FT 3638
TRUST AGREEMENT
Dated: June 19, 2012
The Trust Agreement among First Trust Portfolios L.P., as
Depositor, The Bank of New York Mellon, as Trustee, First Trust Advisors
L.P., as Evaluator and Portfolio Supervisor, and FTP Services LLC, as
FTPS Unit Servicing Agent, sets forth certain provisions in full and
incorporates other provisions by reference to the document entitled
"Standard Terms and Conditions of Trust for FT 785 and certain
subsequent Series, Effective December 9, 2003" (herein called the
"Standard Terms and Conditions of Trust"), and such provisions as are
incorporated by reference constitute a single instrument. All references
herein to Articles and Sections are to Articles and Sections of the
Standard Terms and Conditions of Trust.
WITNESSETH THAT:
In consideration of the premises and of the mutual agreements
herein contained, the Depositor, the Trustee, the Evaluator, the
Portfolio Supervisor and the FTPS Unit Servicing Agent agree as follows:
PART I
STANDARD TERMS AND CONDITIONS OF TRUST
Subject to the provisions of Part II and Part III hereof, all the
provisions contained in the Standard Terms and Conditions of Trust are
herein incorporated by reference in their entirety and shall be deemed
to be a part of this instrument as fully and to the same extent as
though said provisions had been set forth in full in this instrument.
PART II
SPECIAL TERMS AND CONDITIONS OF TRUST
DIVERSIFIED HIGH INCOME CLOSED-END PORTFOLIO, SERIES 7
The following special terms and conditions are hereby agreed to:
A. The Securities initially deposited in the Trust pursuant to
Section 2.01 of the Standard Terms and Conditions of Trust are set forth
in the Schedules hereto.
B. The aggregate number of Units outstanding for the Trust on the
Initial Date of Deposit and the initial fractional undivided interest in
and ownership of the Trust represented by each Unit thereof are set
forth in the Prospectus in the section "Summary of Essential
Information."
Documents representing this number of Units for the Trust are
being delivered by the Trustee to the Depositor pursuant to Section 2.03
of the Standard Terms and Conditions of Trust.
C. The Record Date shall be as set forth in the Prospectus under
"Summary of Essential Information." The Trustee is authorized to make
the payments specified in Part I of Section 3.05 on the last Business
Day of each month.
D. The Distribution Date shall be the 25th day of the month in
which the related Record Date occurs.
E. The Mandatory Termination Date for the Trust shall be as set
forth in the Prospectus under "Summary of Essential Information."
F. First Trust Advisors L.P.'s compensation as referred to in
Section 4.03 of the Standard Terms and Conditions of Trust and FTP
Services LLC's compensation as referred to in Section 3.16 of the
Standard Terms and Conditions of Trust shall collectively be an annual
fee in the amount of $.0080 per Unit.
G. The Trustee's Compensation Rate pursuant to Section 6.04 of the
Standard Terms and Conditions of Trust shall be an annual fee in the
amount of $.0096 per Unit, calculated based on the largest number of
Units outstanding during the calendar year except during the initial
offering period as determined in Section 4.01 of this Indenture, in
which case the fee is calculated based on the largest number of units
outstanding during the period for which the compensation is paid (such
annual fee to be pro rated for any calendar year in which the Trustee
provides services during less than the whole of such year). However, in
no event, except as may otherwise be provided in the Standard Terms and
Conditions of Trust, shall the Trustee receive compensation in any one
year from any Trust of less than $2,000 for such annual compensation.
The Bank of New York Mellon, or any of its affiliates, may perform
services in any capacity for any exchange traded fund, investment
company, investment trust or other entity whose shares are held as an
asset of the Trust, and The Bank of New York Mellon, as Trustee, shall
be entitled to receive the foregoing compensation, without reduction,
notwithstanding that The Bank of New York Mellon or an affiliate is
receiving compensation for services to such exchange traded fund,
investment company, investment trust or other entity. Without limiting
the scope of the expenses for which the Trustee is entitled to
reimbursement in accordance with Section 6.04 of the Standard Terms and
Conditions of Trust, the amounts receivable by the Trustee from the
Trust shall include amounts charged by the Trustee or an affiliate in
connection with custody of securities at any branch or affiliate of the
Trustee located outside the United States.
H. The Initial Date of Deposit for the Trust is June 19, 2012.
I. There is no minimum amount of Securities to be sold by the
Trustee pursuant to Section 5.02 of the Indenture for the redemption of
Units.
J. The minimum number of Units a Unit holder must redeem in order
to be eligible for an in-kind distribution of Securities pursuant to
Section 5.02 shall be 2,500 Units of the Trust. No in-kind distribution
requests submitted during the 10 business days prior to the Trust's
Mandatory Termination Date will be honored.
K. No Unit holder will be eligible for an in-kind distribution of
Securities pursuant to Section 8.02.
PART III
A. Notwithstanding anything to the contrary in the Standard Terms
and Conditions of Trust, Section 1.01 (13) shall be amended to delete
the second sentence of such section and replace it with the following:
"The Percentage Ratio with respect to each Security in a
Trust is that percentage derived by dividing the number of shares
of such Security included in the initial deposit made pursuant to
Section 2.01(a) by the total number of shares of all Securities
included in such deposit."
B. Notwithstanding anything to the contrary in the Standard Terms
and Conditions of Trust, Section 2.01(e) shall be amended to read as
follows:
"The Trustee is hereby irrevocably authorized to effect
registration or transfer of the Securities in fully registered
form to the name of the Trustee or to the name of its nominee or
to hold the Securities in a clearing agency registered with the
Securities and Exchange Commission, in a book entry system
operated by the Federal Reserve Board, with an Eligible Foreign
Custodian or in an Eligible Securities Depository."
C. Section 2.01 of the Standard Terms and Conditions of Trust
shall be amended to include the following section at the end of Section
2.01:
"(g) Notwithstanding anything to the contrary herein, subject to
the requirements set forth in this Section 2.01(g) and unless the
Prospectus otherwise requires, the Depositor may, on any Business Day
(the "Trade Date"), subscribe for additional Units as follows:
(i) Prior to the Evaluation Time on such Business Day, the
Depositor shall provide notice (the "Subscription Notice") to the
Trustee, by telephone 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 (which will be a precise replication of the then existing
portfolio, as consistent with the provisions of Section 2.01(b))
and shall either (a) specify the quantity of additional Securities
to be deposited by the Depositor on the settlement date for such
subscription or (b) instruct the Trustee to purchase additional
Securities with an aggregate value as specified in the
Subscription Notice.
