<PAGE>
As filed with the Securities and Exchange Commission on March 28, 2000
Registration No. 333-31048
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
AMENDMENT NO. 2 TO
FORM S-6
----------------
For Registration Under the Securities Act
of 1933 of Securities of Unit Investment
Trusts Registered on Form N-8B-2
----------------
A. EXACT NAME OF TRUST:
The Pinnacle Family of Trusts, Internet Trust Series I
B. NAME OF DEPOSITOR:
ING Funds Distributor, Inc.
C. COMPLETE ADDRESS OF DEPOSITORS' PRINCIPAL EXECUTIVE OFFICES:
ING Funds Distributor, Inc.
1475 Dunwoody Drive
West Chester, Pennsylvania 19380
D. NAME AND COMPLETE ADDRESS OF AGENT FOR SERVICE:
COPY OF COMMENTS TO:
PETER J. DEMARCO MICHAEL R. ROSELLA, Esq.
Senior Vice President Battle Fowler LLP
ING Funds Distributor, Inc. 75 East 55th Street
1475 Dunwoody Drive New York, New York 10022
West Chester, Pennsylvania 19380
(212) 856-6858
E. TITLE AND AMOUNT OF SECURITIES BEING REGISTERED:
An indefinite number of Units of The Pinnacle Family of Trusts, Internet
Trust Series I are being registered under the Securities Act of 1933
pursuant to Section 24(f) of the Investment Company Act of 1940, as
amended, and Rule 24f-2 thereunder.
F. PROPOSED MAXIMUM AGGREGATE OFFERING PRICE TO THE PUBLIC OF THE SECURITIES
BEING REGISTERED:
Indefinite.
G. AMOUNT OF FILING FEE:
No filing fee required.
H. APPROPRIATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after the effective date of the Registration
Statement.
[_]Check if it is proposed that this filing will become effective
immediately upon filing pursuant to Rule 487.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
THE PINNACLE FAMILY OF TRUSTS
- --------------------------------------------------------------------------------
INTERNET TRUST SERIES I
A unit investment trust
The investment objective of the Internet Trust is to maximize total return
through capital appreciation.
The Sponsor is ING Funds Distributor, Inc.
This Prospectus consists of two parts. Part A contains the Summary of
Essential Information including descriptive material relating to the Trust
and the Statement of Financial Condition of the Trust. Part B contains
general information about the Trust. Part A and Part B must be distributed
together. Read and retain this Prospectus for future reference.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Securities and Exchange Commission has not approved or disapproved
these securities or passed upon the adequacy of this prospectus.
Any representation to the contrary is a criminal offense.
PROSPECTUS DATED MARCH 28, 2000
<PAGE>
INVESTMENT SUMMARY
INVESTMENT OBJECTIVE. The Internet Trust Series I (the "Internet Trust") seeks
to maximize total return through capital appreciation. There is no guarantee
that the investment objective of the Trust will be achieved.
STRATEGY OF PORTFOLIO SELECTION. The Internet Trust seeks to achieve its
investment objective by creating a portfolio using data from the Bloomberg U.S.
Internet Index that combines the following three steps, determined as of two
business days prior to the Initial Date of Deposit:
Step 1:eliminate all financial services companies from the Bloomberg U.S.
Internet Index,
Step 2: of the remaining companies, select the twenty-five (25) companies
having the highest capitalization (the "Top Twenty-Five"), and
Step 3:weigh the 25 stocks equally.
The Bloomberg U.S. Internet Index is a capitalization-weighted index comprised
of U.S. internet companies that have a market capitalization greater than $250
million. The index was developed with a base value of 100 as of December 31,
1998. IPO's that meet the minimum market capitalization are included in the
index after the first day of trading.
DESCRIPTION OF THE TRUST. The Internet Trust contains 25 issues of common
stock. 100% of the issues are represented by the Sponsor's contracts to
purchase. Based upon the principal business of each issuer and current market
values, the Trust is concentrated in the Internet industry. A Trust is
considered to be "concentrated" in a particular category or industry when the
securities in that category or that industry constitute 25% or more of the
total assets of the portfolio.
PRINCIPAL RISK CONSIDERATIONS. Unitholders can lose money by investing in the
Trust. The value of the Units and the Securities in the Trust can each decline
in value. An investment in Units of the Trust should be made with an
understanding of the following risks:
. Since the Trust is concentrated in stocks which derive a substantial
portion of their income from the Internet industry, investors should be
familiar with the risks associated with these industries which may
include the volatile price of internet, computer and technology stocks,
greater government regulations and products that may become obsolete.
. An investment in common stocks includes the risk that the financial
condition of the issuers of the Securities may become impaired or that
the general condition of the stock market may worsen (both of which may
contribute directly to a decrease in the value of the Securities and thus
in the value of the Units).
. Since the portfolio of the Trust is fixed and "not managed," in general,
the Sponsor can sell Securities only at the Trust's termination or in
order to meet redemptions. As a result, the price at which each Security
is sold may not be the highest price it attained during the life of the
Trust.
A-2
<PAGE>
. When cash or a letter of credit is deposited with instructions to
purchase securities in order to create additional Units, an increase in
the price of a particular security between the time of deposit and the
time that securities are purchased will cause the Units to be comprised
of less of that security and more of the remaining securities. In
addition, brokerage fees incurred in purchasing the Securities will be an
expense of the Trust.
. Securities price fluctuations during the period from the time of deposit
to the time the Securities are purchased, and payment of brokerage fees,
will affect the value of each Unit and the income per Unit received by
the Trust.
. There is no assurance that any dividends will be declared or paid in the
future on the Securities.
. Investors should also consider the greater risk of the Trust's
concentration in a particular industry and the effect on their investment
versus a more diversified portfolio. Investors should compare returns
available in less concentrated portfolios before making an investment
decision.
. Some of the Securities are currently listed on the NASDAQ stock market.
The existence of a liquid trading market for certain Securities may
depend on whether dealers will make a market in such Securities. There
can be no assurance that a market will be made for any of the Securities,
that any market for the Securities will be maintained or that any such
market will be or remain liquid. The price at which the Securities may be
sold and the value of the Trust will be adversely affected if trading
markets for the securities are limited or absent.
PUBLIC OFFERING PRICE. The Initial Public Offering Price per 100 units of the
Trust is calculated by:
. dividing the aggregate value of the underlying securities and cash held
in the Trust (representing the estimated organizational costs) by the
number of units outstanding;
. adding a sales charge of 5.495% (5.815% of the net amount invested); and
. multiplying the result by 100.
In addition, during the initial offering period, the Public Offering Price per
100 units will include an amount sufficient to reimburse the Sponsors for the
payment of all or a portion of the estimated organizational costs of the Trust.
The price of a single unit, or any multiple thereof, is calculated by dividing
the Public Offering Price per 100 units by 100 and multiplying by the number of
units. The Public Offering Price per Unit will vary on a daily basis in
accordance with fluctuations in the aggregate value of the underlying
Securities and each investor's purchase price will be computed as of the date
the Units are purchased. Orders involving at least 25,000 Units will be
entitled to a volume discount from the Public Offering Price.
MINIMUM PURCHASE. 100 Units for individuals and 25 Units for custodial accounts
and certain tax deferred retirement plans.
DISTRIBUTIONS. The Trust will distribute any dividends received, less expenses,
semi-annually. The first dividend distribution will be made on June 30, 2000 to
all Unitholders of record on June 15, 2000 and thereafter distributions will be
made on the last business day of every December and June. The final
distribution will be made within a reasonable period of time after the Trust
terminates.
A-3
<PAGE>
MARKET FOR UNITS. Unitholders may sell their Units to the Sponsor or the
Trustee at any time, without fee or penalty. The Sponsor intends to repurchase
Units from Unitholders throughout the life of the Trust at prices based upon
the market value of the underlying Securities. However, the Sponsor is not
obligated to maintain a market and may stop doing so without prior notice for
any business reason. If a market is not maintained, a Unitholder will be able
to redeem his Units with the Trustee at the same price. The existence of a
liquid trading market for the Securities in the Trust may depend on whether
dealers will make a market in these Securities. There can be no assurance of
the making or the maintenance of a market for any of the Securities contained
in the portfolio of the Trust or of the liquidity of the Securities in any
markets made. The price at which the Securities may be sold to meet redemptions
and the value of the Units will be adversely affected if trading markets for
the Securities are limited or absent.
AUTOMATIC REDEMPTION. Any transfer of Units by Unitholders from their
McLaughlin, Piven, Vogel brokerage account will result in the automatic
redemption of those Units. Unitholders, excluding tax sheltered retirement
accounts, will generally incur a taxable gain or loss upon an involuntary
redemption. See "Tax Status" in Part B.
TERMINATION. The Trust will terminate in approximately fifteen months. During
the Liquidation Period, Securities will be sold in connection with the
termination of the Trust. All Securities will be sold or distributed by the
Mandatory Termination Date. The Sponsor does not anticipate that the
Liquidation Period will be longer than seven days, and it could be as short as
one day, depending on the liquidity of the Securities being sold. Unitholders
may elect one of the following three options in receiving their terminating
distributions:
. receive their distribution in-kind, if they own at least 2,500 Units;
. receive cash upon the liquidation of their pro rata share of the
Securities; or
. reinvest in a subsequent series of The Pinnacle Family of Trusts (if one
is offered), at a reduced sales charge.
ROLLOVER OPTION. Unitholders may elect to rollover their terminating
distributions into the next available series of The Pinnacle Family of Trusts,
at a reduced sales charge. Rollover Unitholders must make this election on or
prior to the Rollover Notification Date. When Unitholders make this election,
their Units will be redeemed and the proceeds will be reinvested in units of
the next available series of The Pinnacle Family of Trusts. An election to
rollover terminating distributions will generally be a taxable event. See
"Administration of the Trust--Trust Termination" in Part B for details to make
this election.
REINVESTMENT PLAN. Unitholders may elect to automatically reinvest any
distributions they may receive (except the final distribution made at
termination) into additional Units of the Trust at a reduced sales charge of
1.00%. See "Reinvestment Plan" in Part B for details on how to enroll in the
Reinvestment Plan.
UNDERWRITING. McLaughlin, Piven, Vogel Securities, Inc., with principal offices
at 30 Wall Street, New York, New York 10005, will act as Underwriter for all of
the Units of The Pinnacle Family of Trusts, Internet Trust Series I.
A-4
<PAGE>
FEE TABLE
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This Fee Table is intended to help you understand the costs and expenses you
will bear directly or indirectly. See "Public Sale of Units" and "Trust
Expenses and Charges" in Part B. Although the Trust is a unit investment trust
rather than a mutual fund, this information is presented to permit a comparison
of fees, assuming the principal amount and contributions are rolled over each
year into a new series subject only to a sales charge and trust expenses.
- --------------------------------------------------------------------------------
Unitholder Transaction Expenses
(Fees paid directly from your investment)
<TABLE>
<CAPTION>
Internet Trust
-----------------
As a % Amount
Of Initial per
Offering 100
Price Units
---------- ------
<S> <C> <C> <C>
Maximum Sales Charge Imposed on Purchase............. 5.495% $54.95
Maximum Sales Charge Imposed Per Year on Reinvested
Dividends........................................... 1.00% $10.00
Estimated Organizational Expenses.................... .136% $ 1.36
Maximum Annual Maintenance Fee for a McLaughlin,
Piven, Vogel Brokerage Account...................... $69.50
</TABLE>
Estimated Annual Fund Operating Expenses
(Expenses that are deducted from Trust assets)
<TABLE>
<CAPTION>
Internet Trust
----------------------
As a % Amount
Of Initial per
Net 100
Assets Units
---------- ------
<S> <C> <C> <C> <C>
Trustee's Fee.................................... .091% $ .86
Other Operating Expenses......................... .040% $ .38
Portfolio Supervision, Bookkeeping and
Administrative Fees............................. .026% $.25
---- -----
Total............................................ .131% $1.24
==== =====
</TABLE>
Example
This Example is intended to help you compare the cost of investing in the Trust
with the cost of investing in other unit trusts. You would pay the following
expenses on a $10,000 investment in the Trust assuming estimated operating
expense ratio of .131% for the Trust and a 5% return on the investment
throughout the period. Although your actual costs may be higher or lower, based
on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years
------ -------
<S> <C> <C>
Internet Trust................................................... $644 $1,809
</TABLE>
For purposes of this example, the sales charge imposed on reinvested
dividends is not reflected until the year following payment of the dividend;
the cumulative expenses would be higher if sales charges on reinvested
dividends were reflected in the year of reinvestment. If these charges and fees
were included, your costs would be higher. The Example assumes reinvestment of
all dividends and distributions and utilizes a 5% annual rate of return as
mandated by Securities and Exchange Commission regulations applicable to mutual
funds. The Example should not be considered a representation of past or future
expenses or an annual rate of return.
The Annual Maintenance Fee is applicable to your entire brokerage account
regardless of account size or diversity of holdings and is not related solely
to the purchase of Units. Such account may entitle Unitholders to a commission
discount for equity trades. Contact your account representative for additional
information and see "Public Sale of Units" in Part B.
A-5
<PAGE>
THE INTERNET TRUST
SUMMARY OF ESSENTIAL INFORMATION
As of March 27, 2000, the business day prior to the Initial Date of Deposit
<TABLE>
<S> <C>
Initial Date of Deposit of Secu-
rities in the Trust: March 28,
2000
Aggregate Value of Securities:.. $ 150,254
Number of Units:................ 15,922
Fractional Undivided Interest in
Trust:......................... 1/15,922
Public Offering Price per 100
Units:
Aggregate Value of Securities
in Trust...................... $ 150,254
Divided By 15,922 Units (times
100).......................... $ 943.69
Plus Estimated Organization
Costs*........................ $ 1.36
Plus Sales Charge of 5.495% of
Public Offering Price......... $ 54.95
Public Offering Price+......... $1,000.00
Sponsor's Repurchase Price And
Redemption Price per 100
Units++:....................... $ 945.05
Minimum Income or Principal
Distribution per 100 Units:.... $ 1.00
</TABLE>
Liquidation Period: A 40 day period beginning on the first business day
following the Termination Date.
Termination Date: June 26, 2001 or the disposition of the last security in the
Trust.
Mandatory Termination Date: The last day of the Liquidation Period.
Rollover Notification Date**: June 15, 2001 or another date as determined by
the Sponsor.
Evaluation Time: 4:00 p.m. New York Time.
Minimum Value of Trust: The Trust may be terminated if the value of the Trust
is less than 40% of the aggregate value of the Securities at the completion of
the initial offering period.
Cusip Numbers: Cash: 72346A166 Reinvestment: 72346A174
Trustee: The Chase Manhattan Bank
Trustee's Fee per 100 Units: $.86
Other Fees and Expenses per 100 Units: $.13
Sponsor: ING Funds Distributor, Inc.
Portfolio Supervisor: ING Mutual Funds Management Co. LLC
Portfolio Supervisory, Bookkeeping And Administrative Fee per 100 Units:
Maximum of $.25 (see "Trust Expenses and Charges" in Part B).
Expected Settlement Date of Securities in the Trust: March 31, 2000
Record Dates: June 15 and December 15
Distribution Dates: June 30 and December 31
Reinvestment Sales Charge: 1.00%
- --------
* Investors will reimburse the Sponsor for all or a portion of the costs
incurred in organizing and offering the Trust. These "organization costs"
include costs of preparing the registration statement, the Trust indenture
and other closing documents, registering units with the SEC and the states
and the initial audit of the Trust portfolio. The estimated organization
costs will be paid to the Sponsor from the assets of the Trust as of the
close of the initial offering period. To the extent that actual organization
costs are less than the estimated amount, only the actual organization costs
will be deducted from the assets of the Trust. To the extent that actual
organization costs are greater than the estimated amount, only the estimated
organization costs included in the Public Offering Price will be reimbursed
to the Sponsor.
** The date by which a Rollover Unitholder must elect to reinvest its
terminating distribution in an available series of The Pinnacle Family of
Trusts, if offered.
+ On the Initial Date of Deposit, the only cash in the Income or Principal
Accounts will represent the estimated organization costs. Anyone purchasing
Units after such date will pay a Public Offering Price which includes a pro
rata share of any cash in such Accounts.
++ A Unitholder redeeming 2,500 Units or more may request redemptions be made
in-kind. The Trustee will distribute securities to the Unitholder's
McLaughlin, Piven, Vogel broker-dealer account at The Depository Trust
Company in book-entry form. As of the close of the initial offering period,
the Sponsor's Repurchase Price and Redemption Price for the Trust will be
reduced to reflect its estimated organization cost.
A-6
<PAGE>
THE PINNACLE FAMILY OF TRUSTS
INTERNET TRUST SERIES I
STATEMENT OF FINANCIAL CONDITION, AS OF MARCH 27, 2000
ASSETS
<TABLE>
<CAPTION>
Internet
Trust
--------
<S> <C>
Investment in Securities--Sponsor's Contracts to Purchase
Underlying Securities Backed by Letter of Credit (cost for
Internet Trust: $150,254) (Note 1)................................... $150,254
Cash.................................................................. 217
--------
Total................................................................. $150,471
========
LIABILITIES AND INTEREST OF UNITHOLDERS
Reimbursement to the Sponsor for Organization Costs (Note 2).......... $ 217
Interest of Unitholders--Units of Fractional Undivided Interest
Outstanding (Internet Trust: 15,922 Units)........................... 150,254
--------
Total................................................................. $150,471
========
Net Asset Value per Unit.............................................. $ 9.44
========
</TABLE>
- --------
Notes to Statement of Financial Condition:
The preparation of financial statements in accordance with generally accepted
accounting principles requires Trust management to make estimates and
assumptions that affect the reported amounts and disclosures. Actual results
can differ from those estimates.
(1) The Pinnacle Family of Trusts, Internet Trust Series I (the "Trust") is
a unit investment trust created under the laws of the State of New York and
registered under the Investment Company Act of 1940. The objective of the
Internet Trust sponsored by ING Funds Distributor, Inc., the Sponsor, is to
maximize total return through capital appreciation. An irrevocable letter of
credit issued by SunTrust Bank in an amount of $200,000 has been deposited with
the Trustee for the benefit of the Trust to cover the purchases of such
Securities. Aggregate cost to the Trust of the Securities listed in the
portfolios is determined by the Trustee on the basis set forth under "Public
Sale of Units--Public Offering Price" as of 4:00 p.m. on March 27, 2000. The
Trust will terminate on June 26, 2001 or earlier under certain circumstances as
further described in the Prospectus.
(2) A portion of the Public Offering Price consists of cash in an amount
sufficient to reimburse the Sponsor for the per Unit portion of all or part of
the costs of establishing the Trust. These costs have been estimated at $1.36
per 100 Units for the Trust. A payment will be made as of the close of the
initial public offering period to an account maintained by the Trustee from
which the obligation of the investors to the Sponsor will be satisfied. To the
extent that actual organization costs are less than the estimated amount, only
the actual organization costs will be deducted from the assets of the Trust.
A-7
<PAGE>
THE PINNACLE
FAMILY OF TRUSTS
INTERNET TRUST SERIES I
PORTFOLIO
AS OF MARCH 27, 2000
<TABLE>
<CAPTION>
Market Value
of Stocks as Market Cost of
Number a Value Securities
Portfolio of Ticker Percentage of Per to the
No. Shares Name of Issuer (1)* Symbol the Trust (2) Share Trust (3)
- --------- ------ ---------------------------------------- ------ ------------- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
1 29 Akamai Technologies, Inc. AKAM 4.03% $208.6875 $ 6,052
2 82 Amazon.com, Inc. AMZN 3.99 73.1250 5,996
3 81 America Online, Inc. AOL 4.01 74.3750 6,024
4 24 Ariba, Inc. ARBA 3.92 245.8125 5,899
5 183 At Home Corp. ATHM 4.00 32.8125 6,005
6 59 BEA Systems, Inc. BEAS 3.98 101.4375 5,985
7 91 BroadVision, Inc. BVSN 4.01 66.1875 6,023
8 52 CMGI, Inc. CMGI 4.02 116.2500 6,045
9 28 Commerce One, Inc. CMRC 3.97 213.3125 5,973
10 44 Digex, Inc. DIGX 4.03 137.7500 6,061
11 25 eBay, Inc. EBAY 3.99 239.8125 5,995
12 36 Exodus Communications, Inc. EXDS 4.02 167.8125 6,041
13 34 InfoSpace.com, Inc. INSP 4.04 178.3750 6,065
14 28 Inktomi Corp. INKT 3.93 210.7500 5,901
15 56 Internet Capital Group, Inc. ICGE 3.96 106.3750 5,957
16 22 Juniper Networks, Inc. JNPR 4.05 276.4375 6,082
17 29 Network Solutions, Inc. NSOL 4.04 209.0625 6,063
18 35 Phone.com, Inc. PHCM 3.99 171.2500 5,994
19 85 Portal Software, Inc. PRSF 3.98 70.3125 5,977
20 65 Priceline.com, Inc. PCLN 3.98 92.0000 5,980
21 83 RealNetworks, Inc. RNWK 4.01 72.6250 6,028
22 50 TIBCO Software, Inc. TIBX 4.03 121.0000 6,050
23 32 VeriSign, Inc. VRSN 4.03 189.2500 6,056
24 26 Vignette Corp. VIGN 3.98 230.0000 5,980
25 30 Yahoo! Inc. YHOO 4.01 200.7500 6,022
------ --------
Total Investments in Securities 100.00% $150,254
====== ========
</TABLE>
FOOTNOTES TO PORTFOLIO
(1) Contracts to purchase the Securities were entered into on March 27, 2000.
