As filed with the Securities and Exchange Commission on September 28, 2001
Registration No. 333-64512
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
DB DEPOSITOR INC.
(Exact name of Registrant as specified in governing instruments)
Delaware application pending
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
c/o Deutsche Banc Alex. Brown Inc.
31 West 52nd Street
New York, New York 10019
(212) 469-5000
(Address of principal executive offices)
James T. Byrne Jr.
Deutsche Banc Alex. Brown Inc.
New York, New York 10019
(212) 250-1869
(Name and address of agent for services)
Copy to
Joseph C. Kopec, Esq. Michael L. Fitzgerald, Esq.
Deutsche Banc Alex. Brown Inc. Sidley Austin Brown & Wood LLP
31 West 52nd Street 875 Third Avenue
New York, New York 10019 New York, New York 10022
Approximate date of commencement of proposed sale to the public: From
time to time after the effective date of this registration statement as
determined by market conditions.
If the only securities being registered on this Form are being
offered pursuant to dividend or interest reinvestment plans, please check the
following box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, please check the following box. [X]
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act of 1933, please
check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same offering.
[ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act of 1933, please check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
The registrant hereby amends this registration statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
registration statement thereafter shall become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the registration statement
shall become effective on such date as the SEC, acting pursuant to said
Section 8(a), may determine.
EXPLANATORY NOTE
This registration statement includes a base prospectus with a corresponding
form of prospectus supplement for offering series of certificates representing
the entire beneficial ownership interest in various trusts to be created from
time to time, the assets of which will consist primarily of a publicly issued,
fixed income debt securities or pools of such debt securities together with
certain other assets as described in this registration statement, deposited in
trust by DB Depositor Inc.
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell and is not soliciting an offer to buy these securities in any
state where the offer or sale is not permitted.
Subject to Completion, Dated September 28, 2001
Prospectus Supplement
(To Prospectus Dated [______ __,200_])
Trust Certificates,
Series 2001-[ ]
--------------------------------------------------------------------------------
(Underlying securities will be ____% _________
due ___________, 20__ issued by ____________)
PRINCIPAL INTEREST PRICE TO UNDERWRITING
BALANCE RATE PUBLIC DISCOUNT
[Class ___ certificates] ____ ________ [%][Variable] 100.00% ____%
[Pass Through
Rate]
[Class ___ certificates] ____ ________ [%][Variable] 100.00% ____%
[Pass Through
Rate]
----------------------
The trust
o will be formed pursuant to a trust agreement between
DB Depositor Inc. and [trustee] for the sole purpose
of issuing the certificates.
o will issue [three] classes of certificates, the
[Class ___ certificates], the [Class ___
certificates], and the [Class ___ certificates], all
of which [except the Class ___ certificates] are
offered under this prospectus supplement.
The certificates
o are principally secured by the assets of the trust,
which consist [primarily] of a [pool
of][security][securities] that are described in this
prospectus supplement.
o represent an undivided beneficial interest in the
assets of the trust, which consist solely of the
underlying securities described in this prospectus
supplement.
o currently have no trading market.
o are not insured or guaranteed by any governmental
agency.
The certificates represent non-recourse obligations of the trust only
and do not represent an interest in or obligation of [Deutsche Bank
AG], DB Depositor Inc., the trustee, [the fiscal agent] or any of
their affiliates.
You should review the information in the section headed "Risk
Factors" beginning on page [S-__ of this prospectus supplement and on
page [__] of the prospectus.
----------------------
For complete information about the offered certificates, you should
read both this prospectus supplement and the accompanying prospectus.
This prospectus supplement must be accompanied by the prospectus if
it is being used to offer and sell the offered certificates.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
certificates or passed upon the adequacy or accuracy of this
prospectus. Any representation to the contrary is a criminal offense.
Subject to the satisfaction of certain conditions, the underwriters
named below will purchase the offered certificates from DB Depositor
Inc. See "Method of Distribution" in this prospectus supplement. The
offered certificates will be issued in book-entry form only on or
about ________, 200_.
----------------------
Deutsche Banc Alex. Brown
The date of this Prospectus Supplement is [___________ __, 200_]
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
We provide information to you about the certificates in two separate documents
that progressively provide more detail: (a) the accompanying prospectus, which
provides general information, some of which may not apply to your series of
certificates and (b) this prospectus supplement, which describes the specific
terms of your series of certificates.
If the terms of your series of certificates vary between this prospectus
supplement and the accompanying prospectus, you should rely on the information
in this prospectus supplement.
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
Summary of Principal Terms ............................................S-5
Summary of Prospectus Supplement ......................................S-9
Formation of the Trust ................................................S-15
Risk Factors ..........................................................S-15
Description of the Deposited assets ...................................S-17
[Description of Credit Support] .......................................S-20
Yield on the Certificates .............................................S-22
Description of the Certificates .......................................S-22
Description of the Trust Agreement ....................................S-27
Legal Aspects of the Deposited Assets .................................S-30
Federal Income Tax Consequences .......................................S-30
State Tax Consequences ................................................S-40
ERISA Considerations ..................................................S-40
Method of Distribution ................................................S-43
[LISTING] .............................................................S-44
Ratings ...............................................................S-44
Legal Opinions ........................................................S-44
TABLE OF CONTENTS
Page
Important Notice About Information Presented in this Prospectus
and the Accompanying Prospectus Supplement ...........................2
Where You Can Find More Information.....................................3
Incorporation of Certain Documents by Reference.........................3
Reports to Certificateholders...........................................4
Risk Factors............................................................4
The Depositor...........................................................9
Use of Proceeds.........................................................9
Formation of the Trust..................................................9
Maturity and Yield Considerations......................................10
Description of the Certificates........................................12
Description of Deposited Assets and Credit Support.....................27
Description of the Trust Agreement.....................................38
Currency Risks.........................................................47
Certain United States Federal Income Tax Consequences..................50
ERISA Considerations...................................................56
Underwriting...........................................................58
Legal Matters..........................................................59
S-3
The underwriters may engage in transactions that stabilize, maintain or
otherwise affect the price of the certificates, including over-allotment,
stabilizing and short-covering transactions in such securities and the
imposition of penalty bids, in each case in connection with the offering of
the certificates. For a description of these activities, see "Method of
Distribution" in this prospectus supplement.
--------------
For 90 days following the date of this prospectus supplement, all dealers
selling the offered certificates will deliver a prospectus supplement and
prospectus. This is in addition to the dealers' obligation to deliver a
prospectus when acting as underwriters of the offered certificates and with
respect to their unsold allotments or subscriptions.
You should rely only on the information contained or incorporated by reference
in this prospectus supplement and the accompanying prospectus. We have not
authorized anyone to provide you with different information.
We are not offering the offered certificates in any state where the offer is
not permitted.
We do not claim that the information in this prospectus supplement and the
accompanying prospectus is accurate as of any date other than the dates stated
on the respective covers.
S-4
SUMMARY OF PRINCIPAL TERMS
This summary highlights the principal terms of the certificates being
issued by the trust and of the underlying securities. It does not contain all
of the information that you need to consider in making your investment
decision. To understand all of the terms of the offering of the certificates,
you should read carefully this prospectus supplement and the accompanying
prospectus in full.
The Certificates
The Trust..................................................... DB Depositor Inc. and the trustee will form the
Series 200_-[ ] trust.
Securities Offered............................................ [$ ] [in aggregate principal amount]
[asset-backed] [trust] certificates, Series
200_-[ ], consisting of Class [ ] certificates[,]
[and] Class [ ] certificates [and specify others].
Initial Number of Offered Securities.......................... [ ].
Final Scheduled Distribution Date............................. Class [ ].
Class [ ].
[Interest Rate][Pass-Through Rates]........................... [The Class [ ] certificates will bear interest
at a fixed interest rate of [ ]% per annum.]
[The Variable Pass-Through Rates applicable to
the calculation of the interest distributable on
any distribution date on the certificates [(other
than the Class [ ] certificates)] are equal to
[describe method for determining variable rates].
The initial Variable Pass-Through Rates for the
Class [ ] certificates [,] [and] the Class [ ]
certificates [and specify others] are
approximately __% [,] [and] ___% [and ___%] per
annum, respectively.] [The Pass-Through Rate
applicable to the calculation of the interest
distributable on any distribution date on the
[specify classes] certificates is fixed at ___%
[and ___%, respectively,] per annum.]
Deposited Assets.............................................. The deposited assets will consist of the
underlying securities and [describe any
additional assets which relate to the underlying
securities]. See "--The Underlying Securities" [,
"--Other Deposited Assets"] and "Description of
the Deposited Assets" below.
Original Issue Date........................................... [ ].
Cut-off Date.................................................. [ ].
Distribution Date............................................. [ ], commencing [ ].
Record Date................................................... The [ ] day immediately preceding each
distribution date.
S-5
[Optional Call]............................................... [On any date on or after [ ] (or
after the announcement of any redemption or other
unscheduled payment of the underlying securities)
that any call warrant holder designates as a call
date, the Class [ ] certificates may be called
in whole and not in part at a call price equal to
[ ]% of the outstanding principal amount
thereof, plus any accrued and unpaid interest to
the call date.]
[Mandatory Redemption]........................................ [On any date the underlying securities are
redeemed, the certificates shall be redeemed and
the proceeds of such redemption shall be
distributed in the manner set forth under
"Description of the Certificates--Collections and
Distributions."]
Denominations; Specified Currency............................. The Class [ ] certificates [,] [and] Class [ ]
certificates [and specify others] will be
denominated and payable in [U.S. dollars] [ ] the
specified currency and will be available for
purchase in minimum denominations of [$][ ] and
[multiples of [$][ ]].
Interest Accrual Periods...................................... [Monthly] [Quarterly] [Semi-annually] (or, in the
case of the first Interest Accrual Period, from
and including the Original Issue Date to but
excluding the first distribution date).
Form of Security.............................................. [Book-entry certificates with The Depository
Trust Company]. See "Description of the
Certificates--Definitive Certificates."
Distributions will be settled in [immediately
available (same-day)] [clearinghouse (next-day)]
funds.
Trustee....................................................... The Bank of New York, as trustee.
Ratings....................................................... [ ] by [ ] and [ ] by [ ]. [Specify specific
ratings requirements for particular classes,
including the extent to which the issuance of the
certificates of a given class is conditioned upon
satisfaction of the ratings of each other class
of certificates.] See "Ratings."
Collection Period............................................. With respect to a distribution date, the period
beginning on [ ] and ending at the close of
business on [ ].
S-6
The Underlying Securities
Underlying Securities......................................... A [ ]% [floating rate] [publicly traded debt
security due [ ]] [A pool of publicly issued
[debt securities of various issuers]] [preferred
securities of trusts organized to issue
trust-originated preferred securities] [term
preferred stock having an investment grade
rating] [United States treasury securities] [debt
securities of various United States government
sponsored entities] [debt securities of various
foreign government issuers], exclusive of the
Retained Interest [in/having] an aggregate
principal amount of [$][ ].
Underlying Securities Issuer.................................. [Specify issuer] [Pool of various domestic
corporations, limited liability companies,
banking organizations and insurance companies.]
[A trust or other legal entity organized under
the laws of ______________ to issue trust
preferred securities.] [Asset-backed securities.]
[A[ ]%]-[floating rate] [United States treasury
securities] [debt securities of various United
States government sponsored entities ("GSEs")]
[Government Trust Certificates ("GTCs") [Pool of
various foreign private issuers.], exclusive of
the Retained Interest] [in/having] an aggregate
principal amount of [$][ ].
[Foreign Government Guarantor]................................ [Specify guarantor, if any.]
[GSE Issuer].................................................. [Specify issuer] [Pool of various U.S. government
sponsored entity issuers].
Underlying Securities
Original Issue Date........................................... [ ].
Underlying Securities
Final Payment Date............................................ [ ].
Amortization.................................................. [Describe amortization schedule, if any].
Denominations; Underlying
Securities Currency........................................... The underlying securities are denominated and
payable in [U.S. dollars] [ ] and are available
in minimum denominations of [$][ ] and [multiples
thereof] [multiples of [$][ ]].
Underlying Securities
Payment Dates................................................. [ ], commencing [ ].
Underlying Securities Rate.................................... [% per annum.] [A [Weighted Average] rate per
annum equal to [specify interest rate formula for
debt security].]
S-7
Underlying Securities
Interest Accrual Periods...................................... [Monthly] [Quarterly] [Semi-annually].
Priority...................................................... [Describe senior or subordinated status or
liquidation preference of any of underlying
securities].
Security...................................................... [Describe existence of any security for
obligations or state that underlying securities
are unsecured].
[Redemption/Put/Other Features]............................... [Describe existence of any redemption, put or
other material features applicable to the
underlying securities].
Form of Security.............................................. Book-entry debt securities with DTC [listed on
the [New York] [American] Stock Exchange [specify
other listing].
[Underlying Securities Trustee]............................... [ ]. [The underlying securities have been issued
pursuant to an indenture between _______________
and the issuer of the underlying securities].
[Fiscal and Paying Agent]..................................... [ ] [The underlying securities have been issued
pursuant to a fiscal and paying agency agreement,
between _______________ and the issuer of the
underlying securities] [specify other agreement].
Ratings....................................................... [ ] by [ ] [and [ ] by [ ]]. See "Description of
the Underlying Securities--Ratings of Underlying
Securities."
Other Deposited Assets........................................ [Provide similar tabular summary description of
the principal economic terms of any credit
support or other ancillary or incidental asset].
S-8
Summary of Prospectus Supplement
The following summary highlights selected information from this
prospectus supplement and is qualified by reference to the detailed
information appearing elsewhere in this prospectus supplement and in the
accompanying prospectus.
Depositor..................................................... DB Depositor Inc., an indirect wholly-owned subsidiary of
Deutsche Bank AG. See "DB Depositor Inc." in the accompanying
prospectus.
Certificates.................................................. The certificates will be issued pursuant to the trust
agreement. The certificates will consist of [ ] classes,
designated as Class [ ] certificates [and] [,] Class [ ]
certificates [and [specify other classes]], [all] of which [all
but the Class [ ] certificates] are being offered by this
prospectus supplement.
The Certificate Principal Balance of a certificate outstanding
at any time represents the maximum amount that the certificate
holder is entitled to receive as distributions allocable to
principal. The Certificate Principal Balance of a certificate
will decline to the extent distributions allocable to principal
are made to holders.
[The Class [ ] certificates, which are not being offered by
this prospectus supplement, have in the aggregate an initial
Certificate Principal Balance of [$] (approximate) and a
[Variable] Pass-Through Rate [of __%]. The Class [ ]
certificates represent the right to receive distributions in
respect of their Certificate Principal Balance and interest
thereon at their applicable Pass-Through Rate.] Shortfalls in
collections with respect to the deposited assets will be
allocated solely to the Class [ ] certificates to the extent
provided in this prospectus supplement and, thereafter, will be
allocated among the certificates and the Class [ ]
certificates, as provided in this prospectus supplement. [The
Class [ ] certificates will be transferred by DB Depositor Inc.
to an affiliate on or about [ ], [200_], the closing date, and
may be sold at any time in accordance with any restrictions in
the trust agreement.]
The Underlying Securities..................................... [Interest] [Dividends] on the underlying securities accrue[s]
at the Underlying Securities Rate for each Underlying
Securities Accrual Period and is payable on each Underlying
Securities Payment Date. The entire principal amount of the
underlying securities will be payable on the Underlying
S-9
Securities Final Payment Date. [The underlying securities have
a remaining term to maturity of approximately ___ years.] [As
of the Cut-off Date, the pool of underlying securities have a
weighted average [interest] [dividend] rate of ___% and a
weighted average remaining term to maturity of approximately
years. [Approximately ___% [specify if greater than 10%] of
such underlying securities consist of debt securities of [name
issuer].]
[United States treasury securities]
[Name obligor] is [a U.S. [limited] liability company] [banking
organization] [insurance company] whose principal executive
offices are located at [specify address]]. [The obligor is
subject to the informational requirements of the Exchange Act
and files reports and other information, including financial
information, with the SEC]. [The obligor makes available to the
public upon request certain annual financial and other
information.]
[[Name obligor] is a foreign private issuer subject to the
informational requirements of the Exchange Act and which in
accordance therewith files reports and other information with
the SEC.]
[[Name obligor] is a trust or special purpose legal entity [or
wholly owned subsidiary of a company] that is subject to the
informational requirements of the Exchange Act.]
[United States treasury securities]
[Name obligor] is a [U.S. government-sponsored entity] [specify
other] whose principal executive offices are located at
[specify address]. The obligor [makes available to the public
upon request certain annual financial and other information].
See "Description of the Deposited Assets."
[Other Deposited Assets
and Credit Support]........................................... [The deposited assets will also include [direct obligations of
the United States] [describe any assets that are incidental or
relate to the underlying securities, including hedging
contracts such as puts, calls, interest rate and other basis
swaps, currency swaps, floors, caps collars, or any other
credit
S-10
derivatives] (such assets, together with the underlying
securities, the "deposited assets"). See "Description of the
Deposited Assets--Underlying Securities."]
[The certificateholders of the [specify particular classes]
certificates will have the benefit of [describe credit support]
to support or ensure the [servicing and] [timely] [ultimate]
distribution of amounts due with respect to the deposited
assets, including providing certain coverage with respect to
losses.]
Distributions................................................. Holders of the certificates will be entitled to receive on each
distribution date, to the extent of available funds, after
payment of the expenses of the trustee and its respective
agents up to the Allowable Expense Amount,
o in the case of each class of certificates other than the
Class [ ] certificates,] distributions allocable to interest
at the applicable Pass-Through Rate on the applicable
Certificate Principal Balance,
o [in the case of each class of certificates other than the
Class [ ] certificates,] distributions allocable to
principal, and
o [in the case of each class of certificates other than the
Class [ ] certificates,] distributions allocable to premium,
if any, in an amount equal to all payments of premium, if
any, received on the underlying securities for the applicable
Collection Period.
Distributions will be made to certificateholders only if, and
to the extent that, payments are made with respect to the
deposited assets or are otherwise covered by any credit
support. [The holders of the Class [ ] certificates will be
entitled to receive on each distribution date distributions
allocable to interest in an amount equal to [describe Stripped
Interest].] [The holders of the Class [ ] certificates will not
be entitled to receive any distributions allocable to principal
or premium, if any.] See "Description of the
Certificates--Distributions."
Special Distribution Dates.................................... If a payment with respect to the underlying securities is made
to the trustee after the Underlying Securities Payment Date on
which payment was due, then the trustee will
S-11
distribute any such amounts received on the next occurring
business day (a "Special Distribution Date") as if the funds
had constituted available funds on the distribution date
immediately preceding such Special Distribution Date;
provided, however, that the Record Date for such Special
Distribution Date shall be [five business days prior to the
day on] which the related payment was received from the
underlying securities trustee.
[Subordination]............................................... The rights of the holders of the Class [ ] certificates [and
specify other classes] to receive distributions of principal,
premium, if any, and interest with respect to the deposited
assets will be subordinated to the rights of the holders of the
other classes of certificates with respect to losses
attributable to principal, premium, if any, and interest
realized on a deposited asset. See "Description of the
Certificate--Allocation of Losses; Subordination."]
[Additional Issuance]......................................... [The depositor may deposit additional underlying securities and
the trust may issue additional Class [ ] certificates in
minimum amounts of [$ ], with respect to any Class [ ]
certificates issued, at any time.]
[Redemption][Put][Other Features]............................. [Describe existence of any redemption, put or other material
features applicable to the underlying securities].
[Optional Call:]
[Call Date]................................................... [Any business day on or after [ ] (or after the announcement of
any redemption or other unscheduled payment of the underlying
securities) that any call warrant holder so designates.]
[Call Price].................................................. [The Class [ ] certificates may be called in whole and not in
part at a call price equal to [ ]% of the outstanding principal
amount thereof, plus any accrued and unpaid interest to the
date designated by the call warrant holder as the call date.]
[The Class [ ] certificates are also subject to a call. See
"Description of the Trust Agreement--Termination" and
"Description of Trust Agreement--Termination" in the
prospectus.]
[The Call Warrants]........................................... [The call warrants represent the rights to purchase the
certificates at the call price in connection with an optional
call. The initial call warrants holder will be the depositor or
S-12
an affiliate thereof. The call warrants are not offered by this
prospectus supplement.]
[Optional Termination......................................... DB Depositor Inc. may purchase at a price equal to the
[principal amount] [liquidation preference amount] of the
underlying securities all the deposited assets in the trust on
any distribution date on which the aggregate [principal amount]
[liquidation preference amount] of the underlying securities
remaining in the Trust is less than [10%] of the aggregate
[principal amount] [liquidation preference amount] of the
deposited assets as of the Cut-off Date. This would cause the
termination of the trust and early retirement of the
certificates. [Specify any other purchase or repurchase option
of DB Depositor Inc. See "Description of the Trust
Agreement--Termination" in this prospectus supplement and
"Description of Trust Agreement--Termination" in the
prospectus.]
Certain Federal Income Tax
Consequences.................................................. In the opinion of tax counsel to the trust, the trust will be
classified for federal income tax purposes [as a grantor trust]
[as a partnership] [as a financial asset securitization
investment trust ("FASIT")] [other] and not as an association
taxable as a corporation. See "Certain Federal Income Tax
Consequences."
Ratings....................................................... It is a condition to the issuance of the certificates that the
certificates have the ratings specified above under "Summary of
Principal Terms--The Certificates--Ratings." A security rating
is not a recommendation to buy, sell or hold securities and may
be subject to revision or withdrawal at any time by the
assigning rating agency. A security rating does not address the
occurrence or frequency of redemptions or prepayments on, or
extensions of the maturity of, the deposited assets, the
corresponding effect on yield to investors [or whether
investors in the Class [ ] certificates may fail to recover
fully their initial investment]. See "Ratings."
ERISA Considerations.......................................... An employee benefit plan subject to the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), including an
individual retirement account (an "IRA") or Keogh plan (a
"Keogh") (each, a "Plan") should consult its advisors
concerning the ability of such Plan to purchase certificates
under ERISA or the Code. See "ERISA
S-13
Considerations."
[Listing]..................................................... [The certificates have been approved for listing, subject to
official notice of issuance, on [_____________]. However, it is
unlikely that trading of the certificates on [_____________]
will be active. See "Method of Distribution" in this prospectus
supplement.
S-14
FORMATION OF THE TRUST
The trust will be formed pursuant to the trust agreement (including
the Series 200_ supplement) between DB Depositor Inc. and the trustee. At the
time of the execution and delivery of the Series 200_ supplement, DB Depositor
Inc. will deposit the underlying securities in the trust. The trustee, on
behalf of the trust, will accept such underlying securities and will deliver
the certificates in accordance with the instructions of DB Depositor Inc.
The underlying securities will be purchased by Deutsche Banc Alex.
Brown Inc. or an affiliate thereof in the secondary market, either directly or
through an affiliate of Deutsche Banc Alex. Brown Inc. The underlying
securities (other than underlying securities which are issued by the United
States of America) will not be acquired from [name of the issuer] as part of
any distribution by or pursuant to any agreement with such issuer. [name of
issuer] is [not] participating in this offering and will not receive any of
the proceeds of the sale of the underlying securities to Deutsche Banc Alex.
Brown Inc. or the issuance of the certificates. [Neither Deutsche Banc Alex.
Brown Inc. nor any of its affiliates participated in the initial public
offering of the underlying securities] [Deutsche Banc Alex. Brown Inc., an
affiliate of DB Depositor Inc., participated in the initial public offering of
the underlying securities as a [co-underwriter] [underwriter]].
RISK FACTORS
[No due diligence investigation of the underlying securities, the underlying
securities issuer or [parent of affiliate of underlying securities issuer] has
been made by the depositor, the underwriters or the trustee.]
[In connection with the present offering, none of the depositor, the
underwriters or the trustee (a) has made, or will make, any due diligence
investigation of the business condition, financial or otherwise, of the
underlying securities issuer [or parent of affiliate of underlying securities
issuer] or (b) has verified, or will verify, any reports or information filed
by the underlying securities issuer [or parent of underlying securities
issuer] with the Securities and Exchange Commission or otherwise made
available to the public.
This prospectus supplement does not provide detailed information with
respect to the underlying securities or the underlying securities issuer, any
risk factors relating to the securities or the issuer, or any legal, financial
or other rights or obligations arising under or related to the underlying
securities. It is strongly recommended that prospective investors in the
certificates consider publicly available financial and other information
regarding the underlying securities issuer [and parent of underlying
securities issuer]. The issuance of the certificates should not be construed
as an endorsement by the depositor, the underwriters or the trustee of the
financial condition or business prospects of the underlying securities issuer
[or parent of underlying securities issuer]. See "Description of Underlying
Securities."]
[The underlying securities issuer is the only payment source.]
[The payments made by the underlying securities issuer on the
underlying securities are the only source of payment for your Class [ ]
certificates. The underlying securities issuer is subject to laws permitting
bankruptcy, moratorium, reorganization or other actions. Financial
difficulties could result in delays in payment, partial payment or nonpayment
of the underlying securities and your Class [ ] certificates. In the event of
nonpayment by the underlying securities issuer, the certificateholders will
bear the loss resulting from such nonpayment. See "Description of the
Certificates."]
[In the event of a default on the underlying securities, the depositor will
share pro rata with certificateholders in proceeds of the underlying
securities.]
[If a payment default or acceleration on the underlying securities
occurs on or before [ ] and the depositor is not paid accrued interest on such
date, the depositor will have a claim for such accrued interest, and will
share pro rata with the certificateholders to the extent of such claim in the
proceeds from
S-15
the recovery on the underlying securities. See "Description of the
Certificates--Default on Underlying Securities."]
[Certificateholders are not likely to receive any redemption premiums or
market value appreciation.]
[In certain circumstances, redemption of the underlying securities by
the [underlying securities issuer] requires payment of a redemption premium.
In addition, the market value of the underlying securities may increase to a
value in excess of their face amounts. However, in such circumstances it is
likely that the call warrant holder (initially, the depositor) would exercise
its right to purchase the certificates pursuant to an optional call. The call
price equals the outstanding principal amount of the certificates, plus
accrued interest. If the call warrant holder does exercise its right, a
certificateholder will receive less than if the certificateholder directly
owned the underlying securities and will not receive any premium in excess of
the underlying securities' market value over their face amounts. See
"Description of the Deposited Assets--Redemption of the Underlying
Securities."]
[A change or withdrawal by the rating agencies of their initial ratings may
reduce the market value of the class [ ] certificates.]
[At the time of issuance, the class [ ] certificates will have
ratings assigned by Moody's and S&P equivalent to the ratings of the
underlying securities, which, as of the date of this prospectus supplement
were ["[ ]" by Moody's [and] "[ ]" by S&P [and "[ ]" by Fitch]. It is expected
that the ratings of the Class [ ] certificates will change if the ratings of
the underlying securities change. [[ ] indicates a negative outlook with
respect to the underlying securities. A negative outlook means that a rating
may be lowered by [ ].]
Any rating issued with respect to the class [ ] certificates is not a
recommendation to purchase, sell or hold a security inasmuch as such ratings
do not comment on the market price of the class [ ] certificates or their
suitability for a particular investor. There can be no assurance that the
ratings will remain for any given period of time or that the ratings will not
be revised or withdrawn entirely by the related rating agency if, in its
judgment, circumstances, including the rating of the underlying securities, so
warrant. A revision or withdrawal of such rating may have an adverse effect on
the market price of the class [ ] certificates.]
[Describe risk factors applicable to the specific underlying
securities, other deposited assets and any credit derivative arrangements and
the particular structure of the certificates being offered, including factors
relating to the yield on the certificates and risks associated with the
deposited assets (including any material risks as a result of any repurchase
option or put and the inclusion in the deposited assets of GTCs) and their
terms, as described elsewhere in this prospectus supplement.] See "Risk
Factors" and "Maturity and Yield Considerations" in the accompanying
prospectus.]
[The underlying securities are not guaranteed by the federal
government or any agency or instrumentally thereof, other than the issuer of
the underlying securities.]
DESCRIPTION OF THE DEPOSITED ASSETS
General
This prospectus supplement specifies the relevant terms with respect
to the underlying securities, but does not provide detailed information with
respect to the underlying securities. This prospectus supplement relates only
to the offered certificates and does not relate to the deposited assets. All
disclosure contained in this prospectus supplement with respect to the
underlying securities is derived from publicly available documents. [Describe
publicly available documents.] [The] [Each] issuer of the underlying
securities is [not] subject to the information reporting requirements of the
Exchange Act. Although DB Depositor Inc. has no reason to believe the
information concerning the underlying securities, [name of issuer] [or each
underlying securities prospectus related to the underlying securities] and
other publicly available information is not reliable, neither DB Depositor
Inc. nor any of the underwriters has
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participated in the preparation of such documents, or made any due diligence
inquiry with respect to the information. Events affecting the underlying
securities or [or name of issuer] may have occurred and may have not yet been
publicly disclosed. This would affect the accuracy or completeness of the
publicly available documents described above.
[Use the following where the underlying securities consist of a pool
of obligations of multiple obligors.]
[The deposited assets will consist primarily of the underlying
securities, which are a pool of [treasury securities] [and] publicly traded
debt securities or term preferred stock of [domestic corporations, limited
liability companies, banking organizations, insurance companies or foreign
private issuers] [U.S. government-sponsored entities ("GSEs")] [preferred
securities, or asset-backed securities, of one or more trusts or other special
purpose legal entities] [Multilateral Bank Issuers (as defined in the
prospectus) [Government Trust Certificates ("GTCs")]]. [The deposited assets
will consist primarily of the underlying securities, which are a pool of
publicly issued debt securities. The underlying securities will be purchased
by DB Depositor Inc. in the secondary market, either directly or through an
affiliate of DB Depositor Inc., and will be deposited into the trust. The
underlying securities will not be acquired either from the respective obligors
on the underlying securities or pursuant to any distribution by or agreement
with such obligors].
The composition of the underlying securities pool and the
distribution by ratings, remaining term to maturity and interest rate of the
underlying securities as of the Cut-off Date are as set forth below:
Composition of the Underlying Securities Pool
as of the Cut-off Date
Number of Underlying Securities:
Aggregate Principal Balance: [$]
Average Principal Balance: [$]
Largest Balance: [$]
Weighted Average Interest Rate: %
Weighted Average Original Term to Maturity: Years
Weighted Average Remaining Term to Maturity: Years
Longest Remaining Term to Maturity: Years
Distribution by Industry Classification
of the Underlying Securities Pool as of the Cut-off Date
Percent of
Aggregate Aggregate
Industry Principal Principal
Classification Number Balance Balance
--------------- ------ --------- ----------
Total
Distribution by Ratings
of the Underlying Securities Pool as of the Cut-off Date
Percent of
Aggregate Aggregate
Principal Principal
Rating Number Balance Balance
------- ------ --------- ----------
Total
Distribution by Remaining Term to Maturity
of the Underlying Securities Pool as of the Cut-off Date
Percent of
Aggregate Aggregate
Remaining Term To Principal Principal
Maturity Number Balance Balance
------------------ ------ --------- ----------
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Total
Distribution by Interest Rate
of the Underlying Securities Pool as of the Cut-off Date
Percent of
Aggregate Aggregate
Principal Principal
Rate Range Number Balance Balance
----------- ------ --------- ----------
Total
[The underlying securities consist of debt securities of [domestic
corporate issuers [specify other]]. [The underlying securities consist of debt
securities issued or guaranteed by foreign private issuers]. [The underlying
securities consist of [treasury securities] [debt securities of U.S.
government-sponsored entities ("GSEs")] [GTCs]]. As of the Cut-off Date, [all
of] [approximately % of] the underlying securities were rated [investment
grade] [specify particular rating] by at least one nationally recognized
rating agency, and, based on publicly available information, no obligor of any
underlying security was in default in the payment of any installments of
principal, interest or premium, if any, with respect to the security. Any
rating of any of the underlying securities is not a recommendation to
purchase, hold or sell the underlying security or the certificates, and a
rating may not remain for any given period of time or may be lowered or
withdrawn entirely by a rating agency in the future. See "Ratings" in this
prospectus supplement and "Risk Factors--Ratings of the Certificates Subject
to Change" in the accompanying prospectus regarding considerations applicable
to the ratings of the certificates.]
Underlying Securities
The underlying securities have been issued pursuant to [an]
agreement[s] (specify other)) between the [various] [issuer[s] of the
underlying securities [trustee[s]] [fiscal agent[s]] [a certificate of
designation]. The following summary describes certain general terms of the
[indenture[s]] [fiscal agency agreement[s]] [certificates of designation]
[pooling and servicing agreements], but investors should refer to the
indenture[s] [fiscal agency agreement[s]] [certificate[s] of designation]
[pooling and servicing agreement[s]] [itself] [themselves] for all the terms
governing the underlying securities.
[Each of] the indenture[s] [fiscal agency agreement[s]]
[certificate[s] of designation] [pooling and servicing agreement[s]] limits
the ability of the [respective] issuer[s] of the underlying securities to
engage in certain activities and transactions and requires that the issuer[s]
of the underlying securities perform certain obligations with respect to the
underlying securities. [Describe material restrictive, financial and other
covenants on the issuer[s] of the underlying securities contained in the
relevant document].
[The following is a summary of the typical Underlying Security Events
of Default for each series of outstanding debt securities. [Any additional
Underlying Security Events of Default unique to a Concentrated Underlying
Security have been described following the summary]:
o failure to make payments of principal (and premium, if any) and interest
to holders of the outstanding debt securities when the same shall be due;
o material breaches of certain representations, warranties or covenants or
failure to observe or perform in any material respect any covenant or
agreement continuing for a specified period of time after notice of the
breach is given to the issuer of the underlying securities [or GSE
issuer] by [the underlying securities trustee or] the holders of not less
than a specified percentage of the outstanding debt securities;
o [failure by the issuer of the underlying securities to make any required
payment of principal (and premium, if any) or interest with respect to
certain other outstanding debt obligations of the issuer of the
underlying securities or the acceleration by or on behalf of the holders
thereof of such securities;]
o certain events of bankruptcy or insolvency relating to the issuer of the
[underlying securities]; and
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o [describe any additional common events of default with respect to the
pool of underlying securities].]
As of the Cut-off Date, [all of] [approximately __% of] the
underlying securities were [subject to] [describe any put, call or other
conversion or redemption options applicable to the underlying securities] [and
[all of] [approximately ___% of] the underlying securities were [describe the
nature of the obligation represented by such underlying securities (i.e.,
senior, subordinate, secured) and describe commonalities with respect to any
subordination or security provisions or collateral].]
