PPLUS TRUST CERTIFICATES SERIES EQ-1 SERIES SUPPLEMENT between MERRILL LYNCH DEPOSITOR, INC., as Depositor, and THE BANK OF NEW YORK, as Trustee and Securities Intermediary

Exhibit 4.1

 

 

 

 

PPLUS TRUST CERTIFICATES SERIES EQ-1

 

 

 

SERIES SUPPLEMENT

 

between

 

▇▇▇▇▇▇▇ ▇▇▇▇▇ DEPOSITOR, INC.,

 

as Depositor,

 

and

 

THE BANK OF NEW YORK,

 

as Trustee and Securities Intermediary

 

 

 

 

 

Dated as of June 14, 2007

 

 

 

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SERIES SUPPLEMENT, dated as of June 14, 2007 (the “Supplement”), by and between ▇▇▇▇▇▇▇ ▇▇▇▇▇ DEPOSITOR, INC., a Delaware corporation, as Depositor, THE BANK OF NEW YORK, a New York corporation, as Trustee and Securities Intermediary.

W I T N E S S E T H:

WHEREAS, the Depositor desires to create the Trust designated herein (the “Trust”) by executing and delivering this Supplement, which shall incorporate the terms of the Standard Terms for Trust Agreements, dated as of May 29, 2007 (the “Standard Terms” and, together with this Supplement, the “Trust Agreement”), by and between the Depositor and the Trustee and Securities Intermediary, as modified by this Supplement;

WHEREAS, the Depositor desires to deposit the Underlying Securities set forth on Schedule I attached hereto into the Trust;

WHEREAS, in connection with the creation of the Trust and the deposit therein of the Underlying Securities, it is desired to provide for the issuance of (a) the Certificates evidencing undivided interests in the Trust and (b) Call Rights;

WHEREAS, the Trustee has joined in the execution of the Standard Terms and this Supplement to evidence the acceptance by the Trustee of the Trust; and

WHEREAS, the Securities Intermediary has joined in the execution of the Standard Terms and this Supplement to evidence the acceptance by the Securities Intermediary of its obligations thereunder and hereunder;

NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants expressed herein, it is hereby agreed by and between the Depositor and the Trustee and Securities Intermediary as follows:

Section 1.    Incorporation of Standard Terms. All of the provisions of the Standard Terms, a copy of which is attached hereto as Exhibit A, are hereby incorporated herein by reference in their entirety and this Supplement and the Standard Terms shall form a single agreement among the parties. In the event of any inconsistency between the provisions of this Supplement and the provisions of the Standard Terms, the provisions of this Supplement will control with respect to the transactions described herein.

Section 2.    Definitions. Except as otherwise specified herein or as the context may otherwise require, the following terms shall have the respective meanings set forth below for all purposes under this Supplement (Section 2(c) hereof sets forth terms listed in the Standard Terms that are not applicable to this Series). Capitalized terms used but not defined herein shall have the meanings assigned to them in the Standard Terms.

“Allocation Ratio”: The ratio of the Class A Allocation to the Class B Allocation. Voting Rights, Liquidation Proceeds, Realized Losses and Extraordinary Trust Expenses shall be allocated between Class A Certificateholders and Class B Certificateholders in accordance with the Allocation Ratio and, within each Class, each of the foregoing rights and obligations shall be allocated to Certificateholders in accordance with their pro rata interests in such Class.

 

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“Authorized Denomination”: With respect to Certificates, an aggregate stated and/or notional principal amount of $1,000, as applicable.

“Business Day”: Any day that is not a Saturday, a Sunday or a legal holiday or a day on which banking institutions or trust companies in the City of New York are authorized or obligated by law, regulation or executive order to close and that also is specified as a Business Day with respect to the Underlying Securities.

“Call Date”: Any Business Day that (i) a Call Holder designates as a Call Date on or after June 1, 2012; (ii) a Call Holder designates as a Call Date before June 1, 2012 after the announcement of any redemption of the Underlying Securities or any unscheduled payment of the Underlying Securities or after receipt by the Call Holder of notice of the termination of the Trust; provided that if a Call Right is to be exercised after the announcement of any redemption of the Underlying Securities or any unscheduled payment of the Underlying Securities and prior to such redemption of the Underlying Securities or unscheduled payment, then the Call Date designated by the Call Holder must be the third Business Day prior to such redemption of the Underlying Securities or unscheduled payment; (iii) at any time is deemed a Call Date upon an acceleration of the maturity of the Underlying Securities and payment in full by the Underlying Securities Issuer of all amounts when due; or (iv) at any time in the case of a tender offer for the Underlying Securities, a Call Holder is deemed to designate as a Call Date pursuant to Section 2.02(i)(iv) of the Warrant Agreement.

“Call Holder”: The holder of a Class A Call Right or a Class B Call Right.

“Call Price”: The Class A Call Price and the Class B Call Price.

“Call Right”: The Class A Call Right and the Class B Call Right.

“Certificates”: All 1,000,000 Class A Certificates and all 1,000,000 Class B Certificates.

“Class A Allocation”: The present value (discounted at the rate of 7.1% per annum) of (i) the unpaid interest, except for the Class B Payments, due or to become due on the Underlying Securities on or prior to the Final Scheduled Distribution Date and (ii) the principal amount of the Underlying Securities (in each case assuming that the Underlying Securities are paid in full when due and are not accelerated or redeemed prior to their stated maturity).

“Class A Call Price”: Means $25 per Class A Certificate being called plus any accrued and unpaid interest on each Class A Certificate being called to the Call Date, provided, however, that if the Class A Call Right is exercised before June 1, 2012 and a redemption of the underlying securities has been announced, then the Class A Call Price will be equal to 101% of the stated amount per Class A Certificate plus any accrued and unpaid interest on each Class A Certificate being called to the Call Date. Any payments of interest on the Call Date by the Trust to the applicable Class A Certificateholder shall be excluded.

“Class A Call Right”: The right, but not the obligation, pursuant to the Warrant Agreement and any related Warrant Certificates (as defined in the Warrant Agreement) of one or

 

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more Call Holders to purchase from the Class A Certificateholders on a Call Date some or all, of the Class A Certificates for the Class A Call Price.

“Class A Certificate Account”: The Certificate Account established for the Class A Certificateholders.

“Class A Certificates”: The Certificates issued by the Trust in a stated amount of $25 per trust certificate, entitled to receive on each Distribution Date until and including the Final Scheduled Distribution Date, distributions at a rate of 7.1% per annum on the stated amount of the Class A Certificates and a cash distribution of the principal amount of the Underlying Securities on the Final Scheduled Distribution Date and such other distributions as described herein.

“Class B Allocation”: The sum of the present values (discounted at the rate of 7.9% per annum) of the Class B Payments (assuming, for purposes hereof, that the Underlying Securities are paid in full on their stated maturity date, and no portion thereof is accelerated or redeemed prior to such date).

“Class B Call Price” means the sum of the present values, discounted at a rate of 7.9% per annum, of the unpaid distributions due, or to become due, in respect of the Class B Payments to be made on each Class B Certificate being called on or after the Call Date (assuming, for purposes hereof, that the Underlying Securities are paid in full on their stated maturity date, and no portion thereof is accelerated or redeemed prior to such date). Any payments of interest on the Call Date by the Trust to the applicable Class B Certificateholder shall be excluded.

“Class B Call Right”: The right, but not the obligation, pursuant to the Warrant Agreement and any related Warrant Certificates (as defined in the Warrant Agreement) of one or more Call Holders to purchase from the Class B Certificateholders on a Call Date some or all of the Class B Certificates for the Class B Call Price.

“Class B Certificate Account”: The Certificate Account established for the Class B Certificateholders.

(a)          “Class B Certificates”: The Certificates issued by the Trust with the right to receive, on each Distribution Date, commencing on December 1, 2007 and ending on the Final Scheduled Distribution Date, a distribution of 0.895% per annum of the aggregate notional principal amount of Class B Certificates and such other distributions as described herein.

“Class B Payments” will have the meaning given to it in Section 3(d).

“Closing Date”:   June 14, 2007.