(ii) Promptly following the Evaluation Time on such Business
Day, the Depositor shall verify with the Trustee the number of
additional Units to be created.
(iii) Not later than the time on the settlement date for
such subscription when the Trustee is to deliver or assign the
additional Units created hereby, the Depositor shall deposit with
the Trustee (a) 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 (b) cash or a Letter of
Credit in an amount equal to the aggregate value of the additional
Securities specified in the Subscription Notice to be purchased by
the Trustee, and adding and subtracting the amounts specified in
the first and second sentences of Section 5.01, computed as of the
Evaluation Time on the Business Day preceding the Trade Date
divided by the number of Units outstanding as of the Evaluation
Time on the Business Day preceding the Trade Date, times the
number of additional Units to be created.
(iv) On the settlement date for such subscription, the
Trustee shall, in exchange for the Securities and cash, cash or
Letter of Credit described above, deliver to, or assign in the
name of or on the order of, the Depositor the number of Units
verified by the Depositor with the Trustee.
(v) In the event the Depositor fails to take such action
required by paragraph (iii) above, the Trustee shall, on the
settlement date for such subscription, settle the securities
transactions specified in the Subscription Notice.
(vi) Neither the Trust nor Unit holders of the Trust will be
responsible for any loss resulting from the failure of the
Depositor to take such action required by paragraph (iii) above."
D. Notwithstanding anything to the contrary in the Standard Terms
and Conditions of Trust, Section 6.01(e) shall be amended to read as
follows:
"(e) (1) Subject to the provisions of subparagraph (2) of
this paragraph, the Trustee may employ agents, sub-custodians,
attorneys, accountants and auditors and shall not be answerable
for the default or misconduct of any such agents, sub-custodians,
attorneys, accountants or auditors if such agents, sub-custodians,
attorneys, accountants or auditors shall have been selected with
reasonable care. The Trustee shall be fully protected in respect
of any action under this Indenture taken or suffered in good faith
by the Trustee in accordance with the opinion of counsel, which
may be counsel to the Depositor acceptable to the Trustee,
provided, however that this disclaimer of liability shall not
excuse the Trustee from the responsibilities specified in
subparagraph (2) below. The fees and expenses charged by such
agents, sub-custodians, attorneys, accountants or auditors shall
constitute an expense of the Trust reimbursable from the Income
and Capital Accounts of the Trust as set forth in section 7.04
hereof.
To the extent permitted under the Investment Company Act of
1940 as evidenced by an opinion of counsel to the Depositor
satisfactory to the Trustee or "no-action" letters or exemptive
orders issued by the Securities and Exchange Commission or its
staff, the Trustee may place and maintain in the care of an
Eligible Foreign Custodian (which is employed by the Trustee as a
sub-custodian as contemplated by subparagraph (1) of this
paragraph (e) and which may be an affiliate or subsidiary of the
Trustee or any other entity in which the Trustee may have an
ownership interest) or an Eligible Securities Depository the
Trust's investments (including foreign currencies) for which the
primary market is outside the United States, and such cash and
cash equivalents in amounts reasonably necessary to effect the
Trust's transactions in such investments, provided that:
(A) The Trustee shall indemnify the Trust and hold the Trust
harmless from and against any risk of loss of Trust assets held
with an Eligible Foreign Custodian in accordance with the foreign
custody contract.
(B) The Trustee shall exercise reasonable care, prudence and
diligence such as a person having responsibility for the
safekeeping of Trust assets would exercise, and shall be liable to
the Trust for any loss occurring as a result of its failure to do
so.
(C) The Trustee shall perform all duties assigned to the
Foreign Custody Manager by Rule 17f-5 under the Investment Company
Act of 1940 (17 CFR Section 270.17f-5), as now in effect or as
such rule may be amended in the future ("Rule 17f-5"). The Trustee
shall not delegate such duties.
(D) The Trustee shall (i) provide the Depositor with an
analysis of the custody risks associated with maintaining assets
with an Eligible Securities Depository; (ii) monitor the custody
risks associated with maintaining assets with the Eligible
Securities Depository on a continuing basis and promptly notify
the Depositor of any material change in such risks; and (iii)
exercise reasonable care, prudence and diligence in performing the
foregoing duties. The Depositor shall instruct the Trustee to take
such action as the Depositor deems appropriate in response to a
notification by the Trustee provided pursuant to (ii) in the
preceding sentence.
(E) The Trust's Prospectus shall contain such disclosure
regarding foreign securities and foreign custody as is required
for management investment companies by Forms N-1A and N-2. Such
Prospectus shall also contain disclosure concerning the
Depositor's responsibilities described in (D) above.
(F) The Trustee shall maintain and keep current written
records regarding the basis for the choice or continued use of a
particular Eligible Foreign Custodian pursuant to this
subparagraph for a period of not less than six years from the end
of the fiscal year in which the Trust was terminated, the first
two years in an easily accessible place. Such records shall be
available for inspection by Unit holders and the Securities and
Exchange Commission at the Trustee's corporate trust office during
its usual business hours."
E. Section 4.05 shall be amended to add the following paragraph as
the third paragraph of Section 4.05 of the Standard Terms and Conditions
of Trust:
"The Portfolio Supervisor may employ one or more
sub-Portfolio Supervisors to assist in performing the services set
forth in this Section 4.05 and shall not be answerable for the
default of any such sub-Portfolio Supervisors if such
sub-Portfolio Supervisors shall have been selected with reasonable
care, provided, however, that the Portfolio Supervisor will
indemnify and hold the Trust harmless from and against any loss
occurring as a result of a sub-Portfolio Supervisor's willful
misfeasance, reckless disregard, bad faith, or gross negligence in
performing supervisory duties. The fees and expenses charged by
such sub-Portfolio Supervisors shall be paid by the Portfolio
Supervisor out of proceeds received by the Portfolio Supervisor in
accordance with Section 4.03 hereof."
F. Notwithstanding any provision to the contrary in the Standard
Terms and Conditions of Trust, the Trustee may deem and treat the FTPS
Unit Servicing Agent as the sole Unit holder of FTPS Units for all
purposes of the Indenture and shall not be affected by any notice to the
contrary.
G. Section 1.01 of the Standard Terms and Conditions of Trust
shall be amended to include the following:
"Section 1.01(31). "FTPS Unit" shall mean Units which are
purchased through the Fund/SERV(R) trading system or on a manual
basis through FTP Services LLC or for which FTP Services LLC is
acting as FTPS Unit Servicing Agent.