[The [pool of] underlying securities, together with any other assets
described below and any credit support described under "Description of Credit
Support," represent the sole assets of the trust that are available to make
distributions in respect of the certificates.]
[Use the following with respect to each obligor the underlying
securities of which represent more than 10% of the total underlying securities
available to make distributions in respect of the certificates-only a single
obligor is referred to for purposes of this section of the form of prospectus
supplement.]
[A significant portion of] [Virtually all of] [All of] the deposited
assets of the trust will consist of the [___%] [floating rate] [specify
publicly issued security] due _________ of [specify issuer][, exclusive of the
interest in that security not being so deposited in the trust and being
retained by DB Depositor Inc. as described below (the "Retained Interest")],
having an [aggregate principal amount] [aggregate liquidation preference
amount] outstanding as of the Cut-off Date of approximately [$][specify
currency] (the "underlying securities"). The underlying securities [(other
than underlying securities which are issued by the United States of America)]
will be purchased by DB Depositor Inc. in the secondary market (either
directly or through an affiliate of DB Depositor Inc.) and will be deposited
into the trust. The underlying securities will not be acquired either from
[name such obligor] or pursuant to any distribution by or agreement with [name
such obligor]. [Describe any put, call or other conversion or redemption
options applicable to the underlying securities, as well as the nature of the
obligation represented by such underlying securities (i.e., senior,
subordinate, secured)]. As of the Cut-off Date, the foregoing security
comprising [ %] of the underlying securities was rated [specify investment
grade rating] [investment grade] by [specify nationally recognized rating
agency or agencies], and, based on publicly available information, the obligor
thereon was not in default in the payment of any installments of principal,
interest or premium, if any, with respect to the security. Any such rating of
such underlying securities is not a recommendation to purchase, hold or sell
such underlying securities or the certificates, and a rating may not remain
for any given period of time or may be lowered or withdrawn entirely by a
rating agency in the future. See "Ratings" in this prospectus supplement and
"Risk Factors--Ratings of the Certificates Subject to Change" in the
accompanying prospectus regarding certain considerations applicable to the
ratings of the certificates.
[According to [name such issuer]'s publicly available documents,
[name such issuer] is a [identify form of domestic corporation trust banking
organization or insurance company] whose principal executive offices are
located at [specify address]. DB Depositor Inc. is not an affiliate of [name
such issuer]. [Name such obligor] is subject to the informational requirements
of the Exchange Act and, in accordance therewith, files reports and other
information (including financial information) with the SEC [and makes
available to the public upon request certain annual reports containing
financial and other information]. You can request copies of these documents,
upon payment of a duplicating fee, by writing to the SEC. Please call the SEC
at (800) SEC-0330 for further information on the operation of the SEC's public
reference rooms. In addition, the reports and other information [can be
inspected at the offices of the [New York Stock Exchange at 20 Broad Street,
New York, New York 10005] [American Stock Exchange, 86 Trinity Place, New
York, New York 10013]] [may be obtained from [name such obligor], according to
its most recent annual report, upon written or oral request to [name such
obligor]].]
The trust will have no other significant assets [other than any
credit support or those assets referred to below] from which to make
distributions of amounts due in respect of the certificates. Consequently, the
ability of certificateholders to receive distributions in respect of the
certificates will depend [almost] entirely on the trust's receipt of payments
on the foregoing underlying securities from [name such obligor]. Prospective
purchasers of the certificates should consider carefully [name such obligor]'s
financial condition and its ability to make payments on the underlying
securities. This
S-19
prospectus supplement relates only to the certificates being offered hereby
and does not relate to the underlying securities of [name such obligor]. All
information contained in this prospectus supplement regarding [name such
obligor] is derived from the publicly available documents described in the
preceding paragraph. Neither DB Depositor Inc. nor [any of] the underwriter[s]
has participated in the preparation of the publicly available documents, or
takes any responsibility for the accuracy or completeness of the information
provided therein.
[The deposited assets will also include [direct obligations of the
United States of America][describe any assets which are ancillary or
incidental to the underlying securities, including hedging contracts such as
puts, calls, interest rate swaps, currency swaps, floors, caps and collars,
and any cash or other security pledged to support the underlying securities]
(such assets, together with the underlying securities, the "deposited
assets").]
[DESCRIPTION OF CREDIT SUPPORT]
[For the benefit [solely] of the [offered] [Class [ ] certificates
[and the Class [ ] certificates]], credit support will be obtained [and will
constitute part of the trust to the extent provided below] to support or
ensure the [servicing and] [timely] [ultimate] distribution of amounts due
with respect to the deposited assets, in the form and amount described below.]
[The Letter of Credit
Simultaneously with DB Depositor Inc.'s assignment of the deposited
assets to the trust, DB Depositor Inc. will obtain the letter of credit from [
] in favor of the trustee on behalf of the certificateholders. The letter of
credit will be irrevocable and will [support the [timely][ultimate] remittance
of amounts due with respect to the deposited assets]. [The maximum amount that
the trustee may draw under the letter of credit will initially be equal to
[$]. The initial amount of the letter of credit will be [$] . Thereafter, the
amount of the letter of credit with respect to any distribution date will
equal [the lesser of (i) ___% of the aggregate certificate Principal Balance
outstanding on the preceding distribution date (after giving effect to any
payment of principal made on such preceding distribution date) but in any
event not less than [$] , and (ii)] the amount of the letter of credit on the
preceding distribution date, plus [(a) reimbursement of certain advances under
the letter of credit and (b) recoveries on defaulted deposited assets]
[describe other methods]. The letter of credit expires on , 20__. The trustee
will be obligated, in the event of a drawing on the letter of credit, to
pursue appropriate remedies against the deposited assets and other collateral,
and any realization shall be paid to the letter of credit bank to the extent
of any amounts owing, in the manner and priority specified in this prospectus
supplement.]
[Add language regarding the letter of credit bank with respect to its
debt ratings, activities it engages in, regulatory authorities having
jurisdiction over it and the nature of such regulation, a narrative
description of its assets, liabilities (including deposits) and equity, and
include an address for further information concerning the letter of credit
bank. In addition, to the extent that the letter of credit will cover payment
of 20% or more of the aggregate principal amount of the certificates covered
thereby, provide information of financial and other matters with respect to
the letter of credit bank, if necessary.]]
[The Surety Bond
Simultaneously with DB Depositor Inc.'s assignment of the deposited
assets to the trust, DB Depositor Inc. will obtain the surety bond from [ ] in
favor of the trustee on behalf of the certificateholders. The surety bond will
guaranty [timely] [ultimate] distributions of the principal of and premium, if
any, and interest with respect to the [offered][class[ ]] certificates. The
surety bond expires on , 20__. The trustee will be obligated, in the event of
a drawing on the surety bond, to pursue appropriate remedies against the
deposited assets and other collateral, and any realization shall be paid to
the surety to the extent of any amounts owing, in the manner and priority
specified in this prospectus supplement.
[Add language regarding the issuer of the surety bond with respect to
its debt ratings, activities it engages in, regulatory authorities having
jurisdiction over it and the nature of such regulation, a narrative
description of its assets, liabilities (including deposits) and equity, and
include an address for further information concerning the surety. In addition,
to the extent that the surety bond will cover payment of
S-20
20% or more of the aggregate principal amount of the certificates covered
thereby, provide information of financial and other matters with respect to
the issuer of the surety bond, if necessary.]]
[Reserve Account
DB Depositor Inc. will deposit with the trustee on the closing date
cash, letters of credit and short-term investments acceptable to the rating
agency initially rating the certificates in the amount of [$] . [Collections
with respect to the deposited assets not distributed with respect to the
certificates shall be deposited in the Reserve Account.] Amounts deposited in
the Reserve Account will be used by the trustee to make payments of principal
of and premium, if any, and interest on the certificates to the extent that
funds are not otherwise available. Immediately after any distribution date,
amounts in the Reserve Account in excess of [indicate formula] [may be paid to
DB Depositor Inc.]
YIELD ON THE CERTIFICATES
[Describe factors relating to the deposited assets, the terms thereof
and the manner and priority in which collections thereon are allocated to the
certificateholders of each class of the certificates, as described elsewhere
in this prospectus supplement.] See "Maturity and Yield Considerations" in the
prospectus.
DESCRIPTION OF THE CERTIFICATES
General
The certificates will consist of [ ] classes of certificates,
designated as Class [ ][,] [and] Class [ ] [and Class___] certificates. The
certificates will be denominated and distributions will be payable in [U.S.
dollars][the specified currency]. The certificates represent in the aggregate
the entire beneficial ownership interest in the related trust. The Class [ ]
certificates have in the aggregate an initial [Certificate Principal Balance]
[Notional Amount] of [$]________ (approximate) and a [___%] [Variable]
Pass-Through Rate. The Class [ ] certificates have in the aggregate an initial
[Certificate Principal Balance] [Notional Amount] of [$]________ (approximate)
and a [___%] [Variable] Pass-Through Rate. [The Class [ ] certificates have in
the aggregate an initial [Certificate Principal Balance] [Notional Amount] of
[$]________ (approximate) and a [___%] [Variable] Pass-Through Rate.] [The
Class [ ] certificates, which are not being offered by this prospectus
supplement, will be transferred by DB Depositor Inc. to an affiliate on the
closing date, and may be sold at any time by DB Depositor Inc. in accordance
with the terms of the trust agreement.]
The certificates [(other than the Class [ ] certificates [and specify
others] (the "Definitive Classes"))] will be issued, maintained and
transferred on the book-entry records of DTC and its participants in minimum
denominations of [$ ] and [integral multiples thereof] [multiples of [$ ] in
excess thereof]. [The Class [ ] certificates [and specify any others] will be
offered in registered, certificated form, in minimum percentage interests
corresponding to the initial Notional Amounts or Certificate Principal
Balances, as applicable, of [$ ] and integral multiples of [$ ], except that
one certificate of each such class may be issued with an initial Notional
Amount or Certificate Principal Balance, as applicable, equal to an integral
multiple of [$ ] plus the excess of the initial aggregate Notional Amount or
Certificate Principal Balance, as applicable, of such class over the greatest
integral multiple of [$ ] that is not more than such initial aggregate
Notional Amount or Certificate Principal Balance, as applicable.]
The certificates [(other than the definitive classes of
certificates)] will each initially be represented by one or more global
certificates registered in the name of the nominee of DTC (together with any
successor clearing agency selected by DB Depositor Inc., the "Clearing
Agency"), except as provided below. DB Depositor Inc. has been informed by DTC
that DTC's nominee will be CEDE & Co. No holder of any such certificate will
be entitled to receive a certificate representing such person's interest,
except as set forth below under "--Definitive Certificates." Unless and until
definitive certificates are issued under the limited circumstances described
in this prospectus supplement, all references to actions by certificateholders
with respect to any such certificates shall refer to actions taken by DTC upon
instructions from its participants. See "--Definitive Certificates" below and
"Description of Certificates--Global Securities" in the prospectus.
S-21
Under the rules, regulations and procedures creating and affecting
DTC and its operations, DTC will take action permitted to be taken by a
certificateholder under the trust agreement only at the direction of one or
more participants to whose DTC account the certificates are credited.
Additionally, DTC will take such actions with respect to specified voting
rights only at the direction and on behalf of participants whose holdings of
the certificates evidence these specified voting rights. DTC may take
conflicting actions with respect to these voting rights, to the extent that
participants whose holdings of certificates evidence these voting rights,
authorize divergent action.
Definitive Certificates
Definitive certificates will be issued to certificate owners or their
nominees, respectively, rather than to DTC or its nominee, only if (i) DB
Depositor Inc. advises the trustee in writing that DTC is no longer willing or
able to discharge properly its responsibilities as Clearing Agency with
respect to each class of certificates [(other than the definitive classes)]
and DB Depositor Inc. is unable to locate a qualified successor or (ii) DB
Depositor Inc., at its option, elects to terminate the book-entry system
through DTC.
Upon the occurrence of any event described in the immediately
preceding paragraph, the trustee is required to notify all participants of the
availability through DTC of definitive certificates. Upon surrender by DTC of
the definitive certificates representing the certificates [(other than the
definitive classes of certificates)] and receipt of instructions for
re-registration, the trustee will reissue such certificates as definitive
certificates issued in the respective principal amounts owned by the
individual owners of the certificates. Thereafter the trustee will recognize
the holders of the definitive certificates as certificateholders under the
trust agreement.
Distributions
Collections on the deposited assets that are received by the trustee
for a given Collection Period pursuant to the collection procedures described
in this prospectus supplement and in the prospectus and deposited from time to
time into the Certificate Account will be applied by the trustee on each
applicable distribution date to the following distributions in the following
order of priority, solely to the extent of available funds (as defined below)
on such distribution date:
o to the trustee, all unpaid fees and expenses of the trustee and its
respective agents, up to the allowable expense amount (as defined below)
for the related Collection Period;
o [to the [providers of credit support] [swap or derivative counterparty],
any amounts required to be paid or reimbursed to, or deposited with, any
such person;]
o to the certificateholders of each class of the series, first, to the
payment of Required Interest [and on a pro rata basis to the credit
support providers for the payment of any credit support payments],
second, to the payment of Required Principal and third, to the payment of
Required Premium, in each case applicable to the class, commencing with
the most highly ranked class and, to the extent available funds (as
defined below) remain available, to each other class in accordance with
the ranking specified in this prospectus supplement under "--Allocation
of Losses--Subordination";
o [to the credit support providers, any credit support payments;] and
o to the trustee, all its remaining unpaid fees and expenses and those of
its respective agents not otherwise paid pursuant to clause (i) above.
Collections received from the deposited assets and any applicable
credit support relating to the certificates over a specified period may not be
sufficient, after payment of all allowable expense amounts [and payment of all
amounts required to be paid to the credit support providers] for such period,
to make all required distributions to the certificateholders of the
certificates. To the extent available funds are insufficient to make
distributions due to any series or class, any shortfall will be carried over
and will be distributable on the next distribution date on which sufficient
funds exist to pay the shortfall.
S-22
The following terms have the following meanings:
["Allowable expense amount" means, for any given Collection
Period, the sum of (x) [$]__________ and (y) amounts in respect of
the Allowable Expense Amount from the preceding Collection Period
that have not been applied on the distribution date for that
preceding Collection Period.]
"Available funds" for any distribution date means the sum of
(a) all amounts received on or with respect to the deposited assets
(including investment income on Eligible Investments) received during
the preceding Collection Period[,] [and] (b) amounts available as of
the distribution date pursuant to the credit support described in
this prospectus supplement [and (c) any additional amount that DB
Depositor Inc. may remit to the trustee from time to time according
to the terms of the trust agreement for application as available
funds].
"Call Premium Percentage" for any given distribution date
means [a fixed percentage] [a percentage that varies depending on
[describe basis for variable formula, such as the applicable date or
other factors or indices]].
"Eligible Investments" means, with respect to the
certificates, those investments acceptable to the Rating Agency as
being consistent with the rating of such certificates, as specified
in the trust agreement. Generally, Eligible Investments must be
limited to obligations or securities that mature not later than the
business day prior to the next succeeding distribution date.
"Required Interest" for the certificates or any class of the
certificates on any given distribution date means the accrued and
unpaid interest on the outstanding Certificate Principal Balance [or
Notional Amount] of such certificates, computed at the applicable
Pass-Through Rate.
"Required Premium" for the certificates or any class of the
certificates for any distribution date means an amount equal to the
product of (a) the Required Principal for the certificates on such
distribution date and (b) the Call Premium Percentage for that
distribution date.
"Required Principal" for the certificates or any class of
the certificates for any distribution date means the amount received
on the deposited assets attributable to principal payments thereon
during the related Collection Period, to the extent allocable to such
certificates. The Certificate Principal Balance of a certificate
outstanding at any time represents the maximum amount that the holder
of the certificate is entitled to receive as distributions allocable
to principal from the cash flow on the underlying securities, the
other assets in the trust and any credit support obtained for the
benefit of such holder. The Certificate Principal Balance of any
class of certificates [(other than the Class [ ] certificates)] as of
any date of determination is equal to the initial Certificate
Principal Balance, reduced by the aggregate of (a) all amounts
allocable to principal previously distributed with respect to the
certificate and (b) any reductions in the Certificate Principal
Balance deemed to have occurred in connection with allocations of (i)
net losses realized on any deposited assets allocable to principal on
the deposited assets and (ii) Extraordinary Trust Expenses, as
described in this prospectus supplement. [The Notional Amount of the
Class [ ] certificates as of any date of determination is equal to
[specify amount].] [Holders of the Class [ ] certificates are not
entitled to receive any distributions allocable to principal.]
[Notwithstanding the priorities described above, holders of
the Class [ ] certificates and the Class [ ] certificates will be
entitled to receive on any distribution date 100% of all principal
collections received in the related Collection Period with respect to
the Deposited Assets, to be distributed [on a pro rata basis] in
reduction of the Certificate Principal Balance of the Class [ ]
certificates and the Class [ ] certificates, if any of the following
conditions shall be satisfied: [describe conditions, if any, by which
a certain class is given 100% of the principal cash flow other than
pursuant to subordination that is in effect from the closing date].]
S-23
[Advances
Subject to the following limitations, the trustee will be obligated
to advance or cause to be advanced on or before each distribution date its own
funds, or funds in the Certificate Account that are not included in the
available funds for the distribution date, in an amount equal to the aggregate
of payments of principal, premium, if any, and interest, net of that portion
of the available funds attributable to fees and expenses of the trustee, that
were due during the related Collection Period and that were delinquent on the
related determination date.
Advances are required to be made only to the extent they are deemed
by the trustee to be recoverable from related late collections, insurance
proceeds, if any, or any proceeds from the liquidation of the deposited asset.
The purpose of making such advances is to maintain a regular cash flow to the
certificateholders, rather than to guarantee or insure against losses. The
trustee will not be required to make any advances with respect to reductions
in the amount of the payments on the deposited assets due to bankruptcy
proceedings with respect to the deposited assets.
All advances will be reimbursable to the trustee from late
collections, insurance proceeds, if any, and any proceeds from the liquidation
of the deposited asset as to which such unreimbursed Advance was made. In
addition, any Advances previously made in respect of any deposited asset that
are deemed by the trustee to be nonrecoverable from related late collections,
insurance proceeds, if any, or any proceeds from the liquidation of the
deposited asset may be reimbursed to the trustee out of any funds in the
Certificate Account allocable to any of the deposited assets prior to the
distributions on the certificates.
Allocation of Losses; Subordination [specify if necessary]
[The subordination described in this prospectus supplement provided
by the Class [ ] certificates [and the Class [ ] certificates] is designed to
protect holders of the remaining classes of certificates from certain losses
and other shortfalls with respect to the deposited assets. As a result, losses
and other shortfalls with respect to the deposited assets will be borne by the
remaining classes of certificates, to the extent described below, only if such
losses and other shortfalls are not so covered, or the coverage in respect
thereof has been exhausted.]
[Net losses realized on any deposited assets and Extraordinary Trust
Expenses will be allocated on any distribution date as follows: [describe
allocation among the various classes].]
[An "Extraordinary Trust Expense" is an expense of a given trust in
excess of the allowable expense amount, including certain reimbursements to DB
Depositor Inc. described in the prospectus under "Description of
Certificates--[Certain Matters Regarding the Administrative Agent and DB
Depositor Inc."] and certain reimbursements to the trustee described under
"Description of the Trust Agreement--The Trustee" in this prospectus
supplement.]
[Redemption [Put][Other Features] [Describe existence of any
redemption, put or other material features applicable to the underlying
securities].
[Additional Underlying Securities and Certificates
From time to time hereafter, additional underlying securities may be
sold to the trust, in which case additional Class [ ] certificates and related
Class [ ] certificates will be issued in the same proportions as the
certificates of those classes described in this prospectus supplement. Any
additional certificates will rank pari passu with the certificates described
in this prospectus supplement.]
[The Call Warrant; Optional Call
The Class [ ] certificates are subject to call warrants and may be
purchased from certificateholders in the future by the call warrant holder at a
call price equal to [ ]% of the outstanding principal amount of the
Class [ ]% certificates. The call warrants represent the rights held by the
call warrant holder to purchase from certificateholders the certificates in the
future. On any business day on or after [ ] (or after the announcement of any
redemption or other unscheduled payment or sale of the underlying securities)
that the call warrant holder designates as
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a call date, the call warrant holder may exercise its option to purchase from
certificateholders, in whole and not in part, the Class [ ] certificates
at [par value] plus any accrued and unpaid interest to the call date; provided
that the call warrant holder pays the purchase price on or prior to the call
date. The call warrant holder has the option of paying the purchase price on
or prior to the designated call date. If the call warrant holder does not pay
the purchase price on or prior to the call date, the Class [ ] certificates
will not be purchased from certificateholders at that time. If the call
warrant holder exercises its option to purchase the Class [ ] certificates and
elects to pay the purchase price on or prior to the designated call date, the
call warrant holder will become the holder of the Class [ ] certificates. The
call warrants are not being offered by this prospectus supplement. DB
Depositor Inc., or an affiliate, will be the initial call warrant holder, but
the call warrants are transferable. The Class [ ] certificates are also
subject to call warrants. Unlike a redemption right, the issuer of the Class
[ ] certificates is not repurchasing the Class [ ] certificates pursuant to
the call warrants.]
[Redemption of Certificates upon Redemption of Underlying Securities
Upon receipt by the trustee of a notice that all or a portion of the
underlying securities are to be redeemed, the trustee will select by lot an
equal amount of Class [ ] certificates for redemption and establish the date
those Class [ ] certificates are to be redeemed. Notice of redemption will be
given by the trustee to the registered certificateholders at least [ ] days
before the redemption date by mail to each registered certficateholder at that
registered holder's last address on the register maintained by the trustee;
provided, however, that the trustee will not be required to give any notice of
redemption prior to the [ ] business day after the date it receives notice of
that redemption.
The holder of a Class [ ] certificate which is redeemed will receive,
on the redemption date, a payment equal to its pro rata share of the
distributions made on the underlying securities pursuant to the redemption of
the underlying securities.]
[Restrictions on Transfer of the Class [ ] Certificates
Because the Class [ ] certificates are subordinate to the Class [ ]
certificates and the Class [ ] certificates to the extent set forth in this
prospectus supplement, the Class [ ] certificates may not be purchased by or
transferred to a Plan except upon the delivery of an opinion of counsel as
described in this prospectus supplement. See "ERISA Considerations."]
DESCRIPTION OF THE TRUST AGREEMENT
General
The certificates will be issued pursuant to a trust agreement, a form
of which is filed as an exhibit to the registration statement that includes
the accompanying prospectus. A Current Report on Form 8-K relating to the
certificates containing a copy of the trust agreement as executed will be
filed by DB Depositor Inc. with the SEC following the issuance and sale of the
certificates. The trust created under the trust agreement, including the
Series 200_-[ ] supplement, will consist of:
o the deposited assets (exclusive of any Retained Interest, which is not
part of the trust);
o all payments on or collections in respect of the deposited assets due
after the Cut-off Date, together with any proceeds thereof[,] [and];
o [any credit support in respect of any class or classes of certificates]
[and;
o the rights of DB Depositor Inc. under the purchase agreement between DB
Depositor Inc. and the seller of the underlying securities].
[In addition, the holders of the certificates may also have the
benefit of certain credit support discussed above. See "Description of Credit
Support."] Reference is made to the accompanying prospectus for important
information in addition to that set forth in this prospectus supplement
regarding the trust, the terms and conditions of the trust agreement and the
certificates. The following summaries of certain provisions of the trust
agreement do not purport to be complete and are subject to the detailed
provisions contained in the form of trust agreement, to which reference is
hereby made for a full description of such provisions, including the
definition of certain terms used in this prospectus supplement.
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The Trustee
The Bank of New York, a New York corporation, (or any successor
trustee appointed by an officer of DB Depositor Inc.) will act as trustee for
the certificates and the trust pursuant to the trust agreement. The trustee's
offices are located at [ ] and its telephone number is [ ]. The trust
agreement will provide that the trustee and any director, officer, employee or
agent of the trustee will be indemnified by the trust and will be held
harmless against any loss, liability or expense incurred in connection with
any legal action relating to the trust agreement or the certificates or the
performance of the trustee's duties under the trust agreement, other than any
loss, liability or expense (i) that constitutes a specific liability of the
trustee under the trust agreement or (ii) incurred by reason of willful
misfeasance, bad faith or negligence in the performance of the trustee's
duties under the trust agreement or as a result of a breach, or by reason of
reckless disregard, of the trustee's obligations and duties under the trust
agreement.
Events of Default
An event of default with respect to any class of certificates under
the trust agreement, other than a class of certificates representing an
interest in preferred stock will consist of:
o [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);
o 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
o the occurrence and continuance of such other events specified in the
applicable series supplement.]
[Describe remedies available to certificateholders upon the
occurrence and continuance of an event of default, including, as applicable,
directing the trustee to vote the underlying securities in favor of declaring
the principal balance of and any accrued interest on the outstanding debt
securities to be immediately due and payable].
The trust agreement will provide that, within 30 days after the
occurrence of an event of default in respect of the certificates of any class,
the trustee will give to the holders of the certificates notice, transmitted
by mail, of all such uncured or unwaived events of default known to it.
However, except in the case of an event of default relating to the payment of
principal of or premium, if any, or interest on any of the underlying
securities, the trustee will be protected in withholding the notice if in good
faith it determines that the withholding of such notice is in the interest of
the holders of the certificates of the class.
No holder of any certificate will have the right to institute any
proceeding with respect to the trust agreement, unless (i) the holder
previously has given to the trustee written notice of a continuing breach,
(ii) the holders of certificates of that series evidencing not less than the
"Required Percentage--Remedies" specified in the applicable series supplement
of the aggregate voting rights of such series have requested in writing that
the trustee institute such proceeding in its own name as trustee, (iii) the
holder or holders have offered the trustee reasonable indemnity, (iv) the
trustee has for 15 days failed to institute such proceeding and (v) no
direction inconsistent with that written request has been given to the trustee
during such 15-day period by the holders of certificates of that series
evidencing not less than the Required Percentage. ["Required
Percentage--Remedies" shall mean [ %] of the voting rights.]
Voting Rights
[At all times,] [Subject to the following paragraph,] [ ]% of all
voting rights will be allocated among all holders of the Class [ ]
certificates[,] [and] the Class [ ] certificates [and specify other classes]
in proportion to the then outstanding Certificate Principal Balances [or
Notional Amounts] of their respective certificates and [ ]% of all voting
rights will be allocated among all holders of the Class [ ] certificates in
proportion to the then outstanding [Certificate Principal Balances] [Notional
Amounts] of their respective certificates. [Specify whether and under what
circumstances voting will be class-by-class.]
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[Specify conditions, if any, under which allocation of voting rights
might change from the foregoing percentages.] ["Required
Percentage--Amendment" of voting rights necessary to consent to amendment or
modification of the trust shall be [ %].] ["Required Percentage--Waiver" shall
mean [ %] [of the voting rights].]
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 such underlying securities as
permitted by [DTC] [Federal Reserve Bank] and except as otherwise limited by
the trust agreement. In the event that the trustee receives a request from
[DTC] [Federal Reserve Bank] the [underlying securities trustee] [the fiscal
agent] [or the issuer of the underlying securities] [or GSE issuer] for its
consent to any amendment, modification or waiver of the underlying securities,
[the indenture] or any other related document, or receives any other
solicitation for any action with respect to the underlying securities, the
trustee shall mail a notice of the proposed amendment, modification, waiver or
solicitation to each certificateholder of record as of that 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 Certificate Principal
Balances and Notional Amounts of the certificates, as applicable) 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 that consent or vote is required; provided, however, that,
notwithstanding anything to the contrary, the trustee shall at no time vote 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, (ii) which 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 an
event of default with respect to the underlying securities or an event which
with the passage of time would become an event of default with respect to the
underlying securities and with the unanimous consent of all holders of
outstanding certificates or (iii) which would result in the exchange or
substitution of any of the outstanding underlying securities pursuant to a
plan for the refunding or refinancing of those underlying securities except in
the event of a default under the [indenture] [underlying securities] and only
with the consent of certificateholders representing 100% of the aggregate
voting rights of each outstanding class of the certificates. The trustee will
not be liable for any failure to act resulting from certificateholders' late
return of, or failure to return, directions requested by the trustee from the
certificateholders.
In the event that an offer is made by the [issuer of the underlying
securities] [or GSE issuer] to issue new obligations in exchange and
substitution for any of the underlying securities or any other offer is made
for the underlying securities, the trustee will notify the certificateholders
of such offer as promptly as practicable. The trustee must reject any such
offer unless an event of default under the indenture [underlying securities]
has occurred, the trustee is directed by the affirmative vote of all of the
certificateholders to accept such offer and the trustee has received the tax
opinion described above. Accordingly, a certificateholder generally would be
required to effect a withdrawal of Requested underlying securities from the
trust in order to accept such offer. See "Description of
Certificates--Optional Exchange" in the prospectus.
[If an event of default under the [indenture] [underlying securities]
occurs and is continuing and if directed by all the holders of outstanding
Class [ ] certificates and[, unless the Class [ ] certificates are no longer
outstanding, by all the holders of outstanding Class [ ] certificates,] the
trustee will 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 to be due and payable. In connection with
a vote concerning whether to declare the acceleration of the underlying
securities, the certificateholders' interests of each class may differ and the
interests of either class may differ from holders of other outstanding debt
securities of the underlying securities issuer[s].]
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Termination
The circumstances under which the obligations created by the trust
agreement will terminate in respect of the certificates are described in
"Description of Certificates--Termination" in the prospectus. [Describe
additional termination provisions.]DB Depositor Inc. will have the right to
purchase all remaining deposited assets in the trust and thereby effect early
retirement of the certificates on any distribution date, [(a)] once the
aggregate principal amount of the deposited assets at the time of any such
purchase is less than [10%] of the aggregate principal amount of the deposited
assets as of the Cut-off Date [and (b) at the option of DB Depositor Inc. at
[specify when and on what terms any such option may be exercised]]; provided,
however, that the right to exercise any such option is contingent on such
exercise being consistent with DB Depositor Inc. continued satisfaction of the
applicable requirements for exemption under Rule 3a-7 under the Investment
Company Act of 1940 and all applicable rules, regulations and interpretations.
In the event DB Depositor Inc. exercises any such option, the portion of the
purchase price allocable to the certificates of each class will be, to the
extent of available funds, [100% of their then aggregate outstanding
certificate Principal Balance or Notional Amount, as applicable, plus with
respect to the certificates [one month's] [three month's] [specify other
period] interest at the Fixed Pass-Through Rate or the then applicable
Variable Pass-Through Rate, as the case may be, plus, with respect to each
class of certificates, any previously accrued but unpaid interest.] [Specify
alternative allocation method if different from above.] In no event will the
trust created by the trust agreement for the certificates continue beyond the
expiration of 21 years from the death of the survivor of the person or persons
named in the trust agreement. See "Description of Trust
Agreement--Termination" in the prospectus.
LEGAL ASPECTS OF THE DEPOSITED ASSETS
[Describe any applicable legal aspects of the deposited assets or
relating to the enforceability by the certificateholders of the security
interest, if any, securing such deposited assets.]
FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of the material federal income
tax consequences of the purchase, ownership and disposition of the
certificates by an initial holder of certificates. Consequences will depend on
the terms of the certificate, whether the trust is treated as a grantor trust,
as a partnership or a FASIT for federal income tax purposes, and the assets
collateralizing or otherwise supporting such certificate. The consequences of
owning certificates which are deemed for federal income tax purposes to be
interests in a grantor trust, in a partnership or in a FASIT are discussed
separately below under the captions "Grantor Trust Certificates", "Partnership
Certificates" and "FASIT Certificates" respectively. The applicable trust
agreement would include provisions appropriate to the particulars of the
transaction and to the relevant federal income tax status of the trust and
related certificates.
This summary is based upon laws, regulations, rulings and decisions
currently in effect, all of which are subject to change, possibly on a
retroactive basis. The discussion does not deal with all federal tax
consequences applicable to all categories of investors, some of which may be
subject to special rules. In addition, this summary is generally limited to
investors who will hold the certificates as "capital assets" (generally,
property held for investment) within the meaning of Section 1221 of the
Internal Revenue Code of 1986, as amended (the "Code"), and who do not hold
their certificates as part of a "straddle," a "hedge" or a "conversion
transaction," persons that have a "functional currency" other than the U.S.
dollar and investors in pass-through entities. Investors should consult their
own tax advisors to determine the federal, state, local and other tax
consequences of the purchase, ownership and disposition of the certificates.
[The prospectus supplement for each series of certificates will describe the
consequences that relate to the specific certificates issued pursuant
thereto.]
The trust will be provided with an opinion of Sidley Austin Brown &
Wood LLP (a limited liability partnership), special federal tax counsel to DB
Depositor Inc. regarding certain federal income tax matters discussed below.
An opinion of federal tax counsel, however, is not binding on the Internal
Revenue Service or the courts. Prospective investors should note that no
rulings have been or will be sought from the Service with respect to any of
the federal income tax consequences discussed below, and no assurance can be
given that the Service will not take contrary positions.
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Tax Status of Trust as a Grantor Trust
In the opinion of federal tax counsel, the trust will be classified
as a grantor trust and not as an association, or publicly traded partnership,
taxable as a corporation for federal income tax purposes. Accordingly, each
owner of a certificate will be subject to federal income taxation as if it
owned directly the portion of the deposited assets allocable to the
certificates, and as if it paid directly its share of expenses paid by the
trust. The following discussion assumes that the underlying securities were
not issued with original issue discount, or "OID". Accordingly, the
certificate owners will not realize OID except with respect to a "stripped
interest" (as defined below).
Income of Certificate Owners
In general, a certificate owner will allocate the amount it pays for
its certificate among the underlying securities and the deposited assets in
the trust other than the underlying securities (the "other deposited assets")
allocable to such certificate, in proportion to their relative fair market
values on the date of purchase of the certificate. A certificate owner would
calculate separately its income, gain, loss or deduction realized with respect
to each such asset.
