EXHIBIT 1.1
XXX XXXXXX UNIT TRUSTS, MUNICIPAL SERIES 718
TRUST AGREEMENT
Dated: September 9, 2008
This Trust Agreement among Xxx Xxxxxx Funds Inc., as Depositor, The
Bank of New York Mellon, as Trustee, Standard & Poor's Securities Evaluations,
Inc., as Evaluator, and Xxx Xxxxxx Asset Management, 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 Municipal Series, Effective for Unit Investment Trusts Established On
and After May 3, 2001 (Including Xxx Xxxxxx Focus Portfolios, Municipal Series
347 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, Evaluator 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 Bonds listed in the Schedules hereto have been deposited in
trust under this Trust Agreement.
2. The fractional undivided interest in and ownership of a Trust
represented by each Unit thereof is a fractional amount, the numerator of which
is one and the denominator of which is the amount set forth under "Summary of
Essential Financial Information--General Information--Number of Units" in the
Prospectus Part I for such Trust.
3. The aggregate number of Units described in Section 2.03(a) for a
Trust is that number of Units set forth under "Summary of Essential Financial
Information--General Information--Number of Units" in the Prospectus Part I for
such Trust.
4. The term "First Settlement Date" shall mean the date set forth in
footnote 2 under "Summary of Essential Financial Information" in the Prospectus
Part I for a Trust.
5. The term "Monthly Distribution Date" shall mean the "Distribution
Dates" set forth under "Summary of Essential Financial Information--Estimated
Distributions--Monthly Distributions" in the Prospectus Part I for a Trust.
6. The term "Monthly Record Date" shall mean the "Record Dates" set
forth under "Summary of Essential Financial Information--Estimated
Distributions--Monthly Distributions" in the Prospectus Part I for a Trust.
7. The term "Semi-Annual Distribution Date" shall mean the
"Distribution Dates" set forth under "Summary of Essential Financial
Information--Estimated Distributions--Semi-Annual Distributions" in the
Prospectus Part I for a Trust.
8. The term "Semi-Annual Record Date" shall mean the "Record Dates" set
forth under "Summary of Essential Financial Information--Estimated
Distributions--Semi-Annual Distributions" in the Prospectus Part I for a Trust.
9. The term "Evaluator" shall mean Standard & Poor's Securities
Evaluations, Inc. and its successors in interest, or any successor evaluator
appointed as provided in the Standard Terms and Conditions of Trust.
10. The term "Supervisor" shall mean Xxx Xxxxxx Asset Management and
its successors in interest or any successor supervisor appointed as provided in
the Standard Terms and Conditions of Trust.
11. The term "Trustee" shall mean The Bank of New York Mellon and its
successors in interest or any successor trustee appointed as provided in the
Standard Terms and Conditions of Trust.
12. Section 3.05 is amended by adding the following subsection
immediately after Section 3.05(f):
"(g) Notwithstanding any of the previous provisions, if a Trust has
elected to be taxed as a regulated investment company under the United
States Internal Revenue Code of 1986, as amended, the Trustee is
directed to make any distribution or take any action necessary in order
to maintain the qualification of the Trust as a regulated investment
company for federal income tax purposes or to provide funds to make any
distribution for a taxable year in order to avoid imposition of any
income or excise taxes on the Trust or on undistributed income in the
Trust."
13. The following shall be added to Section 3.07 of the Standard Terms
and Conditions of Trust immediately following Section 3.07(h):
"(i) if the Trust has elected to be taxed as a "regulated investment
company" as defined in the United States Internal Revenue Code of 1986,
as amended, that such sale is necessary or advisable (a) to maintain
the qualification of the Trust as a regulated investment company or (b)
to provide funds to make any distribution for a taxable year in order
to avoid imposition of any income or excise taxes on the Trust or on
undistributed income in the Trust.
In the event a Security is sold pursuant to any provisions of this
Section 3.07 as a direct result of serious adverse credit factors
affecting the issuer of such Security and the Trust has elected to be
taxed as a "regulated investment company" as defined in the United
States Internal Revenue Code of 1986, as amended, then the Depositor
may, but is not obligated, to direct the reinvestment of the proceeds
of the sale of such Security in any other securities which meet the
criteria necessary for inclusion in such Trust on the Initial Date of
Deposit."
