Exhibit 1.1
CLAYMORE SECURITIES DEFINED PORTFOLIOS,
SERIES 174
S&P 100 INDEX PORTFOLIO, SERIES 11
REFERENCE TRUST AGREEMENT
This Reference Trust Agreement dated as of April 7, 2004, between Claymore
Securities, Inc., as Depositor, and The Bank of New York, as Trustee, sets forth
certain provisions in full and incorporates other provisions by reference to the
document entitled "Standard Terms and Conditions of Trust For Series Formed on
or Subsequent to December 18, 2001" (herein called 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 and the Trustee 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
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 Schedule hereto have been deposited
in the Trust(s) under this Reference Trust Agreement as indicated on the
attached Schedule A.
(2) For the purposes of the definition of the term "Unit" in Article
I, it is hereby specified that the fractional undivided interest in and
ownership of a Trust is the amount described in Amendment No. 1 to the
Trust's Registration Statement (Registration No. 333-114011) as filed with
the Securities and Exchange Commission today. The fractional undivided
interest may (a) increase by the number of any additional Units issued
pursuant to Section 2.03, (b) increase or decrease in connection with an
adjustment to the number of Units pursuant to Section 2.03, or (c) decrease
by the number of Units redeemed pursuant to Section 5.02.
(3) The term "Deferred Sales Charge" shall mean the "deferred sales
fee" as described in the Prospectus.
(4) The terms "Income Account Record Date" and "Capital Account
Record Date" shall mean the dates set forth under "Essential
Information--Record Dates" in the Prospectus.
(5) The terms "Income Account Distribution Date" and "Capital
Account Distribution Date" shall mean the dates set forth under "Essential
Information--Distribution Dates" in the Prospectus.
(6) The term "Initial Date of Deposit" shall mean the date of this
Reference Trust Agreement as set forth above.
(7) Section 2.03 is hereby amended by adding the following sentence
as the third sentence of Section 2.03:
"Effective as of the Evaluation Time on April 7, 2004, in the event
that the aggregate value of Securities in the Trust has increased since the
evaluation on April 6, 2004, the Trustee shall issue such number of
additional Units to the Unitholder of outstanding Units as of the close of
business on April 6, 2004, that the price per Unit computed as of the
Evaluation Time on April 7, 2004, plus the maximum applicable sales charge
shall equal approximately $10 per Unit (based on the number of Units
outstanding as of said Evaluation Time, including the additional Units
issued pursuant to this sentence); in the event that the aggregate value of
Securities in the Trust Fund has decreased since the evaluation on April 6,
2004, there will be a reverse split of the outstanding Units, and said
Unitholder will surrender to the Trustee for cancellation such number of
Units, that the price per Unit computed as of the Evaluation Time on April
7, 2004, plus the maximum applicable sales charge shall equal approximately
$10 per Unit (based on the number of Units outstanding as of said
Evaluation Time, reflecting cancellation of Units pursuant to this
sentence)."
(8) The number of Units of the Trust(s) referred to in Section 2.03
shall be equal to the "Number of Units" in the Statement(s) of Financial
Condition in the Prospectus.
