Exhibit 1.1
XXX XXXXXX FOCUS PORTFOLIOS, SERIES 397
TRUST AGREEMENT
Dated: July 22, 2003
This Trust Agreement among Xxx Xxxxxx Funds Inc., as Depositor, The Bank of
New York, as Trustee, and Xxx Xxxxxx Investment Advisory Corp., as Supervisor,
sets forth certain provisions in full and incorporates other provisions by
reference to the document entitled "Standard Terms and Conditions of Trust For
Xxx Xxxxxx Focus Portfolios, Effective for Unit Investment Trusts Established On
and After May 2, 2001 (Including Series 284 and Subsequent Series)" (the
"Standard Terms and Conditions of Trust") and such provisions as are set forth
in full and such provisions as are incorporated by reference constitute a single
instrument. All references herein to Articles and Sections are to Articles and
Sections of the Standard Terms and Conditions of Trust.
WITNESSETH THAT:
In consideration of the premises and of the mutual agreements herein
contained, the Depositor, Trustee and Supervisor agree as follows:
PART I
STANDARD TERMS AND CONDITIONS OF TRUST
Subject to the provisions of Part II hereof, all the provisions contained
in the Standard Terms and Conditions of Trust are herein incorporated by
reference in their entirety and shall be deemed to be a part of this instrument
as fully and to the same extent as though said provisions had been set forth in
full in this instrument.
PART II
SPECIAL TERMS AND CONDITIONS OF TRUST
The following special terms and conditions are hereby agreed to:
1. The Securities listed in the Schedules hereto have been deposited in
trust under this Trust Agreement.
2. The fractional undivided interest in and ownership of the Trusts
represented by each Unit thereof referred to in Section 1.01(56) is
initially an amount the numerator of which is one and the denominator
of which is the amount set forth under "Initial number of Units" for
the Trust in the "Summary of Essential Financial Information" in the
Prospectus.
3. The aggregate number of Units described in Section 2.03(a) for each
Trust is that number of Units set forth under "Initial number of
Units" for each Trust in the "Summary of Essential Financial
Information" in the Prospectus.
4. The terms "Capital Account Distribution Date" and "Income Account
Distribution Date" shall mean the "Distribution Dates" set forth in
the "Summary of Essential Financial Information" in the Prospectus.
5. The terms "Capital Account Record Date" and "Income Account Record
Date" shall mean the "Record Dates" set forth in the "Summary of
Essential Financial Information" in the Prospectus.
6. With respect to Competitive Edge Best Ideas Portfolio, the term
"Deferred Sales Charge Payment Date" shall mean December 10, 2003 and
the 10th day of each month thereafter through April 10, 2004. With
respect to Dividend Income & Value Portfolio the term "Deferred Sales
Charge Payment Date" shall mean December 10, 2003 and the 10th day of
each month thereafter through April 10, 2004 with respect to the
amount designated "Deferred sales charge in first year" in the "Fee
Table" in the Prospectus and December 10, 2004 and the 10th day of
each month thereafter through February 10, 2005 with respect to the
amount designated "Deferred sales charge in second year" in the "Fee
Table" in the Prospectus.
7. The term "Mandatory Termination Date" shall mean the "Mandatory
Termination Date" for each Trust set forth in the "Summary of
Essential Financial Information" in the Prospectus.
8. The Trustee's annual compensation rate described in Section 7.04 shall
be that amount set forth under "Trustee's fee and operating expenses"
in the "Fee Table" in the Prospectus.
9. Section 2.01(b) shall be replaced in its entirety by the following:
"(b) From time to time following the Initial Date of Deposit, the
Depositor, or the Distribution Agent acting on behalf of Rollover Unitholders,
is hereby authorized, in its discretion, to assign, convey to and deposit with
the Trustee (i) additional Securities, duly endorsed in blank or accompanied by
all necessary instruments of assignment and transfer in proper form (or purchase
contracts relating to Contract Securities), and/or (ii) cash (or a Letter of
Credit in lieu of cash) with instructions to purchase additional Securities, in
an amount equal to the portion of the Unit Value of the Units created by such
deposit attributable to the Securities to be purchased pursuant to such
instructions. Such deposit of additional Securities or cash with instructions to
purchase additional Securities shall be made, in each case, pursuant to a
Supplemental Indenture accompanied by a legal opinion issued by legal counsel
satisfactory to the Depositor. Instructions to purchase additional Securities
shall be in writing, and shall specify the name of the Security, CUSIP number,
if any, aggregate amount, price or price range and date to be purchased. When
requested by the Trustee, the Depositor shall act as broker or agent to execute
purchases in accordance with such instructions; the Depositor shall be entitled
to compensation therefor in accordance with applicable law and regulations. The
Trustee shall have no liability for any loss or depreciation resulting from any
purchase made pursuant to the Depositor's instructions or made by the Depositor
as broker, except by reason of its own negligence, lack of good faith or willful
misconduct.