All such contracts are expected to be settled on or about the First
Settlement Date of the Trust which is expected to be March 31, 2000.
(2) Based on the cost of the Securities to the Trust.
(3) Evaluation of Securities by the Trustee was made on the basis of closing
sale prices at the Evaluation Time on the day prior to the Initial Date of
Deposit. The Sponsor's Purchase Price is $150,746. The Sponsor's Loss on
the Initial Date of Deposit is $492.
* None of the stocks in the portfolio paid out any dividends during the twelve
months preceding the Initial Date of Deposit.
A-8
<PAGE>
REPORT OF INDEPENDENT AUDITORS
THE UNITHOLDERS, SPONSOR AND TRUSTEE
THE PINNACLE FAMILY OF TRUSTS,
INTERNET TRUST SERIES I
We have audited the accompanying Statement of Financial Condition of The
Pinnacle Family of Trusts, Internet Trust Series I, including the Portfolio, as
of March 27, 2000. This financial statement is the responsibility of the
Trust's management. Our responsibility is to express an opinion on this
financial statement based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statement
is free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
Our procedures included confirmation with The Chase Manhattan Bank, Trustee, of
an irrevocable letter of credit deposited for the purchase of securities, as
shown in the financial statement as of March 27, 2000. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the financial position of The Pinnacle Family of Trusts,
Internet Trust Series I, at March 27, 2000, in conformity with accounting
principles generally accepted in the United States.
ERNST & YOUNG LLP
New York, New York
March 28, 2000
A-9
<PAGE>
THE PINNACLE FAMILY OF TRUSTS
THE INTERNET TRUST SERIES I
An investment designed for the 21st century.
Investing in the 21st century.
The Internet Trust is a new investment opportunity for individuals who want
to participate in the explosive potential of the Internet. The Internet Trust
is a unit investment trust that seeks capital appreciation by investing in a
portfolio of 25 of the largest Internet companies currently listed in a major
U.S. Internet index./1/ In fact, the Trust may include a broad range of
businesses driving the growth of the Internet--from companies that provide high
speed Internet connectivity to those companies that operate online marketplaces
and even Internet consulting and marketing businesses.
A New Era of Investing
At the dawn of the new millennium, the Internet has become central to the
lives of more people and businesses than anyone might have imagined. Moreover,
there is little question that the Internet will continue to fundamentally
transform our economic, social and political landscape. By dismissing the
entire sector as a fad, you may be missing out on a significant opportunity.
WHAT FACTORS MAKE THE INTERNET A FORCE TO BE RECKONED WITH?
. Current data estimates that the worldwide online population stands at 275.5
million users./2/
. In 1999, the U.S. online population increased by 29 percent over the previous
year./3/
. This year, the online U.S. population will increase to about 50 percent of
the overall population--137 million surfers./4/
. By 2001, the worldwide Internet economy is predicted to soar past the $1
trillion mark./5/
. Internet traffic has doubled every 100 days and Internet commerce will likely
surpass $600 million by 2002/6/
. By 2005, Internet usage is expected to skyrocket to 766 million users
worldwide./7/
Such magnitude is why many experts agree that despite periods of short-term
volatility, Internet-related companies, including those that indirectly benefit
from the power of the Internet, may continue to energize the financial markets,
as well as the economy. In addition, an investment that maximizes the
opportunities available in this sector, may help savvy investors meet their
financial goals more effectively.
- --------
/1/ The index used for creating the Trust is the Bloomberg U.S. Internet
Index. Bloomberg is not affiliated with the Sponsor and has not participated in
any way in the creation of the Trust or in the selection of the stocks included
in the Trust and has not reviewed or approved any information in this brochure.
The Bloomberg U.S. Internet Index is a capitalization weighted index of
domestic Internet-related companies that have a market capitalization greater
than $250 million. The Bloomberg U.S. Internet Index was developed with a base
value of 100 as of December 31, 1998. IPO's that meet the minimum market
capitalization are included in the index after the first day of trading. The
Sponsor has not independently verified this information.
Sources: /2/ Nua Ltd.; /3/ 1999 America Online/Roper Starch Cyberstudy;
/4/ International Data Corporation; /5/ International Data Corporation;
/6/ U.S. Commerce Department; /7/ The Standard.
i
<PAGE>
The Strategy
The Internet Trust offers high return potential through capital appreciation
by investing in a portfolio of 25 of the largest-capitalization domestic
Internet companies that comprise a leading U.S. Internet index.
The strategy employs a disciplined investment approach that helps to ensure
the portfolio includes those Internet companies holding dominant positions in
the marketplace. The selection process identifies the 25 companies in the index
with the highest market capitalizations. In order to maximize the Trust's
exposure to Internet stocks, all financial services companies are eliminated
from the portfolio. Finally, in creating the Trust, each of the 25 selected
stocks are equally weighted.
Risk Considerations:
An investment in Units of the Trust should be made with an understanding of
the risks associated with an investment in common stocks, which include the
risks that the financial condition of the issuer may become impaired or that
the general condition of the stock market may worsen, and the value of the
equity securities in the Trust's portfolio (and, therefore, the value of the
Units) may decline. Since the Trust is concentrated in Internet stocks,
investors should recognize the risks associated with the Internet, which may
include government regulation and obsolete products. In addition, the amount
realized upon the sale of a security at termination might not be the highest
price attained by an individual security during the life of the Trust.
THE VALUE OF THE INTERNET TRUST
Disciplined Investing--The buy-and-hold, fixed portfolio eliminates
management fees and reduces trading expenses. The savings are passed through to
investors. Investors purchasing units will be charged a sales charge.
A Monitored Portfolio--The stocks held in your portfolio are continuously
monitored, and under certain, limited, extraordinary circumstances, can be
removed from the portfolio.
Daily Pricing & Liquidity--You have the flexibility to redeem your units at
the net asset value any day the stock market is open. Keep in mind that the
daily price will fluctuate with the underlying securities, and may be worth
more or less than you originally paid.
Low Minimum Investment--The Trust is able to offer this portfolio comprised
primarily of Internet companies for an initial investment that's as low as
$1,000 or $250 for qualified retirement plans or custodial accounts.
Compounded Returns--You have the option to take advantage of the power of
compounding by having distributions, if any, automatically reinvested into
additional units of the Trust at a reduced sales charge.
Three Options at Termination--The Trust will terminate in approximately 15
months. When the Trust terminates, you have three options, which may be subject
to tax liability. You may:
1. Receive your distribution in cash,
2. Reinvest your proceeds into a new trust (if available) at a reduced
sales charge, or
3. Receive the shares of the underlying stocks (minimums apply).
ii
<PAGE>
THE PINNACLE FAMILY OF TRUSTS
INTERNET TRUST SERIES I
(the "Internet Trust")
PROSPECTUS--PART B
PART B OF THIS PROSPECTUS MAY NOT BE
DISTRIBUTED UNLESS ACCOMPANIED BY
PART A
THE TRUST
ORGANIZATION. The Trust was created under New York State law pursuant to an
Indenture and Trust Agreement and related Reference Trust Agreement ( "Trust
Agreement") among ING Funds Distributor, Inc., as Sponsor, ING Mutual Funds
Management Co. LLC, as Portfolio Supervisor, and The Chase Manhattan Bank, as
Trustee.
On the Initial Date of Deposit, (i) the Sponsor deposited with the Trustee
common stock, including contracts for the purchase of certain such securities
(collectively, the "Securities") and cash or an irrevocable letter of credit
issued by a major commercial bank in the amount required for such purchases,
and (ii) the Trustee, in exchange for the Securities, registered on the
registration books of the Trust the Sponsor's ownership of all Units of the
Trust. As used herein, the term "Securities" means the common stocks initially
deposited in the Trust and described in "Portfolio" in Part A and any
additional common stocks acquired and held by the Trust pursuant to the
provisions of the Indenture.
As of the Initial Date of Deposit, a "Unit" represents a fractional undivided
interest or pro rata share in the Securities and cash of the Trust as is set
forth in the "Summary of Essential Information." As additional Units are issued
by the Trust as a result of the deposit of Additional Securities, as described
below, the aggregate value of the Securities in the Trust will be increased and
the fractional undivided interest in the Trust represented by each Unit will be
decreased. To the extent that any Units are redeemed by the Trustee, the
fractional undivided interest or pro rata share in such Trust represented by
each unredeemed Unit will increase, although the actual interest in such Trust
represented by such fraction will remain unchanged. Units will remain
outstanding until redeemed upon tender to the Trustee by Unitholders, which may
include the Sponsor, or until the termination of the Trust Agreement.
The contracts to purchase Securities deposited initially in the Trust is
expected to settle in three business days, in the ordinary manner for such
Securities. Settlement of the contracts for Securities is thus expected to take
place prior to the settlement of purchase of Units on the Initial Date of
Deposit.
DEPOSIT OF ADDITIONAL SECURITIES. During the 90-day period following the
Initial Date of Deposit (the "Deposit Period"), the Sponsor may deposit (i)
additional Securities in the Trust that are substantially similar to the
Securities already deposited in the Trust ("Additional Securities"), (ii)
contracts to purchase Additional Securities or (iii) cash with instructions to
purchase Additional Securities, in order to create additional Units,
maintaining to the extent practicable the original proportionate relationship
of the number of shares of each Security in the Trust's portfolio on the
Initial Date of Deposit. These additional Units, which will result in an
increase in the number of Units outstanding, will each represent, to the extent
practicable, an undivided interest in the same number and type of securities of
identical issuers as are represented by Units issued on the Initial Date of
Deposit.
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The proportionate relationship among the Securities in the Trust will be
adjusted to reflect the occurrence of a stock dividend, a stock split or a
similar event which affects the capital structure of the issuer of a Security
in the Trust but which does not affect the Trust's percentage ownership of the
common stock equity of such issuer at the time of such event. It may not be
possible to maintain the exact original proportionate relationship among the
Securities deposited on the Initial Date of Deposit because of, among other
reasons, purchase requirements, changes in prices, or unavailability of
Securities. Deposits of Additional Securities in the Trust subsequent to the
Deposit Period must replicate exactly the existing proportionate relationship
among the number of shares of Securities in the Trust's portfolio. Substitute
Securities may be acquired under specified conditions when Securities
originally deposited in the Trust are unavailable (see "The Trust--Substitution
of Securities").
INVESTMENT OBJECTIVE. The Trust seeks to maximize total return through
capital appreciation. There is no guarantee that the investment objective of
the Trust will be achieved.
Achievement of the investment objective is dependent upon several factors
including any appreciation or depreciation in value of the Securities, the full
range of economic and market influences affecting corporate profitability, the
financial condition of issuers and the prices of equity securities in general
and the Securities in particular. In addition, because of other factors (i.e.,
Trust sales charges and expenses, brokerage costs and any delays in purchasing
securities with cash deposited), investors in the Trust may not realize as high
a total return as the theoretical performance of the underlying stocks in the
Trust. Since the Sponsor may deposit additional Securities in connection with
the sale of additional Units, the yields on these Securities may change
subsequent to the Initial Date of Deposit.
STRATEGY OF PORTFOLIO SELECTION. The Internet Trust seeks to achieve its
objective by creating a portfolio using data from the Bloomberg* U.S. Internet
Index that combines the following three steps determined as of two business
days prior to the Initial Date of Deposit:
Step 1: eliminate all financial services companies from the Bloomberg U.S.
Internet Index,
Step 2: of the remaining companies, select the twenty-five (25) companies
having the highest capitalization (the "Top Twenty-Five"),
Step 3: weigh the 25 stocks equally.
The Bloomberg U.S. Internet Index is a capitalization-weighted index
comprised of U.S. internet companies that have a market capitalization greater
than $250 million. The index was developed with a base value of 100 as of
December 31, 1998. IPO's that meet the minimum market capitalization are
included in the index after the first day of trading.
Purchasing a portfolio of these stocks as opposed to one or two stocks can
achieve a more diversified holding. There is only one investment decision
instead of twenty-five. An investment in the Trust can be cost-efficient,
avoiding the odd-lot costs of buying small quantities of securities directly.
An investment in a number of companies with high capitalizations is designed to
increase the Trust's potential for higher returns. The Trust's return will
consist of capital appreciation.
- --------
* Bloomberg is not affiliated with the Sponsor and has not participated in any
way in the creation of the Trust or in the selection of the stocks included
in the Trust and has not reviewed or approved any information included in
this Prospectus.
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<PAGE>
THE SECURITIES
S&P 500 Index. The S&P 500 includes a representative example of leading
companies in leading industries. The S&P 500 is used by 97% of U.S. money
managers and pension plan sponsors and the market value of the 500 companies
contained in this index is approximately $12.318 trillion. Stocks in the S&P
500 represent approximately 80% of the market value of all publicly traded
common stock in the United States although the 500 companies represent only 7%
of the publicly traded companies in the United States.
The S&P 500 is widely regarded as the standard for measuring large-cap U.S.
stock market performance and is also a barometer for overall stock market
performance. The S&P 500 focuses on large cap U.S. companies in leading sectors
such as industrial, transportation, financial and utility. Stocks are chosen
for this index based on market size, liquidity and industry group
representation. NYSE companies make up approximately 90% of the S&P 500 and
NASDAQ companies account for approximately 10%.
NASDAQ. Trading on the NASDAQ Stock Market began in February 1971. NASDAQ
stands for the National Association of Securities Dealers Automated Quotations
Systems. NASDAQ is an electronic dealer exchange (there is no physical trading
floor) on which dealers trade securities by setting a buy and sell price. On
NASDAQ, trading is executed through a computer and telecommunications network
and trades more shares per day than any other major United States market.
Approximately 5,482 domestic and foreign companies are listed on the NASDAQ.
The NASDAQ Stock Market is the United States' second-largest securities market
after the New York Stock Exchange. NASDAQ's share volume reached over 272.6
billion shares in 1999 and dollar volume reached nearly $11,013.21 billion. In
1999, NASDAQ share volume was greater than that of all other U.S. stock
markets. In addition, in 1999 NASDAQ listed 485 U.S. initial public offerings,
which is four times more than any other U.S. stock market.
The NASDAQ stock market is operated by the NASDAQ Stock Market, Inc., an
independent subsidiary of the National Association of Securities Dealers, Inc.
(NASD). Companies listed on the NASDAQ are separated into two major
classifications, the NASDAQ SmallCap Market, for small to medium-sized
companies, and the NASDAQ National Market, for larger companies with higher
capitalization. The NASDAQ Stock Market includes companies of every type and
every size, in every stage of development. Although companies listed on NASDAQ
represent a broad spectrum of industries including agriculture, mining,
construction, manufacturing, transportation, retail, banking and insurance,
just to name a few, the greatest industry concentrations of companies listed on
the NASDAQ are in information technology (including computer technology),
telecommunications, pharmaceuticals, biotechnology, finance, banking and
insurance.
The recent acquisition by the NASD of the American Stock Exchange (AMEX), a
floor-based trading system, has not altered or affected the NASDAQ system. Each
market will continue to function as an independent subsidiary.
NYSE. The New York Stock Exchange (NYSE) is the world's largest equity
market. The NYSE is a floor-based, auction market trading system. In 1999,
there were approximately 809.2 million shares traded each day. Approximately
3,025 domestic and foreign companies are listed on the NYSE with over 280.9
billion shares outstanding and total market capitalization of nearly $12.3
trillion.
The NYSE consists of large, mid-sized and smaller companies in all business
sectors. Moreover, virtually every leading industrial, financial and service
corporation is listed on the NYSE. To be considered for listing on the NYSE, a
company must meet specified levels of net earnings, assets, and trading volume,
and its shares must be widely held by investors.
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<PAGE>
SUBSTITUTION OF SECURITIES. In the event of a failure to deliver any Security
that has been purchased for the Trust under a contract ("Failed Securities"),
the Sponsor is authorized under the Trust Agreement to direct the Trustee to
acquire other securities ("Substitute Securities") to make up the original
corpus of the Trust.
The Substitute Securities must be purchased within 20 days after delivery of
the notice of the failed contract. Where the Sponsor purchases Substitute
Securities in order to replace Failed Securities, the purchase price may not
exceed the purchase price of the Failed Securities and the Substitute
Securities must be substantially similar to the Securities originally
contracted for and not delivered.
Whenever a Substitute Security has been acquired for the Trust, the Trustee
shall, within five days thereafter, notify all Unitholders of the Trust of the
acquisition of the Substitute Security and the Trustee shall, on the next
Distribution Date which is more than 30 days thereafter, make a pro rata
distribution of the amount, if any, by which the cost to the Trust of the
Failed Security exceeded the cost of the Substitute Security.
In the event no substitution is made, the proceeds of the sale of Securities
will be distributed to Unitholders as set forth under "Rights of Unitholders--
Distributions." In addition, if the right of substitution shall not be utilized
to acquire Substitute Securities in the event of a failed contract, the Sponsor
will cause to be refunded the sales charge attributable to such Failed
Securities to all Unitholders, and distribute the principal and dividends, if
any, attributable to such Failed Securities on the next Distribution Date.
RISK CONSIDERATIONS
COMMON STOCK. An investment in Units should be made with an understanding of
the risks inherent in any investment in common stocks including the risk that
the financial condition of the issuers of the Securities may become impaired or
that the general condition of the stock market may worsen (both of which may
contribute directly to a decrease in the value of the Securities and thus in
the value of the Units). Additional risks include those associated with the
right to receive payments from the issuer which is generally inferior to the
rights of creditors of, or holders of, debt obligations or preferred stock
issued by the issuer. Holders of common stocks have a right to receive
dividends only when, if, and in the amounts declared by the issuer's board of
directors and to participate in amounts available for distribution by the
issuer only after all other claims on the issuer have been paid or provided
for. By contrast, holders of preferred stocks usually have the right to receive
dividends at a fixed rate when and as declared by the issuer's board of
directors, normally on a cumulative basis. Dividends on cumulative preferred
stock must be paid before any dividends are paid on common stock and any
cumulative preferred stock dividend which has been omitted is added to future
dividends payable to the holders of such cumulative preferred stock. Preferred
stocks are also usually entitled to rights on liquidation which are senior to
those of common stocks. For these reasons, preferred stocks generally entail
less risk than common stocks.
Moreover, common stocks do not represent an obligation of the issuer and
therefore do not offer any assurance of income or provide the degree of
protection of debt securities. The issuance of debt securities or even
preferred stock by an issuer will create prior claims for payment of principal,
interest and dividends which can adversely affect the ability and inclination
of the issuer to declare or pay dividends on its common stock or the economic
interest of holders of common stock with respect to assets of the issuer upon
liquidation or bankruptcy. Further, unlike debt securities which typically have
a stated principal amount payable at maturity (which value will be subject to
market fluctuations prior thereto), common stocks have neither fixed principal
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<PAGE>
amount nor a maturity and have values which are subject to market fluctuations
for as long as the common stocks remain outstanding. Common stocks are
especially susceptible to general stock market movements and to volatile
increases and decreases in value as market confidence in and perceptions of the
issuers change. These perceptions are based on unpredictable factors including
expectations regarding government, economic, monetary and fiscal policies,
inflation and interest rates, economic expansion or contraction, and global or
regional political, economic or banking crises. The value of the common stocks
in the Trust thus may be expected to fluctuate over the life of the Trust to
values higher or lower than those prevailing on the Initial Date of Deposit.
Unitholders will be unable to dispose of any of the Securities in the Trust,
and, as such, will not be able to vote the Securities. As the holder of the
Securities, the Trustee will have the right to vote all of the voting stocks in
the Trust and will vote in accordance with the instructions of the Sponsor.
INTERNET COMPANIES. Companies in the Internet Trust are subject to the
problems and risks inherent in the technology sectors in general. In addition,
the market in which internet companies compete is characterized by rapidly
changing technology, rapid product and service obsolescence, cyclical market
patterns, intense competition, evolving industry standards and frequent new
product introductions. The success of the issuers of the Securities depends in
substantial part on the timely and successful introduction of new products. An
unexpected change in one or more of the technologies affecting an issuer's
products or in the market for products based on a particular technology could
have a material adverse affect on an issuer's operating results. Furthermore,
there can be no assurance that the issuers of the Securities will be able to
respond in a timely manner to compete in the rapidly developing marketplace.
Based on the trading history of internet stocks, factors such as the
announcement of new products, the development of new technologies or the
general condition of the industry have caused and are likely to cause the
market price of these stocks to fluctuate substantially. In addition internet
stocks have experienced extreme price and volume fluctuations that often have
been unrelated to the operating performance of such companies. This market
volatility may adversely affect the market price of the Securities and
therefore the ability of a Unitholder to redeem Units at a price equal to or
greater than the original price paid for such Units.
Many internet companies rely on a combination of patents, copyrights,
trademarks and trade secret laws to establish and protect their proprietary
rights in their products and technologies. There can be no assurance that the
steps taken by the issuers of the Securities to protect their proprietary
rights will be adequate to prevent misappropriation of their technology or that
competitors will not independently develop technologies that are substantially
equivalent or superior to such issuers' technology. In addition, due to the
increasing public use of the internet, it is possible that other laws and
regulations may be adopted to address issues such as privacy, pricing,
characteristics, and quality of internet products and services. The adoption of
any such laws could have a material adverse impact on the Securities in the
Internet Trust. The above factors could adversely affect the value of the
Trust's Units.
