental agency pursuant to applicable Federal or state statutes,
if such registration shall be required, and to do all things that may be
necessary or required to comply with this provision during the term of the Trust
created hereunder, and the Trustee shall incur no liability or be under any
obligation or expense in connection therewith.
Section 9.5. Written Notice: Any notice, demand, direction or instruction
--------------
to be given to the Depositors hereunder shall be in writing and shall be duly
given if mailed or delivered to the agent for the Depositors designated pursuant
to Section 7.5 as follows: if to Xxxxxxx Xxxxxx & Co., Inc., 000 Xxxxxxxxxx
Xxxxxx, Xxx Xxxxxxxxx, Xxxxxxxxxx 00000; if to Xxxxxxx & Xxxxx, Inc., 2001
-40-
Xxxxx 00, Xxxxxxxxx Xxxxx, Xxxxxxxxxx, Xxx Xxxxxx 00000, or at such other
address as shall be specified by the Depositors to the Trustee in writing. Any
notice to be given to the Portfolio Supervisor shall be in writing and shall be
given if mailed or delivered to the Portfolio Supervisor at 0000 Xxxxx 00,
Xxxxxxxxx Xxxxx, Xxxxxxxxxx, Xxx Xxxxxx 00000 or at such other address as shall
be specified to the Trustee and Schwab by the Portfolio Supervisor in writing.
Any notice, demand, direction or instruction to be given to the Trustee shall be
in writing and shall be duly given if mailed or delivered to the Trustee at 000
Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or such other address as shall be
specified to the Depositors by the Trustee in writing. Any notice to be given to
the Unitholders shall be duly given if mailed or delivered to each Unitholder at
the address of such holder appearing on the registration books of the Trustee.
Section 9.6. Severability: If any one or more of the covenants, agreements,
------------
provisions or terms of this Indenture shall be held contrary to any express
provision of law or contrary to policy or express law, though not expressly
prohibited, or against public policy, or shall for any reason whatsoever be held
invalid, then such covenants, agreements, provisions or terms shall be deemed
severable from the remaining covenants, agreements, provisions or terms of this
Indenture and shall in no way affect the validity or enforceability of the other
provisions of this Indenture or of the Units or the rights of the holders
thereof.
Section 9.7. Dissolution of Depositors Not to Terminate: The dissolution of
------------------------------------------
one or all of the Depositors from or for any cause whatsoever shall not operate
to terminate this Indenture or the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed as of the date first above written.
[Signatures and acknowledgments on separate pages.]
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XXXXXXX XXXXXX & CO, INC.
Depositor
By: /s/ XXX XXXXX
----------------------------------------
Authorized Signator
STATE OF CALIFORNIA )
: ss:
COUNTY OF SAN MATEO )
On this 21st day of August, 2003, before me personally appeared Xxx Xxxxx,
to me known, who being by me duly sworn, said that he is an Authorized Signator
of Xxxxxxx Xxxxxx & Co., Inc. the Depositor, one of the corporations described
in and which executed the foregoing instrument, and that he signed his name
thereto by authority of the Board of Directors of said corporation.
/s/ BANG D. PHO
------------------------------------------
Notary Public
BANG D. PHO
COMM. # 1400228 NOTARY PUBLIC CALIFORNIA
SAN MATEO COUNTY
My Comm. Expires Feb. 13, 2007
XXXXXXX & XXXXX, INC.
Depositor
By: /s/ XXXXXXX X. XXXXX
-----------------------------------------
Authorized Signator
STATE OF NEW JERSEY )
: ss:
COUNTY OF PARSIPPANY )
On this 21st day of August, 2003, before me personally appeared Xxxxxxx X.
Xxxxx, to me known, who being by me duly sworn, said that he is an Authorized
Signator of Xxxxxxx & Xxxxx, Inc., one of the corporations described in and
which executed the foregoing instrument, and that he signed his name thereto by
authority of the Board of Directors of said corporation.
/s/ XXXXX XXXXXXXXX
------------------------------------------
Notary Public
XXXXX X. XXXXXXXXX
NOTARY PUBLIC, STATE OF NEW JERSEY
Commission Expires 3/15/2006
THE BANK OF NEW YORK
Trustee
By: /s/ XXXXX XXXXXXXXX
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Vice President
STATE OF NEW YORK )
:ss.:
COUNTY OF NEW YORK )
On this 22nd day of August, 2003, before me personally appeared Xxxxx
Xxxxxxxxx, to me known, who being by me duly sworn, said that he/she is an
Authorized Signator of The Bank of New York, one of the corporations described
in and which executed the foregoing instrument; that he/she knows the seal of
said corporation; that the seal affixed to said instrument is such corporate
seal; that it was so affixed by authority of the Board of Directors of said
corporation and that he/she signed his/her name thereto by like authority.
/s/ XXXXXXX X. XXXXX, XX.
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Notary Public
Notary Public, State of New York
No. 00-0000000
Qualified in Queens County
Commission Expires April 30, 2007
XXXXXXX & XXXXX ASSET MANAGEMENT, INC.
Portfolio Supervisor
By: /s/ XXXXXXX X. XXXXX
----------------------------------------
Authorized Signator
STATE OF NEW JERSEY )
: ss:
COUNTY OF PARSIPPANY )
On this 21st day of August, 2003, before me personally appeared Xxxxxxx X.
Xxxxx, to me known, who being by me duly sworn, said that he is an Authorized
Signator of the Portfolio Supervisor, one of the entities described in and which
executed the foregoing instrument, and that he signed his name thereto by
authority of the Board of Directors of said corporation.
/s/ XXXXX XXXXXXXXX
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Notary Public
XXXXX X. XXXXXXXXX
NOTARY PUBLIC, STATE OF NEW JERSEY
Commission Expires 3/15/2006