(9) The first paragraph of Section 5.01 is hereby amended and
restated to read as follows:
SECTION 5.01. TRUST EVALUATION. As of the Evaluation Time (a) on the
last Business Day of each year, (b) on the day on which any Unit is
tendered for redemption and (c) on any other day desired by the Trustee or
requested by the Depositor, the Trustee shall: Add (i) all moneys on
deposit in a Trust (excluding (1) cash, cash equivalents or Letters of
Credit deposited pursuant to Section 2.01 hereof for the purchase of
Contract Securities, unless such cash or Letters of Credit have been
deposited in the Interest and Principal Accounts because of failure to
apply such moneys to the purchase of Contract Securities pursuant to the
provisions of Sections 2.01, 3.03 and 3.04 hereof and (2) moneys credited
to the Reserve Account pursuant to Section 3.05 hereof), plus (ii) the
aggregate Evaluation of all Securities (including Contract Securities and
Reinvestment Securities) on deposit in such Trust as is determined by the
Evaluator (such evaluations shall take into account and itemize separately
(i) the cash on hand in the Trust or moneys in the process of being
collected from matured interest coupons or bonds matured or called for
redemption prior to maturity, (ii) the value of each issue of the
Securities in the Trust on the bid side of the market as determined by the
Evaluator pursuant to Section 4.01, and (iii) interest accrued thereon not
subject to collection and distribution). For each such Evaluation there
shall be deducted from the sum of the above (i) amounts representing any
applicable taxes or governmental charges payable out of the respective
Trust and for which no deductions shall have previously been made for the
purpose of addition to the Reserve Account, (ii) amounts representing
estimated accrued fees of the Trust and expenses of such Trust including
but not limited to unpaid fees and expenses of the Trustee, the Evaluator,
the Supervisor, the Depositor and bond counsel, in each case as reported by
the Trustee to the Evaluator on or prior to the date of evaluation, (iii)
any moneys identified by the Trustee, as of the date of the Evaluation, as
held for distribution to Unitholders of record as of a Record Date or for
payment of the Redemption Value of Units tendered prior to such date and
(iv) unpaid organization costs in the estimated amount per Unit set forth
in the Prospectus. The resulting figure is herein called a "TRUST FUND
EVALUATION." The value of the pro rata share of each Unit of the respective
Trust determined on the basis of any such evaluation shall be referred to
herein as the "UNIT VALUE."
(10) For the purposes of Section 6.01(g)(i), the liquidation amount
shall be 20% of the total value of all Securities deposited in the Trust(s)
during a Trust's initial offering period at the time of each such deposit.
(11) Article III is hereby amended by adding the following section:
SECTION 3.23. BOOKKEEPING AND ADMINISTRATIVE EXPENSES. If so provided
in the Prospectus, as compensation for providing bookkeeping and other
administrative services of a character described in Section 26(a)(2)(C) of
the Investment Company Act of 1940 to the extent such services are in
addition to, and do not duplicate, the services to be provided hereunder by
the Trustee or the Depositor for providing supervisory services, the
Depositor shall receive at the times specified in Section 3.05, against a
statement or statements therefor submitted to the Trustee an aggregate
annual fee in an amount which shall not exceed that amount set forth in the
Prospectus, calculated as specified in Section 3.05, but in no event shall
such compensation, when combined with all compensation
received from other series of the Trust or other unit investment trusts
sponsored by the Depositor or its affiliates for providing such bookkeeping
and administrative services in any calendar year exceed the aggregate cost
to the Depositor for providing such services to such unit investment
trusts. Such compensation may, from time to time, be adjusted provided that
the total adjustment upward does not, at the time of such adjustment,
exceed the percentage of the total increase, during the period from the
Trust Agreement to the date of any such increase, in consumer prices for
services as measured by the United States Department of Labor Consumer
Price Index entitled "All Services Less Rent of Shelter" or similar index
as described under Section 3.18. The consent or concurrence of any
Unitholder hereunder shall not be required for any such adjustment or
increase. Such compensations shall be paid by the Trustee, upon receipt of
invoice therefor from the Depositor, upon which, as to the cost incurred by
the Depositor of providing services hereunder the Trustee may rely, and
shall be charged against the Income and Capital Accounts as specified in
Section 3.05. The Trustee shall have no liability to any Unitholder or
other person for any payment made in good faith pursuant to this Section.
If the cash balance in the Income and Capital Accounts shall be
insufficient to provide for amounts payable pursuant to this Section 3.23,
the Trustee shall have the power to sell (1) Securities from the current
list of Securities designated to be sold pursuant to Section 5.02 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 3.23.
Any moneys payable to the Depositor pursuant to this Section 3.23
shall be secured by a prior lien on the Trust except that no such lien
shall be prior to any lien in favor of the Trustee under the provisions of
Section 6.04.
(12) The phrases "supervisory services," "supervisory portfolio
services" and "portfolio supervisory services" in Sections 3.18 are hereby
replaced with the phrase "portfolio supervisory services and bookkeeping
and administrative expenses."