The Trust's investments in securities of technology related companies present
certain risks that may not exist to the same degree in other types of
investments. Technology stocks, in general, tend to be relatively volatile as
compared to other types of investments. Any such volatility will be reflected
in the value of the Trust's Units. The technology and science areas may be
subject to greater governmental regulation than many other areas and changes in
governmental policies and the need for regulatory approvals may have a material
adverse effect on these areas. Additionally, companies in these areas may be
subject to risks of developing technologies, competitive pressures and other
factors and are dependent upon consumer and business
B-5
<PAGE>
acceptance as new technologies evolve. Competitive pressures may have a
significant effect on the financial condition of companies in the technology
sector. For example, if technology continues to advance at an accelerated rate,
and the number of companies and product offerings continues to expand, these
companies could become increasingly sensitive to short product cycles and
aggressive pricing. Further, companies in the technology industry spend heavily
on research and development and are subject to the risk that their products or
services may not prove commercially successful or may become obsolete quickly.
Certain companies whose securities are included in the Trust are engaged in
providing local, long-distance and wireless services, in the manufacture of
telecommunications products and in a wide range of other activities including
directory publishing, information systems and the operation of voice, data and
video telecommunications networks.
Payment on common stocks of companies in the telecommunications industry,
including local, long-distance and cellular service, the manufacture of
telecommunications equipment, and other ancillary services, is generally
dependent upon the amount and growth of customer demand, the level of rates
permitted to be charged by regulatory authorities and the effects of inflation
on the cost of providing services and the rate of technological innovation. To
meet increasing competition, companies may have to commit substantial capital,
particularly in the formulation of new products and services using new
technology. Telecommunications companies are undergoing significant change due
to varying and evolving levels of governmental regulation or deregulation and
other factors. As a result, competitive pressures are intense and the
securities of such companies may be subject to significant price volatility.
The domestic companies in the Trust may consist of former government owned
telecommunications systems that have been privatized in states. The Sponsor
cannot predict whether such privatization will continue in the future or what,
if any, effect this will have on the Trust.
FIXED PORTFOLIO. Unlike a "managed" investment company in which there may be
frequent changes in the portfolio of securities based upon economic, financial
and market analyses, the adverse financial condition of a company will not
result in the elimination of its securities from the portfolio of the Trust. In
the event a public tender offer is made for a Security or a merger or
acquisition is announced affecting a Security, the Sponsor may instruct the
Trustee to tender or sell the Security on the open market when, in its opinion,
it is in the best interests of the Unitholders to do so. All the Securities in
the Trust are liquidated or distributed during the Liquidation Period. Since
the Trust will not sell Securities in response to ordinary market fluctuation,
but only at the Trust's termination or upon the occurrence of certain events,
the amount realized upon the sale of the Securities may not be the highest
price attained by an individual Security during the life of the Trust. See
"Administration of the Trust--Trust Supervision." Some of the Securities in the
Trust may also be owned by other clients of the Sponsor and their affiliates.
However, because these clients may have differing investment objectives, the
Sponsor may sell certain Securities from those accounts in instances where a
sale by the Trust would be impermissible, such as to maximize return by taking
advantage of market fluctuations. Although the Trust is regularly reviewed and
evaluated and the Sponsor may instruct the Trustee to sell Securities under
certain limited circumstances, Securities will not be sold by the Trust to take
advantage of market fluctuations or changes in anticipated rates of
appreciation.
ADDITIONAL SECURITIES. Investors should be aware that in connection with the
creation of additional Units subsequent to the Initial Date of Deposit, the
Sponsor may deposit (i) Additional Securities, (ii) contracts to purchase
Additional Securities or (iii) cash with instructions to purchase Additional
Securities, in each instance maintaining the original proportionate
relationship, subject to adjustment under certain
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circumstances, of the numbers of shares of each Security in the Trust. To the
extent the price of a Security increases or decreases between the time cash is
deposited with instructions to purchase the Security and the time the cash is
used to purchase the Security, Units may represent less or more of that
Security and more or less of the other Securities in the Trust. Brokerage fees
(if any) incurred in purchasing Securities with cash deposited with
instructions to purchase the Securities will be an expense of the Trust. Price
fluctuations between the time of deposit and the time the Securities are
purchased, and payment of brokerage fees, will affect the value of every
Unitholder's Units and the Income per Unit received by the Trust.
In particular, Unitholders who purchase Units during the initial offering
period will experience a dilution of their investment as a result of any
brokerage fees paid by the Trust during subsequent deposits of Additional
Securities purchased with cash deposited. In order to minimize these effects,
the Trust will try to purchase Securities as near as possible to the Evaluation
Time or at prices as close as possible to the prices used to evaluate Trust
Units at the Evaluation Time. In addition, subsequent deposits to create such
additional Units will not be covered by the deposit of a bank letter of credit.
In the event that the Sponsor does not deliver cash in consideration for the
additional Units delivered, the Trust may be unable to satisfy their contracts
to purchase the Additional Securities. The failure of the Sponsor to deliver
cash to the Trust, or any delays in the Trust receiving such cash, may have
significant adverse consequences for the Trust.
YEAR 2000 ISSUE. Many existing computer programs use only two digits to
identify a year in the date field and were designed and developed without
considering the impact of the upcoming change in the century. Therefore, the
year "2000" will be incorrectly identified as the year "1900." If not
corrected, many computer applications can fail or create erroneous results by
or at the Year 2000, requiring substantial resources to remedy. The Sponsor and
Trustee believe that the "Year 2000" problem is material to their business and
operations and may have a material adverse effect on the Sponsor's and the
Trustee's results of operations and, in turn, cash available for distribution
by the Trustee. Although the Sponsor and the Trustee are addressing the problem
with respect to their business operations, there can be no assurance that the
"Year 2000" problem will be properly resolved. The "Year 2000" problem may also
adversely affect issuers of the Securities contained in the Trust to varying
degrees based upon various factors. The Sponsor is unable to predict what
effect, if any, the "Year 2000" problem will have on such issuers.
TERMINATION. The Trust may be terminated at any time and all outstanding
Units liquidated if the net asset value of the Trust falls below 40% of the
aggregate net asset value of that Trust at the completion of the initial public
offering period. Investors should note that if the net asset value of the Trust
should fall below the applicable minimum value, the Sponsor may then terminate
the Trust, at its sole discretion, prior to the Termination Date specified in
the Summary of Essential Information.
LEGAL PROCEEDINGS AND LEGISLATION. At any time after the Initial Date of
Deposit, legal proceedings may be initiated on various grounds, or legislation
may be enacted, with respect to the Securities in the Trust or to matters
involving the business of the issuer of the Securities. There can be no
assurance that future legal proceedings or legislation, regulation or
deregulation will not have a material adverse effect on the Trust or will not
impair the ability of the issuers of the Securities to achieve their business
goals.
RETIREMENT PLANS. The Trust may be well suited for purchase by Individual
Retirement Accounts ("IRAs"), Keogh plans, pension funds and other qualified
retirement plans. Generally, capital gains and income received in each of the
foregoing plans are exempt from Federal taxation. Except with respect to
certain IRAs known as Roth IRAs, distributions from such plans are generally
treated as ordinary income but may, in some cases, be eligible for special 5 or
10 year averaging or tax-deferred rollover treatment. Ten year averaging
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has been preserved in very limited circumstances. Holders of Units in IRAs,
Keogh plans and other tax-deferred retirement plans should consult their plan
custodian as to the appropriate disposition of distributions. Investors
considering participation in any such plan should review specific tax laws
related thereto and should consult their attorneys or tax advisors with respect
to the establishment and maintenance of any such plan. Such plans are offered
by McLaughlin, Piven, Vogel Securities, Inc. Fees and charges with respect to
such plans may vary.
Before investing in the Trust, the trustee or investment manager of an
employee benefit plan (e.g., a pension or profit sharing retirement plan)
should consider among other things whether (i) the investment is prudent under
the Employee Retirement Income Security Act of 1974 ("ERISA"), taking into
account the needs of the plan and all of the facts and circumstances of the
investment in the Trust; (ii) the investment satisfies the diversification
requirement of Section 404(a)(1)(C) of ERISA; and (iii) the assets of the Trust
are deemed "plan assets" under ERISA's and the Department of Labor's definition
of "plan assets."
PUBLIC SALE OF UNITS
PUBLIC OFFERING PRICE. The Public Offering Price of the Units for the Trust
is computed by adding the applicable initial sales charge to the aggregate
value of the Securities (as determined by the Trustee) and any cash held to
purchase Securities, divided by the number of Units of the Trust outstanding.
Valuation of Securities by the Trustee is made at the close of business on the
NYSE on each business day. Securities quoted on a national exchange or NASDAQ
are valued at the closing sale price. Securities not so quoted are valued in
the manner described in the Indenture.
PUBLIC DISTRIBUTION OF UNITS. Units will be distributed to the public at the
Public Offering Price through the Sponsor and may also be distributed through
dealers. The Sponsor intends to qualify the Units for sale in certain states.
VOLUME AND OTHER DISCOUNTS. Units are available at a volume discount from the
Public Offering Price based upon the number of Units purchased. This volume
discount will result in the following reduction of the sales charge applicable
to such purchases:
<TABLE>
<CAPTION>
Approximate
Reduced
Number of Units Sales Charge
--------------- ------------
<S> <C>
25,000 but less than 50,000.................................. 4.995%
50,000 but less than 100,000................................. 4.745%
100,000 or more.............................................. 4.495%
</TABLE>
For transactions of at least 100,000 Units or more, the Sponsor may negotiate
the applicable sales charge and such charge will be disclosed to any such
purchaser.
These discounts will apply to all purchases of Units by the same purchaser.
Units purchased by the same purchasers in separate transactions will be
aggregated for purposes of determining if such purchaser is entitled to a
discount. Such purchaser must own at least the required number of Units at the
time such determination is made. Units held in the name of the spouse of the
purchaser or in the name of a child of the purchaser under 21 years of age are
deemed for the purposes hereof to be registered in the name of the purchaser.
The discount is
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also applicable to a trustee or other fiduciary purchasing securities for a
single trust estate or single fiduciary account.
Unitholders of prior series of The Pinnacle Family of Trusts (formerly known
as McLaughlin, Piven, Vogel Family of Trusts) (the "Prior Series") may
"rollover" into the Trust by exchanging units of the Prior Series for Units of
the Trust at their relative net asset values plus the applicable sales charge.
Unitholders maintaining an account at McLaughlin, Piven, Vogel Securities, Inc.
exercising this option, may purchase such Units subject to a reduced sales
charge of 4.995% for the Internet Trust. (See "Administration of the Trust--
Trust Termination".) The rollover option described herein will also be
available to investors in the Prior Series who elect to exchange units of a
Prior Series for Units of the Trust. An exchange or rollover of units of a
Prior Series for Units of the Trust will generally be a taxable event.
Unitholders with a brokerage account at McLaughlin, Piven, Vogel Securities,
Inc. will qualify to receive one trade to buy equity securities any time
following the first Settlement Date of the Trust and only be charged a $19.50
processing fee.
During the initial offering period, Unitholders who have redeemed units of
the Trust, may purchase Units of this Trust in an amount up to the amount
redeemed, within thirty days after such redemption, at no sales charge.
Investors who purchase Units of the Trust through a Keogh Plan, pension fund
or other qualified retirement plan having 25 or more members maintained at
McLaughlin, Piven, Vogel Securities, Inc. will be subject to a reduced sales
charge of 2.0%.
Employees (and their immediate families) of McLaughlin, Piven, Vogel
Securities, Inc. and ING Funds Distributor, Inc. (and their affiliates) and of
the special counsel to the Sponsor, may, pursuant to employee benefit
arrangements, purchase Units of the Trust without a sales charge at a price
equal to the aggregate value of the underlying securities in the Trust, divided
by the number of Units outstanding. Such arrangements result in less selling
effort and selling expenses than sales to employee groups of other companies.
Resales or transfers of Units purchased under the employee benefit arrangements
may only be made through the Sponsor's secondary market, so long as it is being
maintained.
SPONSOR'S PROFITS. The Sponsor will receive a combined gross underwriting
commission equal to up to 5.495% of the Public Offering Price per 100 Units
(equivalent to 5.815% of the net amount invested in the Securities) for the
Internet Trust. Additionally, the Sponsor may realize a profit on the deposit
of the Securities in the Trust representing the difference between the cost of
the Securities to the Sponsor and the cost of the Securities to the Trust (see
"Portfolio" in Part A). The Sponsor may realize profits or sustain losses with
respect to Securities deposited in the Trust which were acquired from
underwriting syndicates of which they were a member. All or a portion of the
Securities deposited in the Trust may have been acquired through the Sponsor.
During the initial offering period and thereafter to the extent additional
Units continue to be offered by means of this Prospectus, the Underwriter may
also realize profits or sustain losses as a result of fluctuations after the
Initial Date of Deposit in the aggregate value of the Securities and hence in
the Public Offering Price received by the Sponsor for the Units. Cash, if any,
made available to the Sponsor prior to settlement date for the purchase of
Units may be used in the Sponsor's business subject to the limitations of 17
CFR 240.15c3-3 under the Securities Exchange Act of 1934 and may be of benefit
to the Sponsor.
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Both upon acquisition of Securities and termination of the Trust, the Trustee
may utilize the services of the Sponsor for the purchase or sale of all or a
portion of the Securities in the Trust. The Sponsor may only receive brokerage
commissions from the Trust in connection with such purchases and sales in
accordance with applicable law.
In maintaining a market for the Units (see "Liquidity-Sponsor Repurchase")
the Sponsor will realize profits or sustain losses in the amount of any
difference between the price at which it buys Units and the price at which it
resells such Units.
RIGHTS OF UNITHOLDERS
BOOK-ENTRY UNITS. Ownership of Units of the Trust will not be evidenced by
certificates. All evidence of ownership of the Units will be recorded in book-
entry form at The Depository Trust Company ("DTC") through an investor's
McLaughlin, Piven, Vogel brokerage account. Units held through DTC will be
deposited by the Sponsor with DTC in the McLaughlin, Piven, Vogel DTC account
and registered in the nominee name CEDE & CO. Individual purchases of
beneficial ownership interest in the Trust will be made in book-entry form
through DTC. Ownership and transfer of Units will be evidenced and accomplished
directly and indirectly only by book-entries made by DTC and its participants.
DTC will record ownership and transfer of the Units among DTC participants and
forward all notices and credit all payments received in respect of the Units
held by the DTC participants. Beneficial owners of Units will receive written
confirmation of their purchases and sale from their McLaughlin, Piven, Vogel
representative. Transfer, and the requirements therefore, will be governed by
the applicable procedures of DTC and the Unitholder's agreement with the DTC
participant in whose name the Unitholder's Units are registered on the transfer
records of DTC.
DISTRIBUTIONS. Dividends, if any, received by the Trust are credited by the
Trustee to an Income Account for the Trust. Other receipts, including the
proceeds of Securities disposed of, are credited to a Principal Account for the
Trust.
Distributions to each Unitholder from the Income Account are computed as of
the close of business on each Record Date for the following payment date and
consist of an amount substantially equal to such Unitholder's pro rata share of
the income credited to the Income Account, less expenses. Distributions from
the Principal Accounts of the Trust (other than amounts representing failed
contracts, as previously discussed) will be computed as of each Record Date,
and will be made to the Unitholders of the Trust on or shortly after the
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 next Distribution Date. Persons who
purchase Units between a Record Date and a Distribution Date will receive their
first distribution on the Distribution Date following the next Record Date.
As of each Record Date, the Trustee will 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 the expenses of the
Trust (as determined on the basis set forth under "Trust Expenses and
Charges"). 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
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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 dividend distribution per 100 Units, if any, cannot be anticipated and
may be paid as Securities are redeemed, exchanged or sold, or as expenses of
the Trust fluctuate. No distribution need be made from the Income Account or
the Principal Account unless the balance therein is an amount sufficient to
distribute $1.00 per 100 Units.
RECORDS. The Trustee keeps records of the transactions of the Trust at its
corporate trust office including names, addresses and holdings of all
Unitholders of record, a current list of the Securities and a copy of the
Indenture. Such records are available to Unitholders for inspection at
reasonable times during business hours.
REPORTS TO HOLDERS. The Trustee will furnish Unitholders with each
distribution a statement of the amount of income and the amount of other
receipts, if any, which are being distributed, expressed in each case as a
dollar amount per 100 Units. Within a reasonable time after the end of each
calendar year, the Trustee will furnish to each person who at any time during
the calendar year was a Unitholder of record, a statement showing:
(i) as to the Income Account: dividends, interest and other cash amounts
received, amounts paid for purchases of Substitute Securities and
redemptions of Units, if any, deductions for applicable taxes and fees and
expenses of the Trust, and the balance remaining after such distributions
and deductions, expressed both as a total dollar amount and as a dollar
amount representing the pro rata share of each 100 Units outstanding on the
last business day of such calendar year;
(ii) as to the Principal Account: the dates of disposition of any
Securities and the net proceeds received therefrom, deductions for payments
of applicable taxes and fees and expenses of the Trust, amounts paid for
purchases of Substitute Securities and redemptions of Units, if any, and
the balance remaining after such distributions and deductions, expressed
both as a total dollar amount and as a dollar amount representing the pro
rata share of each 100 Units outstanding on the last business day of such
calendar year;
(iii) a list of the Securities held, a list of Securities purchased, sold
or otherwise disposed of during the calendar year and the number of Units
outstanding on the last business day of such calendar year;
(iv) the Redemption Price per 100 Units based upon the last computation
thereof made during such calendar year; and
(v) amounts actually distributed to Unitholders during such calendar year
from the Income and Principal Accounts, separately stated, of the Trust,
expressed both as total dollar amounts and as dollar amounts representing
the pro rata share of each 100 Units outstanding on the last business day
of such calendar year.
Unitholders will be furnished with evaluations of Securities upon request to
the Trustee in order to comply with Federal and state tax reporting
requirements.
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LIQUIDITY
SPONSOR REPURCHASE. Unitholders who wish to dispose of their Units should
inquire of the Sponsor as to current market prices prior to making a tender for
redemption. The aggregate value of the Securities will be determined by the
Trustee on a daily basis and computed on the basis set forth under "Trustee
Redemption." The Sponsor does not guarantee the enforceability, marketability
or price of any Securities in the Portfolio or of the Units. The Sponsor may
discontinue the repurchase of Units if the supply of Units exceeds demand, or
for other business reasons. The date of repurchase is deemed to be the date on
which redemption requests are received in proper form, by ING Funds
Distributor, Inc., 1475 Dunwoody Drive, West Chester, Pennsylvania 19380.
Redemption requests received after 4 P.M., New York Time, will be deemed to
have been repurchased on the next business day. In the event a market is not
maintained for the Units, a Unitholder may be able to dispose of Units only by
tendering them to the Trustee for redemption.
Units purchased by the Sponsor in the secondary market may be reoffered for
sale by the Sponsor at a price based on (i) the aggregate value of the
Securities in a Trust plus (ii) 5.495% sales charge (or 5.815% of the net
amount invested) for the Trust plus (iii) a pro rata portion of amounts, if
any, in the Income and Principal Accounts. Any Units that are purchased by the
Sponsor in the secondary market also may be redeemed by the Sponsor if it
determines such redemption to be in its best interest.
The Sponsor may, under certain circumstances, as a service to Unitholders,
elect to purchase any Units tendered to the Trustee for redemption (see
"Liquidity--Trustee Redemption"). Factors that the Sponsor will consider in
making a determination will include the number of Units of the Trust which they
have in inventory, their estimate of the stability and the time required to
sell such Units and general market conditions. For example, if in order to meet
redemptions of Units the Trustee must dispose of Securities, and if such
disposition cannot be made by the redemption date (three calendar days after
tender), the Sponsor may elect to purchase such Units. Such purchase shall be
made by payment to the Unitholder not later than the close of business on the
redemption date of an amount equal to the Redemption Price on the date of
tender.
TRUSTEE REDEMPTION. At any time prior to the Evaluation Time on the business
day preceding the commencement of the Liquidation Period (approximately fifteen
months from the Date of Deposit), Units may also be tendered to the Trustee for
redemption upon payment of any relevant tax by contacting the Sponsor holding
such Units in street name. In certain instances, additional documents may be
required, such as trust instrument, certificate of corporate authority,
certificate of death or appointment as executor, administrator or guardian. At
the present time there are no specific taxes related to the redemption of
Units. No redemption fee will be charged by the Sponsor or the Trustee. Units
redeemed by the Trustee will be canceled.
Within three business days following a tender for redemption, the Unitholder
will be entitled to receive an amount for each Unit tendered equal to the
Redemption Price per Unit computed as of the Evaluation Time set forth under
"Summary of Essential Information" in Part A on the date of tender. The "date
of tender" is deemed to be the date on which Units are received by the Trustee.
For Units received after the close of trading on the NASDAQ or NYSE (4:00 p.m.
Eastern Time), the date of tender is the next day on which such Exchange is
open for trading, and such Units will be deemed to have been tendered to the
Trustee on such day for redemption at the Redemption Price computed on that
day.