“Collection Period”: (i) With respect to each December 1 Distribution Date, the period beginning on the day after the June 1 Distribution Date of the current year and ending on such December 1 Distribution Date, inclusive, and (ii) with respect to each June 1 Distribution Date, the period beginning on the day after the December 1 Distribution Date of the prior year and ending on such June 1 Distribution Date, inclusive, except for the December 1, 2007

 

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Distribution Date, as to which the Collection Period shall be the period beginning on the Cut-off Date and ending on such December, 2007 Distribution Date, inclusive; provided, however, that clauses (i) and (ii) shall be subject to Section 9(c) hereof.

“Commission”: The United States Securities and Exchange Commission.

“Comparable Treasury Issue”: With respect to any redemption date, the United States Treasury security selected by an Independent Investment Banker as having a maturity comparable to the remaining term of the Underlying Securities to be redeemed that would be used, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the Underlying Securities.

“Comparable Treasury Price”: With respect to any redemption date, (1) the average of the Reference Treasury Dealer Quotations for the redemption date after excluding the highest and lowest of such Reference Treasury Dealer Quotations, or (2) if the Underlying Securities trustee is provided fewer than five Reference Treasury Dealer Quotations, the average of all quotations obtained.

“Corporate Trust Office”: The office of the Trustee located at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention: Corporate Trust Dealing & Trading Group; provided, however, that the office at which certificated securities are delivered for registration of transfer, cancellation or exchange shall be the office of the Trustee, located at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇.

“Cut-off Date”:   June 14, 2007.

“Delivery Certificates” has the meaning given to it in Section 2.02 of the Warrant Agreement.

“Depository”: The Depository Trust Company, its nominees and their respective successors.

“Distribution Date”: June 1 and December 1 of each year (or if such date is not a Business Day, the next succeeding Business Day), commencing on December, 2007 and ending on the Final Scheduled Distribution Date.

“Distribution Election”: (a) If there occurs an Event of Default (as defined in the Underlying Securities Indenture) on the Underlying Securities under clauses (2) or (3) of the definition in Section 501 of the Underlying Securities Indenture, then the Trustee, upon receiving notice of such event, shall, on or immediately after the 30^th day after such event, direct the Market Agent to sell the Underlying Securities and a pro rata portion of the Related Assets held by the Trust, in accordance with the Sale Procedures, and the Liquidation Proceeds, if any, shall be divided between the Classes in accordance with the Allocation Ratio and each Class’ portion shall be deposited into such Class’ Certificate Account and distributed to such Class’ Certificateholders pro rata on the first Business Day following such deposit into such Certificate Account.

 

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(b) If, prior to the day on which the Market Agent sells the Underlying Securities pursuant to paragraph (a) above, there occurs (and the trustee receives notice of such occurrence) an acceleration of the maturity of the Underlying Securities and the Underlying Securities are declared to be immediately due and payable in accordance with the Underlying Securities Indenture, and the Underlying Securities Issuer:

(i) makes full payment of all amounts when due, and such payment exceeds the sum of (x) the aggregate stated amount of the Class A Certificates plus any accrued and unpaid distributions to the date of payment and (y) the sum of the present values, discounted at the rate of 7.9% per year, of the unpaid payments due, or to become due, in respect of the Class B Payments to be made on the Class B Certificates on or after the date of payment (assuming, for purposes of such calculation, that the Underlying Securities would have been paid in full at their stated maturity, that such acceleration had not occurred, and that no portion thereof would have been redeemed prior to such maturity date) then all holders of outstanding Call Rights will be deemed to have exercised their Call Rights automatically, and the Trustee, upon receiving such acceleration proceeds from the Underlying Securities Issuer, shall, on the first Business Day following receipt of such acceleration proceeds, distribute from such acceleration proceeds the following amounts:

(A) the Class A Call Price or the Class B Call Price per Certificate, as applicable, shall be distributed from such payment on account of each Certificate called from the holder thereof (which holders, pursuant to Section 2.02(d) of the Warrant Agreement, shall exclude Certificateholders to whom Delivery Certificates (as defined in the Warrant Agreement) were delivered in accordance with Section 2.02(d) of the Warrant Agreement),

(B) for each Class A Certificate, $25.00 plus any accrued and unpaid interest on such Class A Certificate to that date of payment, or, for each Class B Certificate, the sum of the present values, discounted at the rate of 7.9% per annum, of the unpaid distributions that were due, or to become due, in respect of the Class B Payments to be made on such Class B Certificate on or after the date of payment (assuming, for purposes of such calculation, that the Underlying Securities would have been paid in full on their stated maturity, and that such acceleration had not occurred, and that no portion thereof would have been redeemed prior to such stated maturity date), as applicable, shall be distributed from such payment on account of each Certificate held by Certificateholders to whom Delivery Certificates were delivered in accordance with Section 2.02(d) of the Warrant Agreement, and

(C) any amounts remaining shall be divided between the Classes in accordance with the Allocation Ratio and each Class’ portion shall be distributed pro rata among the Call Holders that are deemed to have exercised their Call Rights automatically pursuant to this clause with respect to that Class and the Certificateholders of that Class to whom Delivery Certificates were delivered in accordance with Section 2.02(d) of the Warrant Agreement;

 

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If the payment to be made by the Underlying Securities Issuer does not exceed the threshold set forth above, the Trustee shall divide the amount of such payment between the Trust Certificate Classes in accordance with the Allocation Ratio and distribute each Class’s portion of such amounts pro rata to the Trust Certificateholders of that Class.

(ii) makes a partial payment of all amounts when due, then the Trustee, upon receiving such payment, shall:

(A) immediately divide such payment between the Classes in accordance with the Allocation Ratio and deposit each Class’ portion of such payment into that Class’ Certificate Account for distribution to such Class’ Certificateholders pro rata on the first Business Day following such deposit into such Certificate Account; provided, that if the Underlying Securities Issuer places any condition, restriction or obligation on the acceptance of such partial payment including but not limited to a waiver of any right granted to a holder of the Underlying Securities, such partial payment will be rejected by the Trustee and no deposit will be made into the Certificate Account,

(B) divide a principal amount of the Underlying Securities equal to the aggregate stated amount of the outstanding Class A Certificates between the Classes in accordance with the Allocation Ratio and distribute each Class’ portion of the Underlying Securities to such Class’ Certificateholders pro rata and divide a pro rata portion of the Related Assets between the Classes in accordance with the Allocation Ratio and distribute each Class’ portion of such Related Assets to such Class’ Certificateholders pro rata to each Certificateholder’s last address as it appears in the Certificate Register within three Business Days of receiving said notice, and

(C) if any Underlying Securities are not distributed pursuant to clause (B), immediately direct the Market Agent to sell all Underlying Securities not so distributed and a pro rata portion of the Related Assets held by the Trust, in accordance with the Sale Procedures, and the Liquidation Proceeds, if any, shall be divided between the Classes in accordance with the Allocation Ratio and each Class’ portion shall be deposited into such Class’ Certificate Account and distributed to such Class’ Certificateholders pro rata on the first Business Day following such deposit into such Certificate Account; or

(iii) fails to make such payment when due, then the Trustee, upon receiving notice of such failure to make payment, shall:

(A) divide a principal amount of Underlying Securities equal to the aggregate stated amount of the outstanding Class A Certificates and a pro rata portion of the Related Assets in accordance with the Allocation Ratio between the Classes in accordance with the Allocation Ratio and distribute each Class’ portion to such Class’ Certificateholders pro rata to each Certificateholder’s last address

 

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as it appears in the Certificate Register within three Business Days of receiving said notice, and

(B) if any Underlying Securities are not distributed pursuant to clause (A), immediately direct the Market Agent to sell all Underlying Securities not so distributed and a pro rata portion of the Related Assets held by the Trust, in accordance with the Sale Procedures, and the Liquidation Proceeds, if any, shall be divided between the Classes in accordance with the Allocation Ratio and each Class’ portion shall be deposited into such Class’ Certificate Account and distributed to such Class’ Certificateholders pro rata on the first Business Day following such deposit into such Certificate Account.