(13) Section 7.05 is hereby amended and replaced in its entirety with
the following:
SECTION 7.05. COMPENSATION. The Depositor shall receive at the times
set forth in Sections 3.05, 3.18, 3.23 and 4.03 as compensation for
performing portfolio supervisory services, bookkeeping and administrative
expenses and evaluation services, such amount and for such periods as
specified the Prospectus and/or Reference Trust Agreement. The compensation
for providing portfolio supervisory services, bookkeeping and
administrative expenses and evaluation services 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 Depositor for services rendered to all
series of Claymore Securities Defined Portfolios 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, or the Depositor, by amounts not exceeding the
proportionate increase during the period from the date of such Prospectus
and/or 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 Depositor
pursuant to Sections 3.05, 3.18 and 3.23 and 4.03 is found to be an
improper charge against a Trust, the Depositor 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
Depositor and such judgment or order shall not be effectively stayed or a
final settlement is established in which the Depositor agrees to reimburse
the Trust for amounts paid to the Depositor pursuant to this Section 7.05.
(14) The first two sentences of Section 3.22 are hereby amended and
replaced with the following:
SECTION 3.22. CREATION AND DEVELOPMENT FEE. If the Prospectus related
to a Trust specifies a creation and development fee, the Trustee shall, on
or immediately after the end of the initial offering period, withdraw from
the Capital Account, an amount equal to the unpaid creation and development
fee as of such date and credit such amount to a special non-Trust account
designated by the Depositor out of which the creation and development fee
will be distributed to the Depositor (the "Creation and Development
Account"). The creation and development fee is the per unit amount
specified in the Prospectus for the Trust.
(15) Article III is hereby amended by adding the following section:
SECTION 3.24. LICENSE FEES. If so provided in the Prospectus, the
Depositor may enter into a Licensing Agreement (the "AGREEMENT") with a
licensor (the "LICENSOR") described in the Prospectus in which the
Trust(s), as consideration for the licenses granted by the Licensor for the
right to use its trademarks and trade names, intellectual property rights
or for the use of databases and research owned by the Licensor, will pay a
fee set forth in the Agreement to the applicable Licensor or the Depositor
to reimburse the Depositor for payment of the expenses.
If the Agreement provides for an annual license fee computed in whole
or part by reference to the average daily net asset value of the Trust
assets, for purpose of calculating the accrual of estimated expenses such
annual fee shall accrue at a daily rate and the Trustee is authorized to
compute an estimated license fee payment (i) until the Depositor has
informed the Trustee that there will be no further deposits of additional
Securities, by reference to an estimate of the average daily net asset
value of the Trust assets which the Depositor shall provide the Trustee,
(ii) thereafter and during the calendar quarter in which the last business
day of the period described in clause (i) occurs, by reference to the net
asset value of the Trust assets as of such last business day,
and (iii) during each subsequent calendar quarter, by reference to the net
asset value of the Trust assets as of the last business day of the
preceding calendar quarter. The Trustee shall adjust the net asset value
(Trust Fund Evaluation) as of the dates specified in the preceding sentence
to account for any variation between accrual of estimated license fee and
the license fee payable pursuant to the Agreement, but such adjustment
shall not affect calculations made prior thereto and no adjustment shall be
made in respect thereof.
(16) Section 2.05 (b) is replaced in its entirety with the following:
(b) Additional Securities deposited during the 90 days following the
initial deposit made pursuant to Section 2.01 hereof shall maintain as
closely as practicable the Original Proportionate Relationship, except as
provided in this Section 2.05(b). 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 Depositor may (A) deposit (or instruct the Trustee to
purchase) Securities of another Original Issue or (B) deposit cash or a
letter of credit with instructions to acquire the Securities of such
Original Issue when they become available.