A Unitholder will receive his redemption proceeds in cash and amounts paid on
redemption shall be withdrawn from the Income Accounts, or, if the balance
therein is insufficient, from the Principal Accounts. All other amounts paid on
redemption shall be withdrawn from the Principal Account. The Trustee is
empowered
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to sell Securities in order to make funds available for redemptions. Such
sales, if required, can result in a sale of Securities by the Trustee at a
loss. To the extent Securities are sold, the size and diversity of the Trust
will be reduced. The Securities to be sold will be selected by the Trustee in
order to maintain, to the extent practicable, the proportionate relationship
among the number of shares of each Security. Provision is made in the Indenture
under which the Sponsor may, but need not, specify minimum amounts in which
blocks of Securities are to be sold in order to obtain the best price for the
Trust. While these minimum amounts may vary from time to time in accordance
with market conditions, the Sponsor believes that the minimum amounts specified
will be approximately 100 shares for readily marketable Securities.
The Redemption Price per Unit is the pro rata share of the Unit in the Trust
determined by the Trustee on the basis of (i) the cash on hand in the
particular Trust or moneys in the process of being collected, (ii) the value of
the Securities in the Trust as determined by the Trustee, less (a) amounts
representing taxes or other governmental charges payable out of the Trust, (b)
the accrued expenses of the Trust and (c) cash allocated for the distribution
to Unitholders of record as of the business day prior to the evaluation being
made. As of the close of the initial public offering period, the Redemption
Price per 100 Units will be reduced to reflect the payment of the per 100 Unit
organization costs to the Sponsor. The Trustee may determine the value of the
Securities in the Trust in the following manner: because the Securities are
listed on national securities exchanges, this evaluation is based on the
closing sale prices on those exchanges. Unless the Trustee deems these prices
inappropriate as a basis for evaluation or if there is no such closing purchase
price, then the Trustee may utilize, at the Trust's expense, an independent
evaluation service or services 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: (i) on the basis of current
bid prices for comparable securities, (ii) by appraising the value of the
Securities on the bid side of the market or (iii) by any combination of the
above.
Any Unitholder tendering 2,500 Units or more of the Trust for redemption may
request, by written notice submitted at the time of tender from the Trustee in
lieu of a cash redemption, a distribution of shares of Securities and cash in
an amount and value equal to the Redemption Price Per Unit as determined as of
the evaluation next following tender. To the extent possible, in kind
distributions ("In Kind Distributions") shall be made by the Trustee through
the distribution of each of the Securities in book-entry form to the account of
the Unitholder's broker-dealer at DTC. An In Kind Distribution will be reduced
by customary transfer and registration charges. The tendering Unitholder will
receive his pro rata number of whole shares of each of the Securities
comprising the Trust portfolio and cash from the Principal Accounts equal to
the balance of the Redemption Price to which the tendering Unitholder is
entitled. If funds in the Principal Account are insufficient to cover the
required cash distribution to the tendering Unitholder, the Trustee may sell
Securities in the manner described above.
The Trustee is irrevocably authorized in its discretion, if the Sponsor does
not elect to purchase a Unit tendered for redemption or if the Sponsor tenders
a Unit for redemption, in lieu of redeeming such Unit, to sell such Unit in the
over-the-counter market for the account of the tendering Unitholder at prices
which will return to the Unitholder an amount in cash, net after deducting
brokerage commissions, transfer taxes and other charges, equal to or in excess
of the Redemption Price for such Unit. The Trustee will pay the net proceeds of
any such sale to the Unitholder on the day he would otherwise be entitled to
receive payment of the Redemption Price.
The Trustee reserves the right to suspend the right of redemption and to
postpone the date of payment of the Redemption Price per Unit for any period
during which the NASDAQ or NYSE is closed, other than
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customary weekend and holiday closings, or when trading on that Exchange is
restricted or during which (as determined by the Securities and Exchange
Commission) an emergency exists as a result of which disposal or evaluation of
the Securities is not reasonably practicable, or for such other periods as the
Securities and Exchange Commission may by order permit. The Trustee and the
Sponsor are not liable to any person or in any way for any loss or damage which
may result from any such suspension or postponement.
AUTOMATIC REDEMPTION. In the event a transfer of Units from a Unitholder's
McLaughlin, Piven, Vogel brokerage account results in the automatic redemption
of those Units, Unitholders will receive an amount equal to the Redemption
Price per Unit computed as of the Evaluation Time set forth under "Summary of
Essential Information" in Part A on the date of transfer. Automatic redemption
proceeds will be paid within three business days following the tender of a
notification of transfer.
ADMINISTRATION OF THE TRUST
TRUST SUPERVISION. The Trust is a unit investment trust and is not a managed
fund. Traditional methods of investment management for a managed fund typically
involve frequent changes in a portfolio of securities on the basis of economic,
financial and market analyses. The Portfolio of the Trust, however, will not be
managed and therefore the adverse financial condition of an issuer will not
necessarily require the sale of its Securities from the portfolio. Although the
portfolio is regularly reviewed, because of the formula employed in selecting
the Securities, it is unlikely the Trust will sell any of the Securities other
than to satisfy redemptions of Units, or to cease buying Additional Securities
in connection with the issuance of additional Units. However, the Trust
Agreement provides that the Sponsor may direct the disposition of Securities
upon the occurrence of certain events including: (i) default in payment of
amounts due on any of the Securities; (ii) institution of certain legal
proceedings; (iii) default under certain documents materially and adversely
affecting future declaration or payment of amounts due or expected; (iv)
determination of the Sponsor that the tax treatment of the Trust as a grantor
trust would otherwise be jeopardized; (v) decline in price as a direct result
of serious adverse credit factors affecting the issuer of a Security which, in
the opinion of the Sponsor, will make the retention of the Security detrimental
to the Trust or the Unitholders; or (vi) 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 Sponsor the sale or tender of the
Security is in the best interest of the Unitholders. Furthermore, the Trust
will likely continue to hold a Security and purchase additional shares
notwithstanding its ceasing to be included among the Top Twenty-Five.
In addition, the Trust Agreement provides as follows:
1. If a default in the payment of amounts due on any Security occurs
pursuant to provision (i) above and if the Sponsor fails to give immediate
instructions to sell or hold that Security, the Trustee, within 30 days of
that failure by the Sponsor, shall sell the Security.
2. It is the responsibility of the Sponsor to instruct the Trustee to
reject any offer made by an issuer of any of the Securities to issue new
securities in exchange and substitution for any Security pursuant to a
recapitalization or reorganization, if any exchange or substitution is
effected notwithstanding such rejection, any securities or other property
received shall be promptly sold unless the Sponsor directs that it be
retained.
3. Any property received by the Trustee after the Initial Date of Deposit
as a distribution on any of the Securities in a form other than cash or
additional shares of the Securities, which shall be retained, shall
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be promptly sold unless the Sponsor directs that it be retained by the
Trustee. The proceeds of any disposition shall be credited to the Income or
Principal Accounts of the Trust.
4. The Sponsor is authorized to increase the size and number of Units of
the Trust by the deposit of Additional Securities, contracts to purchase
Additional Securities or cash or a letter of credit with instructions to
purchase Additional Securities in exchange for the corresponding number of
additional Units from time to time subsequent to the Initial Date of
Deposit, provided that the original proportionate relationship among the
number of shares of each Security in a Trust established on the Initial
Date of Deposit is maintained to the extent practicable. The Sponsor may
specify the minimum numbers in which Additional Securities will be
deposited or purchased. If a deposit is not sufficient to acquire minimum
amounts of each Security, Additional Securities may be acquired in the
order of the Security most under-represented immediately before the deposit
when compared to the original proportionate relationship. If Securities of
an issue originally deposited are unavailable at the time of the subsequent
deposit, the Sponsor may (i) deposit cash or a letter of credit with
instructions to purchase the Security when it becomes available, or (ii)
deposit (or instruct the Trustee to purchase) either Securities of one or
more other issues originally deposited or a Substitute Security.
In determining whether to dispose of or hold Securities, new securities or
property, the Sponsor may be advised by the Portfolio Supervisor.
TRUST AGREEMENT AND AMENDMENT. The Trust Agreement may be amended by the
Trustee and the Sponsor without the consent of any of the Unitholders to: (i)
cure any ambiguity or to correct or supplement any provision which may be
defective or inconsistent; (ii) change any provision thereof as may be required
by the Securities and Exchange Commission or any successor governmental agency;
or (iii) make such other provisions in regard to matters arising thereunder as
shall not adversely affect the interests of the Unitholders.
The Trust Agreement may also be amended in any respect, or performance of any
of the provisions thereof may be waived, with the consent of investors holding
66 2/3% of the Units then outstanding for the purpose of modifying the rights
of Unitholders; provided that no such amendment or waiver shall reduce any
Unitholder's interest in the Trust without his consent or reduce the percentage
of Units required to consent to any such amendment or waiver without the
consent of the holders of all Units. The Trust Agreement may not be amended,
without the consent of the holders of all Units in the Trust then outstanding,
to increase the number of Units issuable or to permit the acquisition of any
Securities in addition to or in substitution for those initially deposited in
such Trust, except in accordance with the provisions of the Trust Agreement.
The Trustee shall promptly notify Unitholders, in writing, of the substance of
any such amendment.
TRUST TERMINATION. The Trust Agreement provides that the Trust shall
terminate as of the Evaluation Time on the business day preceding the
commencement of the Liquidation Period or upon the maturity, redemption or
other disposition, as the case may be, of the last of the Securities held in
such Trust but in no event is it to continue beyond the Mandatory Termination
Date. If the value of the Trust shall be less than the minimum amount set forth
under "Summary of Essential Information" in Part A, the Trustee may, in its
discretion, and shall, when so directed by the Sponsor, terminate such Trust.
The Trust may also be terminated at any time with the consent of the investors
holding 100% of the Units then outstanding. The Trustee may utilize the
services of the Sponsor for the sale of all or a portion of the Securities in
the Trust, and in so doing, the Sponsor will determine the manner, timing and
execution of the sales of the underlying
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Securities. In the event of termination, written notice thereof will be sent by
the Trustee to all Unitholders. Such notice will provide Unitholders with the
following three options by which to receive their pro rata share of the net
asset value of the Trust and requires their election of one of the three
options by notifying the Trustee by returning a properly completed election
request:
1. a Unitholder who owns at least 2,500 units and whose interest in the
Trust will entitle it to receive at least one share of each underlying
Security will have its Units redeemed on or about the commencement of the
Liquidation Period. This will be accomplished by distribution of the
Unitholder's pro rata share of the net asset value of the Trust on such
date distributed in kind to the extent represented by whole shares of
underlying Securities and the balance in cash within three business days
next following the commencement of the Liquidation Period. Unitholders
subsequently selling such distributed Securities will incur brokerage costs
when disposing of such Securities. Unitholders should consult their own tax
adviser in this regard;
2. to receive in cash such Unitholder's pro rata share of the net asset
value of the Trust derived from the sale by the Sponsors as the agents of
the Trustee of the underlying Securities during the Liquidation Period. The
Unitholder's pro rata share of its net assets of the Trust will be
distributed to such Unitholder within three days of the settlement of the
trade of the last Security to be sold; and/or
3. to invest such Unitholder's pro rata share of the net assets of the
Trust derived from the sale by the Sponsor as agent of the Trustee of the
underlying Securities in units of a subsequent series of The Pinnacle
Family of Trusts (the "New Series") provided one is offered. It is expected
that a special redemption and liquidation will be made of all Units of the
Trust held by a Unitholder (a "Rollover Unitholder") who affirmatively
notifies the Trustee on or prior to the Rollover Notification Date set
forth in the "Summary of Essential Information" for the Trust in Part A.
The Units of a New Series will be purchased by the Unitholder within three
business days of the settlement of the trade for the last Security to be
sold. Such purchaser will be entitled to a reduced sales charge upon the
purchase of units of the New Series. It is expected that the terms of the
New Series will be substantially the same as the terms of the Trust
described in this Prospectus, and that similar options with respect to the
termination of such New Series will be available. The availability of this
option does not constitute a solicitation of an offer to purchase Units of
a New Series or any other security. A Unitholder's election to participate
in this option will be treated as an indication of interest only. At any
time prior to the purchase by the Unitholder of units of a New Series such
Unitholder may change his investment strategy and receive, in cash, the
proceeds of the sale of the Securities. An election of this option will not
prevent the Unitholder from recognizing taxable gain or loss (except in the
case of a loss, if and to the extent that Securities contained in the New
Series are treated as substantially identical to Securities held by the
Trust) as a result of the liquidation, even though no cash will be
distributed to pay any taxes. Unitholders should consult their own tax
advisers in this regard.
Unitholders who do not make any election will be deemed to have elected to
receive the termination distribution in cash (option number 2).
The Sponsor has agreed that, to the extent they effect the sales of
underlying Securities for the Trustee, in the case of the second and third
options during the Liquidation Period such sales will be free of brokerage
commissions. The Sponsor, on behalf of the Trustee, will sell the Securities by
the last business day of the Liquidation Period unless prevented by unusual and
unforeseen circumstances, such as, among other reasons, a suspension in trading
of a Security, the close of a stock exchange, outbreak of hostilities and
collapse of the
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economy. The Redemption Price Per 100 Units upon the settlement of the last
sale of Securities during the Liquidation Period will be distributed to
Unitholders in redemption of such Unitholders' interest in the Trust.
Depending on the amount of proceeds to be invested in Units of the New Series
and the amount of other orders for Units in the New Series, the Sponsor may
purchase a large amount of securities for the New Series in a short period of
time. The Sponsor's buying of securities may tend to raise the market prices of
these securities. The actual market impact of the Sponsor's purchases, however,
is currently unpredictable because the actual amount of securities to be
purchased and the supply and price of those securities is unknown. A similar
problem may occur in connection with the sale of Securities during the
Liquidation Period; depending on the number of sales required, the prices of
and demand for Securities, such sales may tend to depress the market prices and
thus reduce the proceeds of such sales. The Sponsor believes that the sale of
underlying Securities over the Liquidation Period described above is in the
best interest of a Unitholder and may mitigate the negative market price
consequences stemming from the trading of large amounts of Securities. The
Securities may be sold in fewer than seven days if, in the Sponsor's judgment,
such sales are in the best interest of Unitholders. The Sponsor, in
implementing such sales of securities on behalf of the Trustee, will seek to
maximize the sales proceeds and will act in the best interests of the
Unitholders. There can be no assurance, however, that any adverse price
consequences of heavy trading will be mitigated.
Section 17(a) of the Investment Company Act of 1940 generally prohibits
principal transactions between registered investment companies and their
affiliates. Pursuant to an exemptive order issued by the SEC, each terminating
Pinnacle Family of Trusts can sell Duplicated Securities directly to a New
Series. The exemption will enable the Trust to eliminate commission costs on
these transactions. The price for those securities transferred will be the
closing sale price on the sale date on the national securities exchange where
the securities are principally traded, as certified and confirmed by the
Trustee.
The Sponsor may for any reason, in its sole discretion, decide not to sponsor
any subsequent series of the Trust, without penalty or incurring liability to
any Unitholder. If the Sponsor so decides, the Sponsor will notify the Trustee
of that decision, and the Trustee will notify the Unitholders. All Unitholders
will then elect either option 1, if eligible, or option 2.
By electing to rollover into the New Series, the Unitholder indicates his
interest in having his terminating distribution from the Trust invested only in
the New Series created following termination of the Trust; the Sponsor expects,
however, that a similar rollover program will be offered with respect to all
subsequent series of the Trust, thus giving Unitholders an opportunity to elect
to rollover their terminating distributions into a New Series. The availability
of the rollover privilege does not constitute a solicitation of offers to
purchase units of a New Series or any other security. A Unitholder's election
to participate in the rollover program will be treated as an indication of
interest only. The Sponsor intends to coordinate the date of deposit of a
future series so that the terminating trusts will terminate contemporaneously
with the creation of a New Series. The Sponsor reserves the right to modify,
suspend or terminate the rollover privilege at any time.
In the event the Sponsor determines that a redemption in kind and subsequent
investment in a New Series by a Unitholder may be accomplished in a manner that
will not result in the recognition of gain or loss for Federal income tax
purposes with respect to any Securities included in the portfolio of the New
Series, Unitholders will be notified at least 30 days prior to the Rollover
Notification Date of the procedures and process necessary to facilitate such
tax treatment.
THE SPONSOR. ING Funds Distributor, Inc., an Iowa corporation, is a wholly
owned indirect subsidiary of ING Group. ING Group, among the leading global
financial services organizations, is engaged in
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asset management, banking and insurance activities in 60 countries worldwide
with over 82,000 employees. The Sponsor is a member of the National Association
of Securities Dealers, Inc.
The information included herein is only for the purpose of informing
investors as to the financial responsibility of the Sponsor and its ability to
carry out its contractual obligations. The Sponsor will be under no liability
to Unitholders for taking any action, or refraining from taking any action, in
good faith pursuant to the Trust Agreement, or for errors in judgment except in
cases of its own willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations and duties.
The Sponsor may resign at any time by delivering to the Trustee an instrument
of resignation executed by the Sponsor. If at any time the Sponsor shall resign
or fail to perform any of its duties under the Trust Agreement or become
incapable of acting or become bankrupt or their affairs are taken over by
public authorities, then the Trustee may either (i) appoint a successor
sponsor; (ii) terminate the Trust Agreement and liquidate the Trust; or (iii)
continue to act as Trustee without terminating the Trust Agreement. Any
successor sponsor appointed by the Trustee shall be satisfactory to the Trustee
and, at the time of appointment, shall have a net worth of at least $1,000,000.
THE TRUSTEE. The Trustee is The Chase Manhattan Bank, with its principal
executive office located at 270 Park Avenue, New York, New York 10017 (800)
428-8890 and its unit investment trust office at Four New York Plaza, New York,
New York 10004. The Trustee is subject to supervision by the Superintendent of
Banks of the State of New York, the Federal Deposit Insurance Corporation and
the Board of Governors of the Federal Reserve System.
The Trustee shall not be liable or responsible in any way for taking any
action, or for refraining from taking any action, in good faith pursuant to the
Trust Agreement, or for errors in judgment; or for any disposition of any
moneys, Securities or Units in accordance with the Trust Agreement, except in
cases of its own willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations and duties; provided, however, that the Trustee
shall not in any event be liable or responsible for any evaluation made by any
independent evaluation service employed by it. In addition, the Trustee shall
not be liable for any taxes or other governmental charges imposed upon or in
respect of the Securities or the Trusts which it may be required to pay under
current or future law of the United States or any other taxing authority having
jurisdiction. The Trustee shall not be liable for depreciation or loss incurred
by reason of the sale by the Trustee of any of the Securities pursuant to the
Trust Agreement. The Trustee has not participated in the selection of the
Trust's Securities.
For further information relating to the responsibilities of the Trustee under
the Trust Agreement, reference is made to the material set forth under "Rights
of Unitholders."
The Trustee may resign by executing an instrument in writing and filing the
same with the Sponsor, and mailing a copy of a notice of resignation to all
Unitholders. In such an event the Sponsor is obligated to appoint a successor
Trustee as soon as possible. In addition, if the Trustee becomes incapable of
acting or becomes bankrupt or its affairs are taken over by public authorities,
the Sponsor may remove the Trustee and appoint a successor as provided in the
Trust Agreement. Notice of such removal and appointment shall be mailed to each
Unitholder by the Sponsor. If upon resignation of the Trustee no successor has
been appointed and has accepted the appointment within thirty days after
notification, the retiring Trustee may apply to a court of competent
jurisdiction for the appointment of a successor. The resignation or removal of
the Trustee becomes effective only when the successor Trustee accepts its
appointment as such or when a court of
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<PAGE>
competent jurisdiction appoints a successor Trustee. Upon execution of a
written acceptance of such appointment by such successor Trustee, all the
rights, powers, duties and obligations of the original Trustee shall vest in
the successor.
Any corporation into which the Trustee may be merged or with which it may be
consolidated, or any corporation resulting from any merger or consolidation to
which the Trustee shall be a party, shall be the successor Trustee. The Trustee
must always be a banking corporation organized under the laws of the United
States or any State and have at all times an aggregate capital, surplus and
undivided profits of not less than $2,500,000.
TRUST EXPENSES AND CHARGES
Investors will reimburse the Sponsor for all or a portion of the estimated
costs incurred in organizing and offering the Trust (collectively, the
"organization costs")--including the cost of the initial preparation and
execution of the Trust Agreement, registration of the Trust and the Units under
the Investment Company Act of 1940 and the Securities Act of 1933 and state
registration fees, the initial fees and expenses of the Trustee, legal expenses
and other actual out-of-pocket costs. The estimated organization costs will be
paid from the assets of the Trust as of the close of the initial public
offering period (which may be between 30 and 90 days). To the extent that
actual organization costs are less than the estimated amount, only the actual
organization costs will be deducted from the assets of the Trust. To the extent
that actual organization costs are greater than the estimated amount, only the
estimated organization costs included in the Public Offering Price will be
reimbursed to the Sponsor. All advertising and selling expenses, as well as any
organizational costs not paid by the Trust, will be borne by the Sponsor at no
cost to the Trust.
ING Mutual Funds Management Co. LLC, an affiliate of ING Funds Distributor,
Inc., will receive, for portfolio supervisory services to the Trust, an annual
fee in the amount set forth under "Summary of Essential Information" in Part A.
This fee may exceed the actual cost of providing portfolio supervisory services
for the Trust, but at no time will the total amount received for portfolio
supervisory services rendered to all series of The Pinnacle Family of Trusts in
any calendar year exceed the aggregate cost to ING Mutual Funds Management Co.
LLC of supplying such services in such year. (See "Administration of the
Trust--Trust Supervision.")
The Trustee will receive, for its ordinary recurring services to the Trust,
an annual fee in the amount set forth under "Summary of Essential Information"
in Part A. For a discussion of the services performed by the Trustee pursuant
to its obligations under the Trust Agreement, see "Administration of the Trust"
and "Rights of Unitholders."