Section 1.01(32). "FTPS Unit Servicing Agent" shall mean FTP
Services LLC or any successor FTPS Unit servicing agent appointed
as hereinafter provided."
H. Section 3.05.I. of the Standard Terms and Conditions of Trust
shall be amended to include the following at the end of such section:
"(d) deduct from the Income account or, to the extent funds
are not available in such Account, from the Capital Account and
pay to the FTPS Unit Servicing Agent the amount that it is
entitled to receive pursuant to Section 3.16."
I. Article III of the Standard Terms and Conditions of Trust shall
be amended to include the following section:
"Section 3.16. FTPS Unit Servicing Agent. FTP Services LLC
acts as record keeper, shareholder servicing agent and
distribution agent for Units which are purchased and sold through
the Fund/SERV(R) trading system or on a manual basis through FTP
Services LLC. ("FTPS Units"). (a) The FTPS Unit Servicing Agent
shall perform all of the duties with respect to recordkeeping of
FTPS Units and FTPS Unit holders, distributions, redemption of
FTPS Units and communications to and with FTPS Unit holders listed
below.
(1) The FTPS Unit Servicing Agent shall keep proper books of
record and account of all of the transactions in the FTPS Units of
each Trust under this Indenture at its corporate office, including
a record of the name and address of, and the FTPS Units issued by
each Trust and held by, every FTPS Unit holder, and such books and
records of each Trust shall be made available to the Trustee and
the Depositor promptly upon request and open to inspection by any
FTPS Unit holder of such Trust, with respect to such FTPS Unit
holders transactions, at all reasonable times during usual
business hours. Without limiting the foregoing, the FTPS Unit
Servicing Agent shall make any records or documents described in
Reg. 270.31(a)-1 under the Investment Company Act of 1940
available promptly to the Trustee and the Depositor upon request
during usual business hours and will preserve such records and
documents for the periods prescribed in Reg. 270.31(a)-2
thereunder.
(2) The FTPS Unit Servicing Agent shall distribute on or
shortly after the Distribution Dates specified in the Trust
Agreement to each FTPS Unit holder of record on its books on the
Record Date for each such Distribution Date specified in the Trust
Agreement such FTPS Unit holder's distribution as computed under
the Standard Terms and Conditions of Trust.
(3) In connection with such distributions set forth above,
the FTPS Unit Servicing Agent shall furnish a Distribution
Statement to FTPS Unit holders of record on its books. The content
and frequency of such Distribution Statements shall in no respect
be less detailed or frequent than that specified in Section 3.06
of the Standard Terms and Conditions of Trust.
(4) The FTPS Unit Servicing Agent shall transmit to each
FTPS Unit holder of record any notice or other communication
received from the Trustee and shall be solely responsible for
soliciting and transmitting to the Trustee any notice required
from FTPS Unit holders.
(5) The FTPS Unit Servicing Agent shall be responsible for
all tax reporting required from time to time by applicable law and
regulations with respect to holders of FTPS Units, and reporting
of cost basis in respect of the FTPS Units of such holders
(including, without limitation, reporting required by Section
6045(g) of the Internal Revenue Code of 1986, as amended).
(6) For purposes of permitting FTPS Unit holders to satisfy
any reporting requirements of applicable federal or state tax law,
the FTPS Unit Servicing Agent shall provide the Trustee with the
name, address, number of FTPS Units held by, and such other
information as requested by the Trustee, for every FTPS Unit
holder so that the Trustee can transmit to any FTPS Unit holder of
record on the FTPS Unit Servicing Agent's books any reports
required to be distributed pursuant to Section 4.02 of the
Standard Terms and Conditions of Trust. The Trustee may rely on
the accuracy and completeness of the information (including any
records or documents made available) provided to it by the FTPS
Unit Servicing Agent and may accept such information without
inquiry. Each of the Depositor and the FTPS Unit Servicing Agent
hereby agree, jointly and severally, to indemnify the Trustee and
hold Trustee harmless from and against any and all costs,
expenses, penalties, damages, liabilities or claims including
attorneys' and accountants' fees sustained or incurred by or
asserted against the Trustee by reason of or as a result of any of
the information provided to the Trustee by the FTPS Unit Servicing
Agent being inaccurate or incomplete. This indemnity shall be a
continuing obligation of each of the Depositor and the FTPS Unit
Servicing Agent, and their successors and assigns, notwithstanding
the termination of this Trust Agreement.
(7) The FTPS Unit Servicing Agent shall distribute to
redeeming FTPS Unit holders of record on its books redemption
proceeds it receives pursuant to Section 5.02 of the Standard
Terms and Conditions of Trust from the Trustee as the sole record
owner of FTPS Units on the Trustee's books.
(8) The FTPS Unit Servicing Agent shall distribute to FTPS
Unit holders of record on its books a pro rata portion of
termination proceeds it receives pursuant to Section 8.02 of the
Standard Terms and Conditions of Trust from the Trustee as the
sole record owner of FTPS Units on the Trustee's books.
(9) In connection with such termination distributions set
forth above, the FTPS Unit Servicing Agent shall furnish a Final
Distribution Statement to FTPS Unit holders of record on its
books. The content of such Final Distribution Statements shall in
no respect be less detailed than that specified in Section 8.02 of
the Standard Terms and Conditions of Trust.
(10) As requested by the Depositor and/or the Trustee, the
FTPS Unit Servicing Agent shall perform such other functions
which, from time to time, are agreed upon by the parties hereto
and which may give rise to additional fees.
(b) As compensation for providing the services set forth
herein, of a character described in Section 26(a)(2)(C) of the
Investment Company Act of 1940, and to the extent that such
services are in addition to, and do not duplicate, the services to
be performed by the Trustee, FTP Services LLC shall receive, in
arrears, against a statement or statements therefore submitted to
the Trustee monthly or annually an aggregate annual fee in the per
Unit amount set forth in Part II of the Trust Agreement for the
Trust, calculated based on the largest number of Units outstanding
during the calendar year, except during the initial offering
period as determined in Section 4.01 of the Standard Terms and
Conditions of Trust, in which case the fee is calculated based on
the largest number of Units outstanding during the period for
which the compensation is paid (such annual fee to be pro rated
for any calendar year in which FTP Services LLC provides services
described herein during less than the whole of such year). Such
fee may exceed the actual cost of providing such services for the
Trust, but at no time will the total amount received by FTP
Services LLC for rendering the services described in this Section
3.16 and First Trust Advisors, L.P. for rendering the services
described in Section 4.03 to unit investment trusts of which the
Depositor is the sponsor in any calendar year exceed the aggregate
cost to FTP Services LLC and First Trust Advisors L.P. of
supplying such services in such year. Such compensation may, from
time to time, be adjusted by the Depositor 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 of Shelter" or similar index, if such index should no
longer be published. The consent or concurrence of any Unit holder
hereunder shall not be required for any such adjustment or
increase. Such compensation shall be paid by the Trustee, upon
receipt of an invoice therefore from FTP Services LLC, which shall
constitute the representation by FTP Services LLC that the
bookkeeping and administrative services for which compensation is
claimed are properly compensable hereunder and that the aggregate
cost incurred by FTP Services LLC of providing FTPS Unit
shareholder servicing hereunder was not less than the compensation
claimed, upon which representation the Trustee may conclusively
rely. Such compensation shall be charged against the Income and/or
Capital Accounts, in accordance with Section 3.05 of the Standard
Terms and Conditions of Trust.