(c) If the Underlying Securities Issuer of any Concentrated Underlying Securities ceases to be a reporting company under the Exchange Act, and no parent guarantor of such Underlying Securities Issuer, if any, includes in its Exchange Act reports condensed consolidating financial statements setting forth financial information for the Underlying Securities Issuer, then the Trustee, upon receiving notice of such event shall (A) divide a principal amount of Underlying Securities equal to the aggregate stated amount of the outstanding Class A Certificates and a pro rata portion of the Related Assets in accordance with the Allocation Ratio between the Classes in accordance with the Allocation Ratio and distribute each Class’ portion to such Class’ Certificateholders pro rata to each Certificateholder’s last address as it appears in the Certificate Register within three Business Days of receiving said notice, and (B) if any Underlying Securities are not distributed pursuant to clause (A), immediately direct the Market Agent to sell all Underlying Securities not so distributed and a pro rata portion of the Related Assets held by the Trust, in accordance with the Sale Procedures, and the Liquidation Proceeds, if any, shall be divided between the Classes in accordance with the Allocation Ratio and each Class’ portion shall be deposited into such Class’ Certificate Account and distributed to such Class’ Certificateholders pro rata on the first Business Day following such deposit into such Certificate Account.

(d) Upon receiving (A) notice of an acceleration of the date of maturity of the Underlying Securities and the Underlying Securities Issuer’s partial payment of all amounts when due as described in subsection (ii) of clause (b) above, or (B) notice of the events set forth in clause (c) above, the Trustee shall, 10 days prior to the exercise of any remedy, provide written notice of the termination of the Trust to the Call Holders. Notwithstanding subsection (ii) of clause (b) and clause (c), the Trustee shall not distribute any such partial payment, Underlying Securities or Related Assets to any Certificateholders before the earlier of (i) the expiration of the 10-day notice of termination period, and (ii) receipt by the Trust of notice of all Call Holders’ election to exercise their Class A Call Right or Class B Call Right, as applicable. If less than all outstanding Class A Call Rights or Class B Call Rights are exercised, upon receiving such notice of election, the Trustee shall select by lot (or by such other reasonable procedure as may be established by the Trustee) for purchase by such exercising Call Holders in the case of Class A Certificates the stated amount of Class A Certificates equal to the stated amount of Class A Call Rights being exercised multiplied by the aggregate stated amount of the outstanding Class A Certificates not subject to Delivery Certificates divided by the aggregate stated amount of the outstanding Class A Call Rights or, in the case of Class B Certificates, the aggregate notional principal amount of Class B Certificates equal to the aggregate notional

 

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principal amount of Class B Call Rights being exercised multiplied by the aggregate notional principal amount of the outstanding Class B Certificates not subject to Delivery Certificates divided by the aggregate notional principal amount of the outstanding Class B Call Rights. The Certificateholders of the Trust Certificates to be purchased shall not be entitled to any right other than the right to receive payment of an amount equal to the applicable Call Price on the date the applicable Call Rights are exercised, and such Trust Certificates shall be deemed to have been automatically surrendered by the Certificateholders to the Trust for further transfer to the exercising Call Holders. The share of the payment, Underlying Securities and Related Assets to be distributed with respect to such called Trust Certificates shall be distributed to the exercising Call Holders. In the case of a sale by the Market Agent of Underlying Securities and Related Assets pursuant to clause (a) above, the Trustee shall deliver such Underlying Securities and Related Assets to the purchaser of such Underlying Securities and Related Assets only against payment in same day funds and the Trustee shall deposit the same into the Certificate Account.

“Eligible Investments”: As defined in the Standard Terms; provided, however, that (i) the minimum required rating for long-term instruments will be equal to the lower of the rating of the Underlying Securities or the Trust Certificates, and (ii) the rating of any short-term instruments will be “A-1+” by S&P and P1 by ▇▇▇▇▇’▇; and provided, further, that any such investment matures no later than the Business Day prior to the next succeeding Distribution Date.

“Escrow Agent”: As will be set forth in the Escrow Agreement.

“Escrow Agreement”: The escrow agreement to be entered into on the Exercise Date among a given Call Holder, the Trustee and the Escrow Agent pursuant to Section 14(b)(iii)(2) hereof.

“Event of Default”: (i) A default in the payment of any interest on any Underlying Security after the same becomes due and payable (subject to any applicable grace period), (ii) a default in the payment of the principal of or any installment of principal of any Underlying Security when the same becomes due and payable and (iii) any other event specified as an event of default in the Indenture. For a summary of certain events of default in the Underlying Securities Indenture, please refer to the Prospectus Supplement.

“Exercise Date”: any date on which a Call Holder notifies the Trustee of its intention to exercise its Call Right in accordance with the provision of Section 15(b)(iii), any date a Call Holder is deemed to have exercised its Call Right pursuant to Section 2.02(i)(iv) of the Warrant Agreement, or any date following the acceleration of the maturity of the Underlying Securities and payment in full of all amounts when due by the Underlying Securities Issuer.

“Final Scheduled Distribution Date”: June 1, 2036 (or if such date is not a Business Day, the next succeeding Business Day).

“Fixed Pass-Through Rate”: With respect to the Class A Certificates, 7.1% per annum and with respect to the Class B Certificates, 0.895% per annum.

 

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“Independent Investment Banker”: One of the Reference Treasury Dealers appointed by the Underlying Securities Issuer, which may have other business relationships with the Underlying Securities Issuer.

“Optional Exchange Date”: Any Distribution Date or such date as is designated pursuant to Section 7(b) hereof.

“Ordinary Expenses”: The compensation due to the Trustee for Ordinary Expenses as defined in the Standard Terms, which, with respect to Ordinary Expenses other than those referred to in clause (iii) of such definition and other than the costs of converting to ▇▇▇▇▇ format the periodic reports required for the Trust under the Exchange Act, shall be fixed at $2,000 per annum.

“Pass-Through Rate”: For each Class of Certificates, the associated Fixed Pass-Through Rate.

“Prepaid Ordinary Expenses”: Zero (0).

“Prospectus Supplements”: The Prospectus Supplement dated June 5, 2007, relating to the Class A Certificates and the Prospectus Supplement dated June 7, 2007, relating to the Class B Certificates.

“Rating Agency”: ▇▇▇▇▇’▇ and S&P

“Record Date”: The Business Day immediately preceding each Distribution Date.

“Reference Treasury Dealer”: Each of Bear, ▇▇▇▇▇▇▇ & Co. Inc., ▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co. and ▇▇▇▇▇▇ Brothers Inc. and two other primary U.S. Government securities dealers (each a “Primary Treasury Dealer”) selected by the Underlying Securities Issuer and their respective successors. If any of the foregoing ceases to be a Primary Treasury Dealer, the Underlying Securities Issuer will replace such Reference Treasury Dealer with another nationally recognized investment banking firm that is a Primary Treasury Dealer.

“Reference Treasury Dealer Quotations”: With respect to each Reference Treasury Dealer and any redemption date, the average of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Underlying Securities Issuer and the Underlying Securities trustee by that Reference Treasury Dealer at 3:30 p.m., New York City time, on the third Business Day preceding the redemption date.

“Remaining Scheduled Payments”: With respect to each Underlying Security to be redeemed on any redemption date, the aggregate amount of the payments of principal of and interest on such Underlying Security that would be due after the redemption date but for the redemption. If the redemption date is not an interest payment date with respect to the Underlying Securities, then the Remaining Scheduled Payments will be reduced by the amount of interest accrued on the Underlying Securities to such redemption date.

“Series”: PPLUS Trust Series EQ-1.

 

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“Treasury Rate”: With respect to any redemption date, the rate per year equal to the semi-annual equivalent yield to maturity (computed as of the second Business Day immediately preceding the redemption date) of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for the redemption date.

“Underlying Securities”: The $25,000,000 aggregate principal amount of 7.995% Notes due 2036 issued by the Underlying Securities Issuer, as described in Schedule I hereto.

“Underlying Securities Indenture”: As set forth in Schedule I.

“Underlying Securities Issuer”: Embarq Corporation.