(17) Section 4.01(b) is replaced in its entirety by the following:
(b) During the initial offering period such Evaluation shall be made
in the following manner: if the Securities are listed on a national
securities exchange or foreign securities exchange, such Evaluation shall
generally be based on the last available sale price on or immediately prior
to the Evaluation Time on the exchange which is the principal market
therefor, which shall be deemed to be the New York Stock Exchange if the
Securities are listed thereon (unless the Evaluator deems such price
inappropriate as a basis for evaluation) or, if there is no such available
sale price on such exchange, at the last available offer prices of the
Securities. Securities not listed on the New York Stock Exchange but
principally traded on the Nasdaq National Market System will be valued at
Nasdaq's official close price. If the Securities are not so listed or, if
so listed, the principal market therefor is other than on such exchange or
there is no such available sale price on such exchange, such Evaluation
shall generally be based on the following methods or any combination
thereof whichever the Evaluator deems appropriate: (i) on the basis of the
current offer price for comparable securities (unless the Evaluator deems
such price inappropriate as a basis for evaluation), (ii) by determining
the valuation of the Securities on the offer side of the market by
appraisal or (iii) by any combination of the above. If the
Trust holds Securities denominated in a currency other than U.S. dollars,
the Evaluation of such Security shall be converted to U.S. dollars based on
current offering side exchange rates (unless the Evaluator deems such
prices inappropriate as a basis for valuation). The Evaluator shall add to
the Evaluation of each Security which is traded principally on a foreign
securities exchange the amount of any commissions and relevant taxes
associated with the acquisition of the Security. As used herein, the
closing sale price is deemed to mean the most recent closing sale price on
the relevant securities exchange immediately prior to the Evaluation Time.
For each Evaluation, the Evaluator shall also confirm and furnish to the
Trustee and the Depositor, on the basis of the information furnished to the
Evaluator by the Trustee as to the value of all Trust assets other than
Securities, the calculation of the Trust Fund Evaluation to be computed
pursuant to Section 5.01.
(18) Section 4.01(c) is replaced in its entirety by the following:
(c) For purposes of the Trust Fund Evaluations required by Section
5.01 in determining Redemption Value and Unit Value and for secondary
market purchases, Evaluation of the Securities shall be made in the manner
described in 4.01(b), on the basis of the last available bid prices of the
Securities (rather than offer prices), except in those cases in which the
Securities are listed on a national securities exchange or a foreign
securities exchange and the last available sale prices are utilized. In
addition, with respect to each Security which is traded principally on a
foreign securities exchange, the Evaluator shall (i) not make the addition
specified in the fourth sentence of Section 4.01(b) and (ii) shall reduce
the Evaluation of each Security by the amount of any liquidation costs
(other than brokerage costs incurred on any national securities exchange)
and any capital gains or other taxes which would be incurred by the Trust
upon the sale of such Security, such taxes being computed as if the
Security were sold on the date of the Evaluation.
(19) Section 9.05 is hereby revised to read as follows:
SECTION 9.05. WRITTEN NOTICE. Any notice, demand, direction or
instruction to be given to the Depositor, Evaluator or Supervisor hereunder
shall be in writing and shall be duly given if mailed or delivered to the
Depositor, 000 Xxxxx Xxxx Xxxx, Xxxxxxx, Xxxxxxxx 00000, or at such other
address as shall be specified by the Depositor to the other parties hereto
in writing.
(20) The second paragraph of Section 6.02 is replaced in its entirety
as follows:
An audit of the accounts of each Trust shall not be conducted unless
the Depositor determines that such an audit is required. In the event that
the Depositor determines that an audit is required, the accounts of each
Trust shall be audited not less than annually by independent public
accountants designated from time to time by the Depositor and reports of
such accountants shall be furnished by the Trustee, upon request, to
Unitholders. The Trustee, however, in connection with any such audits shall
not be obligated to use Trust assets to pay for such audits in excess of
the amounts, if any, indicated in the Prospectus
relating to such Trust. The Trustee shall maintain and provide, upon the
request of a Unitholder or the Depositor, the Unitholders' or the
Unitholder's designated representative with the cost basis of the
Securities represented by the Unitholder's Units.