The Trustee's fees applicable to the Trust are payable as of each Record Date
from the Income Accounts of the Trust to the extent funds are available and
then from the Principal Accounts. Both the Portfolio Supervisor's and the
Trustee's fees may be increased without approval of the Unitholders by amounts
not exceeding proportionate increases in consumer prices for services as
measured by the United States Department of Labor's Consumer Price Index
entitled "All Services Less Rent."
The following additional charges are or may be incurred by the Trust: (i) all
expenses (including counsel fees) of the Trustee incurred and advances made in
connection with its activities under the Trust Agreements, including the
expenses and costs of any action undertaken by the Trustee to protect the Trust
and the rights and
B-19
<PAGE>
interests of the Unitholders; (ii) fees of the Trustee for any extraordinary
services performed under the Trust Agreement; indemnification of the Trustee
for 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 its
acceptance or administration of the Trust; (iii) indemnification of the Sponsor
for any losses, liabilities and expenses incurred in acting as sponsor of the
Trust without gross negligence, bad faith or willful misconduct on its part;
and (iv) all taxes and other governmental charges imposed upon the Securities
or any part of the Trust (no such taxes or charges are being levied, made or,
to the knowledge of the Sponsor, contemplated). The above expenses, including
the Trustee's fees, when paid by or owing to the Trustee are secured by a first
lien on the Trust to which such expenses are charged. In addition, the Trustee
is empowered to sell the Securities in order to make funds available to pay all
expenses.
Unless the Sponsor otherwise directs, the accounts of the Trust shall be
audited not less than annually by independent public accountants selected by
the Sponsor. To the extent lawful, the expenses of the audit shall be an
expense of the Trust. Unitholders covered by the audit during the year may
receive a copy of the audited financial statements upon request.
REINVESTMENT PLAN
Income and principal distributions of Units (other than the final
distribution in connection with the termination of the Trusts) may be
reinvested by participating in the Trust's Reinvestment Plan. Under the plan,
the Units acquired for participants will be either Units already held in
inventory by the Sponsor or new Units created by the Sponsor's deposit of
Additional Securities as described in "The Trust--Deposit of Additional
Securities" in this Part B. Units acquired by reinvestment will be subject to a
reduced sales charge of 1.00%. Unitholders who participate in the Reinvestment
Plan will nevertheless be subject to tax on their distributions in the manner
described under "Tax Status." Investors should inform their broker when
purchasing their Units if they wish to participate in the Reinvestment Plan.
Thereafter, Unitholders should contact their broker if they wish to modify or
terminate their election to participate in the Reinvestment Plan. In order to
enable a Unitholder to participate in the Reinvestment Plan, with respect to a
particular distribution on their Units, such notice must be made at least three
business days prior to the Record Date for such distribution. Each subsequent
distribution of income or principal on the participant's Units will be
automatically applied by the Trustee to purchase additional Units of the Trust.
The Sponsor reserves the right to demand, modify or terminate the Reinvestment
Plan at any time without prior notice. The Reinvestment Plan for the Trust may
not be available in all states.
TAX STATUS
This is a general discussion of certain of the Federal income tax
consequences of the purchase, ownership and disposition of the Units. The
summary is limited to investors who hold the Units as "capital assets"
(generally, property held for investment) within the meaning of the Internal
Revenue Code. Unitholders should consult their tax advisers in determining the
Federal, state, local and any other tax consequences of the purchase, ownership
and disposition of Units.
In rendering the opinion set forth below, Battle Fowler LLP has examined the
Agreement, the final form of Prospectus dated the date hereof and the documents
referred to therein, among others, and has relied on the
B-20
<PAGE>
validity of said documents and the accuracy and completeness of the facts set
forth therein. In the Opinion of Battle Fowler LLP, special counsel for the
Sponsors, under existing law:
1. The Trust will be classified as a grantor trust for Federal income tax
purposes and not as a partnership or association taxable as a corporation.
Classification of the Trust as a grantor trust will cause the Trust not to
be subject to Federal income tax, and will cause the Unitholders of the
Trust to be treated for Federal income tax purposes as the owners of a pro
rata portion of the assets of the Trust. All income received by the Trust
will be treated as income of the Unitholders in the manner set forth below.
2. The Trust is not subject to the New York Franchise Tax on Business
Corporations or the New York City General Corporation Tax. For a Unitholder
who is a New York resident, however, a pro rata portion of all or part of
the income of the Trust will be treated as income of the Unitholder under
the income tax laws of the State and City of New York. Similar treatment
may apply in other states.
3. During the 90-day period subsequent to the initial issuance date, the
Sponsors reserve the right to deposit Additional Securities that are
substantially similar to those deposited in initially establishing the
Trust. This retained right falls within the guidelines promulgated by the
IRS and should not affect the taxable status of the Trust.
A taxable event will generally occur with respect to each Unitholder when the
Trust disposes of a Security (whether by sale, exchange or redemption) or upon
the sale, exchange or redemption of Units by the Unitholder. The price a
Unitholder pays for its Units, including sales charges, is allocated among its
pro rata portion of each Security held by the Trust (in proportion to the fair
market values thereof on the date the Unitholder purchases its Units) in order
to determine its initial cost for its pro rata portion of each Security held by
the Trust.
For Federal income tax purposes, a Unitholder's pro rata portion of dividends
paid with respect to a Security held by the Trust is taxable as ordinary income
to the extent of such corporation's current or accumulated earnings and
profits. A Unitholder's pro rata portion of dividends paid on a Security that
exceed current and accumulated earnings and profits will first reduce a
Unitholder's tax basis in the Security, and to the extent that such dividends
exceed a Unitholder's tax basis in the Security will generally be treated as a
capital gain.
A Unitholder's portion of gain, if any, upon the sale, exchange or redemption
of Units or the disposition of Securities held by the Trust will generally be
considered a capital gain and will be long-term if the Unitholder has held its
Units (and the Trust has held the Securities) for more than one year. Capital
gains realized by corporations are generally taxed at the same rates applicable
to ordinary income, but non-corporate taxpayers who realize long-term capital
gains may be subject to a reduced tax rate of 20%, rather than the "regular"
maximum tax rate of 39.6%. Tax rates may increase prior to the time when
Unitholders may realize gains from the sale, exchange or redemption of the
Units or Securities.
A Unitholder's portion of loss, if any, upon the sale or redemption of Units
or the disposition of Securities held by the Trust will generally be considered
a capital loss and will be long-term if the Unitholder has held its Units (and
the Trust has held the Securities) for more than one year. Capital losses are
deductible to the extent of capital gains; in addition, up to $3,000 of capital
losses ($1,500 for married individuals filing separately) recognized by non-
corporate Unitholders may be deducted against ordinary income.
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<PAGE>
A Unitholder that itemizes its deductions may also deduct its pro rata share
of the fees and expenses of the Trust, but only to the extent that such
amounts, together with the Unitholder's other miscellaneous deductions, exceed
2% of its adjusted gross income. The deduction of fees and expenses is subject
to limitations for individuals with incomes in excess of certain thresholds.
After the end of each calendar year, the Trustee will furnish to each
Unitholder an annual statement containing information relating to the dividends
received by the Trust on the Securities, the gross proceeds received by the
Trust from the disposition of any Security, and the fees and expenses paid by
the Trust. The Trustee will also furnish annual information returns to each
Unitholder and to the Internal Revenue Service.
A corporation (other than an S corporation and certain ineligible
corporations) that owns Units will generally be entitled to a 70% dividends
received deduction with respect to its pro rata portion of dividends taxable as
ordinary income received by the Trust from a domestic corporation or from a
qualifying foreign corporation in the same manner as if such corporation
directly owned the Securities paying such dividends. However, a corporation
owning Units should be aware that there are additional limitations on the
eligibility of dividends for the 70% dividends received deduction. These
limitations include a requirement that stock (and therefore Units) must
generally be held at least 46 days during the 90-day period beginning on the
date that is 45 days before the date on which the stock becomes ex-dividend.
Moreover, the allowable percentage of the deduction will be reduced if a
corporate Unitholder owns stock (or Units) the financing of which is directly
attributable to indebtedness incurred by such corporation.
As discussed in the section "Administration of the Trust--Trust Termination,"
each Unitholder may have three options in receiving its termination
distributions, namely (i) to receive its pro rata share of the underlying
Securities in kind, (ii) to receive cash upon liquidation of its pro rata share
of the underlying Securities, or (iii) to invest the amount of cash it will
receive upon the liquidation of its pro rata share of the underlying Securities
in units of a future series of the Trust (if one is offered) at a reduced sales
charge. A Unitholder that chooses option (i) should be treated as merely
exchanging its undivided pro rata ownership of Securities held by the Trust for
sole ownership of a proportionate share of Securities, and therefore the
transaction should be tax free to the extent Securities are received.
Entities that generally qualify for an exemption from Federal income tax,
such as many pension trusts, are nevertheless taxed under Section 511 of the
Code on unrelated business taxable income. Unrelated business taxable income is
income from a trade or business regularly carried on by the tax-exempt entity
that is unrelated to the entity's exempt purpose. Unrelated business taxable
income generally does not include dividend or interest income or gain from the
sale of investment property, unless such income is derived from property that
is debt-financed or is dealer property. A tax-exempt entity's dividend income
from the Trust and gain from the sale of Units in the Trust or the Trust's sale
of Securities is not expected to constitute unrelated business taxable income
to such tax-exempt entity unless the acquisition of the Unit itself is debt-
financed or constitutes dealer property in the hands of the tax-exempt entity.
Prospective investors are urged to consult their own tax advisers concerning
the Federal, state, local and any other tax consequences of the purchase,
ownership and disposition of Units prior to investing in the Trust.
B-22
<PAGE>
OTHER MATTERS
LEGAL OPINIONS. The legality of the Units offered hereby and certain matters
relating to Federal tax law have been passed upon by Battle Fowler LLP, 75 East
55th Street, New York, New York 10022 as counsel for the Sponsor. Carter,
Ledyard & Milburn, Two Wall Street, New York, New York 10005 have acted as
counsel for the Trustee.
INDEPENDENT AUDITORS. The Statement of Financial Condition, including the
Portfolio, is included herein in reliance upon the report of Ernst & Young LLP,
independent auditors, and upon the authority of said firm as experts in
accounting and auditing.
PORTFOLIO SUPERVISOR. ING Mutual Funds Management Co. LLC, a Delaware limited
liability company, is a wholly-owned indirect subsidiary of ING Group and is an
affiliate of the Sponsor.
PERFORMANCE INFORMATION. Total returns, average annualized returns or
cumulative returns for various periods of the strategy, the related index and
the Trust may be included from time to time in advertisements, sales literature
and reports to current or prospective investors. Total return shows changes in
Unit price during the period plus any dividends and capital gains, divided by
the original public offering price. Average annualized returns show the average
return for stated periods of longer than a year. Sales material may also
include an illustration of the cumulative results of like annual investments in
a strategy during an accumulation period and like annual withdrawals during a
distribution period. Figures for actual portfolios will reflect all applicable
expenses and, unless otherwise stated, the maximum sales charge. No provision
is made for any income taxes payable. Similar figures may be given for the
Trust applying the investment strategies to other indexes. Returns may also be
shown on a combined basis. Trust performance may be compared to performance on
a total return basis of the NASDAQ, NYSE or similar exchanges, as well as the
DJIA, S&P 500 Index or other similar indices. In addition, total return
comparisons may be made to performance data from Bloomberg Financial Markets
LP, Lipper Analytical Services, Inc., Morningstar Publications, Inc., Standard
& Poor's CompuStat and Center for Research in Security Prices (CRSP) at the
University of Chicago or from publications such as The Wall Street Journal,
Money, The New York Times, U.S. News and World Report, Business Week, Forbes or
Fortune. As with other performance data, performance comparisons should not be
considered representative of the Trust's relative performance for any future
period.
Pending the approval of the National Association of Securities Dealers
Regulation, the Sponsor may also include, in advertisements, sales literature
and reports to current or prospective investors, the performance of
hypothetical portfolios to which the Sponsor has applied the same investment
objectives and selection strategies, as well as back-tested data of the
historical performance of such strategies, as described in "The Trust--The
Securities" and which the Sponsor intends to apply to the selection of
securities for the Trust. This performance information is intended to
illustrate the Trust's strategies and should not be interpreted as indicative
of the future performance of the Trust.
B-23
<PAGE>
No person is authorized to give any information or to make any
representations not contained in this Prospectus and you should not rely on any
other information. The Trust is registered as a unit investment trust under the
Investment Company Act of 1940. Such registration does not imply that the Trust
or any of its Units have been guaranteed, sponsored, recommended or approved by
the United States or any state or any agency or officer thereof.
----------------
Table of Contents
<TABLE>
<CAPTION>
Title Page
- ----- ----
<S> <C>
PART A
Investment Summary......................................................... A-2
Fee Table.................................................................. A-5
Summary of Essential Information........................................... A-6
Statement of Financial Condition........................................... A-7
Portfolio.................................................................. A-8
Report of Independent Auditors............................................. A-9
PART B
The Trust.................................................................. B-1
Risk Considerations........................................................ B-4
Public Sale of Units....................................................... B-8
Rights of Unitholders...................................................... B-10
Liquidity.................................................................. B-12
Administration of the Trust................................................ B-14
Trust Expenses and Charges ................................................ B-19
Reinvestment Plan.......................................................... B-20
Tax Status................................................................. B-20
Other Matters.............................................................. B-23
</TABLE>
This Prospectus does not contain all of the information set forth in the
registration statement, filed with the SEC, Washington, D.C., under the
Securities Act of 1933 (file no. 333-31048), and the Investment Company Act of
1940 (file no. 811-08945), and to which reference is made. Information may be
reviewed and copied at the Commission's Public Reference Room, and information
on the Public Reference Room may be obtained by calling the SEC at 1-202-942-
8090. Copies may be obtained from the SEC by:
. visiting the SEC Internet address: http://www.sec.gov
. electronic request (after paying a duplicating fee) at the following E-
mail address: [email protected]
. writing: Public Reference Section of the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549-6009
----------------
The Pinnacle
Family of Trusts
----------------
Internet Trust Series I
(A Unit Investment Trust)
PROSPECTUS
DATED: March 28, 2000
SPONSOR:
ING FUNDS DISTRIBUTOR, INC.
1475 Dunwoody Drive
West Chester, Pennsylvania 19380
1-877-463-6464
TRUSTEE:
THE CHASE MANHATTAN BANK
4 New York Plaza
New York, New York 10004
----------------
This Prospectus does not constitute an offer to sell, or a solicitation of an
offer to buy, securities in any state to any person to whom it is not lawful to
make such offer in such state.
<PAGE>
PART II--ADDITIONAL INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM A--BONDING ARRANGEMENTS
The employees of ING Funds Distributor, Inc. are covered under Brokers'
Blanket Policy, Standard Form 14, in the amount of $2,000,000.
ITEM B--CONTENTS OF REGISTRATION STATEMENT
This Registration Statement on Form S-6 comprises the following papers and
documents:
The facing sheet on Form S-6.
The Cross-Reference Sheet (incorporated by reference to the Cross-
Reference Sheets to the Registration Statements of McLaughlin, Piven,
Vogel Family of Trusts, McLaughlin, Piven, Vogel Industrial Trust and
McLaughlin, Piven, Vogel Technology Trust filed on March 5, 1999, and
McLaughlin, Piven, Vogel Family of Trusts, Pinnacle Trust filed on
August 7, 1998.)
The Prospectus consisting of pages.
Undertakings.
Signatures.
Written consents of the following persons:
Battle Fowler LLP (included in Exhibit 3.1)
Ernst & Young LLP
The following exhibits:
<TABLE>
<CAPTION>
<C> <S>
*99.1.1 --Reference Trust Agreement including certain amendments to the
Trust Indenture and Agreement referred to under Exhibit 99.1.1.1
below.
*99.1.1.1 --Form of Trust Indenture and Agreement.
*99.1.3.5 --Articles of Incorporation and Articles of Amendment of ING Funds
Distributor, Inc.
*99.1.3.6 --Bylaws of ING Funds Distributor, Inc.
*99.3.1 --Opinion of Battle Fowler LLP as to the legality of the
securities being registered, including their consent to the
filing thereof and to the use of their name under the headings
"Tax Status" and "Legal Opinions" in the Prospectus, and to the
filing of their opinion Regarding tax status of the Trust.
99.6.0 --Power of Attorney of ING Funds Distributor, Inc., the Depositor,
by its officers and a majority of its Directors (filed as Exhibit
99.6.0 to Form S-6 Registration No. 333-31048 of The Pinnacle
Family of Trusts, Internet Trust Series I on February 24, 2000
and incorporated hereby by reference).
</TABLE>
- --------
* Filed herewith.
II-1
<PAGE>
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
The Pinnacle Family of Trusts, Internet Trust Series I has duly caused this
Amendment to the Registration Statement to be signed on its behalf by the
undersigned, hereunto duly authorized, in the City of New York and State of New
York on the 28th day of March, 2000.
THE PINNACLE FAMILY OF TRUSTS,
INTERNET TRUST SERIES I (Registrant)
ING FUNDS DISTRIBUTOR, INC.
(Depositor)
PETER J. DEMARCO
By __________________________________
Peter J. DeMarco
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933, this Amendment to
the Registration Statement has been signed below by the following persons, who
constitute the principal officers and a majority of the directors of ING Funds
Distributor, Inc., the Depositor, in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<C> <S> <C>
John J. Pileggi Chief Executive Officer and Director
Mitchell J. Mellen President and Director
Donald E. Brostrom Chief Financial Officer, Treasurer and
Director
Eric M. Rubin Director March 28, 2000
</TABLE>
PETER J. DEMARCO
By __________________________________
Peter J. DeMarco
as Senior Vice President
and Attorney-In-Fact*
- --------
* An executed copy of the Power of Attorney was filed as Exhibit 99.6.0 to Form
S-6 Registration Statement No. 333-31048 on February 24, 2000.
II-2
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference made to our firm under the Caption "Independent
Auditors" in Part B of the Prospectus and to the use of our report dated March
28, 2000, in this Registration Statement (Form S-6 No. 333-31048) of The
Pinnacle Family of Trusts, Internet Trust Series I.
Ernst & Young LLP
New York, New York
March 28, 2000
II-3
<PAGE>
EXHIBIT 1.1
THE PINNACLE FAMILY OF TRUSTS,
INTERNET TRUST SERIES I
REFERENCE TRUST AGREEMENT
This Reference Trust Agreement (the "Agreement") dated March 28, 2000
among ING Funds Distributor, Inc., as Depositor, ING Mutual Funds Management Co.
LLC, as Portfolio Supervisor and The Chase Manhattan Bank, as Trustee, sets
forth certain provisions in full and incorporates other provisions by reference
to the document entitled "The Pinnacle Family of Trusts, Internet Trust Series
I, and Subsequent Series, Trust Indenture and Agreement" dated March 28, 2000
and as amended in part by this Agreement (collectively, such documents
hereinafter called the "Indenture and Agreement"). This Agreement and the
Indenture, as incorporated by reference herein, will constitute a single
instrument.
WITNESSETH THAT:
WHEREAS, this Agreement is a Reference Trust Agreement as defined in
Section 1.1 of the Indenture, and shall be amended and modified from time to
time by an Addendum as defined in Section 1.1 (1) of the Indenture, such
Addendum setting forth any Additional Securities as defined in Section 1.1 (2)
of the Indenture;
WHEREAS, the Depositor wishes to deposit Securities, and any
Additional Securities as listed on any Addendums hereto, into the Trust and
issue Units, and Additional Units as the case maybe, in respect thereof pursuant
to Section 2.5 of the Indenture; and
NOW THEREFORE, in consideration of the premises and of the mutual
agreements herein contained, the Depositor, the Portfolio Supervisor and the
Trustee as follows:
Part I
STANDARD TERMS AND CONDITIONS OF TRUST
Section 1. Subject to the provisions of Part II hereof, all the
provisions contained in the Indenture 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 except that all references to "McLaughlin, Piven, Vogel Securities,
Inc." shall be deleted and the following section of the Indenture hereby is
amended as follows:
<PAGE>
(a) Section 1.1 of the Agreement is amended to add a new paragraph
(6):
"Depositor" shall mean ING Funds Distributor, Inc. or its successors in
interest, or any successor depositor or depositors appointed as herein
provided.
Section 2. This Reference Trust Agreement may be amended and modified
by Addendums, attached hereto, evidencing the purchase of Additional Securities
which have been deposited to effect an increase over the number of Units
initially specified in Part II of this Reference Trust Agreement ("Additional
Closings"). The Depositor and Trustee hereby agree that their respective
representations, agreements and certifications contained in the Closing
Memorandum dated March 28, 2000, relating to the initial deposit of Securities
continue as if such representations, agreements and certifications were made on
the date of such Additional Closings and with respect to the deposits made
therewith, except as such representations, agreements and certifications relate
to their respective By-Laws and as to which they each represent that their has
been no amendment affecting their respective abilities to perform their
respective obligations under the Indenture.
Part II
SPECIAL TERMS AND CONDITIONS OF TRUST
Section 1. The following special terms and conditions are hereby
agreed to:
(a) The Securities (including Contract Securities) listed in the
Prospectus relating to this series of The Pinnacle Family of Trusts (the
"Prospectus") have been deposited in the Trust under this Agreement (see
"Portfolio" in Part A of the Prospectus which for purposes of this Indenture and
Agreement is the Schedule of Securities or Schedule A).