In connection with any deposit pursuant to this Section 2.01(b) in an
Equity and Treasury Trust, the Depositor shall be obligated to determine that
the maturity value of the Zero Coupon Obligations included in the deposit,
divided by the number of Units created by reason of the deposit, shall equal at
least $11.00.
The Depositor, or the Distribution Agent acting on behalf of Rollover
Unitholders, in each case, shall ensure that each deposit of additional
Securities pursuant to this Section shall be, as nearly as is practicable, in
the identical ratio as the Percentage Ratio for such Securities. With respect to
an Index Trust, such 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 Securities in the Trust most under-represented in
the Trust's portfolio in comparison to their weighting in the Trust's Target
Index. The Depositor shall deliver the additional Securities which were not
delivered concurrently with the deposit of additional Securities and which were
represented by Contract Securities within 10 calendar days after such deposit of
additional Securities (the "Additional Securities Delivery Period"). If a
contract to buy such Securities between the Depositor and seller is terminated
by the seller thereof for any reason beyond the control of the Depositor or if
for any other reason the Securities are not delivered to the Trust by the end of
the Additional Securities Delivery Period for such deposit, the Trustee shall
immediately draw on the Letter of Credit, if any, in its entirety, apply the
moneys in accordance with Section 2.01(d), and the Depositor shall forthwith
take the remedial action specified in Section 3.12. If the Depositor does not
take the action specified in Section 3.12 within 10 calendar days of the end of
the Additional Securities Delivery Period, the Trustee shall forthwith take the
action specified in Section 3.12."
11. Section 6.05(a) shall be replaced in its entirety by the following:
"(a) If the Depositor shall offer a subsequent series of a Trust (the "New
Series"), the Trustee shall, if so directed and at the time specified by the
Depositor, send a form of election to Unitholders (which may be included in the
notice sent to Unitholders specified in Section 9.02) whereby Unitholders, whose
redemption distribution would be in an amount sufficient to purchase at least
one Unit of the New Series, may elect to (i) have their Units redeemed through
an In Kind Distribution in the manner provided in Section 6.02, (ii) have the
Distribution Agent make a determination as to which Securities, if any, are
identical to securities contained in the New Series ("Common Securities"), (iii)
have the Distribution Agent sell Securities which are not Common Securities, and
(iv) have the Common Securities and the cash proceeds from the sale of other
Securities applied by the Distribution Agent to purchase Units of the New
Series, all as hereinafter provided. The Trustee shall honor properly completed
election forms returned to the Trustee, accompanied by any Certificate
evidencing Units tendered for redemption or a properly completed redemption
request with respect to uncertificated Units, by its close of business five days
prior to the Special Redemption Date.
All Units so tendered by a Unitholder (a "Rollover Unitholder") shall be
redeemed and canceled on the Special Redemption Date. Subject to payment by such
Rollover Unitholder of any tax or other governmental charges which may be
imposed thereon, such redemption is to be made through an In Kind Distribution
pursuant to Section 6.02 by distribution of cash and/or Securities to the
Distribution Agent on the Special Redemption Date (herein called the "Rollover
Distribution"). Any Securities that are made part of the Rollover Distribution
shall be valued for purposes of the Rollover Distribution as of the Special
Redemption Date.
The Distribution Agent shall determine, based on the value of a
Unitholder's Rollover Distribution, the maximum number of Units of the New
Series such Unitholder is able to purchase using such Rollover Distribution.