“Underlying Securities Prospectus”: The prospectus dated May 12, 2006 filed with the Securities and Exchange Commission by the Underlying Securities Issuer with respect to the Underlying Securities.

“Warrant Agreement”: The Warrant Agreement, dated as of June 14, 2007, by and between the Trust and the Warrant Agent (as defined in the Warrant Agreement).

“Accounting Date”

“Administration Account”

“Administrative Agent”

“Administration Agreement”

“Administrative Agent Termination Event”

“Advance”

“Calculation Agent”

“Disqualified Credit Support”

“Disqualified Swap Counterparty”

“Eligible Expense”

“Exchange Rate Agent”

“Floating Pass-Through Rate”

“Letter of Credit”

 

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“Limited Guarantor”

“Limited Guaranty”

“Notional Amount”

“Reserve Account”

“Requisite Reserve Amount”

“Retained Interest”

“Surety Bond”

“Swap Agreement”

“Swap Counterparty”

“Swap Distribution Amount”

“Swap Guarantee”

“Swap Guarantor”

“Swap Receipt Amount”

“Swap Termination Payment”

Section 3.    Designation of Trust and Certificates (a) The Trust created hereby shall be known as the “PPLUS Trust Series EQ-1”. The Class A Certificates and Class B Certificates evidencing certain undivided ownership interests therein shall be known as the “PPLUS Class A 7.1% Callable Trust Certificates Series EQ-1” and the “PPLUS Class B 0.895% Callable Trust Certificates Series EQ-1,” respectively.

(b)          The Class A Certificates and Class B Certificates shall be held through the Depository in book-entry form and shall be substantially in the form attached hereto as Exhibits B and C, respectively. The Class A Certificates shall be issued in authorized denominations of $25 and integral multiples thereof and the Class B Certificates shall be issued with a notional principal amount of $25 and integral multiples thereof. Except as provided in the Standard Terms, the Trust shall not issue additional Certificates or incur any indebtedness. Notwithstanding anything to the contrary in the Trust Agreement, the Depositor may not increase the amount of the Underlying Securities in the Trust and the Trust may not issue a corresponding amount of additional Certificates.

(c)          The Class A Certificates will be entitled to receive (i) on each Distribution Date, commencing on December 1, 2007 and ending on the Final Scheduled Distribution Date, or such earlier date if the Underlying Securities are redeemed prior to the Final Scheduled Distribution Date, distributions at a rate of 7.1% per annum on the stated amount of the Class A

 

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Certificates and (ii) on the Final Scheduled Distribution Date, a distribution of the aggregate principal amount of the Underlying Securities.

 

(d)          On each Distribution Date, the Class B Certificates will be entitled to receive a distribution of 0.895% per annum multiplied by the notional principal amount of the Class B Certificates (the “Class B Payments”).

(e)          Any reference to the principal amount of the Certificates shall be construed as a reference to the stated amount of the Class A Certificates and/or the notional principal amount of the Class B Certificates, unless otherwise indicated.

Section 4.    Satisfaction of Conditions to Initial Execution and Delivery of Trust Certificates. The Trustee hereby acknowledges receipt, on or prior to the Closing Date, of:

(ii)                 all documents set forth in Section 5.12 of the Standard Terms except that clauses (v), (vi) and (vii) of Section 5.12(a) shall not apply to this Series.

Section 5.    Distributions. (a) On each Distribution Date, the Trustee shall apply the funds in the Certificate Account, solely to the extent of Available Funds in the Certificate Account, as follows:

(i)                  first, to the Trustee, reimbursement for any approved Extraordinary Trust Expenses incurred by the Trustee in accordance with Section 6(b) hereof and approved by not less than 100% of the Certificateholders;

(ii)                 second, pro rata to the holders of the Class A Certificates and Class B Certificates, distributions accrued during the related Collection Period at the rate of 7.1% per annum on the stated amount of the Class A Certificates to holders of the Class A Certificates on such Distribution Date and 0.895% per annum multiplied by the notional principal amount of Class B Certificates to holders of the Class B Certificates on such Distribution Date, commencing on December 1, 2007 and ending on the Final Scheduled Distribution Date;

(iii)                third, divided between the Classes in accordance with the proportionate interest of each Class in any delayed interest payments on the Underlying Securities (i.e., 7.1/7.995 to the Class A Certificateholders and 0.895/7.995 to the Class B Certificateholders) and each Class’ portion distributed to the holders of each Class pro rata, if available, any additional payments paid by the Underlying Securities Issuer as a result of a delay in the receipt by the Trustee of any interest payment on the Underlying Securities;

(iv)                fourth, pro rata to the Class A Certificateholders, on the Final Scheduled Distribution Date only, a distribution of the aggregate principal amount of the Underlying Securities;

 

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(v)                 fifth, to the extent there remain Available Funds in the Certificate Account, to any creditors of the Trust in satisfaction of liabilities thereto; and

(vi)                sixth, to the extent there remain Available Funds in the Certificate Account, to ▇▇▇▇▇▇▇ ▇▇▇▇▇ Capital Services, Inc. and if no Available Funds remain in the Certificate Account then no distribution will be made pursuant to this Section 5(a)(vi).

Subject to Section 9(c) hereof, to the extent Available Funds are insufficient to make any required distributions due to the Certificates on any Distribution Date, any shortfall will be carried over and will be distributed on the next Distribution Date on which sufficient funds are available on the Available Funds to pay such shortfall. Neither ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co. nor any of its Affiliates will have any claim against the Trust pursuant to Section 5(a)(vi) if the Trust fails to make a distribution on a Distribution Date to such person because no Available Funds remain in the Certificate Account on such Distribution Date.

(b)          On an Optional Exchange Date, the Trustee shall distribute to ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co. or any of its Affiliates, other than the Depositor, or any other Person exercising an optional exchange pursuant to Section 7 hereof, as the case may be, Underlying Securities in accordance with Section 7 hereof.

Section 6.    Trustee’s Fees; Escrow Agent’s Fees. (a) Payment to the Trustee of Ordinary Expenses shall be as set forth in a separate agreement between the Trustee and the Depositor. The Trustee agrees that in the event Ordinary Expenses are not paid in accordance with such agreement, it shall (i) not have any claim or recourse against the Trust or the property of the Trust with respect thereto and (ii) continue to perform all of its services as set forth herein unless it elects to resign as Trustee in accordance with Section 7.08 of the Standard Terms.

(b)          Extraordinary Trust Expenses shall not be paid out of the Deposited Assets unless (i) the Trustee is satisfied that it will have adequate security or indemnity in respect of such costs, expenses and liabilities, and (ii) all the Certificateholders of Certificates then outstanding have voted to require the Trustee to incur such Extraordinary Trust Expenses. If Extraordinary Trust Expenses are not approved unanimously as set forth in clause (ii), such Extraordinary Trust Expenses shall not be an obligation of the Trust, and the Trustee shall not file any claim against the Trust therefor notwithstanding failure of Certificateholders to reimburse the Trustee. In addition, if the conditions in (i) and (ii) are not both satisfied, the Trustee shall not be obligated to incur any Extraordinary Trust Expense.

(c)          In the event that one or more Call Holders is required to deposit the applicable Call Price with the Escrow Agent on the Exercise Date pursuant to Section 14(c)(iii)(2) hereof, the Depositor and the Escrow Agent shall enter into an agreement reasonably acceptable to both parties thereto whereby the Depositor shall pay to the Escrow Agent a fee in consideration for its services under the Escrow Agreement or Escrow Agreements, as applicable.