The federal income tax treatment of a holder of a particular class of
certificates will depend upon whether the interest in the underlying
securities represented by the class will be considered, in whole or in part,
to be a "stripped bond" or "stripped coupon" (together, a "stripped interest")
within the meaning of Section 1286 of the Code. A class of certificates will
not be considered to represent a stripped interest in the underlying
securities to the extent the certificate is entitled to receive a
proportionate amount of all principal and interest on the underlying
securities. A class of certificates will be considered in its entirety to
represent a stripped interest in the underlying securities if it is entitled
to receive interest on the underlying securities which is disproportionately
less than the principal which it is entitled to receive on the underlying
securities, or if it is entitled to receive all or part of the interest on the
underlying securities but no principal on the underlying securities. In
addition, if a class of certificates is entitled to receive interest and
principal on the underlying securities, but the interest it is entitled to
receive on the underlying securities is disproportionately more than the
principal it is entitled to receive on the underlying securities, it could be
argued that the certificates represent (a) an interest in the underlying
securities that is not a stripped interest to the extent it represents a
proportional amount of all the principal and interest on the underlying
securities and (b) a stripped interest in the underlying securities to the
extent of any additional interest to which it is entitled on the underlying
securities. If a certificate represents in part a stripped interest and in
part not a stripped interest, such interests will be treated as two separate
items for tax purposes and a purchaser of certificates will be required to
allocate its purchase price among the two items (as well as any other
deposited assets) in proportion to their relative fair market values on the
date of purchase.
Tax Treatment of Certificates to the Extent They are Not Stripped
Interests. To the extent a class of certificates does not represent a stripped
interest in the underlying securities, each certificate owner will be required
to report on its federal income tax return, in a manner consistent with its
method of accounting, its share of the gross income of the trust, including
interest and discount earned on the underlying securities, income derived from
the other deposited assets held by the trust, and any gain or loss upon
collection or disposition of the underlying securities or other deposited
assets. The portion of each monthly payment to a certificate owner that is
allocable to principal on the underlying securities, other than amounts
representing discount, as described below, will represent a recovery of
capital, which will reduce the tax basis of such certificate owner's undivided
interest in the underlying securities.
To the extent that the portion of the purchase price of a certificate
allocated to a certificate owner's undivided interest in a underlying security
is greater than or less than the portion of the principal balance of the
underlying security allocable to the certificate, such interest in the
underlying security will have been acquired at a premium or discount, as the
case may be. In determining whether a certificate owner has purchased its
interest in the underlying securities at a premium or discount, a portion of
the purchase price for a certificate will be allocated to (i) the other
deposited assets, including any accrued interest thereon, held by the trust
and (ii) the accrued interest on the underlying securities at the time of
purchase as though such accrued interest were a separate asset, thus, in each
case, reducing the portion
S-29
of the purchase price allocable to the certificate owner's undivided interest
in the underlying securities (the "Allocated Purchase Price)". To the extent
that the Allocated Purchase Price is less than the principal balance of an
underlying security, the certificate owner's interest in the underlying
security will be treated as purchased at a "market discount." The market
discount on a underlying security will, however, be considered to be zero if
it is less than a statutorily defined de minimis amount. Conversely, to the
extent that the Allocated Purchase Price exceeds the principal balance of an
underlying security, the certificate owner's interest therein will be treated
as purchased with "bond premium." See the discussion below under "Bond
Premium."
For example, if the Allocated Purchase Price paid by a certificate
owner who purchases a certificate in the initial public offering were equal or
almost equal to the portion of the principal balance of the underlying
security that is allocable to the certificate, there would be no significant
amount of discount or premium with respect to its interest in such underlying
security. Moreover, if the total purchase price of a certificate is equal to
the principal amount of the underlying securities allocable to the
certificate, because a portion of such purchase price will be allocated to the
other deposited assets of the trust, in the aggregate a certificate owner's
interest in the underlying securities will have been purchased at a discount.
In general, under the market discount provisions of the Code,
principal payments received by the trust, and all or a portion of the gain
recognized upon a sale or other disposition of an underlying security or upon
the sale or other disposition of a certificate, will be taxable as ordinary
income to the extent of accrued market discount, and a portion of the interest
deduction attributable to any indebtedness treated as incurred or continued to
purchase or carry an underlying security, or a certificate, must be deferred.
The ordinary income treatment on principal payments and dispositions and
deferral of interest deductions described in the preceding sentence will not
apply if a certificate owner elects to include market discount in income
currently as it accrues for each taxable year during which it holds the
certificate. Any such election will also apply to all debt instruments held by
the certificate owner during the year in which the election is made and all
debt instruments acquired thereafter. Market discount will accrue in the
manner to be provided in Treasury regulations, but the Conference Report
accompanying the Tax Reform Act of 1986 states that, until such regulations
are issued, taxpayers may elect to accrue market discount either (i) under a
constant yield (economic accrual) method or (ii) in the proportion that the
stated interest paid on the obligation for the current period bears to total
remaining interest on the obligation.
Tax Treatment of Certificates to the Extent They Are Stripped
Interests. To the extent a class of certificates represents a stripped
interest in the underlying securities, each such certificate will be subject
to the OID rules. The amount of OID on a stripped interest is equal to the
excess of all amounts payable on the stripped interest, other than qualified
stated interest, over the portion of the purchase price for the certificate
allocable to the stripped interest.
Under the Treasury Regulations issued under Section 1286 of the Code,
the interest payable with respect to the stripped interest will, in the
appropriate circumstances, be treated as "qualified stated interest" if it
represents a fixed periodic payment on principal on the underlying securities
to which the stripped interest (i.e., the certificate owner) is also entitled.
If none of the amounts payable to a certificate owner with respect to a
stripped interest constitute qualified stated interest, then the stripped
interest will have OID in an amount equal to the excess of all payments to be
received on the stripped interest over the purchase price for the certificate
allocable to the stripped interest. Moreover, in determining the amount paid
for the stripped interest, a portion of the purchase price for a certificate
must be allocated to the certificate owner's share of other deposited assets
and to accrued interest.
The tax treatment of a certificate owner will depend upon whether the
amount of OID on the stripped interest represented by the certificate is less
than a statutorily defined de minimis amount. In general, under the
Regulations, the amount of OID with respect to the stripped interest will be
de minimis if it is less than 1/4 of one percent multiplied by the product of
the "stated redemption price at maturity" and the number of full years
remaining after the purchase date until the maturity of such stripped
interest. However, if the stripped interest provides for amortization of
principal, the amount of OID will be de minimis if it is less than 1/4 of one
percent multiplied by the product of the stated redemption price at maturity
and the weighted average maturity (i.e., the sum of the amounts obtained by
multiplying the
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amount of each payment under the stripped interest, other than a payment of
qualified stated interest, by a fraction, the numerator of which is the number
of complete years from the purchase date until the payment is made and the
denominator of which is the stated redemption price at maturity) of the
stripped interest. In general, "stated redemption price at maturity" means the
sum of all amounts payable on the stripped interest other than qualified
stated interest.
If the amount of OID on the stripped interest represented by the
certificate is de minimis under the rules discussed above, the stripped
interest would not be treated as having OID. Each certificate owner would be
required to report on its federal income tax return its share of the gross
income of the trust, including interest on the underlying securities and any
gain upon sale or disposition by the trust of the underlying securities. Such
gross income would exceed the Pass-Through Rate on the certificate by an
amount equal to the certificate owner's share of the expenses of the trust for
the period during which it owns a certificate. Each certificate owner would be
required to include the de minimis OID in income as each principal payment on
the stripped interest is received, in proportion to the amount that each
principal payment bears to the stated principal amount of the stripped
interest; that income would be capital gain, short-term or long-term depending
upon the certificate owner's holding period in the certificate. The
certificate owner would be entitled to deduct its share of expenses of the
trust to the extent described below. Any amounts received by a certificate
owner from any credit support or any subordination feature will be treated for
federal income tax purposes as having the same characteristics as the payments
they replace.
Except as described below, a certificate owner would report its share
of the income of the trust under its usual method of accounting. Accordingly,
except as described below, interest on an underlying security would be
includible in a certificate owner's gross income when it accrues on the
underlying securities, or, in the case of certificate owners who are cash
basis taxpayers, when received by the administrative agent, if any, or
otherwise the trustee on behalf of certificate owners. Because the interest
collected on the underlying securities generally is paid to certificate owners
in the following month, the amount of interest includible in a certificate
owner's gross income during any calendar month will not equal the interest
distributed in that month.
If the OID with respect to the stripped interest in the underlying
securities represented by a certificate is not treated as being de minimis, a
certificate owner will be required to include in income, in addition to any
qualified stated interest on the stripped interest as described above, any OID
on the stripped interest. OID must be included in income as it accrues on a
daily basis, regardless of when cash payments are received, using a method
reflecting a constant yield as described below. Such treatment could result in
the accrual of income by such certificate owner prior to the receipt of cash
by such certificate owner. Under the rules described below, the amounts
includible in income by a certificate owner on a stripped interest that has
OID are lesser in the early years and greater in the later years than the
amounts that would be includible on a straight-line basis.
In general, if a stripped interest has OID the certificate owner will
be required, whether such certificate owner uses the cash or the accrual
method of tax accounting, to include in ordinary gross income the sum of the
"daily portions" of OID on the stripped interest for all days during the
taxable year that the certificate owner owns the certificate. The daily
portions of OID on a stripped interest are determined by allocating to each
day in any "accrual period" a ratable portion of the OID allocable to that
accrual period. The amount of OID on a stripped interest allocable to each
accrual period is determined by (i) multiplying the "adjusted issue price" (as
defined below) of the stripped interest by a fraction, the numerator of which
is the annual yield to maturity of the stripped interest and the denominator
of which is the number of accrual periods in a year and (ii) subtracting from
that product the amount of qualified stated interest, if any, payable on the
stripped interest during (or allocable to) such accrual period.
An "accrual period" would generally be each period ending on an
interest payment date on the underlying securities, although Treasury
regulations allow a certificate owner to elect other accrual periods of no
more than a year in length, as long as each scheduled payment on the
underlying securities occurs at the end of an accrual period.
S-31
The "adjusted issue price" of a stripped interest at the beginning of
any accrual period is the purchase price for a certificate allocable to the
stripped interest, including accrued interest, if any, (i) increased by the
amount of OID allocable to all prior accrual periods and (ii) reduced by the
amount of all payments other than qualified stated interest payments, if any,
in all prior accrual periods. In addition, if an interval between payments of
qualified stated interest contains more than one accrual period, the adjusted
issue price at the beginning of each accrual period in the interval is
increased by the amount of qualified stated interest that has accrued prior to
the first day of the accrual period but that is not payable until the end of
the interval.
The trustee intends to account for OID, if any, reportable by
certificate owners by reference to the price paid for a certificate by an
initial purchaser, although the amount of OID will differ for subsequent
purchasers. Subsequent purchasers should consult their tax advisors regarding
the proper calculation of OID.
Bond Premium. In the event that a certificate represents either an
unstripped interest in an underlying security, or a stripped interest which
includes qualified stated interest, and the stripped or unstripped interest is
treated as having been purchased at a premium (i.e., the purchase price of a
certificate allocable to the underlying security exceeds the total amount
payable on the underlying security to the certificateholder other than
qualified stated interest), such premium will be amortizable by the
certificate owner as an offset to interest income, with a corresponding
reduction in the certificate owner's basis, under a constant yield method over
the term of the underlying security if an election under Section 171 of the
Code is made or was previously in effect. Any such election will also apply to
all debt instruments held by the certificate owner during the year in which
the election is made and all debt instruments acquired subsequently.
Election to Treat All Interest as Original Issue Discount. Any
certificate owner may elect to include in gross income all interest, including
stated interest, OID, de minimis OID, market discount and de minimis market
discount, as adjusted by any bond premium or acquisition premium, that accrues
on an unstripped or stripped interest using the constant yield method
described above, treating the instrument as having been issued on the
certificate owner's acquisition date at an issue price equal to such owner's
adjusted basis with no interest payments being qualified stated interest. Such
an election with respect to a unstripped or stripped interest having
amortizable bond premium or market discount would constitute, respectively, an
election to apply the market discount rules or bond premium rules with respect
to all other debt instruments with market discount or amortizable bond
premium, as the case may be, of that certificate owner.
Modification or Exchange of underlying securities. Depending upon the
circumstances, it is possible that a modification of the terms of the
underlying securities, or a substitution of other assets for the underlying
securities following a default on the underlying securities, would be a
taxable event to certificate owners on which they would recognize gain or
loss.
Foreign Tax Credits. Any foreign income taxes withheld from payments
to the trust will be includible in the income of certificate owners and will
likewise be deductible to certificate owners, or, alternatively, certificate
owners may be eligible for a U.S. foreign tax credit subject to various
limitations.
Other Deposited Assets of the Trust
[Describe tax consequences of the other deposited assets.]
Deductibility of Trust's Fees and Expenses
In computing its federal income tax liability, a certificate owner
will be entitled to deduct, consistent with its method of accounting, its
share of reasonable administrative fees, trustee fees and other fees paid or
incurred by the trust as provided in Section 162 or 212 of the Code and any
allowable amortization deductions with respect to certain other assets of the
trust. If a certificate owner is an individual, estate or trust, the deduction
for his share of fees will be a miscellaneous itemized deduction that may be
disallowed in whole or in part.
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Purchase and Sale of a Certificate
A certificate owner's tax basis in a certificate generally will equal
the cost of the certificate, increased by any amounts of undistributed taxable
income (e.g., OID or market discount) and reduced by any amortized premium
(each as described above) and any payments other than payments of qualified
stated interest on an underlying security made on that certificate.
If a certificate is sold, gain or loss will be recognized equal to
the difference between the proceeds of sale allocable to each of the assets of
the trust and the certificate owner's adjusted basis in each of the foregoing.
Any gain or loss will be a capital gain or loss if the certificate was held as
a capital asset, except that gain will be treated in whole or in part as
ordinary interest income to the extent of the certificate owner's interest in
accrued market discount not previously taken into income on underlying
securities.
Backup Withholding
Payments made on the certificates and proceeds from the sale of the
certificates will not be subject to a "backup" withholding tax unless, in
general, the certificate owner fails to comply with certain reporting
procedures and is not an exempt recipient under applicable provisions of the
Code.
Foreign Certificate Owners
To the extent that amounts paid to certificate owners that are not
United States persons ("foreign certificate owners"), are treated as interest
with respect to underlying securities originated after July 18, 1984, such
amounts generally will not be subject to the 30% withholding tax, provided
that such foreign certificate owner (i) fulfills certain certification
requirements, (ii) does not own at least 10% of the total combined voting
power of all classes of stock of the underlying securities issuer or 10% of
the capital or profits of an issuer which is a partnership for federal income
tax purposes and (iii) is not a "related controlled foreign corporation."
Under such requirements, the holder must certify, under penalties of perjury,
that it is not a "United States person" and provide its name and address.
A foreign holder that is not an individual or corporation (or an
entity treated as a corporation for federal income tax purposes) holding a
certificate on its own behalf may have substantially increased certification
requirements and should consult its tax advisor.
[Describe the federal income tax consequences to foreign certificate
owners of an interest in any other deposited assets of the trust.]
A "United States person" means a citizen or resident of the U.S., a
corporation, partnership or other entity created or organized in or under the
laws of the U.S., a state thereof or the District of Columbia, an estate the
income of which is includible in gross income for U.S. federal income tax
purposes, regardless of its source, or a trust with respect to which a court
within the United States is able to exercise primary supervision over its
administration and one or more United States persons have the authority to
control all of its substantial decisions.
Tax Characterization of The Trust as a Partnership
With respect to a trust intended to qualify as a partnership for
federal income tax purposes, DB Depositor Inc. and the administrative agent,
if any, have agreed, and the certificate owners will agree by their purchase
of certificates, to treat the trust as a partnership for purposes of federal,
state and local income, franchise and any other tax measured in whole or in
part by income. However, the proper characterization of the arrangement
involving the trust, the certificate owners, DB Depositor Inc. and the
administrative agent, if any, is not entirely clear because there is no
directly comparable authority.
If the trust were deemed to be a "publicly traded partnership" it
could be subject to corporate income tax. Any such corporate income tax could
materially reduce or eliminate cash that would otherwise be distributable with
respect to the certificates and certificate owners could be liable for any
such tax that is unpaid by the trust. A publicly traded partnership is taxed
in the same manner as a
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corporation unless at least 90% of its gross income consists of specified
types of "qualifying income." Such qualifying income includes, among other
things, interest income not derived in the conduct of a financial or insurance
business, dividend income, and gain from the disposition of assets producing
such income. In the opinion of federal tax counsel, because of the nature of
the income of the trust, the trust will not be a publicly traded partnership
taxable as a corporation.
Partnership Taxation
As a partnership, the trust will not be subject to federal income
tax, but each certificate owner will be required to separately take into
account their allocable share of income, gains, losses, deductions and credits
of the trust. The trust's income will consist primarily of [ ] and any gain
upon collection or disposition [ ]. The trust's deductions will consist
primarily of [ ].
The tax items of a partnership are allocable to the partners in
accordance with the Code, Treasury Regulations and the partnership agreement
(here, the trust agreement and related documents). The trust agreement will
provide that each class of certificate owners will be allocated taxable income
of the trust for each monthly period equal to the sum of (i) the amount
payable (or accruing) at the Pass-Through Rate on such class of certificates
for such month (to the extent such amount would not economically represent a
return of capital); (ii) an amount equivalent to interest that accrues during
such month on amounts previously due on such class of certificates but not yet
distributed; (iii) any trust income for such month attributable to discount on
the underlying securities that corresponds to any excess of the principal
amount of that class of certificates over their initial issue price; and (iv)
[any other income economically accruing for that class of certificates during
such month. [All remaining taxable income of the trust will be allocated to
the [ ]]. It is believed that this allocation will be valid under applicable
Treasury regulations, although no assurance can be given that the Service
would not require a greater amount of income to be allocated to certificate
owners. Moreover, even under the foregoing method of allocation, holders may
be allocated income equal to the entire Pass-Through Rate plus the other items
described above even though the trust might not have sufficient cash to make
current cash distributions of that amount. Thus, cash basis holders in effect
could be required to report income from the certificates on the accrual basis.
In addition, tax allocations and tax reporting will be done on a uniform basis
for all certificate owners, even though their certificates may have been
purchased at different times and at different prices.
An individual taxpayer's miscellaneous itemized deductions (which do
not include interest expense) are subject to limitations and as a result may
be disallowed in whole or in part. Those limitations, which also apply to
estates and trusts, would apply to a certificate owner's share of expenses of
the trust (including fees to the administrative agent, if any) and might
result in such holder being taxed on an amount of income that exceeds the
amount of cash actually distributed to such holder over the life of the trust.
If the trust holds a large number of underlying securities, it
intends to make all tax calculations relating to income and allocations to
certificate owners on an aggregate basis. Were the Service to require that
such calculations be made separately for each underlying security, the trust
might be required to incur additional expense but DB Depositor Inc. believes
that there would not be a material adverse effect on certificate owners.
A certificate owner would increase or decrease its tax basis in its
certificate for its allocable share of the trust's income or loss,
respectively. Any cash distributions by the trust to a certificate owner will
constitute (i) first, a return of capital to the extent of such certificate
owner's tax basis in the certificate (with a corresponding dollar-for-dollar
reduction in such tax basis), and (ii) thereafter, to the extent in excess,
gain on the sale or exchange of such certificate owner's certificate. See
"Disposition of Certificates" below.
Discount and Premium
DB Depositor Inc. believes that the underlying securities were not
issued with OID and, therefore, the trust should not have OID income. However,
the purchase price paid by the trust for the underlying securities may be
greater or less than the remaining principal balance of the underlying
securities at the
S-34
time of purchase. If so, the underlying securities will have been acquired at
a premium or discount, as the case may be. As indicated above, if the trust
acquires a large number of underlying securities it will make this calculation
on an aggregate basis, but might be required to recompute it on an
instrument-by-instrument basis.
The trust will make an election that will result in any market
discount on the underlying securities being included in income currently as
such discount accrues over the life of the underlying securities. As indicated
above in the discussion of "Partnership Taxation," a portion of such market
discount income may be allocated to certificate owners.
Modification or Exchange of Underlying Securities
Depending upon the circumstances, it is possible that a modification
of the terms of the underlying securities, or a substitution of other assets
for the underlying securities following a default on the underlying
securities, would be a taxable event to certificate owners on which they would
recognize gain or loss.
Foreign Tax Credits
Any foreign income taxes withheld from payments to the trust will be
includible in the income of certificate owners and will likewise be deductible
to certificate owners, or, alternatively, certificate owners may be eligible
for a U.S. foreign tax credit subject to various limitations.
Tax Consequences of Other Assets Held by Trust
The manner in which income with respect to the other assets of the
trust should be accrued will depend on the nature of those assets.
[Discuss specific tax consequences of other assets.]
Section 708 Termination
Under Section 708 of the Code, the trust will be deemed to terminate
for federal income tax purposes if 50% or more of the capital and profits
interests in the trust are sold or exchanged within a 12-month period. Were
such a termination to occur, the trust would be considered to have contributed
its assets to a new partnership and distributed the interests in the new
partnership in liquidation to the certificate owners. If any such constructive
termination occurs, the trust does not intend to comply with certain technical
requirements that might be applicable for various reasons including the likely
lack of relevant data. As a result, the trust may be subject to certain tax
penalties and may incur additional expenses. Moreover, the Schedule K-1
information distributed to the certificate owners may be incorrect.
Disposition of Certificates. Generally, capital gain or loss will be
recognized on a sale or other disposition of certificates in an amount equal
to the difference between the amount realized and the seller's tax basis in
the certificates sold. A certificate owner's tax basis in a certificate will
generally equal its cost, increased by his share of trust income includible in
his income (including for the taxable year of sale) and decreased by his share
of deductible trust losses and any distributions received with respect to such
certificate. In addition, both his tax basis in, and the amount realized on a
sale of, a certificate would include the holder's share of liabilities of the
trust. A holder acquiring certificates at different prices may be required to
maintain a single aggregate adjusted tax basis in the certificate and, upon
sale or other disposition of some of the certificates, allocate a pro rata
portion of that aggregate tax basis to the certificates sold, rather than
maintaining a separate tax basis in each certificate for purposes of computing
gain or loss on a sale of that certificate.
On the sale of a certificate, any gain attributable to the holder's
share of any accrued market discount on the underlying securities that has not
otherwise been included in the holder's income would generally be treated as
ordinary income to the holder and would give rise to special tax reporting
requirements. The trust does not expect to have any other assets that would
give rise to those special
S-35
reporting requirements. Thus, to avoid those special reporting requirements,
the trust will elect to include market discount in income as it accrues.
If a certificate owner is required to recognize an aggregate amount
of income, not including income attributable to disallowed itemized deductions
described above, over the life of the certificates that exceeds the aggregate
cash distributions, that excess will generally give rise to a capital loss
upon the retirement of the certificate.
Allocations Between Transferors and Transferees
In general, the trust's taxable income and losses will be determined
monthly and the tax items for a particular calendar month allocable to a
particular class of certificates will be apportioned among holders of the
certificates in proportion to the principal amount of the certificates owned
by them as of the first business day following the end of such month. As a
result, a holder purchasing certificates may be allocated tax items (which
will affect its tax liability and tax basis) attributable to periods before
the actual transaction. The use of such a monthly convention may not be
permitted by existing regulations. If such a convention is not allowed (or
only applies to transfers of less than all of a partner's interest), taxable
income or losses of the trust might be reallocated among the certificate
owners. The trustee is authorized to revise the trust's method of allocation
between transferors and transferees to conform to a method permitted by future
regulations.
Section 754 Election
In the event that a certificate owner sells its certificates at a
profit or loss, the purchasing certificate owner will have a higher or lower
basis in the certificates than the selling certificate owner had. The tax
basis of the trust's assets will not be adjusted to reflect that higher or
lower basis unless the trust were to file an election under Section 754 of the
Code. In order to avoid the administrative complexities that would be involved
in keeping accurate accounting records, as well as potentially onerous
information reporting requirements, the trust will not make the election. As a
result certificate owners might be allocated a greater or lesser amount of
trust income than would be appropriate based on their own purchase price for
certificates.
Administrative Matters
The trustee is required to keep complete and accurate books of the
trust. Such books will be maintained for financial reporting and tax purposes
on an accrual basis and the fiscal year of the trust will be the calendar
year. The trustee will file a partnership information return (Internal Revenue
Service Form 1065) with the Service for each taxable year of the trust and
will report each certificate owner's allocable share of items of trust income
and expense to holders and the Service on Schedule K-1. The trust will provide
the Schedule K-1 information to nominees that fail to provide the trust with
the information statement described below and such nominees will be required
to forward that information to the beneficial owners of the certificates.
Generally, holders must file tax returns that are consistent with the
information return filed by the trust or be subject to penalties, unless the
holder notifies the Service of all such inconsistencies.
Under Code Section 6031, any person that holds certificates as a
nominee at any time during a calendar year is required to furnish the trust
with a statement containing information on the nominee, the beneficial owners
and the certificates so held. This information includes (i) the name, address
and taxpayer identification number of the nominee and (ii) as to each
beneficial owner (x) the name, address and taxpayer identification number of
such person, (y) whether such person is not a United States Person, a
tax-exempt entity, or a foreign government, an international organization, or
any wholly-owned agency or instrumentality of either of the foregoing, and (z)
certain information on certificates that were held, bought or sold on behalf
of such person throughout the year. In addition, brokers and financial
institutions that hold certificates through a nominee are required to furnish
directly to the trust information as to themselves and their ownership of
certificates. A clearing agency registered under Section 17A of the Exchange
Act is not required to furnish an information statement to the trust. The
information referred to above for any calendar year must be furnished to the
trust on or before the following January.
S-36
Nominees, brokers and financial institutions that fail to provide the trust
with the information described above may be subject to penalties.
DB Depositor Inc., as the tax matters partner, will be responsible
for representing the certificate owners in any dispute with the Service. The
Code provides for administrative examination of a partnership as if the
partnership were a separate and distinct taxpayer. Generally, the statute of
limitations for partnership items does not expire before three years after the
date on which the partnership information return is filed. Any adverse
determination following an audit of the return of the trust by the appropriate
taxing authorities could result in an adjustment of the returns of the
certificate owners and, under certain circumstances, a certificate owner may
be precluded from separately litigating a proposed adjustment to the items of
the trust. An adjustment could also result in an audit of a certificate
owner's returns and adjustments of items not related to the income (or loss)
of the trust.
Tax Consequences to Foreign Certificate Owners
It is not clear whether the trust would be considered to be engaged
in a trade or business in the United States for purposes of federal
withholding taxes with respect to non-U.S. persons because there is no clear
authority dealing with that issue under facts substantially similar to those
described in this prospectus supplement. Although it is not expected that the
trust would be engaged in a trade or business in the United States for such
purposes, the trust expects to withhold as if it were so engaged in order to
protect the trust from possible adverse consequences of a failure to withhold.
The trust expects to withhold on the portion of its taxable income that is
allocable to foreign certificate owners pursuant to Code Section 1446, as if
such income were effectively connected to a U.S. trade or business, at a rate
of 35% for foreign holders that are taxable as corporations and 39.6% for all
other foreign holders. Subsequent adoption of Treasury regulations or the
issuance of other administrative pronouncements may require the trust to
change its withholding procedures. In determining a holder's foreign status,
the trust may rely on Form W-8 BEN or the holder's certification of nonforeign
status signed under penalties of perjury. A foreign holder that is not an
individual or corporation (or an entity treated as a corporation for federal
income tax purposes) holding a certificate on its own behalf may have
substantially increased certification requirements and should consult its tax
advisor.
Each foreign holder might be required to file a U.S. individual or
corporate income tax return and pay federal income tax (including, in the case
of a corporation, the branch profits tax) on its share of the trust's income.
Each foreign holder must obtain a taxpayer identification number from the
Service and submit that number to the trust on Form W-8 BEN in order to assure
appropriate crediting of the taxes withheld. A foreign holder generally would
be entitled to file with the Service a claim for refund with respect to taxes
withheld by the trust, taking the position that no taxes were due because the
trust was not engaged in a U.S. trade or business. The trust will cooperate in
any such refund claim if it can do so without incurring any out-of-pocket
cost. No assurance can be given as to whether any such refund claim would be
granted.
The foregoing summary will be modified, as necessary, to reflect
differences caused by the precise nature of the deposited assets relating to a
given series of certificates.
Backup Withholding
Payments made on the certificates and proceeds from the sale of the
certificates will not be subject to a "backup" withholding tax unless, in
general, the certificate owner fails to comply with reporting procedures and
is not an exempt recipient under applicable provisions of the Code.
Tax Characterization of The Trust as a FASIT
Upon the proposed issuance of certificates representing interests in
a FASIT and the promulgation of final Treasury Regulations relating to the
federal income taxation of FASITs and to the federal income tax consequences
of the ownership of FASIT interests, this prospectus supplement relating to
such certificates will describe the requirements for the classification of the
trust as a FASIT and the consequences to a holder of owning such certificates.
S-37
STATE TAX CONSEQUENCES
[Describe any applicable state tax consequences that may arise,
including as a result of the specific nature of the deposited assets relating
to a given series of certificates or the degree of servicing required with
respect to such deposited assets.]
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and the Code impose certain requirements on (a) an employee benefit
plan (as defined in Section 3(3) of ERISA, (b) a plan described in Section
4975(e)(1) of the Code or (c) any entity whose underlying assets are treated
as assets of any such plan by reason of such plan's investment in the entity
(each, a "Plan").
In accordance with ERISA's fiduciary standards, before investing in a
certificate, a Plan fiduciary should determine whether the investment is
permitted under the governing Plan instruments and is appropriate for the Plan
in view of its investment policy and the composition of its portfolio. Other
provisions of ERISA and the Code prohibit certain transactions (including
loans or other extension of credit) involving the assets of a Plan and persons
who have specified relationships to the Plan ("parties in interest" within the
meaning of ERISA or "disqualified persons" within the meaning of Section 4975
of the Code). Thus, a Plan fiduciary considering an investment in certificates
should also consider whether the investment might constitute or give rise to a
non-exempt prohibited transaction under ERISA or the Code. [In addition to the
prohibited transaction issues discussed below that could arise if the trust
assets are classified as Plan assets for ERISA purposes, prospective
purchasers of the Class [ ] certificates offered under this prospectus
supplement should consider the ERISA implications of the grant of the call
option to the holders of the call warrants and the consequences of a
subsequent sale of the Class [ ] certificates to the holders of the call
warrants. The initial holder of the call warrants will be the depositor or an
affiliate thereof but the call warrants are transferable contract rights.]
Trust Assets as "Plan Assets"
[Under a "look-through rule" set forth in Section 2510.3-101 of the
United States Department of Labor ("DOL") regulations (the "Regulation"), a
Plan's assets may include an interest in the underlying assets of an entity
(such as a trust) for certain purposes under ERISA if the Plan acquires an
equity interest in the entity. Thus, unless an exception to the
look-through rule applies, an investment in Certificates by a Plan might
result in the assets of the Trust being deemed to constitute Plan Assets,
which in turn might mean that certain aspects of that investment, including
the operation of the trust, might be subject to the prohibited transaction
provisions under ERISA and the Code. [Specify whether the certificates will
qualify for an exception from the Plan Assets look-through rule under such
Regulation.]
If assets of the trust were deemed to be Plan Assets, transactions
involving the depositor, underwriter, trustee, market agent, underlying
securities trustee and the underlying securities issuer might constitute
non-exempt prohibited transactions with respect to a Plan holding a
certificate unless (i) one or more prohibited transaction class exemptions, or
PTCEs, applies or (ii) in the case of the underlying securities issuer, it is
not a disqualified person or party in interest with respect to such Plan.
Plans maintained or contributed to by the depositor, underwriter, trustee,
market agent, underlying securities trustee and the underlying securities
issuer, or any of their affiliates, should not acquire or hold any
certificate.
If the trust is deemed to hold Plan Assets, the underlying securities
would appear to be an indirect loan between the underlying securities issuer
and any Plan owning certificates; however, the loan, by itself, would not
constitute a prohibited transaction unless the underlying securities that is
the obligor is a party in interest or disqualified person with respect to such
Plan.]
The Regulation contains an exemption from such Plan asset rules if
the security acquired by the Plan is a "publicly offered security." A
"publicly offered security" is defined as a security that is (i) freely
transferable, (ii) part of a class of securities that is owned by 100 or more
investors independent of the issuer and of one another and (iii) sold to the
Plan as part of an offering of securities to the public
S-38
pursuant to an effective registration statement under the Securities Act and
timely registered under the Exchange Act. It is anticipated that the Class [ ]
certificates will meet the criteria of the "publicly offered securities"
exemption. There are no restrictions imposed on the transfer of Class [ ]
certificates; the Class [ ] certificates will be sold pursuant to an effective
registration statement under the Securities Act and then will be timely
registered under the Exchange Act; and the underwriters have undertaken to
sell the Class [ ] certificates to a minimum of 400 beneficial owners. See
"Listing."
If the Class [ ] certificates fail to meet the criteria of the
"publicly offered security" exemption and the assets of the trust were deemed
to be Plan assets, transactions involving the depositor, the underwriters, the
trustee, the underlying securities trustee and the underlying securities
issuer might constitute non-exempt prohibited transactions with respect to a
Plan holding a Class [ ] certificate unless (i) one or more prohibited
transaction class exemptions ("PTCEs") discussed below applies or (ii) in the
case of the underlying securities issuer, it is not a disqualified person or
party in interest with respect to such Plan.]
Prohibited Transaction Exemptions
Certain prohibited transaction class exemptions could apply to the
acquisition and holding of certificates by Plans, and the operation of the
trust, including, but not limited to: PTCE 84-14 (an exemption for certain
transactions determined by an independent qualified professional asset
manager), PTCE 91-38 (an exemption for certain transactions involving bank
collective investment funds), PTCE 90-1 (an exemption for certain transactions
involving insurance company pooled separate accounts); PTCE 95-60 (an
exemption for certain transactions involving insurance company general
accounts) and PTCE 96-23 (an exemption for transactions effected by in-house
asset managers). There is no assurance that these exemptions would apply with
respect to all transactions involving the trust's assets.
[The underwriter is a broker-dealer registered under the Securities
Exchange Act of 1934, as amended, and customarily purchases and sells
securities for its own account in the ordinary course of its business as a
broker-dealer. Accordingly, the sale of certificates by the underwriter to
Plans may be exempt under PTCE 75-1 if the following conditions are satisfied:
(i) the underwriter is not a fiduciary with respect to the Plan and is a party
in interest or disqualified person solely by reason of Section 3(14)(B) of
ERISA or Section 4975(e)(2)(B) of the Code or a relationship to a person
described in such Sections, (ii) the transaction is at least as favorable to
the Plan as an arm's-length transaction with an unrelated party and is not a
prohibited transaction within the meaning of Section 503(b) of the Code, and
(iii) the Plan maintains for at least six years such records as are necessary
to determine whether the conditions of PTCE 75-1 have been met.