Thereafter, based upon the composition of the portfolio securities of the New
Series, the Distribution Agent will calculate the number of Common Securities to
be contributed to create the requisite number of Units of the New Series
specified above. All Securities, other than the Common Securities to be
contributed to the New Series, included in a Unitholder's Rollover Distribution
shall be sold by the Distribution Agent on the Special Redemption Date pursuant
to the Depositor's direction, and the Distribution Agent may employ the
Depositor as broker or agent in connection with such sales. For such brokerage
services, the Depositor shall be entitled to compensation at its customary
rates, provided however, that its compensation shall not exceed the amount
authorized by applicable laws and regulations. In the event the Depositor does
not direct the manner in which Securities are to be sold, the Securities shall
be sold in such manner as the Distribution Agent, in its sole discretion, shall
determine. The Distribution Agent shall have no responsibility for any loss or
depreciation incurred by reason of any sale made pursuant to this Section 6.05.
Upon each trade date for sales of non-Common Securities included in the
Rollover Unitholder's Rollover Distribution, the Distribution Agent shall, as
agent for such Rollover Unitholder, enter into a contract with the Depositor to
purchase from the Depositor Units of the New Series (if any), at the public
offering price for such Units on the Special Redemption Date or, if so
instructed by the Rollover Unitholder, such other date as may be permitted by
and described in the Prospectus. Such contract shall provide for purchase of the
maximum number of Units of the New Series whose purchase price is equal to or
less than the value of the Common Securities to be contributed and the cash
proceeds held by the Distribution Agent for the Unitholder on such day
(including therein the proceeds anticipated to be received in respect of
Securities traded on such day net of all brokerage fees, governmental charges
and any other expenses incurred in connection with such sale), to the extent
Units are available for purchase from the Depositor. In the event a sale of
non-Common Securities included in the Rollover Unitholder's Rollover
Distribution shall not be consummated in accordance with its terms, the
Distribution Agent shall apply the cash proceeds held for such Unitholder as of
the settlement date for the purchase of Units of the New Series to purchase the
maximum number of Units of the New Series which such cash balance will permit,
and the Depositor agrees that the settlement date for Units of the New Series
whose purchase was not consummated as a result of insufficient funds will be
extended until cash proceeds from the Rollover Distribution are available in a
sufficient amount to settle such purchase. If the Unitholder's Rollover
Distribution will produce insufficient cash proceeds to purchase all of the
Units of the New Series contracted for, the Depositor agrees that the contract
shall be rescinded with respect to the Units of the New Series as to which there
was a cash shortfall without any liability to the Rollover Unitholder or the
Distribution Agent. Any cash balance remaining after such purchase shall be
distributed within a reasonable time to the Rollover Unitholder. Units of the
New Series will be uncertificated unless and until the Rollover Unitholder
requests a certificate. Any cash held by the Distribution Agent shall be held in
a non-interest bearing account which will be of benefit to the Distribution
Agent in accordance with normal banking procedures. Neither the Trustee nor the
Distribution Agent shall have any responsibility or liability for loss or
depreciation resulting from any reinvestment made in accordance with this
Section 6.05, or for any failure to make such reinvestment in the event the
Depositor does not make Units available for purchase."
10. Section 6.02 of the Standard Terms and Conditions of Trust shall be
amended by adding the following to the end of such Section:
"Notwithstanding anything to the contrary herein, each Unitholder who holds
Units designated with a "Classic CUSIP" number will be deemed to have tendered
all Units then owned for redemption to the Trustee on the Special Redemption
Date set forth under "Summary of Essential Financial Information" in the
Prospectus and shall have such Units redeemed on such date as provided herein."
12. The second sentence of Section 7.01(e)(2)(E) shall be replaced in its
entirety by "Such Prospectus shall also contain disclosure concerning
the Depositor's responsibilities described in (D) above."
IN WITNESS WHEREOF, the undersigned have caused this Trust Agreement to be
executed; all as of the day, month and year first above written.
XXX XXXXXX FUNDS INC.
By /s/ XXXXXXXX XXXXXXXXXX
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Executive Director
XXX XXXXXX INVESTMENT ADVISORY CORP.
By /s/ XXXXXXXX XXXXXXXXXX
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Assistant Treasurer
THE BANK OF NEW YORK
By /s/ XXXXXXX X'XXXXX
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Vice President
SCHEDULE A TO TRUST AGREEMENT
SECURITIES INITIALLY DEPOSITED
IN
XXX XXXXXX FOCUS PORTFOLIOS, SERIES 397
[Incorporated herein by this reference and made a part hereof is each
"Portfolio" schedule as set forth in the Prospectus.]