If the cash balance in the Income and Capital Accounts shall
be insufficient to provide for amounts payable pursuant to this
Section 3.16, the Trustee shall have the power to sell (i)
Securities from the current list of Securities designated to be
sold pursuant to Section 5.02 hereof, or (ii) if no such
Securities have been so designated, such Securities as the Trustee
may see fit to sell in its own discretion, and to apply the
proceeds of any such sale in payment of the amounts payable
pursuant to this Section 3.16.
All moneys payable to the FTPS Unit Servicing Agent pursuant
to this Section 3.16 shall be secured by a lien on the Trust prior
to the interest of Unit holders, but no such lien shall be prior
to any lien in favor of the Trustee under the provisions of
Section 6.04 of the Standard Terms and Conditions of Trust.
(c) The FTPS Unit Servicing Agent 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, pursuant to this Indenture, except by reason of its own
negligence, lack of good faith or willful misconduct, provided
that the FTPS Unit Servicing Agent shall not in any event be
liable or responsible for any evaluation made by the Evaluator.
(d) Except as the context otherwise requires, the FTPS Unit
Servicing Agent shall be subject to the provisions of Section 4.05
herein in the same manner as it would if it were the Evaluator.
(e) The FTPS Unit Servicing Agent shall be indemnified
ratably by the affected Trust and held harmless against any loss
or liability accruing to it without negligence, bad faith or
willful misconduct on its part, arising out of or in connection
with the operations of the Trust, including the costs and expenses
(including counsel fees) of defending itself against any claim of
liability in the premises, including without limitation any loss,
liability or expense incurred in acting pursuant to written
directions to the FTPS Unit Servicing Agent given by the Trustee
or Depositor from time to time in accordance with the provisions
of this Indenture or in undertaking actions from time to time
which the FTPS Unit Servicing Agent deems necessary in its
discretion to protect the Trust and the rights and interests of
the FTPS Unit holders pursuant to the terms of this Indenture.
(f) The FTPS Unit Servicing Agent shall conduct its
operations in a manner that is compatible with the current
operational procedures and requirements of the Trustee (including,
without limiting the foregoing, the provision and receipt of data
in such format and meeting such technical requirements as the
Trustee may specify) and shall exercise its best efforts to
accommodate any changes in the operational procedures and
requirements which the Trustee may make upon prior notice to the
FTPS Unit Servicing Agent. The Depositor acknowledges and agrees
that the default of the FTPS Unit Servicing Agent in its
obligations under this paragraph, or the performance by the FTPS
Unit Servicing Agent of its obligations in a manner which shall
adversely affect the Trustee's performance of its duties, shall be
a sufficient grounds for the Trustee to remove the FTPS Unit
Servicing Agent pursuant to Section 3.16(d) and Section 4.05.
(g) As used in this Section 3.16, "FTPS Unit holder," when
referring to the records of the Trustee, shall mean the FTPS Unit
Servicing Agent and, when referring to the records to be
maintained by the FTPS Unit Servicing Agent, shall mean each owner
of a FTPS Unit identified on the records of the FTPS Unit
Servicing Agent."
J. Section 4.01(a) and (b) of the Standard Terms and Conditions of
Trust shall be amended to include the FTPS Unit Servicing Agent among
the parties who are furnished information concerning the Evaluation of
each issue of Securities deposited in the Trust and the Trust Fund
Evaluation.
K. The second sentence of the first paragraph of Section 4.03
shall be replaced with the following:
"Such fee may exceed the actual cost of providing such
services for the Trust, but at no time will the total amount
received by First Trust Advisors, L.P. for rendering the services
described in this Section 4.03 and FTP Services LLC for rendering
the services described in Section 3.16 to unit investment trusts
of which the Depositor is the sponsor in any calendar year exceed
the aggregate cost to FTP Services LLC and First Trust Advisors,
L.P. of supplying such services in such year."
L. Section 4.04 of the Standard Terms and Conditions of Trust
shall be replaced in its entirety by the following:
"Section 4.04. Liability of Evaluator. The Trustee, FTPS
Unit Servicing Agent, Depositor and the Unit holders may rely on
any Evaluation furnished by First Trust Advisors, L.P., acting in
its capacity as Evaluator, and shall have no responsibility for
the accuracy thereof. The determinations made by the Evaluator
hereunder shall be made in good faith upon the basis of the best
information available to it. The Evaluator shall be under no
liability to the Trustee, FTPS Unit Servicing Agent, Depositor or
the Unit holders for errors in judgment; provided, however, that
this provision shall not protect the Evaluator 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."