Section 7.    Optional Exchange. (a) ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co. or any of its Affiliates (other than the Depositor), if it holds Certificates, or any other (i) Person or (ii) group of Affiliated Persons (in each case other than the Depositor) holding Class A Certificates with an aggregate stated amount of $5 million or more and an equal aggregate notional principal amount

 

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of Class B Certificates, all acquired pursuant to the exercise of Class A Call Rights or Class B Call Rights held by it, (provided that, in the case of a group of Affiliated Persons, no single Affiliated Person holds Class A Certificates with an aggregate stated amount of less than $500,000 and Class B Certificates with a notional principal amount of less than $500,000 acquired pursuant to the exercise of Class A Call Rights or Class B Call Rights, as applicable, held by it) may notify the Trustee, not less than 30 days but not more than 60 days prior to any Optional Exchange Date, that:

(i)           such Person intends or Affiliated Persons intend to tender an Authorized Denomination of Class A Certificates and an equal number of Class B Certificates that it holds or they hold to the Trustee on such Optional Exchange Date in exchange for a proportional amount of Underlying Securities;

(ii)          such exchange will not cause the Trust or Depositor to fail to satisfy the applicable requirements for exemption under Rule 3a-7 under the Investment Company Act of 1940, as amended;

(iii)         such exchange will not affect the characterization of the Trust as a “grantor trust” under the Code;

(iv)         in the case of an exchange of less than all outstanding Certificates, such exchange will not cause a failure to satisfy the minimum requirements for the Class A Certificates to remain listed on the New York Stock Exchange, unless the Person or Affiliated Persons tendering such Certificates will hold all remaining outstanding Certificates upon completion of the exchange of such Certificates pursuant to this Section 7;

(v)          such exchange will not be made with respect to Certificates subject to outstanding Call Rights held by any Person or Affiliated Persons other than the Person or Affiliated Persons exercising such exchange; and

(vi)         in the case of an exchange by a person other ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co. or any of its Affiliates (other than the Depositor), such exchange will be made with respect to an aggregate stated amount of Class A Certificates equal to the aggregate stated amount of Class A Certificates acquired by such Person or Affiliated Persons pursuant to the exercise of the applicable Call Rights held by it or them.

Upon tender of such Class A Certificates and Class B Certificates on such Optional Exchange Date, the Trustee will deliver to the Person or Affiliated Persons tendering such Certificates an amount of Underlying Securities having a principal amount equal to the aggregate principal amount of Underlying Securities then held by the Trust times the aggregate stated amount of Class A Certificates being tendered divided by the aggregate stated amount of Class A Certificates then outstanding, and in the case of an exchange by ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co. or any of its Affiliates, where such Person or Affiliated Person holds unexercised Class A Call Rights respecting the exchanged Class A Certificates and a corresponding number of unexercised Class B Call Rights respecting the exchanged Class B Certificates, such unexercised Class A Call Rights and Class B Call Rights held by such Person or Affiliated Person shall be cancelled. Any

 

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Call Holder that has properly provided notice of exercise to the Warrant Agent and has deposited the Call Price with the Escrow Agent may concurrently designate an Optional Exchange Date, and such Optional Exchange Date shall be specified in the notice of exercise, provided, however, that such Optional Exchange Date shall not occur prior to the applicable Call Date.

(b)          When a tender offer for the Underlying Securities is pending, ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co. or any of its Affiliates (other than the Depositor), if it holds Certificates, or any other Person or Affiliated Persons (other than the Depositor, or an Affiliate of the Person making such tender offer) holding Class A Certificates with an aggregate stated amount of $5 million or more and an equal aggregate notional principal amount of Class B Certificates, all acquired pursuant to the exercise of the applicable Call Rights held by it (provided that, in the case of a group of Affiliated Persons, no single Affiliated Person holds Class A Certificates with an aggregate stated amount of less than $500,000 and Class B Certificates with a notional principal amount of less than $500,000 acquired pursuant to the exercise of Class A Call Rights or Class B Call Rights, as applicable, held by it), may notify the Trustee, not less than 5 days but not more than 60 days prior to any such Optional Exchange Date as they may designate, that:

(i)                  such Person intends or such Affiliated Persons intend to tender an Authorized Denomination of Class A Certificates with an aggregate stated amount of $5 million or more and a corresponding number of Class B Certificates that it holds or they hold to the Trustee on such Optional Exchange Date in exchange for a proportional amount of Underlying Securities;

(ii)                 such exchange will not cause the Trust or Depositor to fail to satisfy the applicable requirements for exemption under Rule 3a-7 under the Investment Company Act of 1940, as amended;

(iii)                such exchange will not affect the characterization of the Trust as a “grantor trust” under the Code,

(iv)                in the case of an exchange of less than all outstanding Certificates, such exchange will not cause a failure to satisfy the minimum requirements for the Certificates to remain listed on the New York Stock Exchange, unless the Person or Affiliated Persons tendering such Certificates will hold all remaining outstanding Certificates upon completion of the exchange of such Certificates pursuant to this Section 7;

(v)                 such exchange will not be made with respect to Certificates subject to outstanding Call Rights held by any Person or Affiliated Persons other than the Person or Affiliated Persons exercising such exchange; and

(vi)                in the case of an exchange by a person other ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co. or any of its Affiliates (other than the Depositor), such exchange will be made with respect to an aggregate stated amount of Class A Certificates equal to the aggregate stated amount of Class A Certificates acquired by such Person or Affiliated Persons pursuant to the exercise of Call Rights held by it or them.

 

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Upon tender of such Class A Certificates and Class B Certificates on such Optional Exchange Date, the Trustee will deliver to the Person or Affiliated Persons tendering such Certificates an amount of Underlying Securities having a principal amount equal to the aggregate principal amount of Underlying Securities then held by the Trust times the aggregate stated amount of Class A Certificates being tendered divided by the aggregate stated amount of Class A Certificates then outstanding, and in the case of an exchange by ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co. or any of its Affiliates, where such Person or Affiliated Person holds unexercised Class A Call Rights respecting the exchanged Class A Certificates and a corresponding number of unexercised Class B Call Rights respecting the exchanged Class B Certificates, such unexercised Class A Call Rights and Class B Call Rights held by such Person or Affiliated Person shall be cancelled.

(c)          The requirements set forth in paragraphs (a)(ii), (a)(v) and (a)(vi) of Section 4.07 of the Standard Terms do not apply to an Optional Exchange pursuant to this Section 7.

(d)          Any costs associated with the exercise of the rights granted under paragraphs (a) and (b) of this Section 7 will be borne by the Person or Affiliated Persons exercising such rights and not by the Trust.

(e)          In no event can an Optional Exchange be made unless an equal number of Class A and Class B Certificates are tendered for exchange by each Holder exercising this Optional Exchange right.

Section 8.    Events of Default. Within 30 days of its receipt of notice of the occurrence of an Event of Default, the Trustee will give notice to the Certificateholders, transmitted by mail, of all such uncured or unwaived Events of Default actually known to it. However, unless there is an Event of Default relating to the payment of principal of or interest on any of the Underlying Securities, the Trustee will be protected in withholding such notice if in good faith it determines that the withholding of such notice is in the interest of the Certificateholders; provided, however, that the Trustee shall give notice of an Event of Default to the extent required under “Distribution Election.”

 

Section 9.    Miscellaneous. (a) The provisions of Section 4.04, Advances, of the Standard Terms shall not apply to the Certificates.

(b)          The Certificateholders shall not be entitled to terminate the Trust or cause the sale or other disposition of the Underlying Securities; provided, however, that Certificateholders holding all, but not less than all, of the outstanding Certificates may exercise their rights under Section 13(b) with respect to all such Certificates.

(c)          If the Trustee has not received payment with respect to a Collection Period on the Underlying Securities on or prior to the related Distribution Date, such distribution will be made promptly upon receipt of such payment. No additional amounts shall accrue on the Certificates or be owed to Certificateholders as a result of such delay; provided, however, that any additional interest owed and paid by the Underlying Securities Issuer as a result of such

 

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delay shall be paid to the Class A Certificateholders and Class B Certificateholders, proportionately to the ratio of their respective entitlements to interest payments.

(d)          The outstanding principal balance of the Class A Certificates and the aggregate notional principal amount of the Class B Certificates shall not be reduced by the amount of any Realized Loss.

(e)          The Trust may not engage in any business or activities other than in connection with, or relating to, the holding, protecting and preserving of the Deposited Assets and the issuance of the Certificates and Call Rights, and other than those required or authorized by the Trust Agreement or incidental and necessary to accomplish such activities. The Trust may not issue or sell any certificates or other obligations other than the Certificates and Call Rights, or otherwise incur, assume or guarantee any indebtedness for money borrowed.