14. With respect to an Investment Grade Municipal Trust and a
California Investment Grade Trust only, Section 3.14(a) and (b) shall be
replaced in their entirety with the following:
"(a) The Replacement Bonds (i) shall be bonds issued by states or
territories of the United States or political subdivisions thereof
which shall have the benefit of an exemption from United States federal
taxation of interest to an extent equal to or greater than that of the
Bonds they replace and, in the case of a State Trust, shall have the
benefit of an exemption from state taxation to an extent equal to or
greater than that of the Bonds they replace, (ii) shall have a fixed
maturity date (whether or not entitled to the benefits of any sinking,
redemption, purchase or similar fund) within the maturity range, if
any, specified in the Prospectus for the Trust, (iii) must be purchased
at a price that results in a current return as of the Date of Deposit
at least equal to that of the Failed Contract Bonds they replace, (iv)
must be purchased at a price that results in a yield to maturity of the
Date of Deposit at least equal to that of the Failed Contract Bonds
they replace and (v) shall be payable as to principal and interest in
United States currency.
(b) Each Replacement Bond shall have a rating by Standard & Poor's, a
division of The XxXxxx-Xxxx Companies, Inc. or Xxxxx'x Investors
Service, Inc. at least equal to the minimum rating specified in the
Prospectus for inclusion in the related Trust on the Date of Deposit or
be comparably rated by any other nationally recognized credit rating
service rating debt obligations which shall be designated by the
Depositor and shall be satisfactory to the Trustee."
15. The paragraph immediately following Section 3.14(e) of the Standard
Terms and Conditions of Trust shall be replaced in its entirety with the
following:
"Notwithstanding anything to the contrary in this Section 3.14, no
substitution of Replacement Bonds will be made if such substitution
will adversely affect the federal income tax status of the related
Trust."
16. The Standard Terms and Conditions of Trust shall be amended to
include the following section:
"Section 3.18. Regulated Investment Company Election. Regulated
Investment Company Election. If the Prospectus for a Trust states that
such Trust intends to elect to be treated and to qualify as a
"regulated investment company" as defined in the United States Internal
Revenue Code of 1986, as amended, the Trustee is hereby directed to
make such elections and take all actions, including any appropriate
election to be taxed as a corporation, as shall be necessary to effect
such qualification or to provide funds to make any distribution for a
taxable year in order to avoid imposition of any income or excise tax
on the Trust or on undistributed income in the Trust. The Trustee shall
make such reviews of each Trust portfolio as shall be necessary to
maintain qualification of a particular Trust as regulated investment
company and to avoid imposition of tax on a Trust or undistributed
income in a Trust, and the Depositor and Supervisor shall be authorized
to rely conclusively upon such reviews."
17. For purposes of Section 5.01(a), "Business Day" shall mean days the
New York Stock Exchange is open for business.
18. Section 6.02 is amended by adding the following to the end of the
section:
"Notwithstanding anything to the foregoing, in connection with any
redemption by a Unitholder of 1,000 or more Units or Units having an
aggregate Redemption Price of $1,000,000 or more, the Trustee may in
its discretion, and shall when so instructed by the Depositor, satisfy
such redemption through a distribution of such Unitholder's pro rata
portion of each Bond then held by the Trust. Such tendering Unitholder
will receive his pro rata number of Bonds comprising the portfolio of
such Trust, cash from the Interest Account representing interest and
cash from the Principal Account equal to any balance to be paid on such
redemption, including accrued interest. Such pro rata share of each
Bond and the related cash to which such tendering Unitholder is
entitled is referred to herein as an "In Kind Distribution." An In Kind
Distribution will be made by the Trustee through the distribution of
each of the Bonds in book-entry form to the account of the Unitholder's
bank or broker-dealer at Depository Trust Company.
If funds in the Interest or Principal Account are insufficient to cover
the required cash distribution to the tendering Unitholder, the Trustee
may sell Bonds according to the criteria discussed herein."
19. The Trustee's annual compensation as set forth under Section 7.04,
for each distribution plan shall be that amount set forth under the section
entitled "Summary of Essential Financial Information--Expenses--Trustee's Fee"
in the Prospectus Part I for a Trust. In addition, the last sentence of the
first paragraph of Section 7.04 is hereby deleted.