(b) The number of Units delivered by the Trustee in exchange for the
Securities referred to in Section 2.3 is 15,922.
(c) For the purposes of the definition of Unit in item (24) of Section
1.1, the fractional undivided interest in and ownership of the Trust initially
is 1/15,922 as of the date hereof.
(d) The term Record Date shall mean the fifteenth day of June and
December commencing on June 15, 2000.
(e) The term Distribution Date shall mean the last business day of
June and December commencing on June 30, 2000.
(f) The First Settlement Date shall mean March 31, 2000.
-2-
<PAGE>
(g) For purposes of Section 6.1(g), the liquidation amount is hereby
specified to be 40% of the aggregate value of the Securities as of the last
deposit of Additional Securities.
(h) For purposes of Section 6.4, the Trustee shall be paid per annum
an amount computed according to the following schedule, determined on the basis
of the number of Units outstanding as of the Record Date preceding the Record
Date on which the compensation is to be paid, provided, however, that with
respect to the period prior to the first Record Date, the Trustee's compensation
shall be computed at $.86 per 100 Units:
rate per 100 units number of Units outstanding
$0.86 5,000,000 or less
$0.80 5,000,001 - 10,000,000
$0.74 10,000,001 - 20,000,000
$0.62 20,000,001 or more
(i) For purposes of Section 7.4, the Portfolio Supervisor's maximum
annual supervisory fee is hereby specified to be $.25 per 100 Units outstanding.
(j) The Termination Date shall be June 26, 2001 or the earlier
disposition of the last Security in the Trust.
(k) The fiscal year for the Trust shall end on December 31 of each
year.
IN WITNESS WHEREOF, the parties hereto have caused this Reference
Trust Agreement to be duly executed on the date first above written.
[Signatures on separate pages]
-3-
<PAGE>
ING FUNDS DISTRIBUTOR, INC.
Depositor
By: /s/ Peter DeMarco
--------------------------
Senior Vice President
STATE OF NEW YORK )
: ss:
COUNTY OF NEW YORK )
On this 28th day of March, 2000, before me personally appeared Peter
DeMarco, to me known, who being by me duly sworn, said that he is Senior Vice
President of 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/ Carla Vogel
--------------------------------
Notary Public
<PAGE>
THE CHASE MANHATTAN BANK
Trustee
By: /s/ Arthur Reiser
------------------------------
Vice President
STATE OF NEW YORK )
:ss.:
COUNTY OF NEW YORK )
On this 27th day of March, 2000, before me personally appeared
Arthur Reiser to me known, who being by me duly sworn, said that (s)he is
an Authorized Signatory of The Chase Manhattan Bank, one of the corporations
described in and which executed the foregoing instrument; that (s)he 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/ Renita M. Jolley
--------------------------------
Notary Public
<PAGE>
ING MUTUAL FUNDS MANAGEMENT CO. LLC
Portfolio Supervisor
By: /s/ Peter DeMarco
--------------------------
Authorized Signator
STATE OF NEW YORK )
: ss:
COUNTY OF NEW YORK )
On this 28th day of March, 2000, before me personally appeared Peter
DeMarco, 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 sole member of said limited liability company.
/s/ Carla Vogel
--------------------------------
Notary Public
<PAGE>
EXHIBIT 1.1.1
THE PINNACLE FAMILY OF TRUSTS
INTERNET TRUST SERIES I
for all series formed on or subsequent to the effective
date specified below
__________
TRUST INDENTURE AND AGREEMENT
Among
MCLAUGHLIN, PIVEN, VOGEL SECURITIES, INC.
and
ING FUNDS DISTRIBUTOR, INC.
As Depositors
and
THE CHASE MANHATTAN BANK
As Trustee
and
ING MUTUAL FUNDS MANAGEMENT CO. LLC
As Portfolio Supervisor
__________
Dated: March 28, 2000
<PAGE>
THE PINNACLE FAMILY OF TRUSTS
INTERNET TRUST SERIES I
and Subsequent Series
TABLE OF CONTENTS
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Page
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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.........................................................16
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......................................................................17
ARTICLE 4 EVALUATION OF SECURITIES.......................................................................18
Section 4.1. Evaluation of Securities...................................................................18
</TABLE>
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<TABLE>
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<S> <C> <C>
Section 4.2. Tax Reports................................................................................18
Section 4.3. Liability of Trustee with respect to Evaluations...........................................18
ARTICLE 5 TRUST EVALUATION, REDEMPTION, PURCHASE, TRANSFER,
INTERCHANGE OR REPLACEMENT OF CERTIFICATES.....................................................19
Section 5.1. Trust Evaluation...........................................................................19
Section 5.2. Redemptions by Trustee; Purchases by Depositors............................................20
Section 5.3. Depositor Redemptions......................................................................22
Section 5.4. Units to be Held Only Through the Depository Trust Company or a
Successor Clearing Agency......................................................................22
ARTICLE 6 TRUSTEE; REMOVAL OF DEPOSITORS.................................................................23
Section 6.1. General Definition of Trustee's Liabilities, Rights and Duties; Removal of
Depositors...............................................................................23
Section 6.2. Books, Records and Reports.................................................................26
Section 6.3. Indenture and List of Securities on File...................................................27
Section 6.4. Compensation...............................................................................27
Section 6.5. Removal and Resignation of the Trustee; Successor..........................................28
Section 6.6. Qualifications of Trustee..................................................................29
ARTICLE 7 DEPOSITORS.....................................................................................29
Section 7.1. Succession.................................................................................29
Section 7.2. Resignation of a Depositor.................................................................29
Section 7.3. Liability of Depositors and Indemnification................................................30
Section 7.4. Compensation...............................................................................31
Section 7.5. Joint Position of Depositors; Power of Attorney............................................31
Section 7.6. Resignation and Removal of Portfolio Supervisor; Successor.................................32
Section 7.7. Liability of Portfolio Supervisor and Indemnification......................................33
ARTICLE 8 RIGHTS OF UNITHOLDERS..........................................................................34
Section 8.1. Beneficiaries of Trust.....................................................................34
Section 8.2. Rights, Terms and Conditions...............................................................34
ARTICLE 9 ADDITIONAL COVENANTS; MISCELLANEOUS PROVISIONS.................................................35
Section 9.1. Amendments.................................................................................35
Section 9.2. Termination................................................................................35
Section 9.3. Construction...............................................................................38
Section 9.4. Registration of Units......................................................................38
Section 9.5. Written Notice.............................................................................38
Section 9.6. Severability...............................................................................39
Section 9.7. Dissolution of Depositors Not to Terminate.................................................39
</TABLE>
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<PAGE>
THE PINNACLE FAMILY OF TRUSTS,
INTERNET TRUST SERIES I
AND
SUBSEQUENT SERIES
TRUST INDENTURE AND AGREEMENT
DATED MARCH 28, 2000
This Trust Indenture and Agreement ("Indenture") dated March 28, 2000,
among McLaughlin, Piven, Vogel Securities, Inc. and ING Funds Distributor, Inc.,
as Depositors, The Chase Manhattan Bank, as Trustee and ING Mutual Funds
Management Co. LLC, as Portfolio Supervisor.
WITNESSETH THAT
In consideration of the premises and of the mutual agreements herein
contained, the Depositors, the Trustee and the Portfolio Supervisor agree as
follows:
INTRODUCTION
The Depositors concurrently with the execution and delivery hereof are
establishing The Pinnacle Family of Trusts, Internet Trust Series I (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 The Pinnacle Family of Trusts,
Internet Trust Series I and of each additional series of The Pinnacle Family of
Trusts which may be established from time to time hereafter. For The Pinnacle
Family of Trusts, Internet Trust Series I and each subsequent series of The
Pinnacle Family of 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 Supervisor's fee; (10 the Termination Date; and (11 any other change
or addition contemplated or permitted by this Indenture.
<PAGE>
ARTICLE 1
DEFINITIONS; CERTIFICATES
Section 1.1 Definitions: Whenever used in this Indenture the
-----------
following 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 McLaughlin, Piven, Vogel Securities,
Inc.("MPV") or its successors in interest and ING Funds Distributor, Inc.
("ING") or its successors in interest, or any successor depositor or depositors
appointed as herein provided.
(7) "Distribution Date" shall have the meaning assigned to it in Part
II of the Reference Trust Agreement.
(8) "DTC" shall mean Depository Trust Company, or its successors.
(9) "Failed Security" shall have the meaning assigned to it in
Section 3.7 hereof.
(10) "First Settlement Date" shall mean the date specified in Part II
of the Reference Trust Agreement.
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<PAGE>
(11) "Indenture" shall mean this Trust Indenture and Agreement as
originally executed or, if amended as herein provided, as so amended.
(12) "Original Issue" shall mean an issue of Securities deposited pur
suant to Section 2.1 or any Substitute Securities purchased to replace any
Original Issue which have become Failed Securities.
(13) "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.
(14) "Portfolio Supervisor" shall mean ING Mutual Funds Management Co.
LLC, or its successor or any successor Portfolio Supervisor appointed as herein
provided.
(15) "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.
(16) "Record Date" shall have the meaning assigned to it in Part II of
the Reference Trust Agreement.
(17) "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.
(18) "Reference Trust Agreement" shall mean the indenture for the
particular series of The Pinnacle Family of Trusts into which the terms of this
Indenture are incorporated.
(19) "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 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.
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<PAGE>
(20) "Substitute Security" shall mean a Security purchased by the
Trustee pursuant to Section 3.7 hereof.
(21) "Termination Date" shall have the meaning assigned to it in Part
II of the Reference Trust Agreement.
(22) "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.
(23) "Trustee" shall mean The Chase Manhattan Bank, or its successor
or any successor Trustee appointed as herein provided.
(24) "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.
(25) "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
holder's pro rata share thereof.
(26) 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.
(27) 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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<PAGE>
ARTICLE 2
DEPOSIT OF SECURITIES; DECLARATION OF TRUST;
FORM AND ISSUANCE OF CERTIFICATES
Section 2.1 Deposit of Securities: The Depositors, concurrently with
---------------------
the 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.
Section 2.2 Declaration of Trust: The Trustee declares that it holds
--------------------
and 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: The Trustee hereby acknowledges receipt
--------------
of the deposit referred to in Section 2.1, and simultaneously with the receipt
of said deposit, pursuant to the Depositors' direction, has registered 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 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
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<PAGE>
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 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.
--------------------------------
(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 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
-6-
<PAGE>
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 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.
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<PAGE>
(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 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.
-8-
<PAGE>
ARTICLE 3
ADMINISTRATION OF TRUST
Section 3.1 Initial Cost: Subject to reimbursement as hereinafter
------------
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
-------- -------
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 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.
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<PAGE>
Section 3.2 Income Account: The Trustee shall collect the dividends
--------------
or 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 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 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, 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.
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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 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 shall be deducted or paid unless the payment thereof from the Trust
is at that time lawful;
(b) 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;
(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 is 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 as set forth below.
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
from the amount so held pursuant to the immediately preceding paragraph the
amounts that the Portfolio Supervisor is at the time entitled to receive
pursuant to Section 7.4 on account of services theretofore performed and
expenses theretofore incurred.
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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
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funds 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. 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).
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)
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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.
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,
(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, the annual audit fees referred to in Section 6.2, and the annual
fees of the Portfolio Supervisor for portfolio supervisory services
pursuant to Section 7.4,
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(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 of the Portfolio Supervisor 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,
(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.
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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 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;
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(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.
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
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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,
-------- --------
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.
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 Treas. Reg. Section 301.7701-4.
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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
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information selected by the Trustee with reasonable care, or 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 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 other than those involved in such
calculations of Unit Value, the Trustee shall
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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: 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 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
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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 Portfolio Supervisor 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
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
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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.
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. New York City 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 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
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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, evaluation, endorsement, assignment,
resolution, draft or other document, whether or not of the same kind, prima
facie properly executed, or for the disposition of moneys, Securities or Units
pursuant to this Indenture, 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 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
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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 (except that the Trustee shall be responsible for the exercise of due
care in determining the genuineness of Securities delivered to it pursuant to
contracts for the purchase of such 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. 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 Agreement 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 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
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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 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.
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(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 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 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.
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
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.
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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: 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 of the
greatest number of Units of the Trust outstanding at any time during the period
with respect to which such compensation is being computed. 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 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 prior lien on the Trust.
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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
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been received by the Depositors, the retiring Trustee may forthwith apply to a
court of competent 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, 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 Depositor 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
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resignation and 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 the Agreement 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 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 for services rendered
to all series of The Pinnacle Family of 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 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 pursuant to Section 3.5 is found to be an improper charge against the
Trust, the Portfolio Supervisor 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 such judgment or order shall not be effectively stayed or a final settlement
is established in which the Portfolio Supervisor agrees to reimburse the Trust
for amounts paid to the Portfolio Supervisor 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
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<PAGE>
Business 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 ING Funds Distributor, Inc. 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
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<PAGE>
consolidation to which the Portfolio Supervisor hereunder shall be a party,
shall be the successor portfolio 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
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<PAGE>
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.
(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
the Agreement 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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<PAGE>
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; 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 Agreement
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.
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<PAGE>
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 20 days prior to the Termination Date, send a
written notice to each Unitholder of record owning, as of such date, 2,500 Units
and whose interest in the Trust would entitle him to receive at least one share
of each Security. Such notice shall allow such Unitholder 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.
Unitholders who do not effectively request an in-kind distribution shall receive
their distribution upon termination in cash. 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.
On the Termination Date, this Indenture and the Trust created hereby
shall terminate. In connection with such Termination, the Trustee shall
segregate such number of shares of Securities as shall be necessary to satisfy
in-kind distributions to Unitholders electing such distribution.
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
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<PAGE>
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 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
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<PAGE>
(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.
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 electing a cash distribution may
express interest in investing such cash distribution in units of a New Series of
The Pinnacle Family of Trusts. 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 any applicable sales
material with respect to the New Series and 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. 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. 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 McLaughlin, Piven, Vogel
Securities, Inc., 30 Wall Street, New York, New York 10005; if to ING Funds
Distributor, Inc., 1475 Dunwoody Drive, West Chester, Pennsylvania 19380 or at
such other address as shall be specified by the Depositors to the Trustee in
writing. Any notice, demand, direction or instruction to be given to the
Trustee shall be in writing and shall be duly given if
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<PAGE>
mailed or delivered to the Trustee at 4 New York Plaza, New York, New York
10004, 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.]
-39-
<PAGE>
THE CHASE MANHATTAN BANK
Trustee
By:_______________________________
Vice President
STATE OF NEW YORK )
:ss.:
COUNTY OF NEW YORK )
On this ___ day of March, 2000, before me personally appeared
____________________, to me known, who being by me duly sworn, said that he is
an Authorized Signator of The Chase Manhattan Bank, one of the corporations
described in and which executed the foregoing instrument; that he 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 signed his name thereto by like authority.
___________________________________
Notary Public
<PAGE>
ING FUNDS DISTRIBUTOR, INC.
Depositor
By:______________________________
Authorized Signator
STATE OF NEW YORK )
: ss:
COUNTY OF NEW YORK )
On this ___ day of March, 2000, before me personally appeared
__________________, to me known, who being by me duly sworn, said that he is an
Authorized Signator of ING Funds Distributor, 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.
___________________________________
Notary Public
<PAGE>
MCLAUGHLIN, PIVEN, VOGEL SECURITIES, INC.
Depositor
By:______________________________
Authorized Signator
STATE OF NEW YORK )
: ss:
COUNTY OF NEW YORK )
On this ___ day of March, 2000, before me personally appeared
_______________, to me known, who being by me duly sworn, said that he is an
Authorized Signator of McLaughlin, Piven, Vogel Securities, 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.
___________________________________
Notary Public
<PAGE>
ING MUTUAL FUNDS MANAGEMENT CO. LLC
Portfolio Supervisor
By:______________________________
Authorized Signator
STATE OF NEW YORK )
: ss:
COUNTY OF NEW YORK )
On this ___ day of March, 2000, before me personally appeared
__________________, to me known, who being by me duly sworn, said that he is an
Authorized Signator of ING Mutual Funds Management Co. LLC, 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 sole member
of said limited liability company.
___________________________________
Notary Public
<PAGE>
EXHIBIT 1.3.5
ARTICLES OF INCORPORATION
OF
EQUITABLE OF IOWA SECURITIES NETWORK, INC.
TO THE SECRETARY OF STATE
OF THE STATE OF IOWA:
Pursuant to Section 202 of the Iowa Business Corporation Act, Chapter 490
of the Code of Iowa, the undersigned, acting as incorporator, adopts the
following Articles of Incorporation:
ARTICLE I
The name of the corporation is Equitable of Iowa Securities Network, Inc.
ARTICLE II
The corporation shall have perpetual duration.
ARTICLE III
The purpose for which this corporation is organized is the transaction of
any and all lawful business for which corporations may be organized under the
Iowa Business Corporation Act, together with unlimited power to engage in and do
any lawful act concerning the business or businesses of providing investment
management and advisory services to investment companies, insurance companies,
other financial institutions, or to the public generally; buying and selling
securities for its own account; effecting transactions in securities, including
mutual funds and variable annuities of and for the account of others, acting as
a marketing agency for insurance and annuity products; and conducting any and
all other lawful businesses in which a subsidiary investment company of a life
insurance company may engage, but such corporation shall have no authority to
insure lives or grant annuities or hold itself out to be a life insurance
company.
ARTICLE IV
The aggregate number of shares of stock which the corporation is authorized
to issue is fifty thousand (50,000) shares of common stock, of no par value.
<PAGE>
ARTICLE V
The street address of the initial registered office of the corporation is
604 Locust Street, Des Moines, Iowa 50309, located in the County of Polk and the
name of its initial registered agent at such address is John A. Merriman.
ARTICLE VI
The name and address of the incorporator is:
John A. Merriman
604 Locust Street
Des Moines, Iowa 50309
ARTICLE VII
A director of the corporation shall not be personally liable to the
corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for a breach. of the director's
duty of loyalty to the corporation or its shareholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) for a transaction from which the director derives an
improper personal benefit, or (iv) under section 490.833 of the Iowa Business
Corporation Act. If the Iowa Business Corporation Act is hereafter amended to
authorize the further elimination or limitation of the liability of directors,
then the liability of a director of the corporation, in addition to the
limitation on personal liability provided herein, shall be eliminated or limited
to the extent of such amendment, automatically and without any further action,
to the maximum extent permitted by law. Any repeal or modification of this
Article by the shareholders of the corporation shall be prospective only, and
shall not adversely affect any limitation on the personal liability, or any
other right or protection, of a director of the corporation with respect to any
state of facts existing at or prior to the time of such repeal or modification.
Dated this 3rd day of March, 1994.
/s/ JOHN A. MERRIMAN
--------------------
John A. Merriman, Incorporator
STATE OF IOWA
SECRETARY OF STATE
FILED ON 03/03/94 AT 11:16 AM
FILE # 000173691W00028717
WO: 94008466-WS: 94008468
<PAGE>
ARTICLES OF AMENDMENT
OF
EQUITABLE OF IOWA SECURITIES NETWORK
TO THE SECRETARY OF STATE OF THE STATE OF IOWA:
Pursuant to Section 1006 of the Iowa Business Corporation Act, the
undersigned corporation adopts the following amendment to the corporation's
Articles of Incorporation.
1. The name of the corporation is Equitable of Iowa Securities Network, Inc.
2. The text of the amendment to the Articles of Incorporation affected hereby
is as follows:
Article I of the Articles of Incorporation is hereby amended by deleting it
in its entirety and substituting the following in lieu thereof
ARTICLE I
Name
----
The name of the corporation is ING Funds Distributor, Inc.
3. The date of adoption of this amendment was October 20, 1998.
4. The amendment was approved by the shareholders. The designation, number of
outstanding shares, number of votes entitled to be case by each voting group
entitled to vote separately on the amendment, and the number of votes of each
voting group undisputedly represented at the meeting is as follows:
Votes Votes
Designation Shares Entitled Represented
of Group Outstanding to be Cast at Meeting
----------- ----------- ---------- -----------
Common Stock 1,000 1,000 1,000
5. The total number of votes cast for and against the amendment was as follows:
Votes Votes
For Against
----- -------
1,000 0
<PAGE>
6. The number of votes cast for the amendment was sufficient for approval.
EQUITABLE OF IOWA SECURITIES
NETWORK, INC.
Dated: October 20, 1998 By: /s/ EDWARD J. BERKSON
----------------------------
Edward J. Berkson, President
FILED
IOWA
SECRETARY OF STATE
10/22/98
3:20 pm
W 196792
<PAGE>
EXHIBIT 1.3.6
BYLAWS OF
EQUITABLE OF IOWA SECURITIES NETWORK, INC.
ARTICLE I
Offices
-------
The principal office of the Corporation shall be located at Des Moines,
Iowa. The Corporation may have such other offices either within or without the
State of Iowa as the business of the Corporation may from time to time require.
The registered office of the Corporation required by the Iowa Business
Corporation Act to be maintained in the State of Iowa may be, but need not be,
identical with the principal office in the State of Iowa.
ARTICLE II
Shareholders
------------
SECTION 1. ANNUAL MEETING. The annual meeting of the Shareholders shall
be held on a date on or about April 30th of each year, for the purpose of
electing Directors and for the transaction of such other business as may come
before the meeting. If the day fixed for the annual meeting shall, for any
reason, be a legal holiday, such meeting shall be held on the next succeeding
business day. If the election of Directors shall not be held on the day
designated herein for any annual meeting, or for any adjournment thereof, the
Board of Directors shall cause the election to be held at a special meeting of
the Shareholders as soon thereafter as may be convenient.