The custodial and other services rendered by the trustee, market
agent and underlying securities trustee might be exempt pursuant to Section
408(b)(2) of ERISA and Section 4975(d)(2) of the Code, which exempt services
necessary for the establishment or operation of a Plan under a reasonable
contract or arrangement and for which no more than reasonable compensation is
paid. An arrangement would not be treated as reasonable unless it can be
terminated upon reasonably short notice under the circumstances without
penalty. The trustee and the market agent may each be terminated upon 60 days
prior notice and the approval of certificateholders owning more than 66-2/3%
of the aggregate beneficial interest of certificates. The depositor believes
the compensation of the trustee and market agent is reasonable under the
circumstances. The statutory exemption for services noted above does not
provide exemptive relief from prohibited transactions described in Section
406(b) of ERISA or Section 4975(c)(1)(E) or (F) of the Code. In that regard, a
fiduciary with respect to a Plan should consider whether a sale of a portion
of the underlying securities by the market agent to Deutsche Banc Alex. Brown
Inc. or its affiliates might constitute a non-exempt prohibited transaction by
reason of the relationship between the market agent and any such purchaser,
notwithstanding the sale procedure to accept the highest bid submitted and the
certification of the highest bid and identity of bidders to the trustee, or
the possibility that the market agent may not solicit Deutsche Banc Alex.
Brown Inc. and its affiliates to avoid the possibility of a non-exempt
prohibited transaction. The market agent shall, prior to any sale of
underlying securities to Deutsche Banc Alex. Brown Inc. or any of its
affiliates, certify in writing to the trustee that any such purchaser
submitted the highest of at least three bids and shall identify the other
bidders.
S-39
By acquiring and holding a certificate, a Plan shall be deemed to
have represented and warranted to the depositor, trustee, market agent and
underwriter that such acquisition and holding of a certificate does not
involve a non-exempt prohibited transaction with respect to such Plan,
including with respect to the activities of the trust.]
METHOD OF DISTRIBUTION
Subject to the terms and conditions set forth in the underwriting
agreement, dated as of [ ], _______, DB Depositor Inc. has agreed to sell and
[Deutsche Banc Alex. Brown Inc. (an affiliate of DB Depositor Inc.)] [each of
the underwriters named below, including Deutsche Banc Alex. Brown Inc. (an
affiliate of DB Depositor Inc.)] [,] has [severally] agreed to purchase, the
[Certificates] [the principal amount of each class of certificates set forth
below opposite its name].
Class [ ] Class [ ] Class [ ]
--- --- ---
Deutsche Banc Alex. Brown Inc............ $__________ $__________ $__________
Total.............................
============= ============ ============
[Deutsche Banc Alex. Brown Inc. has] [The several underwriters have] agreed,
subject to the terms and conditions set forth in the underwriting agreement,
to purchase all certificates offered hereby if any of such certificates are
purchased. [In the event of default by any underwriter, the underwriting
agreement provides that, in certain circumstances, the purchase commitments of
non-defaulting underwriters may be increased or the underwriting agreement may
be terminated.]
DB Depositor Inc. has been advised by the underwriter[s] that
[it][they] propose[s] to offer the certificates from time to time in
negotiated transactions or otherwise at varying prices to be determined at the
time of sale. The underwriter[s] may effect such transactions by selling
certificates to or through dealers and such dealers may receive compensation
in the form of underwriting discounts, concessions or commissions from the
underwriter[s] and any purchasers of certificates for whom they may act as
agents. The underwriter[s] and any dealers that participate with the
underwriter[s] in the distribution of certificates may be deemed to be
underwriters, and any profit on the resale of certificates by them may be
deemed to be underwriting discounts, or commissions under the Securities Act.
The underwriting agreement provides that DB Depositor Inc. will
indemnify the underwriter[s] against certain civil liabilities, including
liabilities under the Securities Act, or will contribute to payments the
underwriter[s] may be required to make in respect thereof.
[In connection with the sale of the Class [ ] certificates,
Securities and Exchange Commission rules permit the underwriter[s] to engage
in transactions that stabilize the price of the Class [ ] certificates. These
transactions may include purchases for the purpose of fixing or maintaining
the price of the Class [ ] certificates. The underwriter[s] may create a short
position in the Class [ ] certificates in connection with the offering. That
means they sell a larger number of the Class [ ] certificates than is shown on
the cover page of this prospectus supplement. If they create a short position,
the underwriter[s] may purchase Class [ ] certificates in the open market to
reduce the short position. If the underwriter[s] purchase the Class [ ]
certificates to stabilize the price or to reduce their short position, the
price of the Class [ ] certificates could be higher than it might be if they
had not made such purchases. The underwriter[s] make no representation or
prediction about any effect that these purchases may have on the price of the
Class [ ] certificates. The underwriter[s] may suspend any of these activities
at any time.
[In addition to stabilization transactions, the underwriter[s] may
exchange a certain percentage of the Class [ ] certificates constituting an
unsold allotment of the certificates for a like percentage of the deposited
assets in accordance with the Series 200_ - [ ] supplement to the trust
agreement.]
[The underwriter[s] may also impose a penalty bid on certain dealers
and selling group members. This means that if the underwriter[s] purchase
Class [ ] certificates in the open market to reduce the underwriter[s'] short
position or to stabilize the price of the Class [ ] certificates, they may
reclaim the amount of the selling concession from the underwriter[s] or
selling group members who sole those Class [ ] certificates as part of this
offering.]
S-40
[LISTING]
[The certificates are a new issue of securities with no established
trading market. The certificates will be approved for listing, subject to
official notice of issuance, on the [name of exchange]. The certificates will
be eligible for trading on [name of exchange] within the 30-day period after
the initial delivery thereof but it is not likely that substantial amounts of
the certificates will be traded on [name of exchange]. In order to meet one of
the requirements for listing the certificates on [name of exchange], the
underwriter[s] have undertaken to sell the certificates to a minimum of 400
beneficial owners. The underwriter[s] have told the depositor that they
presently intend to make a market in the certificates prior to commencement of
trading on [name of exchange], as permitted by applicable laws and
regulations. The underwriter[s] are not obligated, however, to make a market
in the certificates. Any market making by the underwriter[s] may be
discontinued at any time at the sole discretion of the underwriter[s]. No
assurance can be given as to whether a trading market for the certificates
will develop or as to the liquidity of any trading market.]
RATINGS
It is a condition to the issuance of the certificates that the
certificates be rated not lower than [specify ratings applicable to each
class] by [Standard & Poor's, a division of The McGraw-Hill Companies, Inc.
("Standard & Poor's")][Moody's Investors Service, Inc. ("Moody's")] [and]
[Fitch, Inc. ("Fitch")] (the "Rating[Agency][Agencies]"). The ratings address
the likelihood of the receipt by the certificateholders of payments required
under the trust agreement, and are based primarily on the credit quality of
the deposited assets and any providers of credit support, as well as on the
relative priorities of the certificateholders of each class of the
certificates with respect to collections and losses with respect to the
deposited assets. The rating on the certificates does not, however, constitute
a statement regarding the occurrence or frequency of redemptions or
prepayments on, or extensions of the maturity of, the deposited assets, the
corresponding effect on yield to investors, or whether investors in the Class
[ ] certificates [specify class with Notional Amount] may fail to recover
fully their initial investment.
A security rating is not a recommendation to buy, sell or hold
securities and may be subject to revision or withdrawal at any time by the
assigning rating agency. Each security rating should be evaluated
independently of any other security rating.
DB Depositor Inc. has not requested a rating on the certificates by
any rating agency other than the rating [agency] [agencies]. However, there
can be no assurance as to whether any other rating agency will rate the
certificates, or, if it does, what rating would be assigned by any such other
rating agency. A rating on the certificates by another rating agency, if
assigned at all, may be lower than the ratings assigned to the certificates by
the rating [agency] [agencies].
LEGAL OPINIONS
Certain legal matters relating to the certificates will be passed
upon for DB Depositor Inc. and the underwriter[s] by Sidley Austin Brown &
Wood LLP, New York, New York.
S-41
---------------------------------------
No person has been authorized to give any information or
make any representations other than those contained in
this prospectus supplement or the prospectus, and, if
given or made, such information or representations must
not be relied upon as having been authorized. This
prospectus supplement and the prospectus does not (LOGO)
constitute an offer to sell or the solicitation of an
offer to buy any securities other than the securities to
which it related or an offer to sell or the solicitation
of an offer to buy such securities in any circumstances in
which such offer or solicitation would be unlawful.
Neither the delivery of the prospectus supplement and the
prospectus nor any sale made hereunder shall, under any Trust Certificates
circumstances, create any implications that the Series 2001-[ ]
information contained herein is correct as of any time
subsequent to its date.
Summary of Principal Terms........................S-5 Underlying Securities
Summary of Prospectus Supplement .................S-9 due ___________, 20__
Formation of the Trust ...........................S-15 Issued by ________________
Risk Factors .....................................S-15
Description of the Deposited Assets ..............S-17
[Description of Credit Support] ..................S-20
Yield on the Certificates ........................S-22
Description of the Certificates ..................S-22
Description of the Trust Agreement ...............S-26 Prospectus Supplement
Certain Legal Aspects of the Deposited Assets ....S-29 [__________ __, 20__]
Certain Federal Income Tax Consequences ..........S-29
Certain State Tax Consequences ...................S-40
ERISA Considerations .............................S-40 Subject to Completion,
Method of Distribution ...........................S-42 Dated _____, 2001
[Listing..........................................S-43]
Ratings ..........................................S-43
Legal Opinions ...................................S-44
Important Notice About Information Presented in this Deutsche Banc Alex. Brown
Prospectus and the Accompanying
Prospectus Supplement...........................2
Where You Can Find More Information...............3
Incorporation of Certain Documents by Reference...3
Reports to Certificateholders.....................4
Risk Factors......................................4
The Depositor.....................................9
Use of Proceeds...................................9
Formation of the Trust............................9
Maturity and Yield Considerations.................10
Description of the Certificates...................12
Description of Deposited Assets and Credit
Support...........................................28
Description of the Trust Agreement................40
Currency Risks....................................49
Certain United States Federal Income
Tax Consequences.................................51
ERISA Considerations..............................57
Underwriting......................................59
Legal Matters.....................................60
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange is effective. This prospectus is not an offer to sell
and is not soliciting an offer to buy these securities in any state where the
offer or sale is not permitted.
Prospectus
Subject to Completion, Dated September 28, 2001
--------------------------------------------------------------------------------
Trust Certificates
(Issuable in Series)
DB Depositor Inc.
Depositor
The trust -
o May periodically issue asset-backed certificates in one or more series
with one or more classes; and
o will own -
o a publicly issued security or a pool of securities;
o payments due on those securities; and/or
o other assets described in this prospectus and in the accompanying
prospectus supplement.
The certificates -
o will represent interests in the trust and will be paid only from the
trust assets;
o will be denominated and sold for U.S. dollars or for one or more foreign
or composite currencies and any payments to certificateholders may be
payable in U.S. dollars or in one or more foreign or composite
currencies; and
o will be issued as part of a designated series which may include one or
more classes of certificates and enhancement.
The certificateholders -
o will receive interest and principal payments from the assets deposited
with the trust.
The date of this prospectus is [_____________ __, 2001.]
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED
IN THIS PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT
We provide information to you about the certificates in two separate
documents that progressively provide more detail: (a) this prospectus, which
provides general information, some of which may not apply to a particular
series of certificates, including your series, and (b) the accompanying
prospectus supplement, which will describe the specific terms of your series
of certificates, including:
o the currency or currencies in which the principal, premium, if any, and
any interest are distributable;
o the number of classes of such series and, with respect to each class of
such series, its designation, aggregate principal amount or, if
applicable, Notional Amount and authorized denominations;
o information concerning the type, characteristics and specifications of
the securities deposited with the trust (the "underlying securities") and
any other assets deposited with the trust (together with the underlying
securities, the "deposited assets") and any credit support for such
series or class;
o the relative rights and priorities of each class, including the method
for allocating collections from the deposited assets to the
certificateholders of each class and the relative ranking of the claims
of the certificateholders of each class to the deposited assets;
o the name of the trustee and the administrative agent, if any, for the
series;
o the Certificate Rate or the terms relating to the applicable method of
calculation thereof;
o the time and place of distribution (a "distribution date") of interest,
premium, if any, and/or principal, if any;
o the date of issue;
o the Final Scheduled Distribution Date, (defined in the prospectus
supplement), if applicable;
o the offering price;
o any exchange, redemption, call, or repurchase terms, whether mandatory or
optional, and any other specific terms of certificates of each series or
class.
See "Description of Certificates--General" for a listing of other
items that may be specified in the applicable prospectus supplement.
If the terms of a particular series of certificates vary between this
prospectus and the prospectus supplement, you should rely on the information
in the prospectus supplement.
You should rely only on the information provided in this prospectus
and the accompanying prospectus supplement including the information
incorporated by reference. We have not authorized anyone to provide you with
different information. We are not offering the certificates in any state where
the offer is not permitted. We do not claim the accuracy of the information in
this prospectus or the accompanying prospectus supplement as of any date other
than the dates stated on their respective covers.
2
TABLE OF CONTENTS
Important Notice About Information Presented in this Prospectus and the
Accompanying
Prospectus Supplement...........................................................................................2
Where You Can Find More Information..............................................................................3
Incorporation of Certain Documents By Reference..................................................................3
Reports to Certificateholders....................................................................................4
Risk Factors.....................................................................................................4
The Depositor....................................................................................................9
Use of Proceeds..................................................................................................9
Formation of the Trust...........................................................................................9
Maturity and Yield Considerations...............................................................................10
Description of the Certificates.................................................................................12
Description of Deposited Assets and Credit Support..............................................................27
Description of the Trust Agreement..............................................................................38
Currency Risks..................................................................................................47
Certain United States Federal Income Tax Consequences...........................................................50
ERISA Considerations............................................................................................56
Underwriting....................................................................................................58
Legal Matters...................................................................................................59
WHERE YOU CAN FIND MORE INFORMATION
Each trust is subject to the informational requirements of the
Exchange Act and we file on behalf of each trust, reports and other
information with the Securities and Exchange Commission or the SEC. You may
read and copy any reports, statements or other information we file at the
SEC's public reference room in Washington, D.C. You can request copies of
these documents, upon payment of a duplicating fee, by writing to the SEC.
Please call the SEC at (800) SEC-0330 for further information on the operation
of the public reference rooms. Our SEC filings are also available to the
public on the SEC Internet site (http://www.sec.gov). We do not intend to send
any financial reports to certificateholders.
We filed a registration statement relating to the certificates with
the SEC. This prospectus is part of the registration statement, but the
registration statement includes additional information.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" information we file
with it, which means that we can disclose important information to you by
referring you to those documents. We are incorporating by reference all
documents that we have filed with the SEC pursuant to the Exchange Act prior
to the date of this prospectus. The information incorporated by reference is
considered to be part of this prospectus. Information that we file later with
the SEC will automatically update the information in this prospectus. In all
cases, you should rely on the later information over different information
included in this prospectus or the accompanying prospectus supplement. We
incorporate by reference any future SEC reports filed by or on behalf of the
trust until we terminate our offering of the certificates.
As a recipient of this prospectus, you may request a copy of any
document we incorporate by reference, except exhibits to the documents (unless
the exhibits are specifically incorporated by reference), at no cost, by
writing or calling us at: Secretary of DB Depositor Inc., 31 West 52nd Street,
New York, New York 10019, (212) 250-1869.
REPORTS TO CERTIFICATEHOLDERS
Except as otherwise specified in the applicable prospectus
supplement, unless and until definitive certificates are issued, unaudited
reports containing information concerning the related trust will be prepared
annually by the related trustee and sent on behalf of the related trust only
to Cede & Co., as
3
nominee of DTC and registered holder of the certificates. If definitive
certificates are issued, the reports will be prepared by the related trustee
and sent on behalf of the related trust directly to the certificateholders in
accordance with the trust agreement. See "Description of the
Certificates--Global Securities" and "Description of the Trust
Agreement--Reports to Certificateholders; Notices." The reports will not
constitute financial statements prepared in accordance with generally accepted
accounting principles. The depositor, on behalf of each trust, will cause to
be filed with the SEC such periodic reports as are required under the Exchange
Act. The depositor does not intend to send any financial reports to
certificateholders.
References to "U.S. dollars," US$," "dollar" or "$" are to the lawful
currency of the United States.
For definitions of certain terms used in this prospectus, refer to
"Index of Defined Terms" beginning on page I-1.
RISK FACTORS
In connection with an investment in the certificates of any series,
prospective purchasers should consider, among other things, (1) the risk
factors set forth below and (2) any additional risk factors set forth in the
applicable prospectus supplement.
The trust consists of limited assets and payments on the
certificates will be made solely from deposited assets
The only material assets expected to be in a trust are underlying
securities and any other deposited assets corresponding to the related series
(or class within that series) of certificates being offered. The certificates
do not represent obligations of the depositor, any administrative agent,
Deutsche Banc Alex. Brown Inc. ("DBAB") or any of their respective affiliates
and, unless otherwise specified in the applicable prospectus supplement, are
not insured or guaranteed by the depositor, any administrative agent or DBAB.
Accordingly, certificateholders' receipt of distributions in respect of the
certificates will depend entirely on the performance of and the trust's
receipt of payments with respect to the deposited assets.
The certificates are obligations of the issuing trust and there will
be no recourse to Deutsche Bank AG, the depositor or their affiliates
The certificates will not represent a recourse obligation of, or
interest in, the depositor, any administrative agent, DBAB, the issuer of the
underlying securities or any of their respective affiliates. The certificates
will not be insured or guaranteed by the depositor, DBAB, Deutsche Bank AG or
any of their respective affiliates. The obligations, if any, of the depositor
with respect to the certificates of any series will only be pursuant to
certain limited representations and warranties with respect to an underlying
security or other deposited assets, and recourse with respect to the
satisfaction of the obligations will be limited to any recourse for a breach
of a corresponding representation or warranty that the depositor may have
against the seller of that underlying security or other deposited assets to
the depositor. The depositor does not have, and is not expected in the future
to have, any assets with which to satisfy any claims arising from a breach of
any representation or warranty.
The certificates may not be a liquid investment
There can be no assurance that an active public market for any series
(or class within such series) of certificates will develop or, if a public
market develops, as to the liquidity of the trading market for such
certificates. DBAB has advised the depositor that it intends to make a market
in the certificates, as permitted by applicable laws and regulations, after
their issuance. DBAB is not obligated, however, to make a market in the
certificates of any series or class within that series and market-making
activity may be discontinued at any time without notice at the sole discretion
of DBAB. If an active public market for the certificates does not develop or
continue, the market prices and liquidity of the certificates may be adversely
affected.
4
Early payments may leave an investor unable to reinvest in
comparable investments.
The timing of distributions of interest, premium, if any, and
principal on the certificates will be affected by any early redemption,
amortization or prepayment of the related underlying securities. The
applicable prospectus supplement will describe any puts, calls or other
mandatory or optional redemption or early amortization features, any extension
of maturity provisions applicable to those underlying securities.
The timing of distributions on the certificates will also be affected
by any exchange of the related underlying securities pursuant to a tender
offer or otherwise, the manner and priority in which collections from the
underlying securities and any other deposited assets are allocated to each
class of that series and the performance of the related deposited assets.
Early payment or amortization may adversely affect an investor by returning
principal to the investor when prevailing interest rates have declined and
reinvestment of such funds at the rate applicable to the certificates is not
possible. These factors may be influenced by a variety of accounting, tax,
economic, social and other factors. See "Maturity and Yield Considerations."
Extension of maturity may cause illiquidity and loss of more favorable
investment opportunities.
The timing of distributions of interest, premium, if any, and
principal of underlying securities will also be affected by any extension of
maturity of the related underlying securities, which may be caused by, the
manner and priority in which collections from the underlying securities and
any other deposited assets are allocated to each class of that series and the
performance of the related deposited assets. The applicable prospectus
supplement will describe any extension of maturity provisions applicable to
the underlying securities. Extension of maturity prevents an investor from
obtaining principal funds at the originally scheduled maturity date and may
prevent an investor from obtaining favorable reinvestment at a time when
prevailing interest rates have risen. These factors may be influenced by a
variety of accounting, tax, economic, social and other factors. See "Maturity
and Yield Considerations."
A change in the characterization of the trust could result in adverse
tax consequences to the certificateholders
Prospective investors should be aware that no rulings have been
sought from the Internal Revenue Service ("IRS"). If the trust is
characterized or treated as a corporation for federal income tax consequences,
among other consequences, the trust would be subject to federal income tax,
and similar state income or franchise taxes, on its income and distributions
to certificateholders would be impaired. See "Federal Income Tax
Considerations" in this prospectus and in the related prospectus supplement.
If the underlying securities represent the obligations of foreign
issuers it may be difficult or impossible to obtain or realize upon judgments
against such obligors and the value of the certificates could be adversely
affected
The underlying securities may include obligations of foreign issuers.
Consequently, it may be difficult for the applicable trust as a holder of the
underlying securities to obtain or realize upon judgments in the United States
against the obligor. Even if an issuer is amenable to suit in the United
States, the enforceability of any judgment obtained may be limited by a lack
of substantial assets which can be levied upon in the United States or the
inability to obtain recognition and enforcement of the judgment in the
issuer's country. Because the underlying securities may represent direct or
indirect obligations of foreign issuers, the certificates could be adversely
affected by political, economic and other risks attendant on holding the
obligations of a foreign issuer which are not typically associated with an
investment in securities of a domestic issuer. Such risks include:
o future political and economic developments;
o moratorium on payment or rescheduling of external debts;
o confiscatory taxation;
5
o imposition of any withholding tax;
o exchange rate fluctuations;
o political or social instability or diplomatic developments; and
o the imposition of additional governmental laws or restrictions.
Risks with respect to currency exchange rates and exchange controls
may exist
The certificates of any given series (or class within such series) may
be denominated in a currency other than U.S. dollars. An investment in a
certificate denominated in a currency other than U.S. dollars entails
significant risks that are not associated with a similar investment in a
U.S. dollar-denominated security. These risks include, without limitation,
the possibility of significant changes in rates of exchange between the
U.S. dollar and the currency in which the certificate is denominated and
the possibility of the imposition or modification of foreign exchange
controls with respect to that currency. These risks generally depend on
factors over which the depositor has no control, such as economic and
political events and the supply of and demand for the relevant currencies.
In recent years, rates of exchange between the U.S. dollar and certain
currencies have been highly volatile, and such volatility may be expected
in the future. Past fluctuations in any particular exchange rate do not
necessarily indicate, however, fluctuations in the rate that may occur
during the term of any certificate. Depreciation of the currency in which
the certificate is denominated against the U.S. dollar would decrease the
effective yield of the certificate below its applicable interest rate and,
in certain circumstances, could result in a loss to the investor on a U.S.
dollar basis.
Governments have from time to time imposed, and may in the future
impose, exchange controls that could affect exchange rates and the
availability of a currency for making distributions in respect of
certificates denominated in that currency. There can be no assurance that
exchange controls will not restrict or prohibit distributions of principal,
premium or interest in any currency in which a certificate is denominated.
Even if there are no actual exchange controls, it is possible that, on a
distribution date with respect to any particular certificate, the currency
in which amounts then due to be distributed in respect of the certificate
would not be available.
Prospective purchasers should consult their own financial and legal
advisors as to the risks entailed by an investment in certificates
denominated in a currency other than U.S. dollars. See "Currency Risks."
In addition, there are risks associated with underlying securities
denominated in a currency other than the local currency of a foreign
government. Governments have from time to time imposed, and may in the
future impose, exchange controls that could affect the availability of a
currency for making distributions in respect of underlying securities
denominated in such currency.
The trust may include derivatives which could adversely affect the
value of the certificates
A trust may include various derivative instruments, including
interest rate, currency and credit swaps, caps, floors, collars and options
and structured securities having embedded derivatives (such as structured
notes). Fluctuations in securities, currency and commodity rates, prices,
yields and returns may have a significant effect on the yield to maturity of
derivatives or the levels of support that derivatives can provide to a trust.
In addition, derivatives may be limited to covering only certain risks.
Continued payments on derivatives may be affected by the financial condition
of the counterparties (or, in some instances, the guarantor). There can be no
assurance that counterparties will be able to perform their obligations.
Failure by a counterparty (or the related guarantor, if any) to make required
payments may result in the delay or failure to make payments on the related
securities and risks. In addition, the notional amounts on which payments are
made may vary under certain circumstances and may not bear any correlation to
principal amounts of the related securities. The applicable prospectus
supplement will identify the material terms, the risks and the counterparty
for any derivative instrument in a trust and will describe the agreement with
the counterparty.
6
There exists a risk of loss if public information not available with
respect to the underlying securities.
A prospective purchaser of certificates should obtain and evaluate
the same information concerning each issuer of underlying securities as it
would obtain and evaluate if it were investing directly in the underlying
securities or in other securities issued by that issuer. The publicly
available information concerning an issuer of underlying securities is
important in considering whether to invest in or sell certificates. To the
extent such information ceases to be available, an investor's ability to make
an informed decision to purchase or sell certificates could be impeded. See
"Description of Deposited Assets and Credit Support--Publicly Available
Information."
A reduction or withdrawal of rating could occur which may
adversely affect the value of the certificates
At the time of issuance, the certificates of a series, or each class
of that series, will be rated in one of the investment grade categories by one
or more nationally recognized rating agencies. The rating agencies may rate a
series or class of certificates on the basis of several factors, including the
related deposited assets, any credit support and the relative priorities of
the certificateholders of that series or class to receive collections from,
and to assert claims against, the trust with respect to those deposited assets
and any credit support. The rating agencies are solely responsible for
selecting the criteria for rating the certificates.
Any rating issued with respect to the certificates is not a
recommendation to purchase, sell or hold a security; the ratings do not
comment on the market price of the certificates or their suitability for a
particular investor. There can be no assurance that the ratings will remain
for any given period of time or that any rating will not be revised or
withdrawn entirely by the related rating agency if, in its judgment,
circumstances (including, without limitation, the rating of the underlying
securities) so warrant. A revision or withdrawal of that rating may have an
adverse effect on the market price of the certificates.
The trustees do not actively manage the trust for investors.
Each trust will generally hold the related deposited assets to
maturity and not dispose of them, regardless of adverse events, financial or
otherwise, which may affect any issuer of underlying securities or the value
of the deposited assets. Except as indicated below, a certificateholder will
not be able to dispose of or take other actions with respect to any deposited
assets. Under certain circumstances described in the applicable prospectus
supplement, the trustee will, or will at the direction of a specified
percentage of certificateholders of the relevant series, dispose of, or take
certain other actions in respect of, the deposited assets. In certain limited
circumstances, such as a mandatory redemption of underlying securities or the
exercise by a third party of the right to purchase underlying securities (as
described below under "Description of Deposited Assets--Principal Terms of
Underlying Securities"), the trustee may dispose of the deposited assets prior
to maturity. The applicable prospectus supplement will describe the particular
circumstances, if any, under which a deposited asset may be disposed of prior
to maturity.
Optional Exchange for deposited assets will generally be unavailable
Although the applicable prospectus supplement for a series of
certificates may designate that series as an Exchangeable Series and may state
that a certificateholder may exchange certificates of the Exchangeable Series
for a pro rata portion of deposited assets of the related trust, any such
Optional Exchange Right will be exercisable only if the exercise of that right
(i) would not affect the trust's ability to be exempt under Rule 3a-7 under
the Investment Company Act of 1940, as amended, and all applicable rules,
regulations and interpretations thereunder, and (ii) would not affect the
characterization of the trust as a "grantor trust" under the Code. See
"Description of the Certificates--Optional Exchange." Accordingly, the
Optional Exchange Right described in this prospectus under the heading
"Description of the Certificates--Optional Exchange" and further described in
the applicable prospectus supplement will be available only to the depositor,
DBAB, the trustee, the call warrant holder and their respective affiliates and
designees. Other certificateholders generally will not be able to exchange
their certificates of an
7
Exchangeable Series for a pro rata portion of the deposited assets of the
related trust. The exercise of an Optional Exchange Right will decrease the
aggregate amount of certificates of the applicable Exchangeable Series
outstanding.
----------------------
The accompanying prospectus supplement for each series of
certificates will specify information regarding additional risk factors, if
any, applicable to that series and each class within that series.
8
THE DEPOSITOR
DB Depositor Inc., a Delaware corporation, is an indirect, wholly
owned, limited purpose subsidiary of Deutsche Bank AG. The principal office of
the depositor is located at 31 West 52nd Street, New York, New York 10019. Its
telephone number is (212) 250-1869.
The Certificate of Incorporation of the depositor provides that the
depositor may conduct any lawful activities necessary or incidental to serving
as depositor of one or more trusts that may issue and sell certificates. The
Certificate of Incorporation of the depositor provides that any securities,
except for subordinated securities, issued by the depositor must be rated in
one of the four highest categories available by any rating agency rating the
series. Formation of a grantor trust will not relieve the depositor of its
obligation to issue only securities, except for subordinated securities, rated
in one of the four highest rating categories. Pursuant to the terms of the
trust agreement, the depositor may not issue any securities which would result
in the lowering of the then current ratings of the outstanding certificates of
any series.
USE OF PROCEEDS
Unless otherwise specified in the applicable prospectus supplement,
the net proceeds to be received from the sale of each series or class of
certificates (whether or not offered by this prospectus) will be used by the
depositor to purchase the related deposited assets and arrange credit support
including, if specified in the applicable prospectus supplement, making
required deposits into any reserve account or the applicable certificate
account for the benefit of the certificateholders of such series or class. Any
remaining net proceeds, if any, will be used by the depositor for general
corporate purposes.
FORMATION OF THE TRUST
A separate trust will be created for each series of trust
certificates. The depositor will assign the deposited assets for each series
of certificates to the trustee named in the applicable prospectus supplement,
in its capacity as trustee, for the benefit of the certificateholders of that
series. See "Description of the Trust Agreement--Assignment of deposited
assets." The trustee named in the applicable prospectus supplement will
administer the deposited assets pursuant to the trust agreement and will
receive a fee for these services. Any administrative agent named in the
applicable prospectus supplement will perform the tasks as are specified
therein and in the trust agreement and will receive a fee for these services
as specified in the prospectus supplement. See "Description of the Trust
Agreement--Collection and Other Administrative Procedures" and "--Retained
Interest; Administrative Agent Compensation and Payment of Expenses." The
trustee or an administrative agent, if applicable, will either cause the
assignment of the deposited assets to be recorded or will obtain an opinion of
counsel that no recordation is required to obtain a first priority perfected
security interest in those deposited assets.
Unless otherwise stated in the prospectus supplement, the depositor's
assignment of the deposited assets to the trustee will be without recourse to
the depositor (except as to certain limited representations and warranties, if
any).
To the extent described in the applicable prospectus supplement, the
obligations of an administrative agent will consist primarily of:
o its contractual administrative obligations, if any, under the trust
agreement;
o its obligation, if any, to make cash advances in the event of
delinquencies in payments on or with respect to any deposited assets in
amounts described under "Description of the Trust Agreement--Advances in
Respect of Delinquencies;" and
o its obligations, if any, to purchase deposited assets as to which there
has been a breach of specified representations and warranties or as to
which the documentation is materially defective.
9
The obligations of an administrative agent, if any, named in the
applicable prospectus supplement to make advances will be limited to amounts
which the administrative agent believes ultimately would be
recoverable under any credit support, insurance coverage, the proceeds of
liquidation of the deposited assets or from other sources available for these
purposes. See "Description of the Trust Agreement--Advances in Respect of
Delinquencies."
Unless otherwise specified in the applicable prospectus supplement,
each trust will consist of:
o the deposited assets, or interests therein, exclusive of any interest in
those assets (the "Retained Interest") retained by the depositor or any
previous owner thereof, as from time to time are specified in the trust
agreement;
o the assets as from time to time are identified as deposited in the
related certificate account;
o property, if any, acquired on behalf of certificateholders by foreclosure
or repossession and any revenues received;
o those elements of credit support, if any, provided with respect to any
class within the series that are specified as being part of the related
trust in the applicable prospectus supplement, as described in that
prospectus supplement and under "Description of Deposited Assets and
Credit Support--Credit Support";
o the rights of the depositor relating to any breaches of representations
or warranties by the issuer of the deposited assets; and
o the rights of the trustee in any cash advances, reserve fund or surety
bond, if any, as described under "Description of the Trust
Agreement--Advances in Respect of Delinquencies."
MATURITY AND YIELD CONSIDERATIONS
Each prospectus supplement will contain any applicable information
with respect to the type and maturities of the related underlying securities
and the terms, if any, upon which those underlying securities may be subject
to early redemption (either by the applicable obligor or pursuant to a
third-party call option), repayment (at the option of the holders of the
underlying securities) or extension of maturity. The provisions of the
underlying securities with respect to redemption, repayment or extension of
maturity will, unless otherwise specified in the applicable prospectus
supplement, affect the weighted average life of the related series of
certificates.
The effective yield to holders of the certificates of any series and
class within that series may be affected by aspects of the deposited assets or
any credit support or the manner and priorities of allocations of collections
with respect to the deposited assets between the classes of a given series.
With respect to any series of certificates the underlying securities of which
consist of one or more redeemable securities, extendable securities or
securities subject to a third-party call option, the yield to maturity of that
series or class therein may be affected by any optional or mandatory
redemption or repayment or extension of the related underlying securities
prior to the stated maturity thereof. A variety of tax, accounting, economic,
and other factors will influence whether an issuer exercises any right of
redemption in respect of its securities. The rate of redemption may also be
influenced by prepayments on the obligations a government sponsored entity
issuer holds for its own account. All else remaining equal, if prevailing
interest rates fall significantly below the interest rates on the related
underlying securities, the likelihood of redemption would be expected to
increase. There can be no certainty as to whether any underlying security
redeemable at the option of its issuer will be repaid prior to its stated
maturity.