M. The second sentence of the first paragraph of Section 5.01
shall be amended to delete subsection (ii) of such sentence and replace
it in its entirety with the following:
"(ii) amounts representing estimated accrued expenses of
such Trust including but not limited to unpaid fees and expenses
of the Trustee, the Evaluator, the Portfolio Supervisor, the FTPS
Unit Servicing Agent, the Depositor and its counsel, in each case
as reported by the Trustee to the Depositor on or prior to the
date of Evaluation,"
N. Section 6.01(c) of the Standard Terms and Conditions of Trust
shall be replaced in its entirety with the following:
"(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 Depositor, the
Portfolio Supervisor, the Evaluator, or the FTPS Unit Servicing
Agent, or for the form, character, genuineness, sufficiency, value
or validity of any of the 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
Certificates (except for the due execution thereof by the Trustee)
or for the due execution thereof by the Depositor, and the Trustee
shall in no event assume or incur any liability, duty or
obligation to any Unit holder, the FTPS Unit Servicing Agent or
the Depositor 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 Depositor, the Portfolio
Supervisor, the Evaluator or the FTPS Unit Servicing Agent;"
O. Section 8.02(b) of the Standard Terms and Conditions of Trust
shall be replaced in its entirety with the following:
"(b) deduct from the Income Account of such Trust or, to the
extent that funds are not available in such Account, from the
Capital Account of such Trust, and pay accrued and unpaid fees of
the Evaluator, the Portfolio Supervisor, the FTPS Unit Servicing
Agent, the Depositor and counsel in connection with such Trust, if
any;"
P. Section 8.05 of the Standard Terms and Conditions of Trust
shall be amended to add the following paragraph immediately preceding
the last paragraph of such section:
"Any notice, demand, direction or instruction to be given to
the FTPS Unit Servicing Agent shall be in writing and shall be
duly given if mailed or delivered to the FTPS Unit Servicing Agent
at 000 X. Xxxxxxx Xxxxx, Xxxxx 000, Xxxxxxx, XX 00000, or at such
other address as shall be specified by the FTPS Unit Servicing
Agent to the other parties hereto in writing."
Q. Notwithstanding anything to the contrary in the Standard Terms
and Conditions of Trust, the second paragraph in Section 8.02 shall be
amended to read as follows:
"In the event of any termination of the Trust prior to the
Mandatory Termination Date, the Trustee shall proceed to liquidate
the Securities then held and make the payments and distributions
provided for hereinafter in this Section 8.02, except that in such
event, the distribution to each Unit holder shall be made in cash
and shall be such Unit holder's pro rata interest in the balance
of the principal and income accounts after the deductions herein
provided. In the event that the Trust shall terminate on or after
the Mandatory Termination Date, the Trustee shall, at least thirty
days prior to the Mandatory Termination Date, send a written
notice to all Unit holders of record. If such Unit holder owns at
least the minimum number of Units of Trust set forth in Part II of
the Trust Agreement, such notice shall further indicate that such
Unit holder may elect to receive an in-kind distribution of their
pro rata share of the Securities, to the extent of whole shares.
The Trustee will honor duly executed requests for in-kind
distributions received (accompanied by the electing Unit holder's
Certificate, if issued) by the close of business ten business days
prior to the Mandatory Termination Date. Unit holders who do not
effectively request an in-kind distribution shall receive their
distribution upon termination in cash. Unit holders shall receive
their distribution upon termination in cash."
R. Section 6.01 shall be amended to add the following as paragraph
(n):
"(n) The Trustee may act, and may engage any corporation,
partnership or other entity affiliated with The Bank of New York
Mellon (an "Affiliated Entity") to act, as broker or dealer to
execute transactions, including the purchase or sale of any
securities currently distributed, underwritten or issued by any
Affiliated Entity, and receive, or pay to the Affiliated Entity,
as applicable, compensation for such services at standard
commission rates, markups or concessions."
S. Section 3.02 shall be amended to read in its entirety as
follows:
"Section 3.02 Income Account. The Trustee shall collect the
dividends and other cash distributions on the Securities in each
Trust which would be treated as dividend (other than capital gain
dividends) or interest income under the Internal Revenue Code as
such become payable (including all monies which would be so
treated representing penalties for the failure to make timely
payments on the Securities, or as liquidated damages for default
or breach of any condition or term of the Securities or of the
underlying instrument relating to any Securities and other income
attributable to a Failed Contract Obligation for which no
Replacement Security has been obtained pursuant to Section 3.12
hereof) and credit such income to a separate account for each
Trust to be known as the "Income Account."
Any non-cash distributions received by a Trust shall be sold
to the extent they would be treated as dividend or interest income
under the Internal Revenue Code and the proceeds shall be credited
to the Income Account. Except as provided in the preceding
sentence, non-cash distributions received by a Trust (other than a
non-taxable distribution of the shares of the distributing
corporation which shall be retained by a Trust) shall be dealt
with in the manner described in Section 3.11, herein, and shall be
retained or disposed of by such Trust according to those
provisions and the proceeds thereof shall be credited to the
Capital (Principal) Account. Neither the Trustee nor the Depositor
shall be liable or responsible in any way for depreciation or loss
incurred by reason of any such sale.
All other distributions received by a Trust shall be
credited to the Capital (Principal) Account."
T. Notwithstanding anything to the contrary in the Standard Terms
and Conditions of Trust, the first paragraph of Section 3.05.(II)(a)
shall be amended to provide as follows:
"On each Distribution Date, the Trustee shall distribute to
each Unit holder of record at the close of business on the Record
Date immediately preceding such Distribution Date an amount per
Unit equal to such Unit holder's Income Distribution (as defined
below), plus such Unit holder's pro rata share of the balance of
the Capital Account (except for monies on deposit therein required
to purchase Contract Obligations and, with respect to any Trust
which is a widely held fixed investment trust as defined in Treas.
Reg. Section 1.671-5(b)(22), monies constituting proceeds of
pro-rata sales of Trust assets to effect redemptions, which
proceeds shall be retained for payment of redemptions) computed as
of the close of business on such Record Date after deduction of
any amounts provided in Subsection I, provided, however, that
notwithstanding any contrary provisions of paragraph (II)(c) of
this Section, the Trustee shall not be required to make a
distribution from the Capital Account unless the balance available
for distribution is equal to or greater than $1.00 per
100 Units, except that, notwithstanding any provision of the
Standard Terms and Conditions of Trust or this Trust Agreement to
the contrary:
(i) With respect to any Trust which is a widely held fixed
investment trust as defined on Treas. Reg. Section 1.671-5(b)(22),
the Trustee shall on any Distribution Date distribute the cash
available for distribution in the Income and Capital Accounts
within the meaning of Treas. Reg. Section 1.671-5(b)(5) if the
aggregate amount of such cash available for distribution is equal
to or greater than .1% of the net asset value of the Trust on the
related Record Date. This provision is intended to comply with
Treas. Reg. Section 1.671-5(c)(2)(v)(C) and shall be interpreted
consistent therewith and with any successor regulations.
(ii) With respect to any trust which intends to qualify as a
regulated investment company, as set forth in the Prospectus for
such trust, the Trustee may make such distributions from the
Income or Capital Accounts as may be necessary, as determined by
the Trust's independent registered public accounting firm, in
order to avoid imposition of any income or excise taxes on
undistributed income in the Trust. In addition, the Trustee will
distribute any funds in the Capital Account in December of each
year."