(f)           The Trust may not consolidate, amalgamate, merge with or into, or be replaced by or convey, transfer or lease its properties and assets substantially as an entirety to, any another entity or permit any other entity to consolidate, amalgamate, merge with or into, or replace the Trust.

(g)          Except as expressly provided in the Trust Agreement, the Trust may not sell the Underlying Securities.

(h)          If the Trustee resigns or is removed as Trustee in accordance with Section 7.08 of the Trust Agreement, in addition to providing the Depositor with written notice, the Trustee shall also provide the Rating Agencies with written notice.

(i)           ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co. shall act as the Market Agent and shall serve in such capacity in accordance with the terms of the Market Agent Agreement attached hereto as Exhibit D.

(j)           Notwithstanding anything in the Trust Agreement to the contrary, the Trustee may be removed upon 60 days prior written notice delivered by Certificateholders holding Certificates that represent the Required Percentage-Removal, and such removal shall take effect upon the appointment of a successor Trustee and its acceptance of such appointment as provided in the Trust Agreement.

Section 10. Notices. (a) All directions, demands and notices hereunder or under the Standard Terms shall be in writing and shall be delivered as set forth below (unless written notice is otherwise provided to the Trustee).

If to the Depositor, to:

▇▇▇▇▇▇▇ ▇▇▇▇▇ Depositor, Inc.

c/▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co.

World Financial Center

New York, NY 10080

Attention:         ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇

Telephone:        (▇▇▇) ▇▇▇-▇▇▇▇

 

 

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Facsimile:         (▇▇▇) ▇▇▇-▇▇▇▇

 

If to the Trustee, to:

The Bank of New York

Corporate Trust Dealing & Trading Group

▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇

New York, NY 10286

Attention:         PPLUS Trust Series EQ-1

Telephone:        (▇▇▇) ▇▇▇-▇▇▇▇

Facsimile:         (▇▇▇) ▇▇▇-▇▇▇▇

 

If to the Securities Intermediary, to:

The Bank of New York

Corporate Trust Dealing & Trading Group

▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇

New York, NY 10286

Attention:         PPLUS Trust Series EQ-1

Telephone:        (▇▇▇) ▇▇▇-▇▇▇▇

Facsimile:         (▇▇▇) ▇▇▇-▇▇▇▇

 

If to the Warrant Agent, to

 

The Bank of New York

Corporate Trust Dealing & Trading Group

▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇

New York, NY 10286

Attention:         PPLUS Trust Series EQ-1

Telephone:        (▇▇▇) ▇▇▇-▇▇▇▇

Facsimile:         (▇▇▇) ▇▇▇-▇▇▇▇

 

If to the Rating Agencies, to:

▇▇▇▇▇’▇ Investors Service, Inc.

▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇

New York, NY 10007

Attention:         CBO/CLO Monitoring Department

Telephone:        (▇▇▇) ▇▇▇-▇▇▇▇

Facsimile:         (▇▇▇) ▇▇▇-▇▇▇▇

 

and to:

 

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Standard & Poor’s

▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, 40^th Floor

New York, NY 10041

Attention:         Structured Finance Surveillance Group

Telephone:        (▇▇▇) ▇▇▇-▇▇▇▇

Facsimile:         (▇▇▇) ▇▇▇-▇▇▇▇

 

(b)          Copies of any tender offer materials and all directions, demands and notices required to be given to the Certificateholders hereunder or under the Standard Terms will be given to the Warrant Agent by facsimile transmission and by mail.

Section 11. Governing Law. This Supplement and the transactions described herein shall be construed in accordance with and governed by the laws of the State of New York.

Section 12. Counterparts. This Supplement may be executed in any number of counterparts, each of which shall be deemed to be an original, and all such counterparts shall constitute but one and the same instrument.

Section 13. Termination of the Trust. (a) The Trust shall terminate upon the earlier of (i) the payment in full at maturity or sale by the Trust after a payment default on the Underlying Securities and the distribution in full of all amounts due to the Certificateholders, (ii) the distribution to the Certificateholders of all Underlying Securities in accordance with the Distribution Election, (iii) the exchange of all outstanding Certificates for Underlying Securities pursuant to one or more Optional Exchanges, (iv) the Final Scheduled Distribution Date and (v) the holders of all, but not less than all, of the Certificates exercising their election in Section 13(b) below.

(b)          Certificateholders who hold all, but not less than all, of the outstanding Certificates may, upon prior written notice to the Rating Agencies, elect to terminate the Trust at any time; provided that (i) the exercise of such termination right would not cause the Trust or the Depositor to fail to satisfy the applicable requirements for exemption under Rule 3a-7 under the Investment Company Act of 1940, as amended and (ii) if and for so long as the call warrants remain outstanding, all of the Call Holders have consented to such termination.

(c)          To the extent that the provisions of this Section 13 conflict with Section 10.01 of the Standard Terms, the latter shall control.

Section 14. Sale or Unscheduled Payment of Underlying Securities; Call Right. (a) In the case of Extraordinary Trust Expenses approved by 100% of the Certificateholders of each Class, pursuant to Section 6(b) hereof, the Trustee may, upon prior written notice to the Rating Agencies, elect to sell all or a portion of the Underlying Securities to pay such Extraordinary Trust Expenses.

(b)          As a holder of the Underlying Securities, the Trust may receive redemption proceeds (the “Redemption Amount”) upon the redemption of the Underlying Securities, in whole or in part, by the Underlying Securities Issuer pursuant to the Underlying Securities Indenture and the Underlying Securities Prospectus. (i) Upon the redemption of the Underlying Securities in whole, but not in part, (A) on June 1, 2036 or (B) at the option of the

 

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Underlying Securities Issuer, upon at least 30 days, but not more than 60 days, prior notice pursuant to the Underlying Securities Indenture, the Redemption Amount will be distributed pro rata to the holders of the Underlying Securities, including the Trust. Upon receiving such Redemption Amount, the Trust shall distribute the Redemption Amount first, pro rata to the Class A Certificateholders until each shall have received the stated amount of each Class A Certificate it holds plus accrued and unpaid distributions on the Class A Certificates to the Redemption Date; second, pro rata to the Class B Certificateholders until each shall have received the sum of the present values (discounted at the rate of 7.9% per annum) of the Class B Payments on or after the Redemption Date (assuming, for purposes of such calculation, that the Underlying Securities would have been paid in full on June 1, 2036 with no such redemption or acceleration); and third, any remaining Redemption Amount will be divided between the Classes of trust certificates in accordance with a percentage equal to 7.1/7.995 of such amount to the Class A Certificateholders and 0.895/7.995 of such amount to the Class B Certificateholders, and within each class the Redemption Amount will be distributed pro rata to the Certificateholders of the Class A or Class B Certificates entitled to such Redemption Amount upon the date such Redemption Amount is received in immediately available funds by the Trust if such Redemption Amount is received prior to 1:00 p.m. local time at the office of the Trustee and otherwise on the next Business Day. (ii) Upon any redemption of the Underlying Securities in part at the option of the Underlying Securities Issuer upon at least 30 days, but not more than 60 days, prior notice pursuant to the Underlying Securities Indenture, the Redemption Amount will be distributed pro rata to the holders of the Underlying Securities, including the Trust. Upon any such redemption in part, the Trustee shall select by lot (or by such other reasonable procedure as may be established by the Trustee) a stated amount of Class A Certificates and an equal notional principal amount of Class B Certificates equal to the aggregate amount of each Class of Certificates then outstanding multiplied by the aggregate principal amount of Underlying Securities subject to redemption and then held by the Trust divided by the aggregate principal amount of Underlying Securities then held by the Trust; provided that the amount of each Class of Trust Certificates being selected by lot may be reduced by the aggregate stated amount of Class A Certificates or notional principal amount of Class B Certificates, as applicable, called pursuant to the exercise of Call Rights prior to such redemption in accordance with the terms of the Warrant Agreement. Upon receiving such Redemption Amount, the Trust shall distribute the Redemption Amount, first, pro rata to the Class A Certificateholders selected by lot pursuant to this subsection until each shall have received the stated amount of each Class A Certificate it holds plus accrued and unpaid distributions on the Class A Certificates to the Redemption Date; second, pro rata to the Class B Certificateholders selected by lot pursuant to this subsection until each shall have received the sum of the present values (discounted at the rate of 7.9% per annum) of the Class B Payments on or after the Redemption Date (assuming for purposes of such calculation, that the Underlying Securities would have been paid in full on March 1, 2033 with no such redemption or acceleration); and third, any remaining Redemption Amount will be divided between the Classes of trust certificates in accordance with a percentage equal to 7.1/7.995 of such amount to the Class A Certificateholders and 0.895/7.995 of such amount to the Class B Certificateholders, and within each class the Redemption Amount will be distributed pro rata to the Certificateholders of the Class A or Class B Certificates. Such Redemption Amount will be distributed to the Class A and Class B Certificateholders entitled to such Redemption Amount upon the date such Redemption Amount is received in immediately available funds by the Trust if such Redemption Amount is received prior to 1:00 pm local time