Unless otherwise specified in the applicable prospectus supplement,
each of the underlying securities will be subject to acceleration upon the
occurrence of certain events of default under the terms of the underlying
securities. The maturity and yield on the certificates will be affected by any
early repayment of the underlying securities as a result of the acceleration
of the underlying securities by or on
10
behalf of the holders thereof. See "Description of Deposited
Assets--Underlying Securities--Indentures." If an issuer of underlying
securities becomes subject to a bankruptcy proceeding, the timing and amount
of payments with respect to the principal of, the premium on, if any, and the
interest to be distributed in respect of, the certificates may be materially
and adversely affected. Several factors influence the performance of issuers
that are corporations or other business entities; these factors may affect the
ability of an issuer of underlying securities to satisfy its obligations under
the underlying securities, including the company's operating and financial
condition, leverage, and economic, geographic, legal and social factors. In
addition, if the underlying securities are issued by a foreign government and
the foreign government issuer or guarantor repudiates or places any limitation
or moratorium on the payment of external indebtedness or imposes any
confiscatory or withholding tax, the timing and amount of payments on the
certificates may be materially and adversely affected. A variety of factors
could influence a foreign government's willingness or ability to satisfy its
obligations under the related underlying securities. We cannot predict the
probability of a moratorium or other action affecting any underlying security.
The extent to which the yield to maturity of such certificates may
vary from the anticipated yield due to the rate and timing of payments on the
deposited assets will depend upon the degree to which they are purchased at a
discount or premium and the degree to which the timing of payments on the
deposited assets is sensitive to the rate and timing of payments on the
deposited assets.
The yield to maturity of any series or class of certificates will
also be affected by variations in the interest rates applicable to, and the
corresponding payments in respect of, such certificates, to the extent that
the Certificate Rate for such series or class is based on variable or
adjustable interest rates. With respect to any series of certificates
representing an interest in a pool of government, foreign government or
corporate debt securities, or other eligible securities, disproportionate
principal payments (whether resulting from differences in amortization
schedules, payments due on scheduled maturity or upon early redemption) on the
related underlying securities having interest rates higher or lower than the
then applicable Certificate Rates on such certificates may affect the yield on
the certificates.
A variety of economic, social, political, tax, accounting and other
factors may affect the degree to which any of the underlying securities are
redeemed or called, whether by the applicable obligor or pursuant to a
third-party call option, or the maturity of such underlying securities is
extended, as specified in the applicable prospectus supplement. There can be
no assurance as to the rate or likelihood of redemption, third-party call or
extension of maturity of any underlying security. The applicable prospectus
supplement will, to the extent available, provide further information with
respect to any such experience applicable to the related underlying
securities.
The accompanying prospectus supplement for each series of
certificates will set forth additional information regarding yield and
maturity considerations applicable to that series, and each class within that
series, and the related deposited assets, including the applicable underlying
securities.
11
DESCRIPTION OF THE CERTIFICATES
Each series (or, if more than one class exists, the classes within
that series) of certificates will be issued pursuant to the standard terms and
the series supplement, which together compose the trust agreement, among the
depositor, the trustee and the securities intermediary named in the applicable
prospectus supplement, a form of which trust agreement is attached as an
exhibit to the registration statement. The provisions of the trust agreement
may vary depending upon the terms of the certificates to be issued under the
trust agreement and the nature of the deposited assets, the credit support, if
any, and the related trust. The following summaries describe certain
provisions of the trust agreement that may be applicable to each series of
certificates. The applicable prospectus supplement for a series of
certificates will describe any material provision of the trust agreement that
is not described in this prospectus or the description of which is materially
different from the description in this prospectus. The following summaries do
not purport to be complete and are subject to the detailed provisions of the
form of trust agreement to which reference is made for a full description of
such provisions, including the definition of terms used, and for other
information regarding the certificates. Wherever particular defined terms of
the trust agreement are referred to, such defined terms are incorporated in
this prospectus by reference as part of the statement made, and the statement
is qualified in its entirety by that reference. As used in this prospectus
with respect to any series, the term "certificate" refers to all the
certificates of that series and each class within the series, whether or not
offered by this prospectus and by the applicable prospectus supplement, unless
the context otherwise requires.
A copy of the series supplement relating to each series of
certificates issued from time to time will be filed by the depositor as an
exhibit to a Current Report on Form 8-K, which will be filed with the SEC
following the issuance of that series.
General
There is no limit on the amount of certificates that may be issued
under the trust agreement, and the trust agreement will provide that
certificates of the applicable series may be issued in multiple classes. The
series, or classes within that series, of certificates to be issued under the
trust agreement will represent the entire beneficial ownership interest in the
trust for that series created pursuant to the trust agreement and each class
will be allocated certain relative priorities to receive specified collections
from, and a certain percentage ownership interest of the assets deposited in,
such trust, all as identified and described in the applicable prospectus
supplement. See "Description of Deposited Assets--Credit
Support--Collections."
Reference is made to the applicable prospectus supplement for a
description of the following terms of the series of certificates in respect of
which this prospectus and such prospectus supplement are being delivered:
(i) the title of the certificates;
(ii) the series of the certificates and, if applicable, the number
and designation of classes of the series;
(iii) material information concerning the type, characteristics
and specifications of the deposited assets being deposited
into the related trust by the depositor (including, with
respect to any underlying security which at the time of that
deposit represents a significant portion of all such
deposited assets and any related credit support, information
concerning the material terms of each underlying security,
the identity of the issuer of the underlying security and
where publicly available information regarding the issuer
may be obtained);
(iv) the dates on which, or periods during which, the series of
certificates may be issued, each referred to as an "Original
Issue Date", and the offering price of the certificates;
12
(v) the limit, if any, upon the aggregate principal amount or
Notional Amount, as applicable, of each class of the
certificates;
(vi) if applicable, the relative rights and priorities of each
class (including the method for allocating collections from
and defaults or losses on the deposited assets to the
certificateholders of each class);
(vii) whether the certificates of that series are fixed rate
certificates or floating rate certificates and the
applicable interest rate (the "Certificate Rate"), or the
method of calculation of the rate applicable to that series,
if variable (a "Floating Certificate Rate"), the date or
dates from which such interest will accrue, the applicable
distribution dates on which interest, principal and premium,
in each case as applicable, on that series or class will be
distributable and the related Determination Dates, if any;
(viii) the circumstances and conditions under which any of the
depositor, DBAB or the trustee, or their respective
affiliates and designees, may exercise an Optional Exchange
Right (to the extent that the exercise of such right (a)
would not affect the trust's ability to be exempt under Rule
3a-7 under the Investment Company Act of 1940, as amended,
and all applicable rules, regulations and interpretations
thereunder and (b) would not affect the treatment of the
trust as a "grantor trust" under the Code) and the periods
within which or the dates on which, and the terms and
conditions upon which any such Optional Exchange may be
exercised, in whole and not in part;
(ix) the option, if any, of any specified third party (which may
include one or more of the depositor, DBAB or their
respective affiliates) to purchase certificates held by a
certificateholder and the periods within which or the dates
on which, and the terms and conditions upon which the option
may be exercised, in whole and not in part;
(x) the mandatory or optional redemption, call, repurchase at
the option of the depositor or otherwise, if any;
(xi) the rating of each series or each class within that series
offered by this prospectus, provided, however, that one or
more classes within that series not offered by this
prospectus may be unrated or may be rated below investment
grade;
(xii) if other than denominations of $1,000 and any integral
multiple of $1,000, the denominations in which that series
or class within that series will be issuable;
(xiii) whether the certificates of any class within a given series
are to be entitled to (1) principal distributions, with
disproportionate, nominal or no interest distributions, or
(2) interest distributions, with disproportionate, nominal
or no principal distributions ("Strip Certificates"), and
the applicable terms thereof;
(xiv) whether the certificates of that series or of any class
within that series are to be issued as registered
certificates and whether coupons will be attached;
(xv) the identity of the depositary, if other than DTC, for the
certificates;
(xvi) if other than U.S. dollars, the specified currency
applicable to the certificates of that series or class for
purposes of denominations and distributions on that series
or each class within that series and the circumstances and
conditions, if any, when the currency may be changed, at the
election of the depositor or a certificateholder, and the
currency or currencies in which any principal of or any
premium or any interest on that series or class are to be
distributed pursuant to the election;
13
(xvii) any additional Administrative Agent Termination Events, if
applicable, provided for with respect to such class;
(xviii) all applicable Required Percentages and voting rights
relating to the manner and percentage of votes of
certificateholders of that series and each class within that
series required with respect to certain actions by the
depositor or the trustee under the trust agreement or with
respect to the applicable trust;
(xix) remedies upon the occurrence of a payment default on the
underlying securities on an acceleration of the underlying
securities; and
(xx) all other material terms of that series or class within that
series of certificates.
Unless otherwise indicated in the applicable prospectus supplement,
certificates of each series, including any class of certificates not offered
by this prospectus, will be issued only as registered certificates in
denominations of $1,000 and any integral multiple thereof and will be payable
only in U.S. dollars. The authorized denominations of registered certificates
of a given series or class within that series having a specified currency
other than U.S. dollars will be set forth in the applicable prospectus
supplement.
The United States federal income tax consequences and ERISA
consequences relating to any series or any class within that series of
certificates will be described in the applicable prospectus supplement. In
addition, the prospectus supplement will describe the risks, specific terms
and any other material information relating to any certificates which will
receive payments in a specified currency other than U.S. dollars. Unless
otherwise specified in the applicable prospectus supplement, the U.S. dollar
equivalent of the public offering price or purchase price of a certificate
having a specified currency other than U.S. dollars will be determined on the
basis of the noon buying rate in New York City for cable transfers in foreign
currencies as certified for customs purposes by the Federal Reserve Bank of
New York for such specified currency on the applicable issue date. As
specified in the applicable prospectus supplement, such determination will be
made by the depositor, the trustee, the administrative agent, if any, or an
agent thereof as exchange rate agent for each series of certificates.
Unless specified in the applicable prospectus supplement, registered
certificates may be transferred or exchanged for like certificates of the same
series and class at the corporate trust office or agency of the applicable
trustee in the City and State of New York, subject to the limitations provided
in the trust agreement, without the payment of any service charge, other than
any tax or governmental charge payable in connection with the transfer or
exchange. The depositor may at any time purchase certificates at any price in
the open market or otherwise. Certificates so purchased by the depositor may,
at the discretion of the depositor, be held or resold or surrendered to the
trustee for cancellation of those certificates.
Distributions
Distributions allocable to principal, premium, if any, and interest
on the certificates of each series and class within that series will be made
in the currency other than U.S. dollars for those certificates by or on behalf
of the trustee on each distribution date as specified in the applicable
prospectus supplement and the amount of each distribution will be determined
as of the close of business on the date specified in the applicable prospectus
supplement (the "Determination Date"). If the specified currency for a given
series or class within that series is other than U.S. dollars, the
administrative agent, if any, or otherwise the trustee, will (unless otherwise
specified in the applicable prospectus supplement) arrange to convert all
payments in respect of each certificate of that series or class to U.S.
dollars in the manner described in the following paragraph. The
certificateholder of a registered certificate of a given series or class
within the series denominated in a specified currency other than U.S. dollars
may (if the applicable prospectus supplement and such certificate so indicate)
elect to receive all distributions in respect of such certificate in that
specified currency by delivery of a written notice to the trustee and
administrative agent, if any, for the series not later than fifteen calendar
days prior to the applicable distribution date, except under the circumstances
described under "Currency Risks--Payment Currency" below. An election will
remain in
14
effect until revoked by written notice to such trustee and administrative
agent, if any, received by each of them not later than fifteen calendar days
prior to the applicable distribution date.
Unless otherwise specified in the applicable prospectus supplement,
in the case of a registered certificate of a given series or class within that
series having a specified currency other than U.S. dollars, the amount of any
U.S. dollar distribution in respect of such registered certificate will be
determined by the exchange rate agent based on the highest firm bid quotation
expressed in U.S. dollars received by the exchange rate agent at approximately
11:00 a.m., New York City time, on the second business day preceding the
applicable distribution date (or, if no such rate is quoted on such date, the
last date on which such rate was quoted), from three (or, if three are not
available, then two) recognized foreign exchange dealers in The City of New
York (one of which may be the Offering Agent and another of which may be the
exchange rate agent) selected by the exchange rate agent, for the purchase by
the quoting dealer, for settlement on that distribution date, of the aggregate
amount payable in that specified currency on that payment date in respect of
all registered certificates. All currency exchange costs will be borne by the
certificateholders of such registered certificates by deductions from those
distributions. If no bid quotations are available, such distributions will be
made in the specified currency other than U.S. dollars, unless that specified
currency is unavailable due to the imposition of exchange controls or to other
circumstances beyond the depositor's control, in which case distributions will
be made as described under "Currency Risks--Payment Currency" below.
Unless otherwise specified in the applicable prospectus supplement
and except as specified in the succeeding paragraph, distributions with
respect to registered certificates will be made at the corporate trust office
or agency of the trustee specified in the applicable prospectus supplement in
The City of New York or at the principal London office of the applicable
trustee; provided, however, that any the amounts distributable on the final
distribution date of a certificate will be distributed only upon surrender of
that certificate at the applicable location set forth above.
Unless otherwise specified in the applicable prospectus supplement,
distributions on registered certificates in U.S. dollars will be made, except
as described below, by check mailed to the registered certificateholders of
those certificates (which, in the case of global securities, will be a nominee
of the depositary); provided, however, that, in the case of a series or class
of registered certificates issued between a Determination Date and the related
distribution dates, interest for the period beginning on the issue date for
the series or class and ending on the last day of the interest accrual period
ending immediately prior to or coincident with that distribution date will,
unless otherwise specified in the applicable prospectus supplement, be
distributed on the next succeeding distribution date to the registered
certificateholders of the registered certificates of that series or class on
the related Determination Date. A certificateholder of $10,000,000 (or the
equivalent thereof in a specified currency other than U.S. dollars) or more in
aggregate principal amount of registered certificates of a given series shall
be entitled to receive such U.S. dollar distributions by wire transfer of
immediately available funds, but only if appropriate wire transfer
instructions have been received in writing by the trustee for the series not
later than fifteen calendar days prior to the applicable distribution date.
Simultaneously with the election by any certificateholder to receive payments
in a specified currency other than U.S. dollars (as described above), that
certificateholder shall provide appropriate wire transfer instructions to the
trustee for that series, and all such payments will be made by wire transfer
of immediately available funds to an account maintained by the payee with a
bank located outside the United States.
Except as otherwise specified in the applicable prospectus
supplement, "business day" with respect to any certificate means any day,
other than a Saturday or Sunday, that is (i) not a day on which banking
institutions are authorized or required by law or regulation to be closed in
(a) The City of New York or (b) if the specified currency for that certificate
is other than U.S. dollars, the financial center of the country issuing that
specified currency (which, in the case of ECU, shall be Brussels, Belgium) and
(ii) if the Certificate Rate for that certificate is based on LIBOR, a London
Banking Day. "London Banking Day" with respect to any certificate means any
day on which dealings in deposits in the specified currency of such
certificate are transacted in the London interbank market. The Determination
Date with respect to any distribution date for a series or class of registered
certificates shall be specified in the applicable prospectus supplement.
15
Interest on the Certificates
General. Each class of certificates (other than certain classes of
Strip Certificates) of a given series may have a different Certificate Rate,
which may be a Fixed or Floating Certificate Rate, as described below. In the
case of Strip Certificates with a nominal or no Certificate Principal Balance,
those distributions of interest will be in an amount described in the
applicable prospectus supplement. "Notional Amount" means the notional
principal amount specified in the applicable prospectus supplement on which
interest on Strip Certificates with a nominal or no Certificate Principal
Balance will be made on each distribution date. Reference to the Notional
Amount of a class of Strip Certificates in this prospectus or in a prospectus
supplement does not indicate that the certificates represent the right to
receive any distribution in respect of principal in such amount, but rather
the term "Notional Amount" is used solely as a basis for calculating the
amount of required distributions and determining certain relative voting
rights, all as specified in the applicable prospectus supplement. The
Certificate Rate will be described in the applicable prospectus supplement and
will be based upon the rate of interest received on the underlying securities,
credit support, if any, and any payments payable in respect of the Retained
Interest, if any.
Fixed Rate Certificates. Each series (or, if more than one class
exists, each class within that series) of certificates with a fixed
Certificate Rate will bear interest, on the outstanding Certificate Principal
Balance (or Notional Amount, if applicable), from its Original Issue Date, or
from the last date to which interest has been paid, at the fixed Certificate
Rate stated on the face of the certificate and in the applicable prospectus
supplement until the principal amount of the certificate is distributed or
made available for repayment (or, in the case of fixed rate certificates with
a nominal or no principal amount, until the Notional Amount thereof is reduced
to zero), except that, if so specified in the applicable prospectus
supplement, the Certificate Rate for that series or any such class or classes
may be subject to adjustment from time to time in response to designated
changes in the rating assigned to those certificates by one or more rating
agencies, in accordance with a schedule or otherwise, all as described in that
prospectus supplement. Unless otherwise set forth in the applicable prospectus
supplement, interest on each series or class of fixed rate certificates will
be distributable in arrears on each distribution date specified in the
prospectus supplement. Each distribution of interest shall include interest
accrued through the day specified in the applicable prospectus supplement.
Unless otherwise specified in the applicable prospectus supplement, interest
on fixed rate certificates will be computed on the basis of a 360-day year of
twelve 30-day months.
Floating Rate Certificates. Each series (or, if more than one class
exists, each class within the series) of certificates with a variable
Certificate Rate will bear interest on the outstanding Certificate Principal
Balance (or Notional Amount, if applicable), from its Original Issue Date to
the first Interest Reset Date for that series or class at the initial
Certificate Rate set forth on the face of the certificate and in the
applicable prospectus supplement ("Initial Certificate Rate"). Thereafter, the
Certificate Rate on that series or class for each Interest Reset Period will
be determined by reference to an interest rate basis (the "Base Rate"), plus
or minus the Spread, if any, or multiplied by the Spread Multiplier, if any.
The "Spread" is the number of basis points (one basis point equals one
one-hundredth of a percentage point) that may be specified in the applicable
prospectus supplement as being applicable to that series or class, and the
"Spread Multiplier" is the percentage that may be specified in the applicable
prospectus supplement as being applicable to that series or class, except that
if so specified in the applicable prospectus supplement, the Spread or Spread
Multiplier on that series or any class or classes of floating rate
certificates may be subject to adjustment from time to time in response to
designated changes in the rating assigned to those certificates by one or more
rating agencies, in accordance with a schedule or otherwise, all as described
in the prospectus supplement. The applicable prospectus supplement, unless it
specifies otherwise, will designate one of the following Base Rates as
applicable to a floating rate certificate:
o LIBOR;
o the Commercial Paper Rate;
o the Treasury Rate;
16
o the Federal Funds Rate;
o the CD Rate; or
o such other Base Rate (which may be based on, among other things, one or
more market indices or the interest and/or other payments (whether
scheduled or otherwise) paid, accrued or available with respect to a
designated asset, pool of assets or type of asset) as is specified in the
prospectus supplement and in that certificate.
The "Index Maturity" for any series or class of floating rate
certificates is the period of maturity of the instrument or obligation from
which the Base Rate is calculated. "H.15(519)" means the publication entitled
"Statistical Release H.15(519), Selected Interest Rates," or any successor
publications, published by the Board of Governors of the Federal Reserve
System. "Composite Quotations" means the daily statistical release entitled
"Composite 3:30 p.m. Quotations for U.S. Government Securities" published by
the Federal Reserve Bank of New York.
As specified in the applicable prospectus supplement, floating rate
certificates of a given series or class may also have either or both of the
following (in each case expressed as a rate per annum on a simple interest
basis): (i) a maximum limitation, or ceiling, on the rate at which interest
may accrue during any interest accrual period specified in the applicable
prospectus supplement ( the "Maximum Certificate Rate") and (ii) a minimum
limitation, or floor, on the rate at which interest may accrue during any such
interest accrual period ("Minimum Certificate Rate"). In addition to any
Maximum Certificate Rate that may be applicable to any series or class of
floating rate certificates, the Certificate Rate applicable to any series or
class of floating rate certificates will in no event be higher than the
maximum rate permitted by applicable law, as the same may be modified by
United States law of general application.
The depositor will appoint, and enter into agreements with, agents
acting as calculation agent, to calculate Certificate Rates on each series or
class of floating rate certificates. The applicable prospectus supplement will
set forth the identity of the calculation agent for each series or class of
floating rate certificates. All determinations of interest by the calculation
agent shall, in the absence of manifest error, be conclusive for all purposes
and binding on the holders of floating rate certificates of a given series or
class.
The Certificate Rate on each class of floating rate certificates will
be reset daily, weekly, monthly, quarterly, semiannually or annually (such
period being the "Interest Reset Period" for such class, and the first day of
each Interest Reset Period being an "Interest Reset Date"), as specified in
the applicable prospectus supplement. Interest Reset Dates with respect to
each series, and any class within that series of floating rate certificates,
will be specified in the applicable prospectus supplement; provided, however,
that unless otherwise specified in the prospectus supplement, the Certificate
Rate in effect for the ten days immediately prior to the final scheduled
distribution date, (as defined in the prospectus supplement will be that in
effect on the tenth day preceding such final scheduled distribution date. If
an Interest Reset Date for any class of floating rate certificates would
otherwise be a day that is not a business day, that Interest Reset Date will
occur on a prior or succeeding business day, specified in the applicable
prospectus supplement.
Unless otherwise specified in the applicable prospectus supplement,
interest payable in respect of floating rate certificates shall be the accrued
interest from and including the original issue date of that series or class or
the last Interest Reset Date to which interest has accrued and been
distributed, as the case may be, to but excluding the immediately following
distribution date.
With respect to a floating rate certificate, accrued interest shall
be calculated by multiplying the Certificate Principal Balance of that
certificate (or, in the case of a Strip Certificate with no or a nominal
Certificate Principal Balance, the Notional Amount specified in the applicable
prospectus supplement) by an accrued interest factor. Such accrued interest
factor will be computed by adding the interest factors calculated for each day
in the period for which accrued interest is being calculated. Unless otherwise
specified in the applicable prospectus supplement, the interest factor,
expressed as a decimal calculated to seven decimal places without rounding,
for each day is computed by dividing the Certificate Rate in
17
effect on such day by 360, in the case of LIBOR certificates, Commercial Paper
Rate certificates, Federal Funds Rate certificates and CD Rate certificates or
by the actual number of days in the year, in the case of Treasury Rate
certificates. For purposes of making the foregoing calculation, the variable
Certificate Rate in effect on any Interest Reset Date will be the applicable
rate as reset on that date.
Unless otherwise specified in the applicable prospectus supplement,
all percentages resulting from any calculation of the Certificate Rate on a
floating rate certificate will be rounded, if necessary, to the nearest
1/100,000 of 1% (.0000001), with five one-millionths of a percentage point
rounded upward, and all currency amounts used in or resulting from that
calculation on floating rate certificates will be rounded to the nearest
one-hundredth of a unit (with .005 of a unit being rounded upward).
Interest on any series (or class within the series) of floating rate
certificates will be distributable on the distribution dates and for the
interest accrual periods as and to the extent specified in the applicable
prospectus supplement.
Upon the request of the holder of any floating rate certificate of a
given series or class, the calculation agent for that series or class will
provide the Certificate Rate then in effect and, if determined, the
Certificate Rate that will become effective on the next Interest Reset Date
with respect to that floating rate certificate.
(1) CD Rate Certificates. Each CD Rate certificate will bear interest
for each Interest Reset Period at the Certificate Rate calculated with
reference to the CD Rate and the Spread or Spread Multiplier, if any,
specified in that certificate and in the applicable prospectus supplement.
Unless otherwise specified in the applicable prospectus supplement,
the "CD Rate" for each Interest Reset Period shall be the rate as of the
second business day prior to the Interest Reset Date for that Interest Reset
Period (a "CD Rate Determination Date"), for negotiable United States dollar
certificates of deposit having the Index Maturity designated in the applicable
prospectus supplement as published in H.15(519) under the heading "CDs
(Secondary Market)." In the event that such rate is not published prior to
3:00 p.m., New York City time, on the CD Rate Calculation Date pertaining to
such CD Rate Determination Date, then the "CD Rate" for that Interest Reset
Period will be the rate on such CD Rate Determination Date for negotiable
United States dollar certificates of deposit of the Index Maturity designated
in the applicable prospectus supplement as published in Composite Quotations
under the heading "Certificates of Deposit." If by 3:00 p.m., New York City
time, on such CD Rate Calculation Date, such rate is not yet published in
either H.15(519) or Composite Quotations, then the "CD Rate" for that Interest
Reset Period will be calculated by the calculation agent for such CD Rate
Certificate and will be the arithmetic mean of the secondary market offered
rates as of 10:00 a.m., New York City time, on such CD Rate Determination
Date, of three leading nonbank dealers in negotiable U.S. dollar certificates
of deposit in The City of New York (which may include the underwriters or
their affiliates) selected by the calculation agent for such CD Rate
Certificate for negotiable certificates of deposit of major United States
money center banks of the highest credit standing in the market for negotiable
certificates of deposit with a remaining maturity closest to the Index
Maturity designated in the applicable prospectus supplement [in a denomination
of $5,000,000][in an amount that is representative for a single transaction in
that market at that time]; provided, however, that if the dealers selected by
the calculation agent are not quoting offered rates as mentioned in this
sentence, the "CD Rate" for that Interest Reset Period will be the same as the
CD Rate for the immediately preceding Interest Reset Period (or, if there was
no Interest Reset Period, the Initial Certificate Rate).
The "CD Rate Calculation Date" pertaining to any CD Rate
Determination Date shall be the first to occur of (a) the tenth calendar day
after that CD Rate Determination Date or, if that day is not a business day,
the next succeeding business day or (b) the second business day preceding the
date any distribution of interest is required to be made following the
applicable Interest Reset Date.
(2) Commercial Paper Rate Certificates. Each Commercial Paper Rate
certificate will bear interest for each Interest Reset Period at the
Certificate Rate calculated with reference to the Commercial Paper Rate and
the Spread or Spread Multiplier, if any, specified in such certificate and in
the applicable prospectus supplement.
18
Unless otherwise specified in the applicable prospectus supplement,
the "Commercial Paper Rate" for each Interest Reset Period will be determined
by the calculation agent for that Commercial Paper Rate Certificate as of the
second business day prior to the Interest Reset Date for that Interest Reset
Period (a "Commercial Paper Rate Determination Date", and shall be the Money
Market Yield on that Commercial Paper Rate Determination Date of the rate for
commercial paper having the Index Maturity specified in the applicable
prospectus supplement, as that rate shall be published in H.15(519) under the
heading "Commercial Paper" [(with an Index Maturity of one month or three
months being deemed to be equivalent to an Index maturity of 30 days or 90
days, respectively).] In the event that such rate is not published prior to
3:00 p.m., New York City time, on the Commercial Paper Rate Calculation Date
pertaining to that Commercial Paper Rate Determination Date, then the
"Commercial Paper Rate" for that Interest Reset Period shall be calculated by
the calculation agent and shall be the Money Market Yield on that Commercial
Paper Rate Determination Date of the rate for commercial paper of the
specified Index Maturity as published in Composite Quotations under the
heading "Commercial Paper." If by 3:00 p.m., New York City time, on that
Commercial Paper Rate Calculation Date such rate is not yet published in
either H.15(519) or Composite Quotations, then the "Commercial Paper Rate" for
that Interest Reset Period shall be the Money Market Yield of the arithmetic
mean of the offered rates, as of 11:00 a.m., New York City time, on that
Commercial Paper Rate Determination Date of three leading dealers of
commercial paper in The City of New York (which may include the underwriters
or their affiliates) selected by the calculation agent for that Commercial
Paper Rate Certificate for commercial paper of the specified Index Maturity
placed for an industrial issuer whose bonds are rated "AA" or the equivalent
by a nationally recognized rating agency; provided, however, that if the
dealers selected as aforesaid by the calculation agent are not quoting offered
rates as mentioned in this sentence, the "Commercial Paper Rate" for that
Interest Reset Period will be the same as the Commercial Paper Rate for the
immediately preceding Interest Reset Period or, if there was no Interest Reset
Period, the Initial Certificate Rate.
"Money Market Yield" shall be a yield calculated in accordance with
the following formula:
D X 360 X 100
Money Market Yield = --------------------- =
360 -(D X M)
where "D" refers to the applicable per annum rate for commercial
paper quoted on a bank discount basis and expressed as a decimal, and "M"
refers to the actual number of days in the specified Index Maturity.
The "Commercial Paper Rate Calculation Date" pertaining to any
Commercial Paper Rate Determination Date shall be the first to occur of (a)
the tenth calendar day after the Commercial Paper Rate Determination Date or,
if such day is not a business day, the next succeeding business day or (b) the
second business day preceding the date any distribution of interest is
required to be made following the applicable Interest Reset Date.
(3) Federal Funds Rate Certificates. Each Federal Funds Rate
certificate will bear interest for each Interest Reset Period at the
Certificate Rate calculated with reference to the Federal Funds Rate and the
Spread or Spread Multiplier, if any, specified in that certificate and in the
applicable prospectus supplement.
Unless otherwise specified in the applicable prospectus supplement,
the "Federal Funds Rate" for each Interest Reset Period shall be the effective
rate on the Interest Reset Date for the Interest Reset Period (a "Federal
Funds Rate Determination Date"), for United States dollar Federal Funds as
published in H.15(519) under the heading "Federal Funds (Effective)." In the
event that such rate is not published prior to 3:00 p.m., New York City time,
on the Federal Funds Rate Calculation Date pertaining to such Federal Funds
Rate Determination Date, the "Federal Funds Rate" for that Interest Reset
Period shall be the rate on such Federal Funds Rate Determination Date as
published in Composite Quotations under the heading "Federal Funds/Effective
Rate." If by 3:00 p.m., New York City time, on such Federal Funds Rate
Calculation Date that rate is not yet published in either H.15(519) or
Composite Quotations, then the "Federal Funds Rate" for that Interest Reset
Period [shall be the rate on that Federal Funds Rate Determination Date made
publicly available by the Federal Reserve Bank of New York which is
19
equivalent to the rate which appears in H.15(519) under the heading "Federal
Funds (Effective)"; provided, however, that if such rate is not made publicly
available by the Federal Reserve Bank of New York by 3:00 p.m., New York City
time, on such Federal Funds Rate Calculation Date, the "Federal Funds Rate"
for that Interest Reset Period will be the same as the Federal Funds Rate in
effect for the immediately preceding Interest Reset Period (or, if there was
no Interest Reset Period, the Initial Certificate Rate). Unless otherwise
specified in the applicable prospectus supplement, in the case of a Federal
Funds Rate certificate that resets daily, the Certificate Rate on that
certificate for the period from and including a Monday to but excluding the
succeeding Monday will be reset by the calculation agent for that certificate
on that second Monday (or, if not a business day, on the next succeeding
business day) to a rate equal to the average of the Federal Funds Rate in
effect with respect to each such day in such week.][will be calculated by the
calculation agent and will be the arithmetic mean of the rates for the last
transaction in overnight United States dollar federal funds arranged by three
leading brokers of federal funds transactions in The City of New York, which
may include the underwriters or their affiliates, selected by the calculation
agent prior to 9:00 A.M., New York City time, on such Federal Funds
Determination Date; provided, however, that if the brokers so selected by the
calculation agent are not quoting as mentioned in this sentence, the "Federal
Funds Rate" determined as of such Federal Funds Rate Determination Date will
be the Federal Funds Rate in effect on that Federal Funds Rate Determination
Date.]
The "Federal Funds Rate Calculation Date" pertaining to any Federal
Funds Rate Determination Date shall be the next succeeding business day.
(4) LIBOR Certificates. Each LIBOR certificate will bear interest for
each Interest Reset Period at the Certificate Rate calculated with reference
to LIBOR and the Spread or Spread Multiplier, if any, specified in that
certificate and in the applicable prospectus supplement.
With respect to LIBOR indexed to the offered rate for U.S. dollar
deposits, unless otherwise specified in the applicable prospectus supplement,
"LIBOR" for each Interest Reset Period will be determined by the calculation
agent for any LIBOR certificate as follows:
On the second London Banking Day prior to the Interest Reset Date for
the applicable Interest Reset Period (a "LIBOR Determination Date"), the
calculation agent for the LIBOR certificate will determine the arithmetic mean
of the offered rates for deposits in U.S. dollars for the period of the Index
Maturity specified in the applicable prospectus supplement, commencing on that
Interest Reset Date, which appear on the Reuters Screen LIBO Page at
approximately 11:00 a.m., London time, on the LIBOR Determination Date.
"Reuters Screen LIBO Page" means the display designated as page "LIBOR" on the
Reuters Monitor Money Rates Service (or such other page may replace the LIBO
page on that service for the purpose of displaying London interbank offered
rates of major banks). If at least two of the offered rates appear on the
Reuters Screen LIBO Page, "LIBOR" for that Interest Reset Period will be the
arithmetic mean of the offered rates as determined by the calculation agent
for that LIBOR certificate.
If fewer than two offered rates appear on the Reuters Screen LIBO
Page on that LIBOR Determination Date, the calculation agent for that LIBOR
certificate will request the principal London offices of each of four major
banks in the London interbank market selected by the calculation agent to
provide that calculation agent with its offered quotations for deposits in
U.S. dollars for the period of the specified Index Maturity, commencing on
that Interest Reset Date, to prime banks in the London interbank market at
approximately 11:00 a.m., London time, on that LIBOR Determination Date and in
a principal amount equal to an amount of not less than $1,000,000 that is
representative of a single transaction in the market at that time. If at least
two such quotations are provided, "LIBOR" for that Interest Reset Period will
be the arithmetic mean of such quotations. If fewer than two quotations are
provided, "LIBOR" for that Interest Reset Period will be the arithmetic mean
of rates quoted by three major banks in The City of New York selected by the
calculation agent for that LIBOR certificate at approximately 11:00 a.m., New
York City time, on that LIBOR Determination Date for loans in U.S. dollars to
leading European banks, for the period of the specified Index Maturity,
commencing on the Interest Reset Date, and in a principal amount equal to an
amount of not less than $1,000,000 that is representative of a single
transaction in the market at that time; provided, however, that if fewer than
three banks selected as aforesaid by the calculation agent are quoting rates
as specified in this sentence,
20
"LIBOR" for that Interest Reset Period will be the same as LIBOR for the
immediately preceding Interest Reset Period (or, if there was no Interest
Reset Period, the Initial Certificate Rate).