U. Notwithstanding anything to the contrary in the Standard Terms
and Conditions of Trust, the ninth paragraph of Section 5.02 of the
Standard Terms shall be amended to read in its entirety as follows:
"With respect to any Trust which is a widely held fixed
investment trust as defined on Treas. Reg. Section 1.671-5(b)(22),
for the purpose of funding the Principal Account for payment of
the Redemption Value with respect to each tender of a Unit or
Units for redemption, the Depositor may direct the trustee to sell
and, in the absence of contrary direction from the Depositor, the
Trustee may sell, the pro rata amount of each Security allocable
to the tendered Units as soon as reasonably practicable following
such tender. In determining such pro rata amount, the Trustee may
apply the calendar month aggregation method provided in Treas.
Reg. Section 1.671-5(c)(2)(iv)(G)(3)(i). If the proceeds of such
pro rata sales are insufficient, the Trustee may (i) sell
additional Securities as directed by the Sponsor or, in the
absence of direction, sell Securities in amounts which are
reasonably pro rata as determined by the Trustee or (ii) advance
funds required to pay the Redemption Value, provided that the
Trustee shall have no obligation to advance funds if the
unreimbursed amount advanced to the Trust for this purpose then
equals at least $15,000. When directed by the Depositor or
determined by the Trustee, but in all events as promptly as
reasonably practicable whenever the unreimbursed amount advanced
by the Trustee equals or exceeds $15,000, the Trustee shall sell
additional Securities in the manner provided in clause (i) of the
preceding sentence and shall reimburse itself the amount of the
advance, provided that the Trustee's right to reimbursement shall
not be affected by any delay in sale or reimbursement. The
Trustee's right to reimbursement shall be secured by a lien on the
Trust prior to the interest of the Unit holders. The net proceeds
of any sale of Securities representing income shall be credited to
the Income Account and then disbursed therefrom for payment of
expenses and payments to Unit holders as otherwise provided in
this Indenture. The balance of such net proceeds shall be credited
to the Principal Account. The Depositor and the Trustee shall use
their reasonable efforts to conduct pro rata sales of Securities
qualifying for exception from tax reporting as described in Treas.
Reg. Section 1.671-5(c)(2)(iv)(G) and, during the final calendar
year of the trust, qualifying for the exception from tax reporting
described in Treas. Reg. Section 1.671-5(c)(2)(iv)(F).
Notwithstanding the foregoing, neither the Trustee nor the
Depositor shall be liable to any person in the event sales
proceeds for any calendar year exceed the general de minimis test
of Treas. Reg. Section 1.671-5(c)(2)(iv)(D)(1) (whether or not due
to a failure to sell Securities pro rata) or otherwise require
reporting under Treas. Reg. Section 1.671-5."
V. Notwithstanding anything to the contrary in the Standard Terms
and Conditions of Trust, Section 6.02 of the Standard Terms is amended
to read in its entirety as follows:
"Section 6.02. Books, Records and Reports. (a) General. The
Trustee shall keep proper books of record and account of all the
transactions of each Trust under this Indenture at its corporate
trust office, including a record of the name and address of, and
the Units issued by each Trust and held by, every Unit holder, and
such books and records of each Trust shall be open to inspection
by any Unit holder of such Trust at all reasonable times during
the usual business hours. 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 regulations
thereunder.
(b) Audit of trust accounts. Unless the Depositor determines
that such an audit is not required, the accounts of the Trust
shall be audited not less than annually by independent public
accountants designated from time to time by the Depositor and the
Trustee and the reports of such accountants shall be furnished
upon request to Unit holders. So long as the Depositor is making a
secondary market for Units, the Depositor shall bear the cost of
such annual audits to the extent such cost exceeds $.50 per 100
Units.
(c) Costs of updating of registration statement. If provided
for in the Prospectus for a Trust, the Trustee shall pay, or
reimburse to the Depositor, the expenses related to the updating
of the Trust's registration statement, to the extent of legal
fees, typesetting fees, electronic filing expenses and regulatory
filing fees. Such expenses shall be paid from the Income Account,
or to the extent funds are not available in such Account, from the
Capital Account, against an invoice or invoices therefor presented
to the Trustee by the Depositor. By presenting such invoice or
invoices, the Depositor shall be deemed to certify, upon which
certification the Trustee is authorized conclusively to rely, that
the amounts claimed therein are properly payable pursuant to this
paragraph. The Depositor shall provide the Trustee, from time to
time as requested, an estimate of the amount of such expenses,
which the Trustee shall use for the purpose of estimating the
accrual of Trust expenses. The amount paid by the Trust pursuant
to this paragraph in each year shall be separately identified in
the annual statement provided to Unit holders. The Depositor shall
assure that the Prospectus for the Trust contains such disclosure
as shall be necessary to permit payment by the Trust of the
expenses contemplated by this paragraph under applicable laws and
regulations. The provisions of this paragraph shall not limit the
authority of the Trustee to pay, or reimburse to the Depositor or
others, such other or additional expenses as may be determined to
be payable from the Trust as provided in this Section 6.02.
(d) Tax reporting for grantor trusts. With respect to any
Trust which is a widely held fixed investment trust as defined in
Treas. Reg. Section 1.671-5(b)(22), the Depositor and the Trustee
agree that the Trust meets the requirements of Treas. Reg. Section
1.671-5(f)(1)(i), and the Trustee is authorized:
(i) to report in accordance with any of the safe harbor
methods described in Treas. Reg. Section 1.671-5(f);
(ii) to report sales proceeds, whenever permitted, as
provided in Treas. Reg. Section 1.671-5(f)(1)(iv)(B);
(iii) to report proceeds of sales and dispositions described
in Treas. Reg. Section 1.671-5(c)(2)(iv)(D)(4)(ii) as provided in
Treas. Reg. Section 1.671-5(c)(2)(iv)(D)(4)(i); and
(iv) to use the measuring date, as defined in Treas. Reg.
Section 1.671-5(c)(2)(iv)(D)(1), in lieu of the start-up date,
wherever permitted.
For purposes of Treas. Reg. Section 1.671-5(f)(1)(iv)(A)(2),
the date of the last deposit under 2.01(b) prior to the expiration
of the initial offering period, as certified to the Trustee by the
Depositor, shall be considered the 'start-up date' of the Trust.