(21) The first paragraph of Section 6.04 is replaced in its entirety
as follows:
SECTION 6.04. COMPENSATION. Subject to the provisions of Section 3.14
hereof, the Trustee shall receive at the times set forth in Section 3.05,
as compensation for performing ordinary normal recurring services under
this Indenture, an amount calculated at the annual compensation rate stated
in the Prospectus. The Trustee shall charge a pro rated portion of its
annual fee at the times specified in Section 3.05, which pro rated portion
shall be calculated on the basis of the largest number of Units in such
Trust at any time during the primary offering period. After the primary
offering period has terminated, the fee shall accrue daily and be based on
the number of Units outstanding on the first business day of each calendar
year in which the fee is calculated or the number of Units outstanding at
the end of the primary offering period, as appropriate. The Trustee may
from time to time adjust its compensation as set forth above, PROVIDED that
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 Depositor shall be required. Such
compensation shall be charged by the Trustee against the Income and Capital
Accounts of each Trust; PROVIDED, HOWEVER, that such compensation shall be
deemed to provide only for the usual, normal and proper functions
undertaken as Trustee pursuant to this Indenture.
(22) Section 2.05(a)(3) is hereby amended by adding the following
after the last sentence:
Notwithstanding the foregoing, if the Trust involved seeks to consist
of Securities included in a securities index, deposits of additional
securities shall consist of Securities included in the applicable index as
determined by the Depositor or its designee.
(23) Section 3.05(b)(i) is hereby amended by adding the following
after the last sentence:
Notwithstanding anything to the contrary contained in this paragraph,
if a Trust has elected to be treated as a "regulated investment company" as
defined in the Internal Revenue Code and the Trust's portfolio is based
upon an index, the Depositor or its designee may, but is not obligated to,
direct the investment of any amounts held in the Capital Account that have
not previously been used to pay for the redemption of Units tendered to a
Trust into any Securities included in the applicable index.
(24) Section 3.05 is hereby amended by adding the following as
subsection (c):
(f) Notwithstanding the foregoing, if a Trust has elected to be
treated as a "regulated investment company" as defined in the Internal
Revenue Code, the Trustee may make such additional distributions to
Unitholders as shall be determined by the Depositor or such agent as the
Depositor shall designate to be necessary or desirable to maintain the
status of each Trust as a regulated investment company or to avoid
imposition of any income or excise taxes on undistributed income of the
Trust. The Trustee shall be authorized to rely conclusively upon the
direction, and shall have no duty to make any additional distributions from
a Trust in the absence of such direction. The Trustee shall have no
liability for any tax or other liability incurred by reason of action or
inaction resulting from such direction. The fees of such agent designated
by the Depositor shall be an expense of the Trust reimbursable to the
Trustee in accordance with Section 6.04.
(25) Subsection 3.07 is hereby amended by adding the following as
subsection (c):
(b) If a Trust has elected to be treated as a "regulated investment
company" as defined in the Internal Revenue Code, and not withstanding
anything to the contrary in 3.07(a) and (b), the Depositor by written
notice may direct the Trustee to sell Securities at such price and time and
in such manner as shall be deemed appropriate by the Depositor if the
Depositor shall have determined that any one or more of the following
conditions exist:
(1) that there has been a default in the payment of principal of or
interest on any outstanding debt obligations of the issuer of such
Securities;
(2) that the price of any such Security has declined to such an
extent, as a result of adverse issuer credit factors, so that in the
opinion of the Depositor the retention of such Securities would be
detrimental to the interest of the Unitholders;
(3) that such sale is necessary or advisable (i) to maintain the
qualification of the Trust as a regulated investment company or (ii) to
provide funds to make any distribution for a taxable year in order to avoid
imposition of any income or excise taxes on undistributed income in the
Trust;
(4) that the Security has been removed from the applicable index; or
(5) the Depositor or its designee determines that such sale is
appropriate.