If LIBOR with respect to any LIBOR certificate is indexed to the
offered rates for deposits in a currency other than U.S. dollars, the
applicable prospectus supplement will specify the method for determining such
rate.
(5) Treasury Rate Certificates. Each Treasury Rate certificate will
bear interest for each Interest Reset Period at the Certificate Rate
calculated with reference to the Treasury Rate and the Spread or Spread
Multiplier, if any, specified in such certificate and in the applicable
prospectus supplement.
Unless otherwise specified in the applicable prospectus supplement,
the "Treasury Rate" for each Interest Reset Period will be the rate for the
auction held on the Treasury Rate Determination Date for that Interest Reset
Period of direct obligations of the United States ("Treasury bills") having
the Index Maturity specified in the applicable prospectus supplement, as that
rate shall be published in H.15(519) under the heading "U.S. Government
Certificates-Treasury bills-auction average (investment)" or, in the event
that that rate is not published prior to 3:00 p.m., New York City time, on the
Treasury Rate Calculation Date pertaining to that Treasury Rate Determination
Date, the auction average rate (expressed as a bond equivalent on the basis of
a year of 365 or 366 days, as applicable, and applied on a daily basis) on
that Treasury Rate Determination Date as otherwise announced by the United
States Department of the Treasury. In the event that the results of the
auction of Treasury bills having the specified Index Maturity are not
published or reported as described above by 3:00 p.m., New York City time, on
that Treasury Rate Calculation Date, or if no auction is held on that Treasury
Rate Determination Date, then the "Treasury Rate" for that Interest Reset
Period shall be calculated by the calculation agent for that Treasury Rate
certificate and shall be a yield to maturity (expressed as a bond equivalent
on the basis of a year of 365 or 366 days, as applicable, and applied on a
daily basis) of the arithmetic mean of the secondary market bid rates, as of
approximately 3:30 p.m., New York City time, on that Treasury Rate
Determination Date, of three leading primary United States government
securities dealers selected by the calculation agent for the issue of Treasury
bills with a remaining maturity closest to the specified Index Maturity;
provided, however, that if the dealers selected as aforesaid by that
calculation agent are not quoting bid rates as mentioned in this sentence,
then the "Treasury Rate" for that Interest Reset Period will be the same as
the Treasury Rate for the immediately preceding Interest Reset Period (or, if
there was no Interest Reset Period, the Initial Certificate Rate).
The "Treasury Rate Determination Date" for any Interest Reset Period
will be the day which the Interest Reset Date for that Interest Reset Period
falls on which Treasury bills would normally be auctioned. Treasury bills are
normally sold at auction every Monday, unless a Monday is a legal holiday, in
which case the auction is normally held on the following Tuesday or the
preceding Friday. If, as the result of a legal holiday, an auction is held on
the preceding Friday, that Friday will be the Treasury Rate Determination Date
for the Interest Reset Period commencing in the following week. Unless
otherwise specified in the applicable prospectus supplement, if an auction
date falls on any day that would otherwise be an Interest Reset Date for a
Treasury Rate certificate, then that Interest Reset Date shall instead be the
business day immediately following that auction date.
The "Treasury Rate Calculation Date" pertaining to any Treasury Rate
Determination Date shall be the first to occur of (a) the tenth calendar day
after that Treasury Rate Determination Date or, if that day is not a business
day, the next succeeding business day or (b) the second business day preceding
the date any distribution of interest is required to be made following the
applicable Interest Reset Date.
Principal of the Certificates
Unless otherwise specified in the applicable prospectus supplement,
each certificate, other than certain classes of Strip Certificates, will have
a "Certificate Principal Balance" which, at any time, will equal the maximum
amount that the certificate holder will be entitled to receive in respect of
principal out of the future cash flow on the deposited assets and other assets
included in the related trust. Unless otherwise specified in the applicable
prospectus supplement, distributions generally will be applied to
21
undistributed accrued interest on, then to principal of, and then to premium,
if any, on, each certificate of the class or classes entitled thereto (in the
manner and priority specified in that prospectus supplement) until the
aggregate Certificate Principal Balance of that class or classes has been
reduced to zero. The outstanding Certificate Principal Balance of a
certificate will be reduced to the extent of distributions of principal on
that certificate, and, if applicable pursuant to the terms of the related
series, by the amount of any net losses realized on any deposited assets
allocated to the certificate. Unless otherwise specified in the applicable
prospectus supplement, the initial aggregate Certificate Principal Balance of
all classes of certificates of a series will equal the outstanding aggregate
principal balance of the related deposited assets as of the applicable Cut-off
Date. The initial aggregate Certificate Principal Balance of a series and each
class thereof will be specified in the applicable prospectus supplement.
Distributions of principal of any class of certificates will be made on a pro
rata basis among all the certificates of that class. Strip Certificates with
no Certificate Principal Balance will not receive distributions of principal.
Dual Currency Certificates
Certificates may be issued as dual currency certificates, in which
case payments of principal and/or interest in respect of those dual currency
certificates will be made in those currencies, and rates of exchange will be
calculated upon that bases, as indicated in the certificates and described in
the applicable prospectus supplement. Other material terms and conditions
relating to dual currency certificates will be specified in the certificates
and the applicable prospectus supplement.
Credit Derivatives
If so specified in the applicable prospectus supplement, a trust
issuing a series of certificates may enter into a credit derivative
arrangement such as a credit default swap agreement. Under a swap agreement
the trust would agree, in return for a fee or other consideration, to assume
the default or other credit risk on a security not owned by the trust (a
"Reference Security)". Upon the occurrence of a default or other objective
credit event with respect to the Reference Security, the trust would suffer
the resulting loss pursuant to (i) a provision requiring the trust to pay the
counterparty the difference between the face amount of the Reference Security
and its then current market value as determined by independent quotations
(which payment would be made from the proceeds of the sale of the underlying
securities), (ii) a provision requiring the trust to deliver the underlying
securities to the counterparty in exchange for the Reference Securities, which
would then either be distributed in kind to certificateholders or sold (and
the proceeds distributed) or (iii) other provisions specified in the
applicable prospectus supplement with similar effects. Similarly, if so
specified in the applicable prospectus supplement, a trust may enter into a
put option arrangement pursuant to which the trust will agree to purchase a
Reference Security for a predetermined price, thus assuming the risk of loss
on the security.
Reference Securities will be of the same types as the underlying
securities described in this prospectus. The applicable prospectus supplement
will include information regarding Reference Securities and the issuer of the
Reference Securities that is similar to that provided with respect to
underlying securities.
Optional Exchange
The applicable prospectus supplement may provide that any of the
depositor, DBAB, the call warrant holder or the trustee, or their respective
affiliates and designees, may exchange certificates of any given series (an
"Exchangeable Series") for a pro rata portion of the deposited assets (an
"Optional Exchange Right"). The applicable prospectus supplement will specify
the terms upon which an Optional Exchange Right may be exercised; provided
that (a) any Optional Exchange Right shall be exercisable only to the extent
that the exercise of such right (i) would not affect the trust's ability to be
exempt under Rule 3a-7 under the Investment Company Act of 1940, as amended,
and all applicable rules, regulations and interpretations thereunder and (ii)
would not affect the characterization of the trust as a "grantor trust" under
the Code, and (b) if the deposited assets constitute a pool of underlying
securities, any exercise of the Optional Exchange Right will be effected so
that, with respect to each series or issue of underlying securities included
in such pool (together with any related assets that credit enhance or
otherwise support that series or issue of underlying securities), the
proportion that the principal amount of that series or
22
issue of underlying securities (together with those related assets) bears to
the aggregate principal amount of certificates immediately prior to such
exercise will be equal to the proportion that the principal amount of that
series or issue of underlying securities (together with those related assets)
bears to the aggregate principal amount of certificates immediately after that
exercise. In addition, the exercise of an Optional Exchange Right will
decrease the aggregate amount of certificates of the applicable Exchangeable
Series outstanding. See "Risk Factors--Optional Exchange for Deposited Assets
Will Generally Be Unavailable."
Generally, a holder exchanging certificates will receive a pro-rata
portion of the designated, publicly issued, security or pool of securities
comprising the underlying securities. See "Description of Deposited Assets and
Credit Support." Due to the discrepancy in the denominations of the underlying
securities and the certificates in some instances, it may be necessary to sell
a portion of the underlying securities in order to provide a pro-rata
distribution to the certificateholders engaging in an optional exchange. The
exercise of an Optional Exchange Right will not result in
under-collateralization because the proportion that the principal amount of
that series or issue of underlying securities that the principal bears to the
aggregate principal amount of certificates immediately prior to such exchange
will be the same proportion immediately after exercise. Unless otherwise
specified in the applicable prospectus supplement, the administrative agent or
the trustee will continue to forward or cause to be forwarded reports to
certificateholders with each distribution to certificateholders, including
information regarding the principal amount of the deposited assets. See
"Description of Deposited Assets and Credit Support Reports to
Certificateholders; Notice".
Call Right
DBAB, or the depositor, or if so specified in the relevant prospectus
supplement, a transferee as a result of a private placement to eligible
investors, may hold a call right to purchase all or some of the certificates
of a given series or class from the holders of all or some of the underlying
securities of a given series from the trust. If one or more specified persons
holds a call right, the applicable prospectus supplement will designate the
series as a "Callable Series."
The terms upon which any specified person or entity may exercise a
call right will be specified in the applicable prospectus supplement. Such
terms may relate to, but are not limited to, the following:
o the initial holder of the call right;
o whether the Certificate Principal Balance or Notional Amount, as defined
below, of each certificate being purchased pursuant to the call right
must be an Authorized Denomination;
o the call date or dates; and
o the call price.
After receiving notice of the exercise of a call right, the trustee
will provide notice as specified in the standard terms. Upon the satisfaction
of any applicable conditions to the exercise of a call right, each
certificateholder will be entitled to receive, in the case of a purchase of
less than all of the certificates, payment of a pro rata share of the call
price paid in connection with the exercise. In addition, in conjunction with
the exercise of a call on underlying securities in respect of all or a portion
of the underlying securities, the certificates will be redeemed in whole, pro
rata or in accordance with the Allocation Ratio, as applicable and as
specified in the applicable prospectus supplement. A call right is not
expected to be exercised unless the value of the underlying securities exceeds
the call price payable upon exercise of the call right.
Put Right
If specified in the applicable prospectus supplement, the underlying
securities of a given series may permit the holder thereof to require the
issuer of the underlying securities to repurchase or repay the underlying
securities on or after a fixed date. In addition, a holder may put
certificates of a given series to the depositor or a third party. The terms
upon which underlying securities may be put to the underlying
23
securities issuer or a holder may put its certificates (including the price)
will be specified in the related prospectus supplement; provided, however, any
put option shall only be exercisable only to the extent that the put would not
(i) 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 or (ii) affect the characterization of the trust as a "grantor trust"
under the Code.
Global Securities
Unless otherwise specified in the applicable prospectus supplement,
all certificates of a given series (or, if more than one class exists, any
given class within that series) will, upon issuance, be represented by one or
more global securities. The global securities will be deposited with, or on
behalf of, The Depository Trust Company, or DTC, New York, New York for
registered certificates denominated and payable in U.S. dollars, or such other
depositary identified in the applicable prospectus supplement, and registered
in the name of a nominee of the depositary. Global securities may be issued in
registered form and in either temporary or permanent form. Unless and until it
is exchanged in whole or in part for the individual certificates represented
(each, a "definitive certificate"), a global security may not be transferred
except as a whole by the depositary for such global security to a nominee of
the depositary or by a nominee of that depositary to that depositary or
another nominee of the depositary or by that depositary or any nominee to a
successor of that depositary or a nominee of the successor.
DTC has advised the depositor as follows: DTC is a limited-purpose
trust company organized under the laws of the State of New York, a member of
the Federal Reserve System, a "clearing corporation" within the meaning of the
New York Uniform Commercial Code, and a "clearing agency" registered pursuant
to the provisions of Section 17A of the Exchange Act. DTC was created to hold
securities of its participating organizations and to facilitate the clearance
and settlement of securities transactions among the institutions that have
accounts with the depositary ("participants") in such securities through
electronic book-entry changes in the accounts of the depositary participants,
thereby eliminating the need for physical movement of securities certificates.
The depositary's participants include securities brokers and dealers,
including DBAB, banks, trust companies, clearing corporations, and certain
other organizations, some of whom, and/or their representatives, own the
depositary. Access to the depositary's book-entry system is also available to
others, such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a participant, either directly or
indirectly. DTC has confirmed to the depositor that it intends to follow those
procedures.
Upon the issuance of a global security, the depositary for the global
security will credit, on its book-entry registration and transfer system, the
respective principal amounts or notional amounts, if applicable, of the
individual certificates represented by that global security to the accounts of
its participants. The accounts to be credited shall be designated by the
underwriters of those certificates, or, if those certificates are offered and
sold directly through one or more agents, by the depositor or that agent or
agents.
Ownership of beneficial interests in a global security will be
limited to participants or persons that may hold beneficial interests through
participants. Ownership of beneficial interests in a global security will be
shown on, and the transfer of that ownership will be effected only through,
records maintained by the depositary for such global security or by
participants or persons that hold through participants. The laws of some
states require that certain purchasers of securities take physical delivery of
the securities. These limits and laws may limit the market for beneficial
interests in a global security.
So long as the depositary for a global security, or its nominee, is
the owner of the global security, the depositary or the nominee, as the case
may be, will be considered the sole certificateholder of the individual
certificates represented by such global security for all purposes under the
trust agreement governing the certificates. Except as specified below, owners
of beneficial interests in a global security will not be entitled to have any
of the individual certificates represented by the global security registered
in their names, will not receive or be entitled to receive physical delivery
of any certificates and will not be considered the certificateholder under the
trust agreement governing the certificates. Because the depositary can only
act on behalf of its participants, the ability of a holder of any certificate
to pledge that
24
certificate to persons or entities that do not participate in the depositary's
system, or to otherwise act with respect to the certificate, may be limited
due to the lack of a physical certificate for the certificate.
Distributions of principal of, and premium, if any, and any interest
on individual certificates represented by a global security will be made to
the depositary or its nominee, as the case may be, as the certificateholder of
the global security. None of the depositor, the administrative agent, if any,
the trustee, any paying agent, any securities intermediary or the certificate
registrar will have responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial interests in a global
security or for maintaining, supervising or reviewing any records relating to
beneficial interests.
The depositor expects that the depositary for certificates of a given
class and series, upon receipt of any distribution of principal, premium or
interest in respect of a definitive global security representing any
certificates, will credit immediately participants' accounts with payments in
amounts proportionate to their respective beneficial interests in the
principal amount of the global security as shown on the records of the
depositary. The depositor also expects that payments by participants to owners
of beneficial interests in a global security held through the participants
will be governed by standing instructions and customary practices, as is now
the case with securities held for the accounts of customers in bearer form or
registered in "street name," and will be the responsibility of those
participants.
If the depositary for certificates of a given class of any series is
at any time unwilling or unable to continue as depositary and a successor
depositary is not appointed by the depositor within ninety days, the depositor
will issue individual definitive certificates in exchange for the global
security or securities representing those certificates. In addition, the
depositor may at any time and in its sole discretion determine not to have any
certificates of a given class represented by one or more global securities
and, in such event, will issue individual definitive certificates of that
class in exchange for the global security or securities representing those
certificates. Further, if the depositor so specifies with respect to the
certificates of a given class, an owner of a beneficial interest in a global
security representing certificates of that class may, on terms acceptable to
the depositor and the depositary of the global security, receive individual
definitive certificates in exchange for that beneficial interest. In any such
instance, an owner of a beneficial interest in a global security will be
entitled to physical delivery of individual definitive certificates of the
class represented by the global security equal in principal amount or Notional
Amount, if applicable, to that beneficial interest and to have definitive
certificates registered in its name (if the certificates of that class are
issuable as registered certificates). Individual definitive certificates of
that class so issued will be issued as registered certificates in
denominations, unless otherwise specified by the depositor or in the
applicable prospectus supplement, of $1,000 and integral multiples thereof if
the certificates of that class are issuable as registered certificates.
The applicable prospectus supplement will specify any specific terms
of the depositary arrangement with respect to any class or series of
certificates being offered by the prospectus supplement to the extent not
specified or different from the description above.
DESCRIPTION OF DEPOSITED ASSETS AND CREDIT SUPPORT
General
Each certificate of each series, or if more than one class exists,
each class (whether or not each class is offered by this prospectus) within
that series, will represent an ownership interest specified for that series,
or class, of certificates in a designated, publicly issued, security or a pool
of securities (the "underlying securities"), purchased by the depositor, or an
affiliate thereof, in the secondary market and assigned to a trust as
described in the applicable prospectus supplement. The underlying securities
will represent one or more of the following:
o publicly issued debt obligations or investment grade term preferred stock
of one or more corporations, limited liability companies, banking
organizations or insurance companies organized under the laws of the
United States or any state, the District of Columbia or the Commonwealth
of Puerto Rico, which in each case are subject to the informational
requirements of the Exchange Act and, in accordance with the Exchange
Act, file reports and other information with the SEC or, for certain
depository
25
institutions, with a federal bank or thrift regulatory agency
("domestic corporate securities"), and which, if that security or
securities are Concentrated Underlying Securities, the depositor
reasonably believes (based on publicly available information) meet the
market capitalization and other requirements for a primary issuance of
common stock on Form S-3 at the time of offering of the certificates;
o publicly issued debt securities or investment grade term preferred stock
of one or more foreign private issuers, as defined in rule 405 under the
Securities Act, subject to the informational requirements of the Exchange
Act and, in accordance with the Exchange Act, file reports and other
information with the SEC ("foreign private securities" and together with
domestic corporate securities, the "corporate securities") and which, if
that securities are Concentrated Underlying Securities, the depositor
reasonably believes (based on publicly available information) are
eligible for a primary offering of common stock on Form S-3 at the time
of offering of the certificates;
o preferred securities of one or more trusts or other special purpose legal
entities that hold obligations of issuers that are subject, or are
wholly-owned subsidiaries of companies that are subject (in which case
such parent companies have fully and unconditionally guaranteed such
obligations on a subordinate or non-subordinate basis), to the
informational requirements of the Exchange Act and,
in accordance with the Exchange Act, file reports and other information
with the SEC ("trust preferred securities"), and, if the trust preferred
securities are Concentrated Underlying Securities, that the depositor
reasonably believes (based on publicly available information) are
eligible for a primary offering of common stock on Form S-3 or Form S-3
at the time of the offering of the certificates;
o asset-backed securities of one or more trusts or other special purpose
legal entities (having outstanding at least $75,000,000 in securities
held by non-affiliates) which, unless the depositor is a GSE described
below, are subject at the time of issuance of the asset-backed securities
to the informational requirements of the Exchange Act and, in accordance
with the Exchange Act, file reports and other information with the SEC
("asset-backed securities" and, together with corporate securities and
trust preferred securities, the "Private Sector Securities");
o an obligation issued or guaranteed by the United States of America or any
agency thereof for the payment of which the full faith and credit of the
United States of America is pledged ("Treasury Securities");
o an obligation of one or more U.S. government sponsored entities,
("GSEs"), described below (see "Underlying Securities-Domestic Government
Securities");
o Government Trust Certificates ("GTCs") described below; or
o an obligation issued by a Multilateral Bank Issuer (as defined below).
Notwithstanding any requirement stated or incorporated in this
prospectus relating to reporting under the Exchange Act, it should be noted
that the issuers of the underlying securities are not participating in any
offering of trust certificates and that the depositor and DBAB will not
perform the analysis and review of such issuers that an underwriter of the
underlying securities would perform. The reasonableness of the depositor's
belief as to an underlying security issuer's eligibility to issue common stock
on Form S-3 or Form S-3 should be evaluated in light of these limitations.
This prospectus relates only to the certificates offered by this
prospectus and does not relate to the underlying securities. The following
description of the underlying securities is intended only to summarize certain
characteristics of the underlying securities the depositor is permitted to
deposit in a trust and is not a complete description of any prospectus
relating to any underlying security, and, if applicable, underlying securities
indenture and as qualified by the applicable prospectus supplement, prospectus
relating to any underlying security, if any, and to the extent applicable, the
statement of terms or similar document with respect to any underlying
security, and if applicable, the underlying securities indenture.
26
Underlying Securities
Private Sector Securities
Private Sector Securities will be:
o corporate securities;
o trust preferred securities; or
o asset-backed securities.
Corporate Securities. Corporate securities may consist of senior or
subordinated debt obligations, or investment grade term preferred stock issued
by domestic or foreign issuers, as described above.
Debt obligations may be issued with a wide variety of terms and
conditions. Set forth below is a description of certain features that may be
associated with one or more underlying securities consisting of debt
obligations.
Indentures. With respect to senior or subordinated debt obligations,
the applicable prospectus supplement will specify whether each underlying
security will have been issued pursuant to an indenture between the issuer of
the underlying securities and the underlying securities trustee. If so
specified in the applicable prospectus supplement, the underlying securities
indenture, if any, and the underlying securities trustee, if any, will be
qualified under the Trust Indenture Act of 1939 and the underlying securities
indenture will contain certain provisions required by the Trust Indenture Act.
Certain Covenants. If specified in the applicable prospectus
supplement, the underlying securities that consist of senior or subordinated
debt obligations will be issued pursuant to an underlying securities
indenture. Indentures generally contain covenants intended to protect security
holders against the occurrence or effects of certain specified events,
including restrictions limiting the issuer's, and in some cases any of its
subsidiary's, ability to:
o consolidate, merge, or transfer or lease assets;
o incur or suffer to exist any lien, charge, or encumbrance upon any of its
property or assets;
o incur, assume, guarantee or suffer to exist any indebtedness for borrowed
money if the payment of such indebtedness is secured by the grant of such
a lien; or
o declare or pay any cash dividends, or make any distributions on or in
respect of, or purchase, redeem, exchange or otherwise acquire or retire
for value any capital stock or subordinated indebtedness of the issuer or
its subsidiaries, if any.
An indenture may also contain financial covenants which, among other
things, require the maintenance of certain financial ratios or the creation or
maintenance of reserves. Subject to specified exceptions, indentures typically
may be amended or supplemented and past defaults may be waived with the
consent of the indenture trustee, the consent of the holders of not less than
a specified percentage of the outstanding securities, or both.
The underlying securities indenture related to one or more underlying
securities included in a trust may include some, all or none of the foregoing
provisions or variations thereof or additional covenants not discussed in this
prospectus. To the extent that the underlying securities are investment grade
debt they are unlikely to contain significant restrictive covenants although
certain non-investment grade debt may not be subject to restrictive covenants
either. There can be no assurance that any such provision will protect the
trust as a holder of the underlying securities against losses.
The prospectus supplement for any series of certificates will
describe material covenants in relation to any underlying securities
(including Foreign Government Securities) that represent ten percent
27
or more of the total underlying securities with respect to that series of
certificates (a "Concentrated Underlying Security") and, as applicable, will
describe material covenants that apply to all of the securities in any pool of
underlying securities.
Events of Default. Indentures generally provide that any one of a
number of specified events will constitute an event of default with respect to
the securities issued thereunder. Events of default typically include the
following or variations:
o failure by the issuer to pay an installment of interest or principal on
the securities at the time required, subject to any specified grace
period, or to redeem any of the securities when required, subject to any
specified grace period;
o failure by the issuer to observe or perform any covenant, agreement or
condition contained in the securities or the indenture, as the case may
be, which failure is materially adverse to security holders and continues
for a specified period after notice of the failure is given to the issuer
by the indenture trustee or the holders of not less than a specified
percentage of the outstanding securities; or
o failure by the issuer to make any required payment of principal (and
premium, if any) or interest with respect to certain of the other
outstanding debt obligations of the issuer or the acceleration by or on
behalf of the holders of the securities.
Remedies. Indentures for corporate securities generally provide that
upon the occurrence of an event of default, the indenture trustee may, and
upon the written request of the holders of not less than a specified
percentage of the outstanding securities, the indenture trustee must, take
such action as it may deem appropriate to protect and enforce the rights of
the security holders. Certain indentures provide that the indenture trustee or
a specified percentage of the holders of the outstanding securities have the
right to declare all or a portion of the principal and accrued interest on the
outstanding securities immediately due and payable upon the occurrence of
certain events of default, subject to the issuer's right to cure, if
applicable. Generally, an indenture will contain a provision entitling the
indenture trustee to be indemnified by the security holders prior to
proceeding to exercise any right or power under such indenture with respect to
the securities at the request of the security holders. An indenture is also
likely to limit a security holder's right to institute certain actions or
proceedings to pursue any remedy under the indenture unless certain conditions
are satisfied, including consent of the indenture trustee, that the proceeding
be brought for the ratable benefit of all holders of the security, and/or the
indenture trustee, after being requested to institute a proceeding by the
owners of at least a specified minimum percentage of the securities, shall
have refused or neglected to comply with that request within a reasonable
time.
Each underlying securities indenture or underlying security may
include some, all or none of the foregoing provisions or variations or
additional events of default not discussed in this prospectus. The prospectus
supplement with respect to any series of certificates will describe the events
of default under the underlying securities with respect to any Concentrated
Underlying Security ("Underlying Security Events of Default") and applicable
remedies. With respect to any trust comprised of a pool of securities, the
applicable prospectus supplement will describe certain common Underlying
Security Events of Default with respect to such pool. There can be no
assurance that any such provision will protect the trust, as a holder of the
underlying securities, against losses. If an Underlying Security Event of
Default occurs and the indenture trustee as a holder of the underlying
securities is entitled to vote or take some other action to declare the
principal amount of an underlying security and any accrued and unpaid interest
to be due and payable, the certificateholders' objectives may differ from
those of holders of other securities of the same series and class as any
underlying security ("Outstanding Debt Securities"), in determining whether to
declare the acceleration of the underlying securities.
Subordination. As specified in the applicable prospectus supplement,
certain of the underlying securities with respect to any trust may be either
senior ("Senior Underlying Securities") or subordinated ("Subordinated
Underlying Securities") in right to payment to other existing or future
indebtedness of the issuer of the underlying securities. With respect to
Subordinated Underlying Securities, to the extent of the subordination
provisions of such securities, and after the occurrence of certain events,
security holders and direct creditors whose claims are senior to Subordinated
Underlying Securities, if any, may
28
be entitled to receive payment of the full amount due before the holders of
any subordinated debt securities are entitled to receive payment on account of
the principal (and premium, if any) or any interest on the securities.
Consequently, the trust as a holder of subordinated debt may suffer a greater
loss than if it held unsubordinated debt of the issuer of the underlying
securities. There can be no assurance, however, that in the event of a
bankruptcy or similar proceeding the trust as a holder of Senior Underlying
Securities would receive all payments in respect of the securities even if
holders of subordinated securities receive amounts in respect of the
securities. Reference is made to the prospectus supplement used to offer any
series of certificates for a description of any subordination provisions with
respect to any Concentrated Underlying Securities and the percentage of Senior
Underlying Securities and Subordinated Underlying Securities, if any, in a
trust comprised of a pool of securities.
Secured Obligations. Certain of the underlying securities with
respect to any trust may represent secured obligations of the issuer of the
underlying securities (the "Secured Underlying Securities"). Generally, unless
an event of default shall have occurred and is continuing, or with respect to
certain collateral or as otherwise specified in the indenture pursuant to
which the securities were offered and sold, an issuer of secured obligations
has the right to remain in possession and retain exclusive control of the
collateral securing a security and to collect, invest and dispose of any
income related to the collateral. The indenture pursuant to which any secured
indebtedness is issued may also contain provisions for release, substitution
or disposition of collateral under specified circumstances with or without the
consent of the indenture trustee or upon the direction of not less than a
specified percentage of the security holders. The indenture pursuant to which
any secured indebtedness is issued will also provide for the disposition of
the collateral upon the occurrence of specified events of default. In the
event of a default in respect of any secured obligation, security holders may
experience a delay in payments on account of principal (and premium, if any)
or any interest on the securities pending the sale of any collateral and prior
to or during the period the related collateral may decline in value. If
proceeds of the sale of collateral following an indenture event of default are
insufficient to repay all amounts due in respect of any secured obligations,
the holders of the securities (to the extent not repaid from the proceeds of
the sale of the collateral) would have only an unsecured claim ranking pari
passu with the claims of all other general unsecured creditors.
The underlying securities indenture with respect to any Secured
Underlying Security may include, some, all or none of the foregoing provisions
or variations thereof. The prospectus supplement used to offer any series of
certificates which includes Concentrated Underlying Securities which are
Secured Underlying Securities, will describe the security provisions of the
Underlying Securities and the related collateral. With respect to any trust
comprised of a pool of securities, a substantial portion of which are Secured
Underlying Securities, the applicable prospectus supplement will disclose
general information regarding the security provisions and the collateral.
Trust Preferred Securities. As specified in the applicable prospectus
supplement, a trust may include one or more trust preferred securities. Trust
preferred securities are preferred equity securities issued by a trust, such
as a Delaware statutory business trust, established for the purpose of issuing
common and preferred equity securities and investing the proceeds in certain
subordinated debt obligations. The subordinated debt obligations are issued by
the parent of the trust, i.e., the company to whom the trust issues its common
equity securities, or by an affiliate of such parent. Trust preferred
securities generally have economic characteristics that mirror those of the
subordinated debt obligations that are the trusts' principal assets.
Specifically, the trust preferred securities generally have a liquidation
preference equal to the principal balance of the subordinated debt obligations
and are subject to mandatory redemption on the maturity date of the
subordinated debt obligations, or such earlier date as the issuer optionally
prepays the subordinated debt. The trust preferred securities generally pay
dividends at a rate approximately equal to the interest rate on the
subordinated debt obligations, and such dividends and interest payments
generally are due on or about the same date.
The trusts that issue trust preferred securities generally have no
assets other than the subordinated debt obligations issued by that trusts'
affiliates. The subordinated debt obligations are subordinated to all other
unsubordinated debt of the affiliates, including the debt issued subsequent to
issuance of the subordinated debt obligations.
29
In view of the relationship of the trusts that issue trust preferred
securities to their parent companies and in view of certain undertakings by
the parents, the trusts will not file reports under the Exchange Act so long
as their parent companies file reports under the Exchange Act.
Asset-Backed Securities. As specified in the applicable prospectus
supplement, a trust may include one or more asset-backed securities.
Asset-backed securities may be asset-backed notes or pass-through
certificates, in each case issued by a trust or other special-purpose entity.
Asset-backed notes are secured by, and pass-through certificates represent an
interest in, a fixed or revolving pool of financial assets. These financial
assets may consist of secured or unsecured consumer or other receivables, such
as automobile loans or contracts, automobile leases, credit card receivables,
home equity or other mortgage loans, trade receivables, floor plan (inventory)
loans, automobile leases, equipment leases, and other assets that produce
streams of payments. Asset-backed notes generally are issued pursuant to
indentures and pass-through certificates generally are issued pursuant to
pooling and servicing agreements. A separate servicing agreement typically is
executed in connection with asset-backed notes. The servicing agreements,
indentures and pooling and servicing agreements are referred to as the
"asset-backed agreements".
The asset-backed agreements provide for the appointment of a trustee
and the segregation of the transferred pool of assets from the other assets of
the transferor. This segregation generally is only required to the extent
necessary to perfect the interest of the trustee in the assets against claims
of unsecured creditors of the transferor of the assets. Where so required by
the Uniform Commercial Code, or "UCC", (for instance, home equity loan notes)
certain of the documents evidencing the underlying receivables are delivered
to the possession of the trustee or other custodian for the holders of the
asset-backed securities. In the case of most assets, either no documents
evidence the receivables (for instance, credit card receivables) or documents
exist, but the UCC does not require their possession to perfect a transfer
(for instance, automobile installment sales contracts). In these cases, the
transferor segregates the assets only on its own books and records, such as by
marking its computer files, and perfects the trustee's interest by filing a
financing statement under the UCC. This method of segregation and perfection
presents the risk that the trustee's interest in the assets could be lost as a
result of negligence or fraud, such that the trustee and the asset-backed
security holders become unsecured creditors of the transferor of the assets.
Domestic Government Securities
Domestic Government Securities will be:
o Treasury Securities;
o GSEs; or
o GTCs.
GSEs. As specified in the applicable prospectus supplement, the
obligations of one or more of the following GSEs may be included in a trust:
Federal National Mortgage Association, Federal Home Loan Mortgage Corporation,
Student Loan Marketing Association, Resolution Funding Corporation, Federal
Home Loan Banks (to the extent such obligations represent the joint and
several obligations of the twelve Federal Home Loan Banks), Tennessee Valley
Authority and Federal Farm Credit Banks. GSE debt securities generally are
exempt from registration under the Securities Act pursuant to Section 3(a)(2)
of the Securities Act (or are deemed by statute to be so exempt) and are not
required to be registered under the Exchange Act. The securities of any GSE
will be included in a trust only to the extent (A) its obligations are
supported by the full faith and credit of the U.S. government or (B) the
organization makes publicly available its annual report, which shall include
financial statements or similar financial information with respect to the
organization. Based on information contained in the offering document pursuant
to which any GSE issuer's securities were originally offered, the applicable
prospectus supplement will specify information with respect to the public
availability of information with respect to any GSE issuer the debt securities
of which constitute more than ten percent of the underlying securities for any
series of
30
certificates as of the date of the prospectus supplement. The specific terms
and conditions of the underlying securities will be specified in the
applicable prospectus supplement.
In the case of a GSE issuer there will generally be a fiscal agent
with respect to any related underlying security whose actions will be governed
by a fiscal agency agreement. A fiscal agent is not a trustee for the holders
of the underlying securities and does not have the same responsibilities or
duties to act for the holders of a GSE's securities as would a trustee. Unless
otherwise specified in the applicable prospectus supplement, the underlying
securities with respect to any GSE issuer will not be guaranteed by the United
States and do not constitute a debt or obligation of the United States or of
any agency or instrumentality thereof other than the related GSE.
Contractual and Statutory Restrictions. A GSE issuer and the related
underlying securities may be subject to contractual and statutory restrictions
which may provide some protection to securityholders against the occurrence or
effects of specified events. Unless otherwise specified in the applicable
prospectus supplement, each GSE is limited to the activities as will promote
its statutory purposes as set forth in the publicly available information with
respect to the issuer. See "Description of the Deposited Assets--Publicly
Available Information" in the applicable prospectus supplement. A GSE's
promotion of its statutory purposes, as well as its statutory, structural and
regulatory relationships with the federal government may cause or require the
GSE to conduct its business in a manner that differs from that an enterprise
which is not a GSE might employ.
