FT 1406
TRUST AGREEMENT
Dated: May 15, 2007
The Trust Agreement among First Trust Portfolios L.P., as
Depositor, The Bank of New York, 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 and the Portfolio Supervisor 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
STRATEGIC INCOME ADVANTAGE SELECT, CLOSED-END PORTFOLIO, SERIES 8
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. (1) 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 the 15th day of each month.
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 last 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.
H. The Initial Date of Deposit for the Trust is May 15,
2007.
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.
However, the ability to request an in-kind distribution of
Securities pursuant to Section 5.02 will terminate at any time
that the number of outstanding Units has been reduced to 10% or
less of the highest number of Units issued by the Trust. No in-
kind distribution requests submitted during the 30 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.
(2) 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 Foeign Custody Manager by Rule 17f-5 under the
Investment Company Act of 1940 (17 CFR 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 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/SERVr 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) 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.
(6) 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.
(7) 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.
(8) 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.
(9) 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 ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, 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 fifteen 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 (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 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 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, 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. 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. 1.675-5(c)(2)(v)(C) and shall be
interpreted consistent therewith and with any successor
regulations."
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:
"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. 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. 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.
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. 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. 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. 1.671-
5(b)(22), the Depositor and the Trustee agree that the
Trust meets the requirements of Treas. Reg. 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. 1.671-
5(f);
(ii) to report sales proceeds, whenever
permitted, as provided in Treas. Reg. 1.671-
5(f)(1)(iv)(B);
(iii) to report proceeds of sales and
dispositions described in Treas. Reg. 1.671-
5(c)(2)(iv)(D)(4)(ii) as provided in Treas. Reg. 1.671-
5(c)(2)(iv)(D)(4)(i); and
(iv) to use the measuring date, as
defined in Treas. Reg. 1.671-5(c)(2)(iv)(D)(1), in
lieu of the start-up date, wherever permitted.
For purposes of Treas. Reg. 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."
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."
IN WITNESS WHEREOF, First Trust Portfolios L.P., The Bank
of New York, 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 ▇▇▇▇▇ ▇. ▇▇▇▇▇
Senior Vice President
THE BANK OF NEW YORK,
Trustee
By ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Vice President
[SEAL]
ATTEST:
▇▇▇▇ ▇. ▇▇▇▇▇▇
Vice President
FIRST TRUST ADVISORS L.P.,
Evaluator
By ▇▇▇▇▇ ▇. ▇▇▇▇▇
Senior Vice President
FIRST TRUST ADVISORS L.P.,
Portfolio Supervisor
By ▇▇▇▇▇ ▇. ▇▇▇▇▇
Senior Vice President
FTP Services LLC,
FTPS Unit Servicing Agent
By ▇▇▇▇▇ ▇. ▇▇▇▇▇
Senior Vice President
SCHEDULE A TO TRUST AGREEMENT
Securities Initially Deposited
FT 1406
(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.)