(e) Cost-basis reporting for Unit holders who purchase or
hold their Units through the First Trust Advisor Direct system
("Advisor Direct"). The Depositor shall maintain information
required for the reporting of the cost basis of Advisor Direct
holders (as defined in section 2.03(b)) as may be required from
time to time by applicable law (including, without limitation,
Section 6045(g) of the Internal Revenue Code of 1986, as amended)
and regulations, and the Depositor shall be responsible for the
reporting of such information to the Advisor Direct holders, or if
reporting by the Depositor is not permitted by applicable law or
regulation or if the Depositor and Trustee otherwise agree that
the Trustee shall report such information, the Depositor shall
provide the Trustee such information as will permit the Trustee to
provide required cost-basis information to the Advisor Direct
holders and shall provide the information at such times and in
such form as the Trustee may reasonably request. The Depositor
will be solely responsible for the accuracy of such cost-basis
information and the reporting thereof to Advisor Direct holders as
provided above. The Trustee may rely conclusively upon the
cost-basis information provided by the Depositor with respect to
Advisor Direct holders, and shall be indemnified in accordance
with Section 6.04 of the Indenture against any loss or liability,
including any penalty or other charge imposed by any taxing
authority in respect of such cost-basis information or reporting
thereof made by the Depositor as provided in this paragraph."
W. Notwithstanding anything to the contrary in the Standard Terms
and Conditions of the Trust, the eighth paragraph of Section 5.02 of the
Standard Terms shall be amended to read in its entirety as follows:
"Notwithstanding the foregoing provisions of this Section
5.02, the Trustee (or the FTPS Unit Servicing Agent in the case of
FTPS Units) is hereby irrevocably authorized in its discretion, in
the event that the Depositor does not purchase any Units tendered
to the Trustee (or the FTPS Unit Servicing Agent in the case of
FTPS Units) for redemption, or in the event that a Unit is being
tendered by the Depositor for redemption, in lieu of redeeming
Units, to sell Units in the over-the-counter market through any
broker-dealer of its choice for the account of the tendering Unit
holder at prices which will return to the Unit holder an amount in
cash, net after deducting brokerage commissions, transfer taxes
and other charges, equal to or in excess of the Redemption Value
which such Unit holder would otherwise be entitled to receive on
redemption pursuant to this Section 5.02. The Trustee (or the FTPS
Unit Servicing Agent in the case of FTPS Units) shall pay to the
Unit holder the net proceeds of any such sale on the day on which
such Unit holder would otherwise be entitled to receive payment of
the Redemption Value hereunder."
X. Notwithstanding anything to the contrary in the Standard Terms
and Conditions of Trust, Section 6.01(l) shall be replaced in its
entirety with the following:
"The Trust may include (I) a letter or letters of credit
meeting the requirements of Section 2.05 for the purchase of
Securities or Contract Obligations issued by the Trustee in its
individual capacity for the account of the Depositor or (II)
Securities issued by the Trustee, its parent, or affiliates, and
the
Trustee may otherwise deal with the Depositor and the Trust
with the same rights and powers as if it were not the Trustee
hereunder; and"
Y. Notwithstanding anything to the contrary in the Standard Terms
and Conditions of Trust, Section 3.07 shall be amended to add the
following immediately after Section 3.07(i):
"(j) that as a result of the ownership of the Security, the
Trust or its Unit holders would be a direct or indirect
shareholder of a passive foreign investment company as defined in
section 1297(a) of the Internal Revenue Code.
(k) that such sale is necessary for the Trust to comply with
such federal and/or state securities laws, regulations and/or
regulatory actions and interpretations which may be in effect from
time to time."
Z. Notwithstanding anything to the contrary in the Standard Terms
and Conditions of Trust, paragraph (e) of Section 6.05 shall be amended
by adding the following sentence at the end thereof:
"The Trustee's and each successor Trustee's right to
indemnification shall survive its resignation or removal."
AA. All references to The Bank of New York in the Standard Terms
and Conditions of Trust shall be replaced with "The Bank of New York
Mellon."
BB. Any notice, demand, direction or instruction to be given to
either the Depositor, Portfolio Supervisor or Evaluator shall be in
writing and shall be duly given if mailed or delivered to such party at
000 Xxxx Xxxxxxx Xxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxxx 00000, or at such
other address as shall be specified by the Depositor, Portfolio
Supervisor or Evaluator to the other parties hereto in writing.
CC. Article IV of the Standard Terms and Conditions of Trust shall
be amended to add the following:
"Section 4.06. Liability of Portfolio Supervisor. The
Portfolio Supervisor shall be under no liability to the Unit
holders for any action taken or for refraining from the taking of
any action in good faith pursuant to this Indenture or for errors
in judgment, but shall be liable only for its own 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."
DD. Notwithstanding anything to the contrary in the Standard Terms
and Conditions of Trust, the last sentence of Section 3.01 shall be
replaced with the following:
"As used herein, the Depositor's reimbursable expenses of
organizing the Trust 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 costs of a portfolio
consultant, if any, 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."
EE. Section 2.03(b) of the Standard Terms and Conditions of Trust
is restated in full as follows:
"Notwithstanding any provisions of the Indenture to the
contrary, Units shall be held solely in uncertificated form
evidenced by appropriate notation in the registration books of the
Trustee, and no Unit holder shall be entitled to the issuance of a
Certificate evidencing the Units owned by such Unit holder. The
only permitted registered holders of Units shall be (i) Depository
Trust Company (or its nominee, Cede & Co.), (ii) the FTPS Unit
Servicing Agent, or (iii) Unit holders who purchase or otherwise
hold their Units through Advisor Direct ("Advisor Direct
holders"); consequently, individuals who are not Advisor Direct
holders or holders of FTPS Units must hold their Units through an
entity which is a participant in Depository Trust Company. Except
as provided by the preceding provisions of this paragraph, the
rights specified in this Indenture of holders of Units evidenced
by a Certificate shall apply to holders of Units held in
uncertificated form."
FF. Notwithstanding anything to the contrary in the Standard Terms
and Conditions of Trust, Section 3.13 shall be amended by adding the
following sentences at the end thereof:
"To the extent permitted by applicable law and regulatory
authorization, unpaid portions of the deferred sales charge shall
be secured by a lien on the Trust in favor of the Depositor,
provided that such lien shall be subordinate to the lien of the
Trustee granted by Section 6.04 of the Standard Terms and
Conditions of Trust. To the extent of such lien, the Trustee shall
hold the assets of the Trust for the benefit of the Depositor,
provided that the Trustee is authorized to make dispositions,
distributions and payments for expenses in the ordinary course of
the administration of the trust without regard to such lien."