Upon receipt of such direction from the Depositor, the Trustee shall
proceed to sell the specified Securities in such manner as the Depositor or
its designee shall direct. If the Trust's portfolio is based upon an index,
the Depositor or its designee may enter into contracts on behalf of the
Trust to reinvest the proceeds of the sale of any Security sold pursuant to
this section, Section 5.02 or otherwise pursuant to this Indenture into any
Security included in the applicable index. Without limiting the generality
of the foregoing, in determining whether such reinvestment is practicable,
the Depositor may,
but is not obligated to, specifically consider the ability of the Trust to
reinvest such proceeds into round lots of a Security. Contracts for sale or
purchase of Securities shall be made by the Depositor on behalf of the
Trust or by such agent as the Depositor shall designate. The Depositor or
its designee shall provide the Trustee such information as the Trustee may
require in order to settle the transactions. The Trustee shall not be
liable or responsible in any way for depreciation or loss incurred by
reason of any sale or purchase made pursuant to any such direction or by
reason of the failure of the Depositor to give any such direction, and in
the absence of such direction the Trustee shall have no duty to sell or
purchase any Securities under this Section 3.07(c) and shall have no
responsibility for the composition of each Trust portfolio. The Depositor
shall not be liable for errors of judgment in directing or failing to
direct the Trustee pursuant to this Section 3.07(c). This provision,
however, shall not protect the Depositor against any liability for 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 Depositor or its designated agent shall make such reviews of each
Trust portfolio as shall be necessary to maintain qualification of a
particular Trust as a regulated investment company and the Depositor shall
be authorized to rely conclusively upon such reviews in directing sales
pursuant to paragraph (3) of this section.
(26) Section 3.11 is hereby revised to read as follows:
SECTION 3.11. REORGANIZATION AND SIMILAR EVENTS. (a) 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, or to exchange securities, for Trust
Securities, the Trustee shall reject such offer. However, should any
issuance, 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, unless the Depositor
advises the Trustee to keep such securities or property. The Trustee also
may accept a tender offer for cash if the Supervisor determines that the
sale or tender is in the best interest of the Unitholders. The cash
received in such exchange and cash proceeds of any such sale or tender
offer shall be distributed to Unitholders on the next Income Distribution
Date in the manner set forth in Section 3.05 regarding distributions from
the Capital Account. This section shall apply, but its application shall
not be limited, to public tender offers, mergers, acquisitions,
reorganizations and recapitalizations. Unless the Depositor directs 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 3.06. Except as provided in Article VI, neither the
Depositor nor the Trustee shall not be liable or responsible in any way for
depreciation or loss incurred by reason of any such sale. Neither the
Depositor nor the Trustee shall be liable to any person for any action or
failure to take action pursuant to the terms of this Section 3.11 other
than failure to notify the Depositor.
(b) Notwithstanding the foregoing, if a Trust has elected to be
treated as a "regulated investment company" as defined in the Internal
Revenue Code, 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, or to
exchange securities, for Trust Securities, the Trustee shall reject such
offer. However, should any issuance, exchange or substitution be effected
notwithstanding such rejection or without an initial offer, any securities,
cash and/or property received shall be deposited hereunder and shall be
promptly sold, if securities or property, by the Trustee pursuant to the
Depositor's direction, unless the Depositor advises the Trustee to keep
such securities or property; PROVIDED, HOWEVER, if the Trust's portfolio is
based upon an index, and such securities are components of the applicable
index, the Depositor may advise the Trustee to keep such securities. The
cash received in such exchange and cash proceeds of any such sales shall,
as the Depositor or its designee shall direct, be (1) reinvested into any
Securities included in the applicable index, if the Trust's portfolio is
based upon an index, or (2) distributed to Unitholders on the next Capital
Account Distribution Date in the manner set forth in this indenture
regarding distributions from the Capital Account. Without limiting the
generality of the foregoing, in determining whether such reinvestment is
practicable, the Depositor may, but is not obligated to, specifically
consider the ability of a Trust to reinvest such proceeds into round lots
of a Security. Except as provided in Article VI, the Trustee shall not be
liable or responsible in any way for depreciation or loss incurred by
reason of any such rejection or sale.
(27) Subsections (a) through (e) of Section 3.17 are hereby restated
to read as follows:
(a) The Replacement Securities shall be Equity Securities as
originally selected for deposit in that series of the Trust.