Neither the United States nor any agency thereof is obligated to
finance any GSE issuer's operations or to assist a GSE issuer in any manner.
Prospective purchasers should consult the publicly available information with
respect to each GSE issuer for a more detailed description of the regulatory
and statutory restrictions on the related GSE's activities.
Events of Default. Underlying securities issued by a GSE Issuer may
provide that any one of a number of specified events will constitute an event
of default with respect to the securities issued thereunder. Events of default
typically include the following or variations:
o failure by the issuer to pay an installment of interest or principal on
the securities at the time required (subject to any specified grace
period) or to redeem any of the securities when required (subject to any
specified grace period);
o failure by the issuer to observe or perform any covenant, agreement or
condition contained in the securities or the indenture or authorizing
legislation or regulation, as the case may be, which failure is
materially adverse to security holders and continues for a specified
period after notice is given to the issuer by the fiscal agent or the
holders of not less than a specified percentage of the outstanding
securities; and
o failure by the issuer to make any required payment of principal (and
premium, if any) or interest with respect to certain of the other
outstanding debt obligations of the issuer or the acceleration by or on
behalf of the holders thereof of the securities.
GTCs. As specified in the applicable prospectus supplement, a trust
may include one or more GTCs. GTCs are certificates evidencing undivided
fractional interests in a trust, the assets of which consist of promissory
notes, (the "GTC Notes"), payable in U.S. dollars, of a certain foreign
government, backed a full faith and credit guaranty issued by the United
States of America, acting through the Defense Security Assistance Agency of
the Department of Defense, of the due and punctual payment of 90% of all
payments of principal and interest due on the GTC Notes and a security
interest in collateral, consisting of non-callable securities issued or
guaranteed by the United States government thereof, sufficient to pay the
remaining 10% of all payments of principal and interest due on the GTC Notes.
Multilateral Bank Issuers
As specified in the applicable prospectus supplement, a trust may
include obligations of one or more Multilateral Bank Issuers. A "Multilateral
Bank Issuer" means the International Bank for
31
Reconstruction and Development, the Inter-American Development Bank, the Asian
Development Bank, the African Development Bank, the International Finance
Corporation, the European Bank for Reconstruction and Development, or another
multilateral development bank that has a comparable volume of outstanding
securities and files with the SEC comparable publicly available information,
and the securities of which are exempted from registration under the
Securities Act.
Principal Terms of Underlying Securities
Reference is made to the applicable prospectus supplement for each
series of certificates for a description of the following terms, as
applicable, of any Concentrated Underlying Security:
(i) the title and series of the underlying securities, and the
aggregate principal amount, denomination and form thereof;
(ii) whether the debt securities are senior or subordinated to
any other existing or future obligations of the issuer of
the underlying securities;
(iii) whether any of the obligations are secured or unsecured and
the nature of any collateral;
(iv) the limit, if any, upon the aggregate principal amount of
the debt securities;
(v) the dates on which, or the range of dates within which, the
principal of (and premium, if any, on) the debt securities
will be payable;
(vi) the rate or rates or the method of determination, at which
the underlying securities will bear interest, if any (the
"Underlying Securities Rate"); the date or dates from which
the interest will accrue (the "Underlying Securities
Interest Accrual Periods"); and the
30
dates on which the interest will be payable (the
"Underlying Securities Payment Dates");
(vii) the obligation, if any, of the issuer of the underlying
securities to redeem the outstanding debt securities
pursuant to any sinking fund or similar provisions, or at
the option of a holder thereof, and the periods within which
or the dates on which, the prices at which and the terms and
conditions upon which the debt securities may be redeemed or
repurchased, in whole or in part, pursuant to that
obligation;
(viii) the periods within which or the dates on which, the prices
at which and the terms and conditions upon which the debt
securities may be redeemed, if any, in whole or in part, at
the option of the issuer of the underlying securities;
(ix) the periods within which or the dates on which, the prices
at which and the terms and conditions upon which the holder
of the underlying securities may require the issuer of the
underlying securities to repurchase or otherwise repay the
underlying securities;
(x) whether the underlying securities were issued at a price
lower than the principal amount;
(xi) if other than U.S. dollars, the foreign or composite
currency in which the debt securities are denominated, or in
which payment of the principal of (and premium, if any) or
any interest on the underlying securities will be made (the
"Underlying Securities Currency"), and the circumstances, if
any, when the currency of payment may be changed;
(xii) material events of default or restrictive covenants provided
for with respect to the underlying securities;
(xiii) the rating, if any; and
(xiv) any other material terms of the underlying securities.
32
With respect to a trust containing a pool of underlying securities,
the applicable prospectus supplement will describe the composition of the
underlying securities pool as of the Cut-off Date, certain material events of
default or restrictive covenants common to the underlying securities, and, on
an aggregate, percentage or weighted average basis, as applicable, the
characteristics of the pool with respect to the terms set forth in (ii),
(iii), (v), (vi), (vii), (viii) and (ix) of the preceding paragraph and any
other material terms regarding such pool of securities.
Publicly Available Information
In addition to the foregoing, with respect to each Concentrated
Underlying Security the applicable prospectus supplement will disclose the
identity of the applicable obligor and the underlying securities trustee, if
applicable, and will describe the existence and type of certain information
that is made publicly available by each obligor regarding such underlying
security and will disclose where and how prospective purchasers of the
certificates may obtain publicly available information about the obligor.
Publicly available information will typically consist of the quarterly and
annual reports filed under the Exchange Act by the issuer with, and which are
available from, the SEC. Such information will typically consist of the
obligor's annual report, which contains financial statements or similar
financial information, and can be obtained from the SEC, if so specified in
the applicable prospectus supplement, or from the office of the obligor
identified in the applicable prospectus supplement. However, the precise
nature of that publicly available information and where and how it may be
obtained with respect to any given GSE issuer will vary, and, as described
above, will be specified in the applicable prospectus supplement.
If an issuer of Concentrated Underlying Securities ceases to file
periodic reports under the Exchange Act, the depositor, on behalf of the
trust, will continue to be subject to the reporting requirements of the
Exchange Act, but certain information regarding that issuer may be
unavailable.
Unless otherwise specified in the applicable prospectus supplement,
in the event that an issuer of a Concentrated Underlying Security (or the
issuers of underlying securities the combined principal balances of which
exceed ten percent of the aggregate principal balance of the underlying
securities) underlying a series of trust certificates ceases to file periodic
reports required under the Exchange Act, the depositor shall within a
reasonable period of time (i) file periodic reports containing the information
that such issuer(s) would otherwise file or (ii) instruct the trustee to
distribute within a reasonable period of time the underlying security or
securities to the certificateholders pursuant to the procedures set forth in
the trust agreement or (iii) instruct the trustee to sell the underlying
security or securities and distribute the proceeds from that sale to the
certificateholders in accordance with the Allocation Ratio (any such sale will
result in a loss to the certificateholders of the relevant series if the sale
price is less than the purchase price for such Concentrated Underlying
Securities).
Other Deposited Assets
The depositor may deposit, assets other than the underlying
securities, into a trust assets related or incidental to one or more of the
underlying securities or to some other asset deposited in the trust, including
hedging contracts and other similar arrangements (such as puts, calls,
interest rate swaps, currency swaps, floors, caps and collars), cash and
assets ancillary or incidental to the foregoing or to the underlying
securities (including assets obtained through foreclosure or in settlement of
claims with respect thereto), credit derivatives and direct obligations of the
United States All such assets for any given series, together with the related
underlying securities, are referred to as the "deposited assets". To the
extent described in the applicable prospectus supplement, the trustee on
behalf of the certificateholders of a trust may enter into an agreement
constituting or providing for the purchase of certain assets as described
above. The applicable prospectus supplement will, to the extent appropriate,
contain analogous disclosure with respect to the foregoing assets as referred
to above with respect to the underlying securities.
Unless otherwise specified in the applicable prospectus supplement,
the deposited assets for a given series of certificates and the related trust
will not constitute deposited assets for any other series of certificates and
the related trust and the certificates of each class of a given series possess
an equal and ratable undivided ownership interest in such deposited assets.
The applicable prospectus supplement
33
may, however, specify that certain assets constituting a part of the deposited
assets relating to any given series may be beneficially owned solely by or
deposited solely for the benefit of one class or a group of classes within
that series. In that event, the other classes of that series will not possess
any beneficial ownership interest in those specified assets constituting a
part of the deposited assets.
Credit Support
As specified in the applicable prospectus supplement for a given
series of certificates, the trust for any series of certificates may include,
or the certificateholders of that series (or any class or group of classes
within that series) may have the benefit of, credit support for any class or
group of classes within that series. Credit support may be provided by any
combination of the following means described below or any other means
described in the applicable prospectus supplement. The applicable prospectus
supplement will specify whether the trust for any class or group of classes of
certificates contains, or the certificateholders of the certificates have the
benefit of, credit support and, if so, the amount, type and other relevant
terms of each element of credit support with respect to any class or classes
and certain information with respect to the obligors of each element,
including financial information with respect to any obligor providing credit
support for 20% or more of the aggregate principal amount of the class or
classes unless that obligor is subject to the informational requirements of
the Exchange Act.
Subordination. As discussed below under "--Collections," the rights
of the certificateholders of any given class within a series of certificates
to receive collections from the trust for that series and any credit support
obtained for the benefit of the certificateholders of that series (or classes
within that series) may be subordinated to the rights of the
certificateholders of one or more other classes of that series to the extent
described in the applicable prospectus supplement. Such subordination
accordingly provides some additional credit support to those
certificateholders of those other classes. For example, if losses are realized
during a given period on the deposited assets relating to a series of
certificates so that the collections received are insufficient to make all
distributions on the certificates of that series, those realized losses would
be allocated to the certificateholders of any class of any series that
is subordinated to another class, to the extent and in the manner specified in
the applicable prospectus supplement. In addition, if so specified in the
applicable prospectus supplement, certain amounts otherwise payable to
certificateholders of any class that is subordinated to another class may be
required to be deposited into a reserve account. Amounts held in any reserve
account may be applied as described below under "--Reserve Accounts" and in
the applicable prospectus supplement.
If so specified in the applicable prospectus supplement, the credit
support for any series or class of certificates may include, in addition to
the subordination of certain classes of that series and the establishment of a
reserve account, any of the other forms of credit support described below. Any
other forms of credit support that are solely for the benefit of a given class
will be limited to the extent necessary to make required distributions to the
certificateholders of such class or as otherwise specified in the applicable
prospectus supplement. In addition, if so specified in the applicable
prospectus supplement, the obligor of any other forms of credit support may be
reimbursed for amounts paid pursuant to that credit support out of amounts
otherwise payable to one or more of the classes of the certificates of that
series.
Letter of Credit; Surety Bond. The certificateholders of any series
(or class or group of classes of certificates within that series) may, if
specified in the applicable prospectus supplement, have the benefit of a
letter or letters of credit issued by a bank or a surety bond or bonds issued
by a surety company. In either case, the trustee or such other person
specified in the applicable prospectus supplement will use its reasonable
efforts to cause the letter of credit or the surety bond, as the case may be,
to be obtained, to be kept in full force and effect (unless coverage
thereunder has been exhausted through payment of claims) and to pay, unless
otherwise specified in the applicable prospectus supplement in a timely manner
the fees or premiums therefor. The trustee or such other person specified in
the applicable prospectus supplement will make or cause to be made draws under
the letter of credit or the surety bond, as the case may be, under the
circumstances and to cover the amounts specified in the applicable prospectus
supplement. Any amounts otherwise available under the letter of credit or the
surety bond will be reduced to the extent of any prior unreimbursed draws
thereunder. The applicable prospectus
34
supplement will specify the manner, priority and source of funds by which any
such draws are to be repaid.
Unless otherwise specified in the applicable prospectus supplement,
in the event that the letter of credit bank or the surety, as applicable,
ceases to satisfy any credit rating or other applicable requirements specified
in the applicable prospectus supplement, the trustee or other person specified
in the applicable prospectus supplement will use its reasonable efforts to
obtain or cause to be obtained a substitute letter of credit or surety bond,
as applicable, or other form of credit enhancement providing similar
protection, that meets the requirements and provides the same coverage to the
extent available for the same cost. There can be no assurance that any letter
of credit bank or any surety, as applicable, will continue to satisfy such
requirements or that any substitute letter of credit, surety bond or similar
credit enhancement will be available providing equivalent coverage for the
same cost. To the extent not so available, the credit support otherwise
provided by the letter of credit or the surety bond (or similar credit
enhancement) may be reduced to the level otherwise available for the same cost
as the original letter of credit or surety bond.
Reserve Accounts. If so specified in the applicable prospectus
supplement, the trustee or other person named in the prospectus supplement
will deposit or cause to be deposited into a reserve account maintained with
an eligible institution (which may be the trustee) any combination of cash or
permitted investments in specified amounts, which will be applied and
maintained in the manner and under the conditions specified in the prospectus
supplement. In the alternative or in addition to such deposit, a reserve
account may be funded through application of a portion of collections received
on the deposited assets for a given series of certificates, in the manner and
priority specified in the applicable prospectus supplement. Amounts deposited
in such reserve account may be distributed to certificateholders of the class
or group of classes within that series, or may be used for other purposes, in
the manner and to the extent specified in the applicable prospectus
supplement. Amounts deposited in any reserve account will be invested in
certain permitted investments by, or at the direction of, the trustee, the
depositor or other person named in the applicable prospectus supplement.
Collections
The trust agreement will establish procedures by which the trustee or
other person specified in the prospectus supplement is obligated to administer
the related deposited assets. This will include making collections of all
payments made on the deposited assets and depositing the collections from time
to time prior to any applicable distribution date into a segregated
certificate account maintained or controlled by the trustee for the benefit of
that series. An administrative agent, if any is appointed pursuant to the
applicable prospectus supplement, will direct the trustee, and otherwise the
trustee will make all determinations, as to the appropriate application of the
collections and other amounts available for distribution to the payment of any
administrative or collection expenses (such as the administrative fee) and
credit support-related ongoing fees (such as insurance premiums, letter of
credit fees or any required account deposits) and to the payment of amounts
then due and owing on the certificates of that series (and classes within that
series), all in the manner and priorities described in the applicable
prospectus supplement. The applicable prospectus supplement will specify the
collection periods, if applicable, and distribution dates for a given series
of certificates and the particular requirements relating to the segregation
and investment of collections received on the deposited assets during a given
collection period or on or by certain specified dates. Amounts received from
the deposited assets and any credit support obtained for the benefit of
certificateholders for a particular series or class of certificates over a
specified period may not be sufficient, after payment of all prior expenses
and fees for that period, to pay amounts then due and owing to holders of
those certificates. The applicable prospectus supplement will also specify the
manner and priority by which any net losses realized on any deposited assets
will be allocated among the classes of any series of certificates, if
applicable.
The relative priorities of distributions with respect to collections
from the assets of the trust assigned to classes of a given series of
certificates may permanently or temporarily change over time upon the
occurrence of certain circumstances specified in the applicable prospectus
supplement. Moreover, the applicable prospectus supplement may specify that
the relative distribution priority assigned to each class of a given series
for purposes of payments of certain amounts, such as principal,
35
may be different from the relative distribution priority assigned to each such
class for payments of other amounts, such as interest or premium.
DESCRIPTION OF THE TRUST AGREEMENT
The following summary of certain provisions of the trust agreement
that may be applicable to each series of certificates does not purport to be
complete, and the summary is qualified in its entirety by reference to the
detailed provisions of the form of trust agreement filed as an exhibit to the
registration statement. Wherever defined terms of the standard terms or the
series supplement are referred to, the defined terms are incorporated in this
prospectus by reference as part of the statement made, and the statement is
qualified in its entirety by reference.
Assignment of Deposited Assets
At the time of issuance of any series of certificates, the depositor
will cause the underlying securities to be included in the related trust, and
any other deposited asset specified in the prospectus supplement, to be
assigned to the related trustee, together with all principal, premium, if any,
and interest received by or on behalf of the depositor on or with respect to
deposited assets after the cut-off date specified in the prospectus
supplement, the "Cut-off Date", other than principal, premium, if any, and
interest due on or before the Cut-off Date and other than any Retained
Interest. The trustee will, concurrently with such assignment, deliver the
certificates to the depositor in exchange for certain assets to be deposited
in the trust. Each deposited asset will be identified in a schedule appearing
as an exhibit to the trust agreement. The schedule will include certain
statistical information with respect to each underlying security and each
other deposited asset as of the Cut-off Date, and in the event any underlying
security is a Concentrated Underlying Security, the schedule will include, to
the extent applicable, information regarding the payment terms thereof, the
Retained Interest, if any, with respect thereto, the maturity or terms
thereof, the rating, if any, thereof and certain other information.
In addition, the depositor will, with respect to each deposited
asset, deliver or cause to be delivered to the trustee (or to the custodian
hereinafter referred to) all documents necessary to transfer ownership of such
deposited asset to the trustee. The trustee (or such custodian) will review
the documents within such period as is permitted in the prospectus supplement,
and the trustee (or such custodian) will hold the documents in trust for the
benefit of the certificateholders.
With respect to the types of deposited assets specified in the
applicable prospectus supplement if and to the extent described therein, if
any document is found to be missing or defective in any material respect, the
trustee (or such custodian) will immediately notify the administrative agent,
if any, and the depositor, and the administrative agent, if any, and the
trustee will immediately notify the relevant person who sold the applicable
deposited asset to the depositor. To the extent specified in the applicable
prospectus supplement, if the relevant person who sold the applicable
deposited asset to the depositor cannot cure that omission or defect within 60
days after receipt of notice, that applicable person will be obligated, within
90 days of receipt of notice, to repurchase the related deposited asset from
the trustee at the purchase price or provide a substitute for the deposited
asset. There can be no assurance that the relevant person who sold the
applicable deposited asset to the depositor will fulfill this repurchase or
substitution obligation. Although the administrative agent, if any, or
otherwise the trustee is obligated to use its best efforts to enforce this
obligation, neither that administrative agent nor the depositor will be
obligated to repurchase or substitute for such deposited asset if the relevant
person who sold the applicable deposited asset to the depositor defaults on
its obligation. Unless otherwise specified in the applicable prospectus
supplement, when applicable, this repurchase or substitution obligation
constitutes the sole remedy available to the certificateholders or the trustee
for omission of, or a material defect in, or failure to provide, a constituent
document.
Each of the depositor and the administrative agent, if any, will make
representations and warranties regarding its authority to enter into, and its
ability to perform its obligations under, the trust agreement. Upon a breach
of any representation of the depositor or administrative agent, as the case
may be, which materially and adversely affects the interests of the
certificateholders, the depositor or any administrative agent, respectively,
will be obligated to cure the breach in all material respects.
36
Collection and Other Administrative Procedures
General. With respect to any series of certificates the trustee or
such other person specified in the prospectus supplement directly or through
sub-administrative agents, will make reasonable efforts to collect all
scheduled payments under the deposited assets. The trustee will follow the
collection procedures, as it would follow with respect to comparable financial
assets that it held for its own account, provided that such procedures are
consistent with the trust agreement and any related instrument governing any
credit support, collectively referred to as the "credit support instruments",
and provided that, except as otherwise expressly specified in the applicable
prospectus supplement, it shall not be required to expend or risk its own
funds or otherwise incur personal financial liability.
Sub-Administration. Any trustee or administrative agent may delegate
its obligations in respect of the deposited assets to a third party
sub-administrative agent they deem qualified to perform the obligations.
However, the trustee or administrative agent will remain obligated with
respect to the obligations under the trust agreement. Each sub-administrative
agent will be required to perform the customary functions of an administrator
of comparable financial assets, including, if applicable, collecting payments
from obligors and remitting the collections to the trustee; maintaining
accounting records relating to the deposited assets, attempting to cure
defaults and delinquencies; and enforcing any other remedies with respect
thereto all as and to the extent provided in the applicable sub-administration
agreement.
The agreement between any administrative agent or trustee and a
sub-administrative agent will be consistent with the terms of the trust
agreement and the assignment to the sub-administrator by itself will not
result in a withdrawal or downgrading of the rating of any class of
certificates issued pursuant to the trust agreement. Although the
sub-administration agreement will be a contract solely between the
administrative agent and the sub-administrative agent, the trust agreement
pursuant to which a series of certificates is issued will provide that, if for
any reason the administrative agent for the series of certificates is no
longer acting in that capacity, the trustee or any successor administrative
agent must recognize the sub-administrative agent's rights and obligations
under the sub-administration agreement.
The administrative agent or trustee will be solely liable for all
fees owed by it to any sub-administrative agent, irrespective of whether the
compensation of the administrative agent or trustee, as applicable, pursuant
to the trust agreement with respect to the particular series of certificates
is sufficient to pay the fees. However, a sub-administrative agent may be
entitled to a Retained Interest in certain deposited assets to the extent
specified in the applicable prospectus supplement. Each sub-administrative
agent will be reimbursed by the administrative agent, if any, or otherwise the
trustee for certain expenditures which it makes, generally to the same extent
the administrative agent or trustee, as applicable, would be reimbursed under
the terms of the trust agreement relating to the series. See "--Retained
Interest; Administrative Agent Compensation and Payment of Expenses."
The administrative agent or trustee may require any
sub-administrative agent to agree to indemnify the administrative agent or
trustee, as applicable, for any liability or obligation sustained in
connection with any act or failure to act by the sub-administrative agent.
Realization upon Defaulted Deposited Assets. Unless otherwise
specified in the applicable prospectus supplement, the trustee, on behalf of
the certificateholders of a given series, or any class or classes within the
series, will present claims under each applicable credit support instrument,
and will take reasonable steps as are necessary to receive payment or to
permit recovery with respect to defaulted deposited assets. As set forth
above, all collections by or on behalf of the trustee or administrative agent
under any credit support instrument are to be deposited in the certificate
account for the related trust, subject to withdrawal as described above.
Unless otherwise specified in the applicable prospectus supplement,
if recovery on a defaulted deposited asset under any related credit support
instrument is not available, the trustee will be obligated to follow, or cause
to be followed, normal practices and procedures as it deems necessary or
advisable to realize upon the defaulted deposited asset. However, except as
otherwise expressly specified in the applicable prospectus supplement, the
trustee shall not be required to expend or risk its own funds or
37
otherwise incur personal financial liability. If the proceeds of any
liquidation of the defaulted deposited asset are less than the sum of (i) the
outstanding principal balance of the defaulted deposited asset, (ii) interest
accrued but unpaid at the applicable interest rate, and (iii) the aggregate
amount of expenses incurred by the administrative agent and the trustee in
connection with such proceedings to the extent reimbursable from the assets of
the trust under the trust agreement, the trust will realize a loss in the
amount of such difference. Only if and to the extent specified in the
applicable prospectus supplement, the administrative agent or trustee, as so
provided, will be entitled to withdraw or cause to be withdrawn from the
related certificate account out of the net proceeds recovered on any defaulted
deposited asset, prior to the distribution of the proceeds to
certificateholders, amounts representing its normal administrative
compensation on the deposited asset, unreimbursed administrative expenses
incurred with respect to the deposited asset and any unreimbursed advances of
delinquent payments made with respect to the deposited asset.
Retained Interest; Administrative Agent Compensation and Payment of Expenses
The prospectus supplement for a series of certificates will specify
whether there will be any Retained Interest in the deposited assets, and, if
so, the owner of the Retained Interest. A Retained Interest will be
established on an asset-by-asset basis and will be specified in an exhibit to
the applicable series supplement to the trust agreement. A Retained Interest
in a deposited asset represents a specified interest therein. Payments in
respect of the Retained Interest will be deducted from payments on the
deposited assets as received and, in general, will not be deposited in the
applicable certificate account or become a part of the related trust. Unless
otherwise specified in the applicable prospectus supplement, any partial
recovery of interest on a deposited asset, after deduction of all applicable
administration fees, will be allocated between the Retained Interest, if any,
and interest distributions to certificateholders on a pari passu basis.
The applicable prospectus supplement will specify the administrative
agent's, if any, and the trustee's compensation, and the source, manner and
priority of payment, with respect to a given series of certificates.
If and to the extent specified in the applicable prospectus
supplement, in addition to amounts payable to any sub-administrative agent,
the administrative agent, if any or the trustee, will pay from its
compensation certain expenses incurred in connection with its administration
of the deposited assets, including, without limitation, payment of the fees
and disbursements of the trustee, if applicable, and independent accountants,
payment of expenses incurred in connection with distributions and reports to
certificateholders, and payment of any other expenses described in the
applicable prospectus supplement.
Advances in Respect of Delinquencies
Unless otherwise specified in the applicable prospectus supplement,
the administrative agent or the trustee will have no obligation to make any
advances with respect to collections on the deposited assets or in favor of
the certificateholders of the related series of certificates. However, to the
extent specified in the applicable prospectus supplement, the administrative
agent or the trustee will advance on or before each distribution date its own
funds or funds held in the certificate account for the series that are not
part of the funds available for distribution for such distribution date. The
amount of funds advanced will equal the aggregate of payments of principal,
premium, if any, and interest, net of related administration fees and any
Retained Interest, with respect to the deposited assets that were due during
the related Collection Period, as defined in the applicable prospectus
supplement, and were delinquent on the related Determination Date, subject to
(i) any such administrative agent's or trustee's good faith determination that
such advances will be reimbursable from Related Proceeds and (ii) such other
conditions as may be specified in the prospectus supplement.
Advances are intended to maintain a regular flow of scheduled
interest, premium, if any, and principal payments to holders of the class or
classes of certificates entitled to payments, rather than to guaranty or
insure against losses. Unless otherwise specified in the applicable prospectus
supplement, advances of an administrative agent's or trustee's funds will be
reimbursable only out of related
38
recoveries on the deposited assets, (and amounts received under any form of
credit support) for the series with respect to which such advances were made
(as to any deposited assets, "Related Proceeds"); provided, however, that any
advance will be reimbursable from any amounts in the certificate account for
the series to the extent that the administrative agent or trustee shall
determine, in its sole judgment, that the advance, a "Nonrecoverable Advance",
is not ultimately recoverable from Related Proceeds. If advances have been
made by the administrative agent or trustee from excess funds in the
certificate account for any series, the administrative agent or trustee will
replace the funds in such certificate account on any future distribution date
to the extent that funds in the certificate account on the distribution date
are less than payments required to be made to certificateholders on such date.
If so specified in the applicable prospectus supplement, the obligations, if
any, of an administrative agent or trustee to make advances, may be secured by
a cash advance reserve fund or a surety bond. If applicable, information
regarding the characteristics of, and the identity of any obligor on, any such
surety bond, will be specified in the applicable prospectus supplement.
Certain Matters Regarding the Administrative Agent and the Depositor
An administrative agent, if any, for each series of certificates
under the trust agreement will be named in the applicable prospectus
supplement. The entity serving as administrative agent for any the series may
be the trustee, the depositor, an affiliate of either the relevant person who
sold the applicable deposited asset to the depositor or any third party and
may have other normal business relationships with the trustee, the depositor,
their affiliates or the relevant person who sold the applicable deposited
asset to the depositor.
The trust agreement will provide that an administrative agent may
resign from its obligations and duties under the trust agreement with respect
to any series of certificates only if that resignation, and the appointment of
a successor, will not result in a withdrawal or downgrading of the rating of
any class of certificates of that series, or upon a determination that its
duties under the trust agreement with respect to that series are no longer
permissible under applicable law. No resignation will become effective until
the trustee or a successor has assumed the administrative agent's obligations
and duties under the trust agreement with respect to that series.
The trust agreement will further provide that neither an
administrative agent, the depositor nor any director, officer, employee, or
agent of the administrative agent or the depositor will incur any liability to
the related trust or certificateholders for any action taken, or for
refraining from taking any action, in good faith pursuant to the trust
agreement or for errors in judgment; provided, however, that none of the
administrative agent, the depositor nor any such person will be protected
against any liability that would otherwise be imposed by reason of willful
misfeasance, bad faith or gross negligence in the performance of their or by
reason of reckless disregard of obligations and duties thereunder. The
standard terms will further provide that, unless otherwise provided in the
applicable series supplement thereto, an administrative agent, the depositor
and any director, officer, employee or agent of the administrative agent or
the depositor will be entitled to indemnification by the related trust and
will be held harmless against any loss, liability or expense incurred in
connection with any legal action relating to the trust agreement or the
certificates, other than any loss, liability or expense incurred by reason of
willful misfeasance, bad faith or gross negligence in the performance of their
or by reason of reckless disregard of their obligations and duties. In
addition, the trust agreement will provide that neither an administrative
agent nor the depositor will be under any obligation to appear in, prosecute
or defend any legal action which is not incidental to their respective
responsibilities under the trust agreement or which in its opinion may cause
it to incur any expense or liability. Each of the administrative agent or the
depositor may, however, in its discretion undertake any action which it may
deem necessary or desirable with respect to the trust agreement and the rights
and duties of the parties and the interests of the certificateholders
thereunder. The applicable prospectus supplement will describe how the legal
expenses and costs of such action and any resulting liability will be
allocated.
Any person into which an administrative agent may be merged or
consolidated, or any person resulting from any merger or consolidation to
which an administrative agent is a part, or any person succeeding to the
business of an administrative agent, will be the successor of the
administrative agent under the trust agreement with respect to the
certificates of any given series.
39
Administrative Agent Termination Events; Rights Upon Administrative Agent
Termination Event
Unless otherwise specified in the applicable prospectus supplement,
"Administrative Agent Termination Events" under the trust agreement with
respect to any given series of certificates will consist of the following:
o any failure by an administrative agent to remit to the trustee any funds
in respect of collections on the deposited assets and credit support, if
any, as required under the trust agreement, that continues unremedied for
five days after the giving of written notice of failure to the
administrative agent by the trustee or the depositor, or to the
administrative agent, the depositor and the trustee by the holders of the
certificates evidencing not less than 25% of the voting rights;
o any failure by an administrative agent duly to observe or perform in any
material respect any of its other covenants or obligations under the
trust agreement with respect to the series which continues unremedied for
thirty days after the giving of written notice of that failure to the
administrative agent by the trustee or the depositor, or to the
administrative agent, the depositor and the trustee by the holders of the
certificates evidencing not less than 25% of the voting rights; and
o specified events of insolvency, readjustment of debt, marshalling of
assets and liabilities or similar proceedings and certain actions by or
on behalf of an administrative agent indicating its insolvency or
inability to pay its obligations.
Any additional Administrative Agent Termination Events with respect
to any given series of certificates will be specified in the applicable
prospectus supplement. In addition, the applicable prospectus supplement and
the related series supplement to the trust agreement will specify as to each
matter requiring the vote of holders of certificates of a class or group of
classes within a given series, the circumstances and manner in which the
Required Percentage applicable to each matter is calculated. "Required
Percentage" means with respect to any matter requiring a vote of holders of
certificates of a given series, the specified percentage (computed on the
basis of outstanding Certificate Principal Balance or Notional Amount, as
applicable) of certificates of a designated class or group of classes within
that series (either voting as separate classes or as a single class)
applicable to such matter, all as specified in the applicable prospectus
supplement and the related series supplement to the trust agreement. "Voting
rights" evidenced by any certificate will be the portion of the voting rights
of all the certificates in the related series allocated in the manner
described in the applicable prospectus supplement.
Unless otherwise specified in the applicable prospectus supplement,
so long as an Administrative Agent Termination Event under the trust agreement
with respect to a given series of certificates remains unremedied, the
depositor or the trustee may, and at the direction of holders of those
certificates evidencing not less than the "Required Percentage--Administrative
Agent Termination" (as defined in the prospectus supplement, if applicable) of
the Voting Rights, terminate all the rights and obligations of the
administrative agent under the trust agreement relating to the applicable
trust and in and to the related deposited assets (other than any Retained
Interest of the administrative agent). The trustee will then succeed to all
the responsibilities, duties and liabilities of the administrative agent under
the trust agreement with respect to that series (except that if the trustee is
prohibited by law from obligating itself to make advances regarding delinquent
deposited assets, then the trustee will not be so obligated) and will be
entitled to similar compensation arrangements. In the event that the trustee
is unwilling or unable to act, it may or, at the written request of the
holders of the certificates evidencing not less than the "Required
Percentage--Administrative Agent Termination" of the voting rights, it will
appoint, or petition a court of competent jurisdiction for the appointment of,
an administration agent acceptable to the rating agency with a net worth at
the time of such appointment of at least $15,000,000 to act as successor to
that administrative agent under the trust agreement with respect to that
series. Pending such appointment, the trustee is obligated to act in that
capacity, except that if the trustee is prohibited by law from obligating
itself to make advances regarding delinquent deposited assets, then the
trustee will not be so obligated. The trustee and any such successor may agree
upon the compensation be paid to such
40
successor, which in no event may be greater than the compensation payable to
the administrative agent under the trust agreement with respect to that
series.
No certificateholder will have the right under the trust agreement to
institute any proceeding with respect thereto unless the holder previously has
given to the trustee written notice of breach and unless the holders of
certificates evidencing not less than the "Required Percentage--Remedies" (as
defined in the prospectus supplement) of the voting rights have made written
request upon the trustee to institute such proceeding in its own name as
trustee thereunder and have offered to the trustee reasonable indemnity, and
the trustee for fifteen days has neglected or refused to institute any such
proceeding. The trustee, however, is under no obligation to exercise any of
the trust agreement or powers vested in it by the trust agreement or to make
any investigation of matters arising from that trust agreement or to
institute, conduct or defend any litigation or in relation thereto at the
request, order or direction of any of the holders of certificates covered by
the trust agreement, unless the certificateholders have offered to the trustee
reasonable security or indemnity against the costs, expenses and liabilities
which may be incurred.
Modification and Waiver
Unless otherwise specified in the applicable prospectus supplement,
the trust agreement for each series of certificates may be amended by the
depositor and the trustee with respect to that series, without notice to or
consent of the certificateholders, for specified purposes including:
o to cure any ambiguity;
o to correct or supplement any provision in the trust agreement which may
be inconsistent with any other provision in the agreement or in the
prospectus supplement;
o to add or supplement any credit support for the benefit of any
certificateholders (provided that if an addition affects any series or
class of certificateholders differently than any other series or class of
certificateholders, then such addition will not, as evidenced by an
opinion of counsel, have a material adverse effect on the interests of
any affected series or class of certificateholders);
o to add to the covenants, restrictions or obligations of the depositor,
the administrative agent, if any, or the trustee for the benefit of the
certificateholders;
o to add, change or eliminate any other provisions with respect to matters
or questions arising under that trust agreement so long as (x) an
addition, change or elimination will not, as evidenced by an opinion of
counsel, affect the tax status of the trust or result in a sale or
exchange of any certificate for tax purposes and (y) the trustee has
received written confirmation from each rating agency rating the
certificates that the amendment will not cause such rating agency to
qualify, reduce or withdraw the then current rating thereof; or
o to comply with any requirements imposed by the Code.