GG. For Trusts which make annualized distributions of income, as
set forth in the Prospectus for such Trusts, Section 2.01(b)(4), as
renumbered hereby, shall be amended to add the following sentence at the
end thereof:
"If the Cash amount pursuant to the foregoing calculation is
negative, the Trustee shall distribute to the Depositor the amount
of such deficit, and may advance funds to the Trust for such
purpose, such advance to be repaid and secured in the manner
provided in Section 3.05(II)(b) as amended herein."
HH. Section 3.07(h) of the Standard Terms and Conditions of Trust
shall be replaced in its entirety with the following:
"(h) in the case of a Trust which has elected to qualify as
a "regulated investment company," that the sale of Securities is
necessary or advisable: (i) in order to maintain the qualification
of the Trust as such; or (ii) to provide funds to make any
distribution from such a Trust for a taxable year in order to
avoid imposition of any income or excise taxes on undistributed
income in the Trust;"
II. For Trusts which intend to qualify as a regulated
investment company, as set forth in the Prospectus for such
Trusts, the first two sentences in the second paragraph of Section
3.11 of the Standard Terms and Conditions of Trust shall be
replaced in their entirety with the following:
"In the event that an offer by the issuer of any of the
Securities or any other party shall be made to issue new
securities, or to exchange securities, for Trust Securities, the
Trustee will, at the direction of the Depositor, vote for or
against any offer for new or exchanged securities or property in
exchange for a Trust Security. Should any issuance, exchange or
substitution be effected, any securities, cash and/or property
received shall be deposited hereunder and shall be promptly sold,
if securities or property, by the Trustee pursuant to the
Depositor's direction, unless the Depositor advises the Trustee to
keep such securities or property."
JJ. For Trusts which intend to qualify as a regulated investment
company, as set forth in the Prospectus for such Trusts, Section
2.01(b)(4) of the Standard Terms and Conditions of Trust shall be
deleted in its entirety and Section 2.01(b)(5) shall be renumbered to
"Section 2.01(b)(4)."
KK. For Trusts which intend to qualify as a regulated investment
company, as set forth in the Prospectus for such Trusts, Section 3.12(a)
of the Standard Terms and Conditions of Trust shall be replaced in its
entirety with the following:
"(a) The New Securities shall be Securities as originally
selected for Deposit in that Series of the Trust or securities
which the Depositor determines to be similar in character as
Securities originally selected for Deposit;"
LL. For Trusts which intend to qualify as a regulated investment
company, as set forth in the Prospectus for such Trusts, Article III of
the Standard Terms and Conditions of Trust shall be amended to include
the following section:
"Section 3.17. Regulated Investment Company Election. Each
Trust elects to be treated and to qualify as a "regulated
investment company" as defined in the Internal Revenue Code, and
the Trustee is hereby directed to make such elections, including
any appropriate election to be taxed as a corporation, as shall be
necessary to effect such qualification."
MM. For Trusts which intend to qualify as a regulated investment
company, as set forth in the Prospectus for such Trusts, Section 8.01(b)
shall be amended to remove the following text from such section:
"as a grantor trust."
NN. Notwithstanding anything to the contrary in the Standard Terms
and Conditions of Trust, for Trusts which make annualized distributions
of income, as set forth in the Prospectus for such Trust, Section
3.05 (II)(b) shall be replaced with the following:
"(b) For purposes of this Section 3.05, the Unit holder's
Income Distribution shall be equal to such Unit holder's pro rata
share of the balance of the Income Account calculated as of the
prior Record Date, on the basis of one-twelfth of (i) the annual
income of the Trust for the ensuing twelve months estimated by
reference to the distributions made on the Securities during the
preceding calendar quarter (as adjusted for any information with
respect to future dividends received by the Trustee prior to such
Record Date) less (ii) the fees and expenses then deductible
pursuant to Section 3.05 (I) and (iii) the Trustee's estimate of
other expenses properly 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. The Trustee shall advance out of its
own funds and deposit in and credit to the Income Account on each
Distribution Date, to the extent that there is not sufficient cash
in the Income Account, the additional amount, if any, anticipated
by the Trustee to be necessary to make the Income Distribution as
specified in the preceding sentence; the Trustee shall be entitled
to be reimbursed from the Income Account without interest when
funds are available therein from income on any of the Securities,
including upon the sale of Securities to meet redemptions, for any
and all amounts advanced by it pursuant to this paragraph. The
Trustee shall be deemed to be the beneficial owner of the income
of the Trust to the extent such income is required to reimburse
the Trustee for amounts advanced by it pursuant to this paragraph;
amounts payable to the Trustee in respect of such advances shall
be secured by a lien on the Trust prior to the interests of Unit
holders. In the event any issuer of Securities fails to make an
anticipated distribution, or there is a disposition of Securities
or other event that reduces the net income which will be received
from that estimated by the Trustee, the Trustee shall, on the
Record Date next following the Trustee's determination that such
event has occurred, reduce the amount of the next following
distribution by such amount as will enable the Trustee to recover
any advances to the Trust referable to the anticipated receipt of
such unrealized income. As determined by the Trust's independent
registered public accounting firm, the Trustee shall adjust the
December distribution from the Income and Capital Accounts as may
be necessary so that the Trust distributions during the calendar
year equal an amount necessary to avoid paying any regulated
investment company excise tax during such year. The Trustee is
authorized to reduce the following January distribution by the
amount of any such increase."
IN WITNESS WHEREOF, First Trust Portfolios L.P., The Bank of
New York Mellon, First Trust Advisors L.P. and FTP Services LLC have
each caused this Trust Agreement to be executed and the respective
corporate seal to be hereto affixed and attested (if applicable) by
authorized officers; all as of the day, month and year first above
written.
FIRST TRUST PORTFOLIOS L.P.,
Depositor
By Xxxxx X. Xxxxx
Senior Vice President
THE BANK OF NEW YORK MELLON,
Trustee
By Xxxx X. Xxxxxx
Managing Director
[SEAL]
ATTEST:
Xxx X. Xxx
Vice President FIRST TRUST ADVISORS L.P.,
Evaluator
By Xxxxx X. Xxxxx
Senior Vice President
FIRST TRUST ADVISORS L.P.,
Portfolio Supervisor
By Xxxxx X. Xxxxx
Senior Vice President
FTP Services LLC,
FTPS Unit Servicing Agent
By Xxxxx X. Xxxxx
Senior Vice President
SCHEDULE A TO TRUST AGREEMENT
Securities Initially Deposited
FT 3638
(Note: Incorporated herein and made a part hereof for the Trust is
the "Schedule of Investments" for the Trust as set forth in the
Prospectus.)