Notwithstanding the foregoing, if a Trust has elected to be treated as a
"regulated investment company," as defined in the Internal Revenue Code and
the Trust's portfolio is based upon an index, the Replacement Securities
shall be a component of the applicable index.
(b) The purchase of the Replacement Securities shall not adversely
affect the federal income tax status of the Trust.
(c) The purchase price of the Replacement Securities shall not
exceed the total amount of cash deposited, or the amount available under
the Letter of Credit deposited, by the Depositor at the time of the deposit
of the Failed Contract Security.
(d) The written instructions of the Depositor shall (i) identify the
Replacement Securities to be purchased, (ii) state that the contract to
purchase, if any, to be entered into by the Trustee is satisfactory in form
and substance and (iii) state that the foregoing conditions of clauses (a)
through (d) have been satisfied with respect to the Replacement Securities.
(e) The Replacement Securities shall be purchased within 30 days
after the deposit of the Failed Contract Security.
(f) Notwithstanding the foregoing clauses (c) and (d), if a Trust
has elected to be treated as a "regulated investment company," as defined
in the Internal Revenue Code, the Depositor shall furnish a notice to the
Trustee in respect to the Replacement Security purchased or to be purchased
that shall (1) identify the Replacement Securities, (2) state that the
contract to purchase, if any, entered into by the Depositor is satisfactory
in form and substance and (3) state that the foregoing conditions of clause
(a) have been satisfied with respect to the Replacement Securities.
(28) Article III is hereby amended by adding the following
Section 3.25:
SECTION 3.25. REGULATED INVESTMENT COMPANY ELECTION. If so provided in
the Prospectus for a Trust, such Trust elects to be treated and to qualify
as a "regulated investment company" as defined in the Internal Revenue
Code, and the Trustee is hereby directed to make such elections, including
any appropriate election to be taxed as a corporation, as shall be
necessary to effect such qualification.
(29) Section 5.02 is hereby amended by adding the following after the
last sentence:
If a Trust has elected to be taxed as a "regulated investment company"
and such Trust's portfolio is based upon an index, and if Securities in the
Trust are sold for the payment of the Redemption Price and there are excess
proceeds remaining after meeting redemption requests, the Depositor or its
designee may, but is not obligated to, direct the investment of such excess
proceeds into any Securities included in the applicable index.
(30) Section 9.02 is hereby amended by additng the following after
the last sentence:
If a Trust has elected to be treated as a "regulated investment
company" as defined in the Internal Revenue Code, and if the Trust involved
seeks to consist of securities included in a securities index, then
notwithstanding anything to the contrary herein, if at any time the index
shall no longer be compiled, maintained or made available, the Depositor
may (i) direct that the Trust created hereby continue to be operated
hereunder utilizing the components of the index as existed on the last date
on which the index components were available to a Trust or (ii) direct the
Trustee to terminate this Indenture and the Trust created hereby and
liquidate the Trust in such manner as the Depositor shall direct.
(31) Section 9.01 is hereby amended by adding the following as
subsection (d):
(d) If a Trust has elected to be treated as a "regulated investment
company" as defined in the Internal Revenue Code and notwithstanding
Section 9.01(a), this Indenture may be amended from time to time by the
Depositor and the Trustee without the consent of any of the Unitholders (1)
to cure any ambiguity or to correct or supplement any provisions contained
herein which may be defective or inconsistent with any other provision
contained herein; (2) to change any provision hereof as may be required by
the
Securities and Exchange Commission or any successor governmental agency
exercising similar authority; (3) to make such amendments as may be
necessary for each Trust to continue to qualify as a regulated investment
company for federal income tax purposes; or (4) to make such other
provisions in regard to matters or questions arising hereunder as shall not
adversely affect the interest of the Unitholders (as determined in good
faith by the Depositor and the Trustee). This Indenture may also be amended
from time to time by the Depositor and the Trustee (or the performance of
any of the provisions of this Indenture may be waived) with the consent of
holders of Units representing 66-2/3% of the Units at the time outstanding
under the Trust Indenture of the individual Trust or Trusts affected for
the purpose of adding any provisions of this Indenture or of materially
modifying in any manner the rights of the holders of Units of such Trust or
Trusts; PROVIDED, HOWEVER, that in no event may any amendment be made which
would (1) alter the rights to the Unitholders as against each other, (2)
provide the Trustee with the power to engage in business or investment
activities other than as specifically provided in this Indenture or (3)
adversely affect the characterization of a Trust as a regulated investment
company for federal income tax purposes; PROVIDED, FURTHER, that the
consent of 100% of the Unitholders of any individual Trust is required to
amend this Indenture (1) to reduce the aforesaid percentage of Units the
holders of which are required to consent to certain amendments and (2) to
reduce the interest in such Trust represented by any Units of such Trust.