 

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at the office of the Trustee and otherwise on the next Business Day. Upon distribution of the Redemption Amount by the Trustee, the Trust Certificates called pursuant to the exercise of Call Rights and the Trust Certificates selected by lot pursuant to this subsection (ii) shall be deemed to have been surrendered for cancellation by the Trust, and the aggregate stated amount of the outstanding Class A Certificates and the aggregate notional principal amount of the outstanding Class B Certificates shall be reduced by the aggregate stated amount of such Class A Certificates and the aggregate notional principal amount of such Class B Certificates, as applicable; provided that the right of a Certificateholder to receive the Call Price will not be affected by any such deemed surrender. Payment of the Redemption Amount with respect to the Certificates will be made to the Call Holder exercising the Call Rights.

(c)          The Call Terms are as follows:

(i)                  The initial holders of the Call Rights are as named in the Call Warrants and such holders may transfer the Call Rights, in whole or in part, to one or more third parties in privately negotiated transactions;

(ii)                 A Call Holder that has met the exercise requirements set forth in paragraph (c)(iii) of this Section 15 may, on the Call Date, exercise its option to purchase, in whole or in part, a principal or notional amount of Class A or Class B Certificates, as applicable, proportionate to such Call Holder’s exercised Call Warrants, in Authorized Denominations of the Class A or Class B Certificates at the Class A Call Price or Class B Call Price, as applicable;

(iii)                In order to exercise its Call Right on a Call Date, a Call Holder must, not less than 14 days (or not less than three days in the case of an announcement of any redemption of the Underlying Securities or other unscheduled payment of the Underlying Securities or after receipt of notice of termination of the Trust or not less than five Business Days prior to the expiration of a tender offer for the Underlying Securities) but not more than 60 days prior to such Call Date:

(1)          notify the Trustee in writing of its intention to exercise such Call Right (which notice is irrevocable, subject to Section 2.02(i)(v) of the Warrant Agreement) and whether such exercise is in connection with a tender offer for the Underlying Securities. In the event that such notice is provided in connection with a tender offer for the Underlying Securities, if the exercising Holder did not receive from the Warrant Agent notice of a Tender Offer, then such Holder shall also provide the Warrant Agent with any information the Holder may have from a third-party source indicating that such Tender Offer is pending.

(2)          deposit the applicable Call Price with the Escrow Agent (the “Escrow Deposit”) to be held in escrow pursuant to an Escrow Agreement reasonably satisfactory to the Trustee and substantially in the form attached hereto as Exhibit E (to be entered into immediately preceding delivery of the applicable Call Price by such Call Holder to the Escrow Agent) until such Call Price is paid by the Trustee to the Certificateholders in accordance with paragraph (d) of this Section 15 or returned to the exercising Holders pursuant to subsection (i) of

 

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Section 2.02 of the Warrant Agreement; provided, that if (a) all of the outstanding Trust Certificates of a given Class are to be purchased pursuant to the exercise of the Warrants on an Exercise Date and the exercising Call Holder at such time holds Class A Certificates or Class B Certificates that are subject to Call Rights, the Call Holder may deposit such Class A Certificates or Class B Certificates with the Escrow Agent in lieu of the portion of the Call Price that would relate thereto, and (b) if less than all of the outstanding Class B Trust Certificates are to be purchased pursuant to the exercise of the Warrants on an Exercise Date and the exercising Call Holder at such time holds Class B Certificates that are subject to Call Rights, the Call Holder may deposit such Class B Certificates with the Escrow Agent in lieu of the portion of the Call Price that would relate thereto.

(3)          provide the Trustee with any other documents customary for a transaction of this nature, including a certificate of the Call Holder certifying the solvency of such Call Holder on such date; provided that the Call Holder need not provide any such solvency certificate if the rating of the senior, unsecured long-term debt of the Call Holder, or the Call Holder’s credit support provider, if applicable, by Moody’s and S&P is in one of the investment grade categories of ▇▇▇▇▇’▇ and S&P, respectively, on such date.

The provisions of this Section 14 (c)(iii)(1) through (3) shall not apply if Warrants are being exercised upon an acceleration of the maturity of the Underlying Securities and payment in full by the Underlying Securities Issuer of all amounts due upon such acceleration.

(d)          In connection with any exercise of the Call Rights to purchase Class A Certificates, the Trustee shall select by lot (or by such other reasonable procedure as may be established by the Trustee) a stated amount of the outstanding Class A Certificates to be surrendered by the Class A Certificateholders thereof to the Trustee upon any such exercise (other than Class A Trust Certificates held by any Person to whom a Delivery Certificate was delivered in accordance with Section 2.02(d) of the Warrant Agreement, as evidenced by the registration of such Delivery Certificate in the Delivery Register in accordance with Section 4.01 of the Warrant Agreement), deliver such Class A Certificates to the exercising Call Holder and the proceeds of the Class A Call Price shall be distributed pro rata among such Class A Certificateholders on the Call Date in accordance with the provisions of the Warrant Agreement. In connection with any exercise of the Call Rights to purchase Class B Certificates, if the amount to be purchased exceeds the amount of Trust Certificates of such Class held by the Call Holder and deposited with the Escrow Agent, the Trustee shall select by lot (or by such other reasonable procedure as may be established by the Trustee) an aggregate notional principal amount of the outstanding Class B Certificates to be surrendered by the Class B Certificateholders thereof to the Trustee upon any such exercise (other than Class B Trust Certificates held by any Persons to whom a Delivery Certificate was delivered in accordance with Section 2.02(d) of the Warrant Agreement, as evidenced by the registration of such Delivery Certificate in the Delivery Register in accordance with Section 4.01 of the Warrant Agreement), deliver such Class B Certificates to the exercising Call Holder and the proceeds of the Class B Call Price shall be distributed pro rata among such Certificateholders on the Call Date in accordance with the provisions of the Warrant Agreement. Upon distribution of the applicable Call Price, the Trust Certificates called pursuant to the exercise of Call Rights shall be deemed to have been surrendered and such Trust

 

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Certificates shall be transferred to the Call Holder; provided that the right of a Certificateholder to receive the Call Price will not be affected by any such deemed surrender.

 

(e)          The rights of the Certificateholders under the Trust Agreement and the Certificates are limited by the terms, provisions and conditions of the Trust Agreement and the Warrant Agreement with respect to the exercise of the applicable Call Rights by the Call Holder. The Certificateholders, by their acceptance of Certificates, covenant and agree to tender any and all Certificates to the Warrant Agent upon the Call Holder’s exercise of Call Rights and deposit of the applicable Call Price with the Escrow Agent for such Certificates in accordance with the applicable procedures in the Warrant Agreement.