SECTION 2. SPECIAL MEETINGS. Special meetings of the Shareholders may be
called by the President, the Secretary, the Board of Directors acting upon
majority vote, or the holders of not less than one-tenth of all the outstanding
shares of the Corporation entitled to vote at such meeting.
SECTION 3. RULES. All meetings of the Shareholders shall be conducted in
accordance with Robert's Rules of Order.
SECTION 4. PLACE OF MEETING. The Board of Directors may designate any
place either within or without the State of Iowa as the place of meeting for any
annual meeting or for any special meeting called by the Board of Directors. If
no designation is made, the place of
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meeting shall be the principal office of the Corporation in the State of Iowa,
except as otherwise provided in Section 6 of this Article.
SECTION 5. NOTICE OF MEETINGS. Written or printed notice, stating the
place, day and hour of the meeting, and in case of a special meeting, the
purpose or purposes for which the meeting is called, shall be delivered not less
than ten (10) nor more than sixty (60) days before the date of the meeting,
either personally or by mail, by or at the direction of the President, the
Secretary, or the officer or persons calling the meeting, to each Shareholder of
record entitled to vote at such meeting. If mailed, such notice shall be deemed
to be delivered when deposited in the United States Mail in a sealed envelope
addressed to the Shareholder at his address as it appears on the stock transfer
books of the Corporation, with postage thereon prepaid.
SECTION 6. MEETING OF ALL SHAREHOLDERS. If all of the Shareholders shall
meet at any time and place, either within or without the State of Iowa, and
consent in writing to the holding of a meeting, such meeting shall be valid
without call or notice, and at such meeting any corporate action may be taken.
SECTION 7. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. For the
purpose of determining Shareholders entitled to notice, or to vote at any
meeting of Shareholders, or any adjournment thereof, or entitled to receive
payment of any dividend, or in order to make a determination of Shareholders for
any other proper purpose, the Board of Directors may close the stock transfer
books for a stated period but not to exceed, in any case, sixty (60) days. If
the stock transfer books shall be closed for the purpose of determining
Shareholders entitled to notice of or to vote at a meeting of Shareholders, such
books shall be closed for at least ten (10) days immediately preceding such
meeting. In lieu of closing the stock transfer books, the Board of Directors
may fix in advance a date as the record date for any such determination of
Shareholders. Such date in any case shall be not more than seventy (70) days
and, in case of a meeting of Shareholders, not less than ten (10) days prior to
the date on which the particular action, requiring such determination of
Shareholders, is to be taken. If the stock transfer books are not closed and no
record date is fixed for the determination of Shareholders entitled to notice of
or to vote at a meeting of Shareholders, or Shareholders entitled to receive
payment of the dividend, the date on which notice of the meeting is mailed or
the date on which the resolution of the Board of Directors declaring such
dividend is adopted, as the case may be, shall be the record date for such
determination of Shareholders. When a determination of Shareholders entitled to
vote at any meeting of Shareholders has been made as provided in this Bylaw,
such determination shall apply to any adjournment thereof, unless the board of
directors fixes a new record date, which it must do if the meeting is adjourned
to a date more than one hundred twenty (120) days after the date fixed for the
original meeting
SECTION 8. VOTING RECORDS. The officer or agent having charge of the
stock transfer books for shares, of the Corporation shall prepare, within two
(2) business days after notice of a Shareholders' meeting is given, an
alphabetical list of the names of all Shareholders who are entitled to notice of
that meeting. The list must be arranged by voting group and within
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each voting group by class or series of shares, and show the address of and
number of shares held by each Shareholder. This record shall be available for
inspection by any Shareholder beginning two (2) days after notice of the meeting
is given for which the list was prepared and continuing through the meeting, at
the Corporation's principal office or at a place identified in the meeting
notice in the city where the meeting will be held. Such record shall also be
produced and kept open at the time and place of the meeting and shall be subject
to the inspection of any Shareholder, or a Shareholder's agent or attorney, at
any time during the meeting or any adjournment. A Shareholder, or a
Shareholder's agent or attorney, is also entitled to copy the record during
regular business hours and at the person's expense during the period it is
available for inspection if (1) the person's demand is made in good faith and
for a proper purpose, (2) the person describes with reasonable particularity his
purpose, and (3) the record is directly connected with the person's purpose. The
stock transfer book shall be prima facie evidence as to who are the Shareholders
entitled to examine such record or transfer books, or to vote at any meeting of
Shareholders.
SECTION 9. QUORUM. A majority of the shares entitled to vote represented
in person or by proxy, shall constitute a quorum at any meeting of Shareholders.
Once a share is represented for any purpose at a meeting, it is deemed present
for quorum purposes for the remainder of the meeting and for any adjournment of
that meeting, unless a new record date is or must be set for that adjourned
meeting. If a quorum exists, action on a matter, other than the election of
directors, is approved if the majority of the votes actually cast favors the
action, unless the vote of a greater number is required by the Iowa Business
Corporation Act or by these Bylaws or by the Articles of Incorporation.
If at any annual or special meeting of the Shareholders or any adjournment
of such meeting a quorum shall fail to attend in person or by proxy, a majority
in interest of the Shareholders attending, in person or by proxy at the time and
place of said meeting or adjourned meeting may adjourn the same from time to
time without notice other than by announcement at the meeting until a quorum
shall attend, and thereupon any business may be transacted which might have been
transacted at the meeting as originally called had the same been then held.
SECTION 10. PROXIES. At all meetings of Shareholders, a Shareholder may
vote either in person or by a proxy pursuant to an appointment form executed in
writing by the Shareholder or by his duly authorized Attorney-in-Fact. Such an
appointment shall be filed with the Secretary of the Corporation before or at
the time of the meeting. No appointment shall be valid after eleven (11) months
from the date of its execution unless otherwise provided in the appointment
form. An appointment of a proxy is revocable by the Shareholder unless the
appointment form conspicuously states that it is irrevocable and the appointment
is coupled with an interest. An irrevocable appointment is revoked when the
interest with which it is coupled is extinguished.
SECTION 11. VOTING OF SHARES. Each outstanding share shall be entitled to
one (1) vote upon each matter submitted to a vote at a meeting of the
Shareholders, unless otherwise provided in the Articles of Incorporation or the
Iowa Business Corporation Act, or in the instance
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of authorized and issued Preferred Stock, subject to such voting rights as
provided in a resolution of the Board of Directors designating a series thereof.
The cumulative method of voting shall not be allowed.
SECTION 12. VOTING OF SHARES BY CERTAIN HOLDERS. Shares standing in the
name of another corporation, domestic or foreign, may be voted by such officer,
agent or proxy as the Bylaws of such Corporation may prescribe, or, in the
absence of such provision, as the Board of Directors of such Corporation shall
determine.
Shares held by an Administrator, Executor, Guardian or Conservator may be
voted by him either in person or by proxy, without a transfer of such shares
into his name. Shares standing in the name of a trustee may be voted by him,
either in person or by proxy, but no trustee shall be entitled to vote shares
held by him without a transfer of such shares into his name.
Shares standing in the name of a receiver may be voted by such receiver,
and shares held by or under the control of a receiver may be voted by such
receiver without the transfer thereof into his name if authority to do so be
contained in an appropriate order of the court by which such receiver was
appointed.
A Shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
SECTION 13. ORGANIZATION. The President shall call the meetings of
Shareholders to order and act as presiding officer thereof. In the absence of
the President, a majority of the shares present represented in person or by
proxy may elect any Shareholder present, or the duly authorized proxy of any
Shareholder, to act as presiding officer of the meeting. The Secretary of the
Corporation shall act as Secretary of all meetings of the Shareholders, but in
his absence the presiding officer may appoint any person to act as Secretary of
the meeting.
SECTION 14. ORDER OF BUSINESS. The order of business at all meetings of
Shareholders, unless otherwise determined by a vote of a majority of the shares
represented in person or by proxy at such meeting, shall be determined by the
presiding officer.
SECTION 15. BALLOTING. Upon the demand of any Shareholder, the vote upon
any question before the meeting shall be by ballot. If such demand is made, the
presiding officer shall appoint Inspectors of Election, not to exceed three (3)
in number, to receive and take charge of proxies and ballots. No director or
candidate for the office of director shall be appointed as such inspector.
SECTION 16. ACTION WITHOUT MEETING. Any action required or permitted by
the Iowa Business Corporation Act to be taken at a Shareholders' meeting may be
taken without a meeting or vote, without prior notice, if one or more written
consents describing the action taken
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are signed by the holders of outstanding shares having not less than ninety
percent (90%) of the votes entitled to be cast at a meeting at which all shares
entitled to vote on the action were present and voted, and are delivered to the
Corporation for inclusion in the minutes or filing with the corporate records.
ARTICLE III
Directors
---------
SECTION 1. GENERAL POWERS. The business and affairs of the Corporation
shall be managed by its Board of Directors. The Board of Directors shall have
the power to commit shares of the authorized but unissued capital stock of the
Corporation for acquisitions of other property of any and all kinds. Such stock
shall be issued at valuation placed thereon by the Board of Directors, but in no
event for a consideration less than the par value of such shares.
SECTION 2. NUMBER, TENURE AND QUALIFICATIONS. The number of Directors of
the Corporation shall be no more than fifteen. Each Director shall hold office
for the term of which he is elected, or until his successors shall have been
elected and qualified.
SECTION 3. REGULAR MEETINGS. A regular meeting of the Board of Directors
shall be held without other notice than this Bylaw, immediately after, and at
the same place as, the annual meeting of Shareholders. The Board of Directors
may provide by resolution, the time and place, either within or without the
State of Iowa, for the holding of additional regular meetings without other
notice than such resolution.
SECTION 4. SPECIAL MEETING. Special meetings of the Board of Directors
may be called by or at the request of the President or any member of the Board
of Directors. Meetings of the Board shall be held at the principal office of
the Corporation unless a different place, either within or without the State of
Iowa shall be designated by the President or Board of Directors.
SECTION 5. NOTICE. Notice of any special meeting shall be given at least
two (2) days previously thereto by oral, telephonic, telegraphic or written
notice, delivered or mailed, to each Director at his address on file with the
Corporation. If mailed or telegraphed, such notice shall be deemed to be
delivered when deposited in the United States Mail or delivered to the telegraph
company, as the case may be. Any Director may waive notice of any meeting. The
attendance of a Director at any meeting shall constitute a waiver of notice of
such meeting, except where a Director attends a meeting for the express purpose
of objecting to the transaction of any business because the meeting is not
lawfully called or convened. Neither the business to be transacted at, nor the
purpose of, any regular or special meeting of the Board of Directors need be
specified in the notice or waiver of notice of such meeting.
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SECTION 6. QUORUM. A majority of the Board of Directors shall constitute
a quorum for the transaction of business at any meeting of the Board of
Directors, provided that if less than a majority of the Directors are present at
such meeting, a majority of the Directors present may adjourn the meeting from
time to time without further notice. The act of a majority of the Directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors.
Members of the Board of Directors of the Corporation may participate in a
meeting of Board of Directors by conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in a meeting pursuant to this provision shall
constitute presence in person at such meeting.
SECTION 7. VACANCIES. Any vacancy occurring in the Board of Directors and
any Directorship to be filled by reason of an increase in the number of
Directors may be filled by the affirmative vote of a majority of the Directors
then in office, even if less than a quorum of the Board of Directors. A
Director so elected shall be elected for the unexpired term of his predecessor
in office or the full term of such new Directorship.
SECTION 8. RESIGNATION. Any Director may resign at any time. Such
resignation shall be made in writing and shall take effect at the time specified
therein. If no time is specified, it shall take effect at the time of its
receipt by the Secretary, who shall record such resignation noting the time of
its reception. The acceptance of a resignation shall not be necessary to make
it effective.
SECTION 9. REMOVAL. The entire Board of Directors or any individual
Director may be removed from office, with or without cause, at a Shareholders'
meeting called expressly for that purpose by the vote of a majority of those who
actually vote. In case the entire Board or any one or more of the Directors are
so removed, new Directors may be elected at the same meeting for the unexpired
term of the Director or Directors so removed. A director shall not be removed
without a meeting pursuant to written consents unless such consents are obtained
from the holders of all the outstanding shares of the Corporation. Failure to
elect Directors to fill the unexpired term of the Directors so removed shall be
deemed to create a vacancy or vacancies in the Board of Directors.
SECTION 10. PRESIDING OFFICER. The Board of Directors, at the first
meeting and at each regular meeting held immediately following the annual
meeting of Shareholders, may appoint one of their number to act as Chairman of
the Board of Directors, who may also be an officer of the Corporation, and as
Chairman he shall preside at meetings of the Board. In his absence a member of
the Board to be selected by the members present shall preside. The Secretary of
the Corporation shall act as Secretary at all meetings of the Board, or in his
absence the Board of Directors meeting may designate any person to act as
Secretary. The Chairman of the Board of Directors shall perform such other
duties as from time to time may be assigned to him by the Board of Directors.
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SECTION 11. ORDER OF BUSINESS. The order of business at all meetings of
the Board of Directors, unless otherwise determined by the affirmative vote of a
majority of the members of such Board present at any meeting, shall be
determined by the presiding officer.
SECTION 12. EFFECT OF PRESENCE AT MEETINGS. A Director of the Corporation
who is present at a meeting of the Board of Directors at which action on any
corporate matter is taken shall be presumed to have assented to the action taken
unless his dissent shall be entered in the minutes of the meeting or unless he
shall file his written dissent to such action with the person acting as the
Secretary of the meeting before the adjournment thereof or shall forward such
dissent by registered or certified mail to the Secretary of the Corporation
immediately after the adjournment of the meeting. Such right to dissent shall
not apply to a Director who voted in favor of such action.
SECTION 13. COMPENSATION. Compensation of the Directors and members of
the Executive Committee shall be fixed by resolution of the Board of Directors.
No stated salary shall be paid Directors and members of the Executive Committee,
as such for their services, but by resolution of the Board of Directors, a fixed
sum and expenses may be allowed for attendance at each regular or special
meeting of such Board or Committee; provided that nothing herein contained shall
be construed to preclude any Director or member of the Executive Committee from
serving the Corporation in any other capacity and receiving compensation
therefor.
SECTION 14. CONFLICT OF INTEREST. No contract or other transaction
between the Corporation and one or more of its Directors or any other
Corporation, firm, association or entity in which one or more of its Directors
are Directors or Officers or are financially interested, shall be either void or
voidable because of such relationship or interest or because such Director or
Directors are present at the meeting of the Board of Directors or a committee
thereof which authorizes, approves or ratifies such contract or transaction or
because his or their votes are counted for such purpose, if any of the following
occur:
(a) The fact of such relationship or interest is disclosed or known to the
Board of Directors or committee which authorizes, approves, or ratifies the
contract or transaction by a vote or consent sufficient for the purpose without
counting the votes or consents of such interested Director.
(b) The fact of such relationship or interest is disclosed or known to the
Shareholders entitled to vote and they authorize, approve or ratify such
contract or transaction by vote or written consent.
(c) The contract or transaction is fair and reasonable to the Corporation.
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Common or interested Directors may be counted in determining the presence
of a quorum at a meeting of the Board of Directors or a committee thereof which
authorizes, approves, or ratifies such contract or transaction.
SECTION 15. INFORMAL ACTION BY BOARD OF DIRECTORS. Any action required to
be taken at a meeting of the Board of Directors by the Iowa Business Corporation
Act, may be taken without a meeting of the Board of Directors if written consent
setting forth the action so taken shall be signed by all of the members of the
Board of Directors and included in the minutes or filed with the corporate
records reflecting the action taken. Such written consent shall have the same
force and effect as a unanimous vote of the Board of Directors and may be stated
as such in any article or document filed with the Secretary of State of the
State of Iowa pursuant to the provisions of the Iowa Business Corporation Act.
The provisions of this Bylaw shall be applicable whether or not the Iowa
Business Corporation Act requires that such action be taken by resolution of the
Board of Directors.
ARTICLE IV
The Executive-Committee and Other Committees
--------------------------------------------
SECTION 1. DESIGNATION OF EXECUTIVE COMMITTEE. The Board of Directors, by
resolution adopted by a majority of the entire number of Directors, from time to
time may designate two or more Directors to constitute an Executive Committee
and such designated Directors shall serve at the pleasure of the Board.
SECTION 2. POWERS OF THE EXECUTIVE COMMITTEE. Except as may at any time
be otherwise provided by law, the Executive Committee, in intervals between the
meetings of the full Board of Directors, shall possess and exercise all of the
powers of the Board of Directors in the management, direction and control of the
operations, business and affairs of the Corporation, in such manner as the
Executive Committee shall deem for the best interest of the Corporation, in all
cases where specific directions shall not have been given by the Board of
Directors, and shall have power to authorize the seal of the Corporation to be
affixed to all instruments and documents which may require it, but no such
Committee shall have the authority of the Board of Directors in reference to
amending the Articles of Incorporation, authorizing distributions, filling
vacancies on the Board of Directors or on any of its committees, authorizing the
issuance or reacquisition of shares unless according to a method prescribed by
the Board of Directors, adopting a plan of merger or consolidation, recommending
to the shareholders the sale, lease, exchange or other disposition of all or
substantially all of the property and assets of the Corporation otherwise than
in the usual and regular course of its business, recommending to the
shareholders a voluntary dissolution of the Corporation or a revocation thereof,
or amending the Bylaws of the Corporation. The designation of any such
Committee and the delegation thereto of authority shall not operate to relieve
the Board of Directors, or any member thereof, of any responsibility imposed by
law.
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SECTION 3. EXECUTIVE COMMITTEE TO REPORT TO BOARD. All action by the
Executive Committee shall be reported to the Board of Directors at its meeting
next succeeding the date when such action is taken, and shall be subject to
revision, amendment or alteration, but failure to submit the same or to receive
approval thereof shall not invalidate any completed or incompleted action taken
by the Corporation upon authorization by the Executive Committee prior to the
time at which the same has been, or was, submitted to the Board of Directors.
SECTION 4. PROCEDURE. The Executive Committee shall fix its own rules of
procedure (which need not be written) and shall meet when, where and as provided
by such rules or by resolution of the Board of Directors. Unless designated by
the Board of Directors, the Chairman of the Executive Committee shall be chosen
by the Executive Committee, and the Secretary of the Corporation, if present,
shall act as Secretary of the meetings. In the absence of either, the Executive
Committee shall appoint a Chairman or Secretary, as the case may be, of the
meeting. The Executive Committee shall keep a record of its acts and
proceedings. A majority of the Executive Committee shall be necessary to
constitute a quorum for the transaction of any business, and the act of a
majority of the members present at a meeting at which a quorum is present shall
be the act of the Executive Committee. The members of the Executive Committee
shall act only as a committee, and the individual members shall have no power as
such, but the Executive Committee may act by the written resolution of a
majority thereof although not formally convened. The Board of Directors may
vote the members of the Executive Committee a reasonable fee as compensation for
attendance at meetings of such committee.
SECTION 5. INFORMAL ACTION BY THE EXECUTIVE COMMITTEE. Any action
required to be taken at a meeting of the Executive Committee of the Board of
Directors by the Iowa Business Corporation Act, may be taken without a meeting
of the Executive Committee if written consent setting forth the action so taken
shall be signed by all of the members of the Executive Committee and included in
the minutes or filed with the corporate records reflecting the action taken.
Such written consent shall have the same force and effect as a unanimous vote by
the members of the Executive Committee and may be stated as such in any articles
or documents filed with the Secretary of State of the State of Iowa pursuant to
the Iowa Business Corporation Act. The provisions of this Bylaw shall be
applicable whether or not the Iowa Business Corporation Act requires that such
action be taken by resolution by the members of the Executive Committee.
SECTION 6. OTHER COMMITTEES. The Board of Directors may by resolution
provide for such other standing or special committees as it from time to time
deems desirable, and discontinue the same at its pleasure. Each such committee
shall have such powers and perform such duties, not inconsistent with law, as
may be assigned to it by the Board of Directors. If provision be made for any
such committee, the members thereof shall be appointed by the Board of Directors
and shall serve at the pleasure of the Board. Vacancies in such committees
shall be filled by the Board of Directors.
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ARTICLE V
Officers
--------
SECTION 1. NUMBER. The officers of the Corporation shall be a President,
one or more Vice Presidents (the number thereof to be determined by the Board of
Directors), a Treasurer, and a Secretary. Any two or more offices may be held
by the same person. Officers need not be Shareholders or Directors of the
Corporation.
The Board of Directors or the Executive Committee may also appoint a
Comptroller, one or more Assistant Comptrollers, one or more Assistant
Treasurers, one or more Assistant Secretaries and such other officers, agents
and representatives as they from time to time shall deem necessary, each of whom
shall have such authority and perform such duties as may be designated by the
Board of Directors or the Executive Committee.
SECTION 2. ELECTION AND TERM OF OFFICE. The officers of the Corporation
shall be elected annually by the Board of Directors at its annual meeting
immediately following the annual meeting of Shareholders. If the election of
officers shall not be held at such a meeting, such election of officers shall be
held as soon thereafter as conveniently may be. Vacancies may be filled, or new
offices created and filled at any meeting of the Board of Directors. Each
officer shall hold office until his successor shall have been duly elected or
until his death, or until he shall resign or shall have been removed, in the
manner hereafter provided.