Promptly after the execution of any amendment requiring the consent of
the Unitholders or any of any other amendment if directed by the Depositor,
the Trustee shall furnish written notification of the substance of such
amendment to each Unitholder then of record affected thereby.
It shall not be necessary for the consent of Unitholders under this
Section 9.01 or under Section 9.02 to approve the particular form of any
proposed amendment, but it shall be sufficient if such consent shall
approve the substance thereof. The manner of obtaining such consents and of
evidencing the authorization of the execution thereof by Unitholders shall
be subject to such reasonable regulations as the Trustee may prescribe.
(32) Section 3.01 is hereby amended by as follows:
SECTION 3.01. INITIAL COSTS. Subject to reimbursement as hereinafter
provided, the cost of organizing the Trust and sale of the Trust Units
shall be borne by the Depositor, PROVIDED, HOWEVER, that the liability on
the part of the Depositor 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 2.01. Upon notification
from the Depositor that the primary offering period is concluded, or after
six months, if earlier, the Trustee shall withdraw from the Account or
Accounts specified in the Prospectus or, if no Account is therein
specified, from the Capital Account as further set forth in Section 3.03,
and pay to the Depositor the Depositor's reimbursable expenses of
organizing the Trust and sale of the Trust Units in an amount certified to
the Trustee by the Depositor 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 Capital Account is
insufficient to make such withdrawal, the Trustee shall, as directed by the
Depositor, sell Securities identified by the Depositor, or distribute to
the Depositor Securities having a value, as determined under Section 4.01
as of the date of distribution, sufficient for such reimbursement.
Securities sold or distributed to the Depositor to reimburse the Depositor
pursuant to this Section shall be sold or distributed by the Trustee to the
extent practicable, in the percentage ratio then existing (unless the Trust
elects to be treated as a "regulated investment company" as defined in the
United States Internal Revenue Code (the "INTERNAL REVENUE CODE"), in which
case sales or distributions by the Trustee shall be made in accordance with
the instructions of the Depositor or its designees). 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 Depositor shall deliver to the Trustee any cash
identified in the Statement of Financial Condition of the Trust included in
the Prospectus not later than the First Settlement Date and the Depositor's
obligation to make such delivery shall be secured by the Letter of Credit
deposited pursuant to Section 2.01. Any cash which the Depositor has
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
Depositor otherwise directs, 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 of 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 5.02. As used herein, the Depositor's 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, Securities and Exchange Commission and
state blue sky registration fees, the cost of the initial 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.
This Reference Trust Agreement shall be deemed effective when executed and
delivered by the Sponsor and the Trustee.
IN WITNESS WHEREOF, the parties hereto have caused this Reference Trust
Agreement to be duly executed.
CLAYMORE SECURITIES, INC., DEPOSITOR
By /s/ Xxxxxxxx Xxxxxxx
--------------------------------------
Senior Managing Director and
General Counsel
THE BANK OF NEW YORK, TRUSTEE
By /s/ Xxxxxx Xxxxxxxx
--------------------------------------
Vice President
SCHEDULE A
SECURITIES INITIALLY DEPOSITED
CLAYMORE SECURITIES DEFINED PORTFOLIOS, SERIES 174
(Note: Incorporated herein and made a part hereof are the "Trust
Portfolio(s)" as set forth in the Prospectus.)