(f)           Upon receipt of a notice of a tender offer for the Underlying Securities, the Trustee shall deliver notice of the tender offer to the Warrant Agent and holders of Delivery Certificates (as defined in Section 2.02(d) of the Warrant Agreement) within two Business Days after receipt of notice from the Tender Offeror (as defined in the Warrant Agreement). Within two Business Days of the expiration of the period for validly delivering tender offer exercise notices pursuant to Section 2.02(i)(i) of the Warrant Agreement, the Trustee shall, after giving effect to the exercise of Call Rights with respect to Trust Certificates already held by the Call Holder, as set forth in the Warrant Agreement, (A) select by lot (or by such other reasonable procedure as may be established by the Trustee), in the case of Class A Certificates, a stated amount of Class A Certificates equal to the aggregate stated amount of Class A Certificates not subject to Delivery Certificates then outstanding multiplied by the aggregate principal amount of Class A Call Rights being exercised divided by the aggregate principal amount of the outstanding Class A Call Rights and, in the case of Class B Certificates an aggregate notional principal amount of Class B Certificates equal to the aggregate notional principal amount of Class B Certificates not subject to Delivery Certificates then outstanding multiplied by the aggregate notional principal amount of Class B Call Rights being exercised divided by the aggregate notional principal amount of the outstanding Class B Call Rights and (B) notify the Certificateholders of the selected Certificates that, subject to Section 2.02(i) of the Warrant Agreement, such Certificates will be purchased on the Call Date. Upon the Trustee’s receipt of the tender offer proceeds, the applicable Call Price will be distributed pursuant to Section 2.02(e) and Section 2.02(i)(vi) of the Warrant Agreement pro rata to the Certificateholders whose Certificates have been purchased and the tender offer proceeds will be distributed by the Trustee pro rata to the exercising Call Holders pursuant to Section 2.02(i) of the Warrant Agreement. Upon distribution of the applicable Call Price and tender offer proceeds, the Trust Certificates called pursuant to the exercise of Call Rights shall be deemed to have been surrendered for cancellation by the Trustee and the aggregate stated amount of the outstanding Trust Certificates shall be reduced by the aggregate stated amount of such Trust Certificates; provided that the right of a Certificateholder to receive the Call Price will not be affected by any such deemed surrender.

Section 15. Amendments. Notwithstanding anything in the Trust Agreement to the contrary, in addition to the other restrictions on modification and amendment contained herein, the Trustee shall not enter into any amendment or modification of the Trust Agreement that would adversely affect in any material respect the interests of the Certificateholders or the Call Holders without the consent of 100% of such Certificateholders or Call Holders, as the case may be; provided, however, that no such amendment or modification will be permitted if the

 

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Trustee has been advised by the Depositor that such amendment or modification would alter the status of the Trust as a “grantor trust” for federal income tax purposes. Further, no amendment shall be permitted pursuant to paragraphs (vi), (vii) and (x) of Section 11.01(a) of the Standard Terms without prior written confirmation by each Rating Agency that such amendment will not result in a downgrading or withdrawal of its rating of the Certificates. The Trustee may consult with counsel and shall be entitled to rely upon an Opinion of Counsel for purposes of determining compliance with the provisions of this Section 15.

 

Section 16. Voting of Underlying Securities, Modification of Indenture. The Trustee, as holder of the Underlying Securities, has the right to vote and give consents and waivers in respect of the Underlying Securities as permitted by the Depository and except as otherwise limited by the Trust Agreement. In the event that the Trustee receives a request from the Depository, the Underlying Securities trustee or the Underlying Securities Issuer for its consent to any amendment, modification or waiver of the Underlying Securities, the Underlying Securities Indenture or any other document thereunder or relating thereto, or receives any other solicitation for any action with respect to the Underlying Securities, the Trustee shall mail a notice of such proposed amendment, modification, waiver or solicitation to each Certificateholder of record as of such date. The Trustee shall request instructions from the Certificateholders as to whether or not to consent to or vote to accept such amendment, modification, waiver or solicitation. The Trustee shall consent or vote, or refrain from consenting or voting, in the same proportion (based on the relative outstanding principal balances of the Certificates) as the Certificates of the Trust were actually voted or not voted by the Certificateholders thereof as of a date determined by the Trustee prior to the date on which such consent or vote is required after weighing the votes of the Class A Certificateholders and the Class B Certificateholders in accordance with the Allocation Ratio; provided, however, that, notwithstanding anything in the Trust Agreement to the contrary, the Trustee shall at no time vote on or consent to any matter (i) unless such vote or consent would not (based on an Opinion of Counsel) alter the status of the Trust as a “grantor trust” for federal income tax purposes or result in the imposition of tax upon the Certificateholders, or (ii) that would alter the timing or amount of any payment on the Underlying Securities, including, without limitation, any demand to accelerate the Underlying Securities, except in the event of a default under the Underlying Securities or an event that with the passage of time would become an event of default under the Underlying Securities and with the consent of 100% of the Certificateholders and 100% of the Call Holders, or (iii) except as provided in the following paragraph, that would result in the exchange or substitution of any of the outstanding Underlying Securities pursuant to a plan for the refunding or refinancing of such Underlying Securities except in the event of a default under the Underlying Securities Indenture and only with the consent of 100% of the Certificateholders and 100% of the Call Holders. The Trustee shall have no liability for any failure to act resulting from Certificateholders’ or Call Holders’ late return of, or failure to return, directions requested by the Trustee from the Certificateholders and Call Holders.

If an offer is made by the Underlying Securities Issuer to issue new obligations in exchange and substitution for any of the Underlying Securities, pursuant to a plan for the refunding or refinancing of the outstanding Underlying Securities or any other offer is made for the Underlying Securities, the Trustee shall notify the Certificateholders, the Call Holders and the Rating Agencies of such offer promptly. Subject to Sections 7(b) and 14 in connection with a tender offer and the exercise of Call Rights or Optional Exchange rights, the Trustee must

 

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reject any such offer unless the Trustee is directed by the affirmative vote of 100% of the Certificateholders and 100% of the Call Holders to accept such offer, the Trustee has received the tax opinion described above and if the Trustee is so directed, the Trustee shall promptly notify the Rating Agencies of such direction accompanied by evidence of the affirmative vote of such Certificateholders and Call Holders.

If an event of default under the Underlying Securities Indenture occurs and is continuing, and if directed by 100% of the Certificateholders, the Trustee shall vote the Underlying Securities in favor of directing, or take such other action as may be appropriate to direct, the Underlying Securities trustee to declare the unpaid principal amount of the Underlying Securities and any accrued and unpaid interest thereon to be due and payable.

Section 17. Call Right Documentation. Simultaneously with the execution hereof, the Depositor hereby directs the Trustee, in the name of and on behalf of the Trust, to enter into a Warrant Agreement and any related Warrant Certificates (as defined in the Warrant Agreement) evidencing the Call Rights and to make representations contained therein on behalf of the Trust. At the direction of the Depositor, the Trustee shall execute such further documents as may be required to evidence any transfer of any or all of the rights, interests or obligations under the Warrant Agreement and any related Warrant Certificates.

Section 18. Third Party Beneficiary. The Escrow Agent and each Call Holder shall be third party beneficiaries of this Trust Agreement.

Section 19. Nonpetition Covenant. Notwithstanding any prior termination of this Trust Agreement, each of the Trustee (including any Administrative Agent, Authenticating Agent and Paying Agent) and the Depositor agrees that it shall not, until the date which is one year and one day after the termination of the PPLUS Trust Series EQ-1, acquiesce, petition or otherwise invoke or cause the Trust to invoke the process of the United States, any State or other political subdivision thereof or any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government for the purpose of commencing or sustaining a case by or against the Trust under a Federal or state bankruptcy, insolvency or similar law or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of such Trust or all or any part of the property or assets of such Trust or ordering the winding up or liquidation of the affairs of such Trust.”

 

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IN WITNESS WHEREOF, the parties hereto have caused this Supplement to be duly executed by their respective authorized officers as of the date first written above.

 

 

 

 

 

 

 

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SCHEDULE I

PPLUS TRUST CERTIFICATES, SERIES EQ-1

UNDERLYING SECURITIES SCHEDULE

 

 

 

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EXHIBIT A

 

Standard Terms for Trust Agreements

 

(begins on next page)

 

 

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EXHIBIT B

 

Form of Class A Certificate

 

(begins on next page)

 

 

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EXHIBIT C

 

Form of Class B Certificate

 

(begins on next page)

 

 

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EXHIBIT D

 

Market Agent Agreement

 

(begins on next page)

 

 

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EXHIBIT E

 

Form of Escrow Agreement

 

(begins on next page)