SECTION 3. REMOVAL. Any officer or agent elected or appointed by the
Board of Directors may be removed by the Board of Directors whenever in its
judgment the best interests of the Corporation would be served thereby, but such
removal shall be without prejudice to the contract rights, if any, of the person
so removed or of the Corporation. Election or appointment of an officer or
agent shall not of itself create contract rights.
All employees riot appointed by or with the affirmative approval of the
Board of Directors or of the Executive Committee shall be subject to removal at
the pleasure of the officers appointing them or their successors in office.
SECTION 4. VACANCIES. Any vacancy in office, occurring during the year
through death, resignation or other cause, may be filled for the unexpired
portion of the term by a majority vote of the Board of Directors at any special
meeting or regular meeting thereof.
SECTION 5. PRESIDENT. The President shall be the principal executive
officer of the Corporation and shall in general supervise and control all of the
business and affairs of the Corporation. He shall be a member, ex-officio, of
the Executive Committee. He shall preside, when present, at the meetings of the
Stockholders. He may sign, with the Secretary or any other proper officer of
the Corporation thereunto authorized by the Board of Directors, certificates for
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shares of the Corporation, any deeds, mortgages, bonds, contracts, or other
instruments which the Board of Directors have authorized to be executed, except
in cases where the signing and execution thereof shall be expressly delegated by
the Board of Directors or by these Bylaws to some other officer or agent of the
Corporation, or shall be required by law to be otherwise signed or executed; and
in general shall perform all duties incident to the office of President and such
other duties as may from time to time be prescribed by the Board of Directors.
SECTION 6. THE VICE PRESIDENTS. In the absence of the President, or in
the event of his inability or refusal to act, a Vice President shall perform the
duties of the President, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the President. In the event the President
knows in advance that he will be absent or unable for any other reason to act,
he may appoint a specific Vice President to act during his absence or inability
to act.
The Vice Presidents shall also perform such other duties as may be assigned
to them by the President or by the Board of Directors.
SECTION 7. THE TREASURER. The Treasurer shall have charge and custody of,
and be responsible for all funds and securities of the Corporation; receive and
give receipts for moneys due and payable to the Corporation from any source
whatsoever and deposit all such moneys in the name of the Corporation in such
banks, trust companies or other depositories as shall be selected by the Board
of Directors, and in general perform all the duties incident to the office of
Treasurer, and such other duties as from time to time may be assigned to him by
the President and the Board of Directors. In the performance of his duties and
responsibility, he may delegate his authority to other officers or employees of
the Corporation with the approval of the President or Board of Directors.
He shall give such bond for the faithful performance of his duties as the
Board of Directors may require.
SECTION 8. THE SECRETARY. The Secretary shall keep the minutes of the
Shareholders and of the Board of Directors meetings in one or more books
provided for that purpose; see that all notices are duly given in accordance
with the provisions of these Bylaws or as required by law; be custodian of the
corporate records and the seal of the Corporation, if any; keep a register of
the post office address of each Shareholder; sign with the President or a Vice
President, certificates for shares of the Corporation, the issue of which shall
have been authorized by proper corporate authority; have general charge of the
stock books of the Corporation; and in general perform all duties incident to
the office of Secretary and such other duties as from time to time may be
assigned to him by the President or by the Board of Directors. In the
performance of his duties and responsibility, he may delegate his authority to
other officers or employees of the Corporation with the approval of the
President or the Board of Directors.
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SECTION 9. OTHER OFFICERS. Any other officers elected by the Board of
Directors shall have such duties as may be assigned to them by the Board of
Directors or the President.
SECTION 10. COMPENSATION OF OFFICERS. The salaries of the officers shall
be fixed from time to time by the Board of Directors and no officer shall be
prevented from receiving such salary by reason of the fact that he is also a
Director of the Corporation.
ARTICLE VI
lndemnification of Officers and Directors
-----------------------------------------
SECTION 1. STANDARD OF CONDUCT. Any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceedings, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or enterprise, shall be indemnified to the following extent and
under the following circumstances:
(a) In an action, suit or proceeding other than an action by or in the
right of the Corporation, such person shall be indemnified against expenses
(including attorney's fees), judgments, fines, and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in the best interests of the Corporation, in the case of conduct in his
official capacity with the Corporation, or, in all other cases, at least not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, if he had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or proceeding
judgment, order, settlement, conviction or upon a plea of nolo contendere or its
equivalent shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful.
(b) In an action, suit or proceedings by or in the right of the
Corporation, notwithstanding any provision precluding liability in the Articles
of Incorporation, such person shall nonetheless be indemnified against expenses
(including attorney's fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in the best interests of
the Corporation, in the case of conduct in his official capacity with the
Corporation, or, in all other cases, at least not opposed to the best interests
of the Corporation, except that no indemnification shall be made in respect of
any claim, issue or matter as to which such person shall have been adjudged to
be liable for negligence or misconduct in the performance of his duty to the
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Corporation unless and only to the extent that the court in which such action or
suit was brought shall determine upon application that, despite the adjudication
of liability, but in view of all circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which such court
shall deem proper.
SECTION 2. CONDITIONS FOR INDEMNIFICATION. Any indemnification under this
Bylaw (unless ordered by a court) shall be made by the Corporation only:
(a) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in the defense of any
action, suit or proceeding referred to in paragraph (a) and (b) of Section 1
above, or in the defense of any claim, issue or matter therein, he shall be
indemnified against expenses in connection therewith, or
(b) Upon a determination that the indemnification of such director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in paragraphs (a) and (b) of Section I
above. Such determination shall be made by (1) the Board of Directors by a
majority vote of a quorum consisting of directors who are not parties to the
action, suit or proceeding, or (2) if such quorum is not obtainable, or, even if
obtainable, a quorum of disinterested Directors so directs, independent legal
counsel in a written opinion, or (3) the shareholders.
The Corporation shall not indemnify a director in connection with a
proceeding by or in the right of the Corporation in which the director was
adjudged liable to the Corporation or in connection with any proceeding charging
improper personal benefit to the director, whether or not involving action in
the director's official capacity, in which the director was adjudged liable on
the basis that personal benefit was improperly received by the director.
SECTION 3. PAYMENT OF EXPENSES. Expenses, including attorney's fees,
incurred in defending a civil or criminal action, suit or proceeding may be paid
by the Corporation in advance of the final disposition of such action, suit or
proceeding as authorized in the manner provided in Section 2(b) above upon
receipt of an undertaking by or on behalf of the director, officer, employee or
agent to repay such amount unless it shall ultimately be determined that he is
entitled to be indemnified by the Corporation as authorized in this Bylaw.
SECTION 4. INDEMNIFICATION UNDER BYLAWS NOT EXCLUSIVE. The
indemnification herein provided shall not be deemed exclusive of any other
rights, which those indemnified may be entitled under any Bylaw, agreement, vote
of the shareholders or disinterested directors, or otherwise, both as to action
in his official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee, or agent and shall inure to the benefit of the heirs,
executor, and administrator of such a person.
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SECTION 5. INSURANCE. The Corporation shall have power to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee, or agent of the Corporation, or is or was serving at the request of
the Corporation as a director, officer, employee, or agent of another
Corporation, partnership, joint venture, trust, or other enterprise against any
liability asserted against him and incurred by him in any such capacity or
arising out of his status as such, whether or not the Corporation would have the
power to indemnify him against such liability under the provisions of this
Bylaw.
ARTICLE VII
Certificates for Shares and Their Transfer
------------------------------------------
SECTION 1. CERTIFICATES FOR SHARES. Every shareholder of the Corporation
shall have a certificate, in such form as may be determined by the Board of
Directors, signed by either the President or a Vice President and by the
Secretary or an Assistant Secretary, and impressed with the seal of the
Corporation or a facsimile thereof, if the Corporation elects to have one,
certifying the number of shares of the Corporation owned by him. All
certificates for shares shall be consecutively numbered, and the name of the
person owning the shares represented thereby with the number of shares and the
date of issue shall be entered on the books of the Corporation. The signatures
of the President or Vice President and the Secretary or an Assistant Secretary
may be facsimiles if the certificate is countersigned by a transfer agent, or
registered by a registrar, other than the Corporation itself or an employee of
the Corporation. The Board of Directors shall have power and authority to make
all such rules and regulations as they may deem expedient concerning the issue,
transfer and registration of certificates for shares of the Corporation. In
case any officer or other authorized person of the Corporation who has signed,
or whose facsimile signature has been used on, any such certificate shall cease
to be such officer, employee, or agent, for whatever cause, before the
certificate shall have been issued by the Corporation, the certificate may,
nevertheless, be issued by the Corporation with the same effect as though the
person who signed it or whose facsimile signature has been used thereon was such
officer or employee or agent at the date of issue.
SECTION 2. TRANSFER OF SHARES. Transfer of shares of the Corporation
shall be made only on the books of the Corporation by the registered holder
thereof, or by his attorney thereunto authorized by Power of Attorney, duly
executed and filed with the Secretary of the Corporation, and on surrender for
cancellation of the certificates for such shares. The person in whose name
shares stand on the Corporation books shall be deemed the owner thereof for all
purposes as regards the Corporation.
SECTION 3. TRANSFER AGENT AND REGISTRAR. The Board of Directors may
appoint a transfer agent or a registrar and may require all stock certificates
to bear the signature of such transfer agent or registrar. When the certificate
is signed by a transfer agent or a registrar,
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the signature of the President or Vice President and Secretary or Assistant
Secretary may be facsimiles.
SECTION 4. SURRENDERED, LOST OR MUTILATED CERTIFICATES. All certificates
surrendered to the Corporation for transfer shall be cancelled, and no new
certificate shall be issued until the former certificate for a like number of
shares shall have been surrendered and cancelled, except that in the case of a
lost, destroyed, or mutilated certificate, a new one may be issued therefor upon
such terms and conditions as the Board of Directors may deem advisable and as
may be permitted by the law of Iowa.
SECTION 5. SEAL. The Corporation shall not have a seal.
ARTICLE VII
Capital Stock, Issuance and Dividends
-------------------------------------
SECTION 1. CONSIDERATION. The consideration for the issuance of shares of
stock in the Corporation may consist, in whole or in part, of any tangible or
intangible property or benefit to the Corporation, including cash, promissory
notes, services performed, contracts for services to be performed, or other
securities of the Corporation. When payment of the consideration for which
shares are to be issued shall have been received by the Corporation, such shares
shall be deemed to be fully paid and non-assessable, but the Corporation may
place in escrow shares issued for a contract for future services or a promissory
note, or make other arrangements to restrict the transfer of the shares, and may
credit distributions in respect of the shares against their purchase price,
until the services are performed, the note is paid, or the benefits received.
If the services are not performed. the note is not paid, or the benefits are not
received, the shares escrowed or restricted and the distributions credited may
be cancelled in whole or in part. In the absence of fraud in the transaction,
the judgment of the Board of Directors or the Shareholders, as the case may be,
as to the value of the consideration received for the shares shall be
conclusive, but in no event shall stock of the Corporation be issued for
consideration less than the par value of the stock to be so issued. No
certificate representing shares of stock in the Corporation shall be issued for
any share until such share is fully paid.
SECTION 2. PURCHASE BY CORPORATION. The Corporation shall have the right
to purchase, take, receive or otherwise acquire, hold, own, pledge, transfer, or
otherwise dispose of its own shares for such consideration that the Board of
Directors may determine. Unless otherwise directed by resolution of the Board
of Directors, such shares shall constitute treasury shares; and purchases by the
Corporation of its own shares, whether direct or indirect, may be made only to
the extent of the corporate surplus.
Notwithstanding the foregoing limitation, the Corporation may purchase or
otherwise acquire its own shares for the purpose of:
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(a) Eliminating fractional shares.
(b) Collecting or compromising indebtedness to the Corporation.
(c) Paying dissenting shareholders entitled to payment for their shares
under the provisions of the laws of the State of Iowa.
(d) Effecting, subject to other provisions of Iowa law, the retirement of
its redeemable shares by redemption or by purchase at not to exceed the
redemption price.
No purchase of or payment by the Corporation for its own shares shall be
made at the time when the Corporation is insolvent or when such purchase or
payment would make it insolvent.
Whenever the Board of Directors resolves to treat any shares of the
Corporation which have been purchased by it as redeemed, and thus restored to
the category of authorized but unissued shares, a statement of cancellation
shall be filed with the Secretary of State of the State of Iowa as required by
law.
SECTION 3. DIVIDENDS. The Board of Directors may, from time to time,
declare, and the Corporation may pay dividends on its outstanding shares in
cash, property, or in its own shares, out of unreserved surplus, but no
distribution may be made if, after giving it effect, either of the following
would result:
(a) The Corporation would not be able to pay its debts as they become due
in the usual course of business.
(b) The Corporation's total assets would be less than the sum of its total
liabilities plus, unless the Articles of Incorporation permit otherwise, the
amount that would be needed, if the Corporation were to be dissolved at the time
of the distribution, to satisfy the preferential rights upon dissolution of
shareholders whose preferential rights are superior to those receiving the
distribution.
The Board of Directors may base a determination that a distribution is not
prohibited either on financial statements prepared on the basis of accounting
practices and principles that are reasonable in the circumstances or on a fair
valuation or other method that is reasonable in the circumstances.
ARTICLE IX
Miscellaneous
-------------
SECTION 1. FISCAL YEAR. The Corporation fiscal year shall run from the
1st day of January to the 31st day of December of each year.
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SECTION 2. WAIVER OF NOTICE. Whenever any notice whatsoever is required
to be given under the provisions of the Iowa Business Corporation Act, waiver
thereof in writing, signed by the person or persons entitled to such notice,
whether before or after the time stated therein, shall be deemed equivalent to
the giving of such notice.
ARTICLE X
Bylaws
------
Bylaws may be adopted, altered, repealed or amended for the Corporation by
the Board of Directors and/or by the Shareholders in lawful and proper meeting
assembled. Any and all Bylaws adopted by the Shareholders shall supersede and
shall prevail over Bylaws adopted by the Board of Directors.
Approved and adopted at the Organizational Meeting held on the March 24,
1994.
/s/ JOHN A. MERRIMAN
----------------------------------------
John A. Merriman, Secretary
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EXHIBIT 3.1
[LETTERHEAD OF BATTLE FOWLER LLP]
March 28, 2000
ING Funds Distributor, Inc.
1475 Dunwoody Drive
West Chester, Pennsylvania 19380
ING Mutual Funds Management Co. LLC
1475 Dunwoody Drive
West Chester, Pennsylvania 19380
Re: The Pinnacle Family of Trusts, Internet Trust Series I
------------------------------------------------------
Dear Sirs:
We have acted as special counsel for ING Funds Distributor, Inc., as
Depositor, Sponsor and Principal Underwriter (the "Depositor") and ING Mutual
Funds Management Co. LLC, as Portfolio Supervisor (the "Portfolio Supervisor")
of The Pinnacle Family of Trusts, Internet Trust Series I (the "Trust") in
connection with the issuance by the Trust of units of fractional undivided
interest (the "Units") in the Trust. Pursuant to the Trust Agreements referred
to below, the Depositor has transferred to the Trust certain securities and
contracts to purchase certain securities together with an irrevocable letter of
credit to be held by the Trustee upon the terms and conditions set forth in the
Trust Agreements. (All securities to be acquired by the Trust are collectively
referred to as the "Securities".)
In connection with our representation, we have examined copies of the
following documents relating to the creation of the Trust and the issuance and
sale of the Units: (a) the Trust Indenture and Agreement and related Reference
Trust Agreement, each of even date herewith,
<PAGE>
BATTLE FOWLER LLP PAGE 2
ING Funds Distributor, Inc.
ING Mutual Funds Management Co. LLC
March 28, 2000
relating to the Trust (collectively, the "Trust Agreements") among the
Depositor, the Portfolio Supervisor and The Chase Manhattan Bank, as Trustee;
(b) the Notification of Registration on Form N-8A and the Registration Statement
on Form N-8B-2, as amended, relating to the Trust, as filed with the Securities
and Exchange Commission (the "Commission") pursuant to the Investment Company
Act of 1940 (the "1940 Act"); (c) the Registration Statement on Form S-6
(Registration No. 333-31048) filed with the Commission pursuant to the
Securities Act of 1933 (the "1933 Act"), and all Amendments thereto (said
Registration Statement, as amended by said Amendment(s) being herein called the
"Registration Statement"); (d) the proposed form of final Prospectus (the
"Prospectus") relating to the Units, which is expected to be filed with the
Commission this day; (e) resolutions of the Board of Directors of ING Funds
Distributor, Inc. authorizing the execution and delivery by the Depositor of the
Trust Agreements and the consummation of the transactions contemplated thereby;
(f) the Articles of Incorporation, Articles of Amendment and Bylaws of ING Funds
Distributor, Inc.; (g) a certificate of an authorized officer of ING Funds
Distributor, Inc. with respect to certain factual matters contained therein; (h)
resolutions of the sole member of ING Mutual Funds Management Co. LLC
authorizing the execution and delivery by the Portfolio Supervisor of the Trust
Agreements and the consummation of the transactions contemplated thereby; (i)
the Certificate of Formation, the Certificate of Correction and Limited
Liability Company Agreement of ING Mutual Funds Management Co. LLC; and (j) a
certificate of an authorized officer of ING Mutual Funds Management Co. LLC with
respect to certain factual matters contained therein.
We have examined the Order of Exemption from certain provisions of
Sections 11(a) and 11(c) of the 1940 Act, filed on behalf of Reich & Tang
Distributors L.P.; Equity Securities Trust (Series 1, Signature Series and
Subsequent Series), Mortgage Securities Trust (CMO Series 1 and Subsequent
Series), Municipal Securities Trust, Series 1 (and Subsequent Series) (including
Insured Municipal Securities Trust, Series 1 (and Subsequent Series and 5th
Discount Series and Subsequent Series)); New York Municipal Trust (Series 1 and
Subsequent Series); and A Corporate Trust (Series 1 and Subsequent Series)
granted on October 9, 1996. In addition, we have examined the Order of
Exemption from certain provisions of Sections 2(a)(32), 2(a)(35), 22(d) and
26(a)(2) of the 1940 Act and Rule 22C-1 thereunder, filed on behalf of Reich &
Tang Distributors L.P.; Equity Securities Trust; Mortgage Securities Trust;
Municipal Securities Trust (including Insured Municipal Securities Trust); New
York Municipal Trust; A Corporate Trust; Schwab Trusts; and all presently
outstanding and subsequently issued series of these trusts and all subsequently
issued series of unit investment trusts sponsored by Reich & Tang Distributors
L.P. granted on October 29, 1997. Further, we have examined a no-action letter
from the Commission permitting ING Funds Distributor, Inc. to rely upon the
Orders of Exemption described above.
<PAGE>
BATTLE FOWLER LLP PAGE 3
ING Funds Distributor, Inc.
ING Mutual Funds Management Co. LLC
March 28, 2000
We have not reviewed the financial statements, compilation of the
Securities held by the Trust, or other financial or statistical data contained
in the Registration Statement and the Prospectus, as to which you have been
furnished with the reports of the accountants appearing in the Registration
Statement and the Prospectus.
In addition, we have assumed the genuineness of all agreements,
instruments and documents submitted to us as originals and the conformity to
originals of all copies thereof submitted to us. We have also assumed the
genuineness of all signatures and the legal capacity of all persons executing
agreements, instruments and documents examined or relied upon by us.
Statements in this opinion as to the validity, binding effect and
enforceability of agreements, instruments and documents are subject to: (i)
limitations as to enforceability imposed by bankruptcy, reorganization,
moratorium, insolvency and other laws of general application relating to or
affecting the enforceability of creditors' rights, and (ii) limitations under
equitable principles governing the availability of equitable remedies.
We are not admitted to the practice of law in any jurisdiction but the
State of New York and we do not hold ourselves out as experts in or express any
opinion as to the laws of other states or jurisdictions except as to matters of
Federal, Iowa and Delaware corporate law.
Based exclusively on the foregoing, we are of the opinion that under
existing law:
(1) The Trust Agreements have been duly authorized and entered into by an
authorized officer of each of the Depositor and the Portfolio Supervisor and are
valid and binding obligations of the Depositor and the Portfolio Supervisor in
accordance with their respective terms.
(2) The registration of the Units on the registration books of the Trust
by the Trustee has been duly authorized by the Depositor in accordance with the
provisions of the Trust Agreements and issued for the consideration contemplated
therein, will constitute fractional undivided interests in the Trust, will be
entitled to the benefits of the Trust Agreements, and will conform in all
material respects to the description thereof contained in the Prospectus. Upon
payment of the consideration for the Units as provided in the Trust Agreements
and the Registration Statement, the Units will be fully paid and non-assessable
by the Trust.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name in the Registration Statement
and in the Prospectus under the headings "Tax Status" and "Legal Opinions". We
authorize you to deliver copies of this opinion to the
<PAGE>
BATTLE FOWLER LLP PAGE 4
ING Funds Distributor, Inc.
ING Mutual Funds Management Co. LLC
March 28, 2000
Trustee and the Trustee may rely on this opinion as fully and to the same extent
as if it had been addressed to it.
This opinion is intended solely for the benefit of the addressees and the
Trustee in connection with the issuance of the Units of the Trust and may not be
relied upon in any other manner or by any other person without our express
written consent.
Very truly yours,
/s/ Battle Fowler LLP
Battle Fowler LLP