20. Section 9.01 of the Standard Terms and Conditions of Trust shall be
replaced in its entirety with the following:
"Section 9.01. Amendments. (a) This Indenture may be amended from time
to time by the Depositor and Trustee or their respective successors,
without the consent of any of the Unitholders, (i) 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, (ii) to make such other provision in regard to
matters or questions arising hereunder as shall not materially
adversely affect the interests of the Unitholders or (iii) to make such
amendments as may be necessary (a) for the Trust to continue to qualify
as a regulated investment company for federal income tax purposes if
the Trust has elected to be taxed as such under the United States
Internal Revenue Code of 1986, as amended, or (b) to prevent the Trust
from being deemed an association taxable as a corporation for federal
income tax purposes if the Trust has not elected to be taxed as a
regulated investment company under the United States Internal Revenue
Code of 1986, as amended. This Indenture may not be amended, however,
without the consent of all Unitholders then outstanding, so as (1) to
permit, except in accordance with the terms and conditions hereof, the
acquisition hereunder of any Bonds other than those specified in the
Schedules to the Trust Agreement or (2) to reduce the aforesaid
percentage of Units the holders of which are required to consent to
certain of such amendments. This Indenture may not be amended so as to
reduce the interest in a Trust represented by Units (whether evidenced
by Certificates or held in uncertificated form) without the consent of
all affected Unitholders.
(b) Except for the amendments, changes or modifications as provided in
Section 9.01(a) hereof, neither the parties hereto nor their respective
successors shall consent to any other amendment, change or modification
of this Indenture without the giving of notice and the obtaining of the
approval or consent of Unitholders representing at least 75% of the
Units then outstanding of the affected Trust. Nothing contained in this
Section 9.01(b) shall permit, or be construed as permitting, a
reduction of the aggregate percentage of Units the holders of which are
required to consent to any amendment, change or modification of this
Indenture without the consent of the Unitholders of all of the Units
then outstanding of the affected Trust and 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, (3) adversely affect the tax status of the
Trust for federal income tax purposes or result in the Units being
deemed to be sold or exchanged for federal income tax purposes or (4)
unless the Trust has elected to be taxed as a regulated investment
company for federal income tax purposes, result in a variation of the
investment of Unitholders in the Trust.
(c) Unless the Depositor directs that other notice shall be provided,
the Trustee shall include in the annual report provided pursuant to
Section 3.06 notification of the substance of such amendment."
21. The first sentence of Section 9.02 of the Standard Terms and
Conditions of Trust shall be replaced in its entirety with the following:
"Section 9.02. Termination. This Indenture and any Trust created hereby
shall terminate upon the maturity, redemption, sale or other
disposition as the case may be of the last Bond held in such Trust
unless sooner terminated as hereinbefore specified and may be
terminated at any time by the written consent of Unitholders
representing 75% of the then outstanding Units of such Trust; provided,
that in no event shall a Trust continue beyond the end of the calendar
year preceding the fiftieth anniversary of the execution of the related
Trust Agreement except for an IM-IT Limited Maturity Trust, IM-IT
Intermediate Trust, IM-IT Short Intermediate Trust, Quality
Intermediate Trust, or Quality Municipals Income Trust, Limited
Maturity Series which in no event shall continue beyond the end of the
calendar year preceding the twentieth anniversary of the execution of
the related Trust Agreement (the respective "Mandatory Termination
Date"); and provided further that in connection with any such
liquidation it shall not be necessary for the Trustee to dispose of any
Bond of such Trusts if retention of such Bond, until due, shall be
deemed to be in the best interests of Unitholders, including, but not
limited to, situations in which a Bond insured by the Portfolio
Insurance, if any, are in default, situations in which a Bond insured
by Portfolio Insurance reflects a deteriorated market price resulting
from a fear of default and situations in which a Bond mature after the
Mandatory Termination Date."
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/ XXXX X. XXXXXXX
----------------------------------------------------
Executive Director
XXX XXXXXX ASSET MANAGEMENT
By: /s/ XXXX X. XXXXXXX
----------------------------------------------------
Executive Director
STANDARD & POOR'S SECURITIES EVALUATIONS, INC.
By: /s/ XXXXX X. XXXXXXXX
----------------------------------------------------
Senior Vice President
THE BANK OF NEW YORK MELLON
By: /s/ XXXXX XXXXXX
----------------------------------------------------
Assistant Vice President
SCHEDULE A TO TRUST AGREEMENT
SECURITIES INITIALLY DEPOSITED
IN
XXX XXXXXX UNIT TRUSTS, MUNICIPAL SERIES 718
[Incorporated herein by this reference and made a part hereof is the
"Portfolio" schedule as set forth in the Prospectus Part I for each Trust.]