Without limiting the generality of the foregoing, unless otherwise
specified in the applicable prospectus supplement, the trust agreement may
also be modified or amended from time to time by the depositor, and the
trustee, with the consent of the holders of certificates evidencing not less
than the "Required Percentage--Amendment", as defined in the prospectus
supplement, of the voting rights of those certificates that are materially
adversely affected by such modification or amendment for the purpose of adding
any provision to or changing in any manner or eliminating any provision of the
trust agreement or of modifying in any manner the rights of the
certificateholders; provided, however, that in the event modification or
amendment would materially adversely affect the rating of any series or class
by each rating agency, the "Required Percentage--Amendment" specified in the
related series supplement to the trust agreement shall include an additional
specified percentage of the certificates of that series or class.
41
Except as otherwise specified in the applicable prospectus
supplement, no modification or amendment may, however, (i) reduce in any
manner the amount of or alter the timing of, distributions or payments which
are required to be made on any certificate without the consent of the holder
of such certificate or (ii) reduce the aforesaid Required Percentage of voting
rights required for the consent to any amendment without the consent of the
holders of all certificates covered by the trust agreement then outstanding.
Unless otherwise specified in the applicable prospectus supplement,
holders of certificates evidencing not less than the "Required
Percentage--Waiver", as defined in the prospectus supplement, of the voting
rights of a given series may, on behalf of all certificateholders of that
series, (i) waive, insofar as that series is concerned, compliance by the
depositor, the trustee or the administrative agent, if any, with certain
restrictive provisions, if any, of the trust agreement before the time for
that compliance and (ii) waive any past default under the trust agreement with
respect to certificates of that series, except a default in the failure to
distribute amounts received as principal of (and premium, if any) or any
interest on any certificate and except a default in respect of a covenant or
provision the modification or amendment of which would require the consent of
the holder of each outstanding certificate affected.
Reports to Certificateholders; Notices
Reports to Certificateholders. Unless otherwise specified in the
applicable prospectus supplement, with each distribution to certificateholders
of any class of certificates of a given series, the administrative agent or
the trustee, as specified in the applicable prospectus supplement, will
forward or cause to be forwarded to that certificateholder, to the depositor
and to the other parties as may be specified in the trust agreement, a
statement setting forth:
(i) the amount of such distribution to certificateholders of
such class allocable to principal of or interest or premium,
if any, on the certificates of such class; and the amount of
aggregate unpaid interest as of such distribution date;
(ii) in the case of certificates with a variable Certificate
Rate, the Certificate Rate applicable to such distribution
date, as calculated in accordance with the method specified
in this prospectus and in the applicable prospectus
supplement;
(iii) the amount of compensation received by the administrative
agent, if any, and the trustee for the period relating to
such distribution date, and the other customary information
as the administrative agent, if any, or otherwise the
trustee deems necessary or desirable to enable
certificateholders to prepare their tax returns;
(iv) if advances are provided for, the aggregate amount of
advances included in that distribution, and the aggregate
amount of unreimbursed advances at the close of business on
such distribution date;
(v) the aggregate stated principal amount or, if applicable,
notional principal amount of the deposited assets and the
current interest rate at the close of business on such
distribution date to the extent notified thereof;
(vi) the aggregate Certificate Principal Balance or aggregate
Notional Amount, if applicable, of each class of
certificates (including any class of certificates not
offered in the applicable prospectus supplement) at the
close of business on such distribution date, separately
identifying any reduction in the aggregate Certificate
Principal Balance or aggregate Notional Amount due to the
allocation of any net losses realized on any deposited
assets or otherwise; and
(vii) as to any series (or class within that series) for which
credit support has been obtained, the amount of coverage of
each element of credit support included therein as of the
close of business on the distribution date to the extent
notified thereof.
42
In the case of information furnished with respect to the amounts of
distributions or the amounts of compensation of the administrative agent and
the trustee, the amounts shall be expressed as a U.S. dollar amount (or
equivalent in any other specified currency) per minimum denomination of
certificates or for such other specified portion. Within a reasonable period
of time after the end of each calendar year, the administrative agent or the
trustee, as specified in the applicable prospectus supplement, shall furnish
to each person, at the address set forth for such person on the records of
the trustee or administrative agent, as applicable, who at any time during the
calendar year was a certificateholder a statement containing the information
set forth above with respect to the amounts of distributions or the amounts of
compensation of the administrative agent and the trustee, aggregated for such
calendar year or the applicable portion during which such person was a
certificateholder. Such obligation of the administrative agent or the trustee,
as applicable, will be deemed to have been satisfied to the extent that
substantially comparable information shall be provided by the administrative
agent or the trustee, as applicable, pursuant to any requirements of the Code
as are from time to time in effect.
Notices. Unless otherwise specified in the applicable prospectus
supplement, any notice required to be given to a holder of a registered
certificate will be mailed to the last address of such holder set forth in the
applicable certificate register.
Evidence as to Compliance
If so specified in the applicable prospectus supplement, the trust
agreement will provide that commencing on a certain date and on or before a
specified date in each year after, a firm of independent public accountants
will furnish a statement to the trustee to the effect that the firm has
examined documents and records relating to the administration of the deposited
assets during the related 12-month period (or, in the case of the first
report, the period ending on or before the date specified in the prospectus
supplement, which date shall not be more than one year after the related
Original Issue Date) and that, on the basis of certain agreed upon procedures
considered appropriate under the circumstances, the firm is of the opinion
that the administration was conducted in compliance with the terms of the
trust agreement, except for exceptions as the firm shall believe to be
immaterial and the other exceptions and qualifications as shall be set forth
in that report.
The trust agreement may also provide for delivery to the depositor,
the administrative agent, if any, and the trustee on behalf of the
certificateholders, on or before a specified date in each year, of an annual
statement signed by two officers of the trustee to the effect that the trustee
has fulfilled its obligations under the trust agreement throughout the
preceding year with respect to any series of certificates.
Copies of the annual accountants' statement, if any, and the
statement of officers of the trustee may be obtained by certificateholders
without charge upon written request to either the administrative agent or the
trustee, as applicable, at the address specified in the applicable prospectus
supplement.
Replacement Certificates
Unless otherwise specified in the applicable prospectus supplement,
if a registered certificate is mutilated, destroyed, lost or stolen, it may be
replaced at the corporate trust office or agency of the applicable trustee in
the City and State of New York or at the principal London office of the
applicable trustee, or other location as may be specified in the applicable
prospectus supplement, upon payment by the holder of such expenses as may be
incurred by the applicable trustee and the furnishing of the evidence and
indemnity as that trustee may require. Mutilated certificates must be
surrendered before new certificates will be issued.
Termination
The obligations created by the trust agreement for each series of
certificates will terminate upon the payment to certificateholders of that
series of all amounts held in the related certificate account or by an
administrative agent, if any, and required to be paid to them pursuant to the
trust agreement following the earlier of (i) the final payment or other
liquidation of the last deposited asset subject thereto or the disposition of
all property acquired upon foreclosure or liquidation of that deposited asset
and (ii) the purchase of all the assets of the trust by the party entitled to
effect that termination, under the
43
circumstances and in the manner specified in the applicable prospectus
supplement. In no event, however, will any trust created by the trust
agreement continue beyond the respective date specified in the applicable
prospectus supplement. Written notice of termination of the obligations with
respect to the related series of certificates under the trust agreement will
be provided as set forth above under "--Reports to Certificateholders;
Notices--Notices," and the final distribution will be made only upon surrender
and cancellation of the certificates at an office or agency appointed by the
trustee which will be specified in the notice of termination.
Any purchase of deposited assets and property acquired in respect of
deposited assets evidenced by a series of certificates will be made at a price
approximately equal to the aggregate fair market value of all the assets in
the trust (as determined by the trustee, the administrative agent, if any,
and, if different than both such persons, the person entitled to effect that
termination), in each case taking into account accrued interest at the
applicable interest rate to the first day of the month following such purchase
or, to the extent specified in the applicable prospectus supplement, a
specified price as determined in the prospectus supplement. The exercise of
such right will effect early retirement of the certificates of that series,
but the right of the person entitled to effect the termination is subject to
the aggregate principal balance of the outstanding deposited assets for the
series at the time of purchase being less than the percentage of the aggregate
principal balance of the deposited assets at the Cut-off Date for that series
specified in the applicable prospectus supplement.
Duties of the Trustee
The trustee makes no representations as to the validity or
sufficiency of the trust agreement, the certificates of any series or any
deposited asset or related document. The trustee is not accountable for the
use or application by or on behalf of any administrative agent of any funds
paid to the administrative agent or its designee in respect of the
certificates or the deposited assets, or deposited into or withdrawn from the
related certificate account or any other account by or on behalf of the
administrative agent. If no Administrative Agent Termination Event has
occurred and is continuing with respect to any given series, the trustee is
required to perform only those duties specifically required under the trust
agreement with respect to that series. However, upon receipt of the various
certificates, reports or other instruments required to be furnished to it, the
trustee is required to examine those documents and to determine whether they
conform to the requirements of the trust agreement.
The Trustee
The trustee for any given series of certificates under the trust
agreement will be named in the applicable prospectus supplement. The
commercial bank, national banking association or trust company serving as
trustee will be unaffiliated with, but may have banking relationships with or
provide financial services to, the depositor, any administrative agent or any
of their affiliates.
CURRENCY RISKS
Exchange Rates and Exchange Controls
An investment in a certificate having a specified currency other than
U.S. dollars entails significant risks that are not associated with a similar
investment in a security denominated in U.S. dollars. Those risks include,
without limitation, the possibility of significant changes in rates of
exchange between the U.S. dollar and the specified currency and the
possibility of the imposition or modification of foreign exchange controls
with respect to that specified currency. Such risks generally depend on
factors over which the depositor has no control, such as economic and
political events and the supply of and demand for the relevant currencies. In
recent years, rates of exchange between the U.S. dollar and certain currencies
have been highly volatile, and such volatility may be expected in the future.
Fluctuations in any particular exchange rate that have occurred in the past
are not necessarily indicative, however, of fluctuations in the rate that may
occur during the term of any certificate. Depreciation of the specified
currency for a certificate against the U.S. dollar would result in a decrease
in the effective yield of that certificate below its Certificate Rate and, in
certain circumstances, could result in a loss to the investor on a U.S. dollar
basis.
44
Governments have from time to time imposed, and may in the future
impose, exchange controls that could affect exchange rates as well as the
availability of a specified currency other than U.S. dollars for making
distributions in respect of certificates denominated in that currency. At
present, the depositor has identified the following currencies in which
distributions of principal, premium and interest on certificates may be made:
Australian dollars, Canadian dollars, Danish kroner, Italian lire, Japanese
yen, New Zealand dollars, U.S. dollars and ECU. However, certificates
distributable with specified currencies other than those listed may be issued
at any time. There can be no assurance that exchange controls will not
restrict or prohibit distributions of principal, premium or interest in any
specified currency other than U.S. dollars. Even if there are no actual
exchange controls, it is possible that, on a distribution date with respect to
any particular certificate, the currency in which amounts then due to be
distributed in respect of the certificate are distributable would not be
available. In that event, the payments will be made in the manner set forth
above under "Description of Certificates--General" or as otherwise specified
in the applicable prospectus supplement.
As specified in the applicable prospectus supplement, certain of the
underlying securities may be denominated in a currency other than the
specified currency. Although payments in respect of principal and interest on
the certificates will be made in the specified currency, the payments may be
based in whole or in part upon receipt by the related trust of payments in the
underlying securities currency. An investment in certificates supported by
underlying securities denominated in a currency other than the specified
currency entails significant risks not associated with an investment in
securities supported by obligations denominated in the same currency as the
currency of payment on the securities. The risks include, without limitation,
the possibility of significant changes in rates of exchange between the
specified currency and the underlying securities currency and the possibility
of the imposition or modification of foreign exchange controls with respect to
either the specified currency or the underlying securities currency.
Prospective purchasers should consult their own financial and legal
advisors as to the risks entailed by an investment in certificates denominated
in a currency other than U.S. Dollars. such certificates are not an
appropriate investment for persons who are unsophisticated with respect to
foreign currency transactions.
The information set forth in this prospectus is directed to
prospective purchasers of certificates who are United States residents. The
applicable prospectus supplement for certain issuances of certificates may
specify certain information applicable to prospective purchasers who are
residents of countries other than the United States with respect to matters
that may affect the purchase or holding of, or receipt of distributions of
principal, premium or interest in respect of, the certificates.
Any prospectus supplement relating to certificates having a specified
currency other than U.S. dollars will contain information concerning
historical exchange rates for that currency against the U.S. dollar, a
description of that currency, any exchange controls affecting that currency
and any other required information concerning such currency.
Payment Currency
Except as described below or unless otherwise specified in the
applicable prospectus supplement, if distributions in respect of a certificate
are required to be made in a currency other than U.S. dollars and that
currency is unavailable due to the imposition of exchange controls or other
circumstances beyond the depositor's control or is no longer used by the
government of the country issuing that currency or for the settlement of
transactions by public institutions of or within the international banking
community, then all distributions in respect of that certificate shall be made
in U.S. dollars until that currency is again available or so used. The amounts
so payable on any date in such currency shall be converted into U.S. dollars
on the basis of the most recently available noon buying rate in New York City
for cable transfers in foreign currencies as certified for customs purposes by
the Federal Reserve Bank of New York for that currency or as otherwise
indicated in the applicable prospectus supplement.
45
If distribution in respect of a certificate is required to be made in
ECU and ECU is no longer used in the European Monetary System, then all
distributions for that certificate shall be made in U.S. dollars until ECU is
again so used. The amount of each distribution in U.S. dollars shall be
computed on the basis of the equivalent of the ECU in U.S. dollars, determined
as described below, as of the second business day prior to the date on which
that distribution is to be made.
The equivalent of the ECU in U.S. dollars as of any date, (the "Day
of Valuation") shall be determined for the certificates of any series and
class by the applicable trustee on the following basis. The component
currencies of the ECU for this purpose (the "Components)" shall be the
currency amounts that were components of the ECU as of the last date on which
the ECU was used in the European Monetary System. The equivalent of the ECU in
U.S. dollars shall be calculated by aggregating the U.S. dollar equivalents of
the Components. The U.S. dollar equivalent of each of the Components shall be
determined by that trustee on the basis of the most recently available noon
buying rate in New York City for cable transfers in foreign currencies as
certified for customs purposes by the Federal Reserve Bank of New York for
those Components or as otherwise indicated in the applicable prospectus
supplement.
If the official unit of any component currency is altered by way of
combination or subdivision, the number of units of that currency as a
Component shall be divided or multiplied in the same proportion. If two or
more component currencies are consolidated into a single currency, the amounts
of those currencies as Components shall be replaced by an amount in that
single currency equal to the sum of the amounts of the consolidated component
currencies expressed in the single currency. If any component currency is
divided into two or more currencies, the amount of that currency as a
Component shall be replaced by amounts those currencies, each of which shall
be equal to the amount of the former component currency divided by the number
of currencies into which that currency was divided.
All determinations referred to above made by the applicable trustee
shall be at its sole discretion and shall, in the absence of manifest error,
be conclusive for all purposes and binding on the related certificateholders
of that series.
Foreign Currency Judgments
Unless otherwise specified in the applicable prospectus supplement,
the certificates will be governed by and construed in accordance with the law
of the State of New York. Courts in the United States customarily have not
rendered judgments for money damages denominated in any currency other than
the U.S. dollar. A 1987 amendment to the Judiciary Law of the State of New
York provides, however, that an action based upon an obligation denominated in
a currency other than U.S. dollars will be rendered in the foreign currency of
the underlying obligation and converted into U.S. dollars at the rate of
exchange prevailing on the date of the entry of the judgment or decree.
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of the material federal income
tax consequences of the purchase, beneficial ownership and disposition of a
certificate purchased at initial issuance and held as a capital asset within
the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended,
but does not purport to be a comprehensive description of all of the tax
considerations that may be relevant to a decision to purchase a certificate.
Such consequences generally will depend on the terms of the specific
certificate and the assets collateralizing or otherwise supporting that
certificate. Except as otherwise noted, this discussion deals only with an
owner of a certificate that is (i) a citizen or resident of the United States
(ii) a corporation or partnership created or organized in the United States or
under the laws of the United States or any State (including the District of
Columbia), (iii) an estate the income of which is subject to U.S. federal
income taxation regardless of its source, or (iv) a trust if a court within
the United States is able to exercise primary supervision over its
administration and one or more United States persons have the authority to
control all of its substantive decisions (each, a "U.S. Holder").
This summary is based upon laws, regulations, rulings and decisions
currently in effect, all of which are subject to change, possibly on a
retroactive basis. It does not deal with all federal tax consequences
applicable to a holder of certificates in light of that holder's
circumstances. In particular, it
46
does not discuss all the tax consequences that may be relevant to certain
categories of investors subject to special rules such as certain financial
institutions, insurance companies and dealers, investors who hold their
certificates as part of a "straddle," a "hedge" or a "conversion transaction,"
and investors that have a "functional currency" other than the U.S. dollar.
Prospective investors should consult their own tax advisors to
determine the federal, state, local and other tax consequences applicable to
them of the purchase, ownership and disposition of the certificates, including
the advisability of making any of the elections described below, as well as
any tax consequences arising under the law of any state or other taxing
jurisdiction.
The trust will be provided with an opinion of Sidley Austin Brown &
Wood LLP, special federal tax counsel to DB Depositor Inc. regarding certain
federal income tax matters discussed below. Further, the tax consequences
arising from the ownership of any series of certificates with special
characteristics will be set forth in the applicable prospectus supplement and
a legal opinion of federal tax counsel will be filed with the Commission in
connection with each series of certificates. In such opinion, federal tax
counsel will opine as to the tax disclosure regarding the certificates
specified in this prospectus and the applicable prospectus supplement. An
opinion of federal tax counsel, however, is not binding on the Internal
Revenue Service or the courts. Prospective investors should note that no
rulings have been or will be sought from the Service with respect to any of
the federal income tax consequences discussed below, and no assurance can be
given that the Service will not take contrary positions.
Tax Status of Trust as a Grantor Trust
If the trust is structured so as to constitute a grantor trust for
federal income tax purposes, the applicable prospectus supplement will
indicate that federal tax counsel has provided an opinion that the trust will
be classified as a grantor trust and not as an association, or publicly traded
partnership taxable as a corporation for federal income tax purposes. The
following discussion assumes that the trust will be classified as a grantor
trust and not as an association (or publicly traded partnership) taxable as a
corporation for federal income tax purposes. Accordingly, each certificate
owner will be treated as the owner of a pro rata undivided interest in the
deposited assets in the trust for federal income tax purposes.
If the trust will be classified for federal income tax purposes as an
entity other than a grantor trust, the applicable prospectus supplement will
contain a description of the material federal income tax consequences to
investors of the purchase, beneficial ownership and disposition of interests
in the trust.
Income of Certificate Owners
In General. Each U.S. holder of a certificate will be subject to
federal income taxation as if it owned directly the portion of the deposited
assets allocable to such certificate, and as if it paid directly its share of
expenses paid by the trust. Except as described below, a U.S. holder would
report its share of the income of the trust under its usual method of
accounting. Because the payments collected on the underlying securities
generally are paid to U.S. holders in the following month, the amounts
includible in a U.S. holder's gross income attributable to the underlying
securities during any calendar month will not equal the amounts distributed in
that month.
A U.S. holder will allocate the amount it pays for its certificate
among the underlying securities, the interest accrued on the underlying
securities that are treated as debt for federal income tax purposes (the
"underlying debt securities") and the deposited assets in the trust other than
the underlying debt securities (the "Other Deposited Assets") allocable to
that certificate, in proportion to their relative fair market values on the
date of purchase of the certificate. A U.S. holder would calculate separately
its income, gain, loss or deduction realized with respect to each asset.
This discussion assumes that the trust will be treated as a grantor
trust for federal income tax purposes. Should the trust be treated as an
entity other than a grantor trust for federal income tax purposes, the
applicable prospectus supplement will contain a description of the material
federal income tax consequences to investors of the purchase, beneficial
ownership and disposition of interests in the Trust.
47
Underlying Debt Securities. Except as provided below, each U.S.
holder of a certificate will be required to report on its federal income tax
return its pro rata share of the stated interest that is unconditionally
payable at least annually at a single fixed rate (a "qualified stated
interest") on the Underlying Debt Securities in accordance with its regular
method of accounting.
Original Issue Discount. The underlying debt securities may have
originally been sold with original issue discount ("OID"). As provided in the
Code and the applicable regulations, OID is the excess of the "stated
redemption price" of a note (generally, the sum of all payments on the note
other than qualified stated interest) over its "issue price" (generally, the
initial offering price to the public, excluding bond houses and brokers, at
which a substantial amount of those underlying debt securities has been sold).
An underlying debt security issued with a de minimis amount of OID
(i.e., one-quarter of one percent of the stated redemption price multiplied by
the number of complete years to its maturity) is not treated as having been
issued with OID. A U.S. holder having an interest in an underlying debt
security with a de minimis amount of OID will include that OID in income as
capital gain on a pro rata basis as principal payments are made on the
underlying debt security.
A U.S. holder of certificates representing an interest in an
underlying debt security having more than a de minimis amount of OID (an "OID
underlying security"), is required to include OID in income as it accrues,
which may be before the receipt of the cash attributable to such income, based
on a compounding of interest at a constant rate (using the yield to maturity
of the underlying debt security as originally issued). In general, OID must be
included in ordinary gross income the sum of the "daily portions" of OID for
all days during the taxable year that the U.S. holder owns the certificate.
The daily portions of OID are determined by allocating to each day in any
"accrual period" a ratable portion of the OID allocable to that accrual
period. The amount of OID allocable to each accrual period is determined by
(i) multiplying the "adjusted issue price" of the stripped interest by a
fraction, the numerator of which is the annual yield to maturity of the
stripped interest and the denominator of which is the number of accrual
periods in a year and (ii) subtracting from that product the amount of
qualified stated interest, if any, payable on the stripped interest during or
allocable to that accrual period.
An "accrual period" would generally be each period ending on an
interest payment date on the underlying debt securities, although Treasury
regulations allow a U.S. holder to elect other accrual periods of no more than
a year in length, as long as each scheduled payment on the underlying debt
securities occurs at the end of an accrual period.
The "adjusted issue price" at the beginning of any accrual period is
the purchase price for a certificate allocable to the underlying debt security
(including accrued interest, if any) (i) increased by the amount of OID
allocable to all prior accrual periods and (ii) reduced by the amount of all
payments other than qualified stated interest payments, if any, in all prior
accrual periods. In addition, if an interval between payments of qualified
stated interest contains more than one accrual period, the adjusted issue
price at the beginning of each accrual period in the interval is increased by
the amount of qualified stated interest that has accrued prior to the first
day of the accrual period but that is not payable until the end of the
interval.
The trustee intends to account for OID, if any, reportable by U.S.
holders by reference to the price paid for a certificate by an initial
purchaser, although the amount of OID will differ for subsequent purchasers.
Such subsequent purchasers should consult their tax advisors regarding the
proper calculation of OID.
Stripped Interests. A class of certificates will not be considered to
represent a "stripped bond" or "stripped coupon" (together a "stripped
interest") within the meaning of Section 1286 of the Code to the extent the
class is entitled to receive a proportionate amount of all principal and
interest on the underlying debt securities. A class of certificates will be
considered in its entirety to represent a stripped interest in the underlying
debt securities if it is entitled to receive interest on the underlying debt
securities which is disproportionately less than the principal which it is
entitled to receive on the underlying debt securities, or if it is entitled to
receive all or part of the interest on the underlying debt securities but no
principal on the underlying debt securities. In addition, if a class of
certificates is entitled to receive interest and principal on the
48
underlying debt securities, but the interest it is entitled to receive on the
underlying debt securities is disproportionately more than the principal it is
entitled to receive on the underlying debt securities, it could be argued that
the certificates represents (a) an interest in the underlying debt securities
that is not a stripped interest to the extent it represents a proportional
amount of all the principal and interest on the underlying debt securities
and (b) a stripped interest in the underlying debt securities to the extent of
any additional interest to which it is entitled on the underlying debt
securities. If a certificate represents, in part a stripped interest and, in
part not a stripped interest, such interests will be treated as two separate
items for tax purposes and a purchaser of certificates will be required to
allocate its purchase price among the two items (as well as any other
deposited assets) in proportion to their relative fair market values on the
date of purchase.
In addition to any qualified stated interest, a holder of a
certificate representing a stripped interest having more than a de minimis
amount of OID will be required to include such OID in income as it accrues on
a daily basis under rules similar to those applicable to OID underlying
securities. For these purposes, the amount of OID on a stripped interest is
equal to the excess of all amounts payable on the stripped interest (other
than qualified stated interest) over the portion of the purchase price for the
certificate allocable to the stripped interest. Under the Treasury regulations
issued under Section 1286 of the Code, the interest payable with respect to
the stripped interest will, in the appropriate circumstances, be treated as
"qualified stated interest" if it represents a fixed periodic payment on
principal on the underlying debt securities to which the holder is also
entitled. If none of the amounts payable to a holder with respect to a
stripped interest constitutes qualified stated interest, then the stripped
interest will have OID in an amount equal to the excess of all payments to be
received on the stripped interest over the purchase price for the certificate
allocable to the stripped interest.
If the amount of OID on the stripped interest represented by the
certificate is de minimis, the stripped interest will not be treated as having
OID. The amount of OID with respect to a stripped interest will generally be
de minimis if it is less than one-quarter of one percent of the stated
redemption price at maturity multiplied by the number of complete years
remaining after the purchase date until the maturity of such stripped
interest. However, if the stripped interest provides for amortization of
principal, the amount of OID will be de minimis if it is less than one-quarter
of one percent of the stated redemption price at maturity multiplied by the
weighted average maturity (i.e., the sum of the amounts obtained by
multiplying the amount of each payment under the stripped interest (other than
a payment of qualified stated interest) by a fraction, the numerator of which
is the number of complete years from the purchase date until the payment is
made and the denominator of which is the stated redemption price at maturity)
of the stripped interest. Each U.S. holder of a certificate would be required
to include the de minimis OID in income as each principal payment on the
stripped interest is received, in proportion to the amount that each principal
payment bears to the stated principal amount of the stripped interest. That
income would be capital gain, short-term or long-term depending upon the U.S.
holder's holding period in the certificate.
Principal Repayments. The portion of each monthly payment to a U.S.
holder that is allocable to principal on the underlying debt securities (other
than amounts representing discount, as described below) will represent a
recovery of capital, which will reduce the tax basis of such U.S. holder's
undivided interest in the underlying debt securities.
Acquisition Premium. If a certificate represents an interest in an
OID underlying security purchased with an acquisition premium (i.e., at a
price in excess of its adjusted issue price but less than its stated
redemption price), the annual amount includible in the income of the holder of
the certificate as OID is generally reduced by that portion of the excess
properly allocable to such year. Unless a holder of a certificate makes the
accrual method election described below, acquisition premium is allocated on a
pro rata basis to each accrual of OID, so that that holder is allowed to
reduce each accrual of OID by a constant fraction.
Market Discount. If a certificate represents an interest in an
underlying debt security purchased at a "market discount" (i.e., at a price
less than the stated redemption price or, in the case of an OID underlying
security, the adjusted issue price), the holder of that certificate will be
required (unless the difference is less than a de minimis amount) to treat any
principal payments on, or any gain realized upon
49
the disposition or retirement of, the underlying debt security as interest
income to the extent of the market discount that accrued while that
certificateholder held the underlying debt security. A U.S. holder may elect
to include that market discount in income on a current basis. Market discount
is considered to be de minimis if it is less than one-quarter of one percent
of the underlying debt security's stated redemption price multiplied by the
number of complete years to maturity after the holder acquired the
certificate. If an underlying debt security with more than a de minimis amount
of market discount is disposed of in a nontaxable transaction (other than a
nonrecognition transaction described in Section 1276(d) of the Code), accrued
market discount will be includible as ordinary income to the certificateholder
as if such certificateholder had sold the certificate at its then fair market
value. A U.S. holder of a certificate that represents an interest in an
underlying debt security purchased at a market discount that does not elect to
include market discount in income on a current basis also may be required to
defer the deduction for a portion of the interest expense on any indebtedness
incurred or continued to purchase or carry the certificate until the deferred
income is realized.
Amortizable Bond Premium. Except as noted below, a holder of a
certificate representing an interest in an underlying debt security purchased
for an amount in excess of the principal amount (or in the case of an OID
underlying security, the remaining stated redemption price) will be treated as
having premium with respect to the underlying debt security in the amount of
that excess. A U.S. holder of a certificate that represents an OID underlying
security with premium is not required to include in income any OID with
respect to that underlying debt security. If a U.S. holder makes an election
under Section 171(c)(2) of the Code to treat such premium as "amortizable bond
premium" the amount of interest that must be included in that U.S. holder's
income for that accrual period (where that underlying debt security is not
optionally redeemable prior to its maturity date) will be reduced by the
portion of the premium allocable to that period based on the underlying debt
security's yield to maturity. If the underlying debt security may be called
prior to maturity after the U.S. holder has acquired it, the U.S. holder
generally may not assume that the call will be exercised and must amortize
premium to the maturity date. If the underlying debt security is in fact
called, any unamortized premium may be deducted in the year of the call. If a
U.S. holder makes the election under Section 171(c)(2), the election also
shall apply to all bonds the interest on which is not excludible from gross
income ("Fully Taxable Bonds"), held by the certificateholder at the beginning
of the first taxable year to which the election applies and to all Fully
Taxable Bonds thereafter acquired by it, and is irrevocable without the
consent of the Service. If an election is not made, that U.S. holder must
include the full amount of each interest payment in income in accordance with
its regular method of accounting and will receive a tax benefit from the
premium only in computing its gain or loss upon the sale or other disposition
or retirement of the underlying debt security.
Election to Treat All Interest as OID. Any U.S. holder may elect to
include in gross income all interest (including stated interest, OID, de
minimis OID, market discount and de minimis market discount, as adjusted by
any bond premium or acquisition premium) that accrues on an unstripped or
stripped interest using the constant yield method described above, treating
the instrument as having been issued on the U.S. holder's acquisition date at
an issue price equal to that owner's adjusted basis with no interest payments
being qualified stated interest. An election with respect to a unstripped or
stripped interest having amortizable bond premium or market discount would
constitute, respectively, an election to apply the market discount rules or
bond premium rules with respect to all other debt instruments with market
discount or amortizable bond premium, as the case may be, of such U.S. holder.
Other Deposited Assets
The applicable prospectus supplement will contain a summary of the
material federal income tax consequences to a U.S. holder of the deposited
assets other than underlying debt securities held by the trust.
Modification or Exchange of deposited asset. Depending upon the
circumstances, it is possible that a modification of the terms of a deposited
asset, or a substitution of other assets for the deposited asset following a
default on the deposited asset, would be a taxable event to U.S. holders on
which they would recognize gain or loss.
50
Foreign Tax Credits. Any foreign income taxes withheld from payments
to the trust will be includible in the income of U.S. holders and will
likewise be deductible to U.S. holders, or, alternatively, U.S. holders may be
eligible for a U.S. foreign tax credit subject to various limitations.
Deductibility of Trust's Fees and Expenses. In computing its federal
income tax liability, a U.S. holder will be entitled to deduct, consistent
with its method of accounting, its share of reasonable administrative fees,
trustee fees and other fees paid or incurred by the trust as provided in
Section 162 or 212 of the Code and any allowable amortization deductions with
respect to certain other assets of the trust. If a U.S. holder is an
individual, estate or trust, this deduction of fees will be a miscellaneous
itemized deduction that may be disallowed in whole or in part.
Sale, Exchange, Disposition or Retirement of a Certificate. Upon the
sale, exchange or other disposition of a certificate, or upon the retirement
of a certificate, a U.S. holder will recognize gain or loss equal to the
difference, if any, between the amount realized upon the disposition or
retirement and the U.S. holder's tax basis in the certificate. A U.S. holder's
tax basis for determining gain or loss on the disposition or retirement of a
certificate will be the cost of that certificate to that holder, increased by
the amount of OID and any market discount includible in that holder's gross
income with respect to an underlying debt security, and decreased by the
amount of any payments under an underlying debt security that are part of its
stated redemption price and by the portion of any premium applied to reduce
interest payments as described above.
Gain or loss upon the disposition or retirement of a certificate will
be capital gain or loss, except to the extent the gain represents accrued
stated interest, original issue or market discount on the certificate not
previously included in gross income, to which extent such gain or loss would
be treated as ordinary income. Any capital gain or loss will be long-term
capital gain or loss if at the time of disposition or retirement the
certificate has been held for more than one year.
Backup Withholding. Payments made on the certificates and proceeds
from the sale of the certificates generally will not be subject to a "backup"
withholding tax unless, in general, the U.S. holder fails to comply with
certain reporting procedures and is not an exempt recipient under applicable
provisions of the Code.
Foreign Certificateholders
Withholding at the Source. To the extent that amounts paid to a
certificateholder that is not a U.S. holder, or a foreign certificateholder,
are treated as U.S. source interest with respect to underlying debt securities
originated after July 18, 1984, those amounts generally will not be subject to
U.S. withholding tax, provided that that foreign certificateholder (i)
fulfills certain certification requirements, (ii) the foreign
certificateholder does not actually or constructively own 10% or more of the
capital or profits of, or 10% or more of the combined voting power of the
stock of, the issuer of an underlying debt security; (iii) the foreign
certificateholder is not a controlled foreign corporation related to the
issuer of an underlying debt security within the meaning of Code section
864(d)(4); and (iv) the foreign certificateholder is not a bank receiving
interest pursuant to a loan agreement with the issuer of an underlying debt
security entered into in the ordinary course of its trade or business. Under
such requirements, the holder must certify, under penalties of perjury, that
it is not a "United States person" and provide its name and address.
A foreign certificateholder that does not have certain present or
former connections with the United States (e.g., holding a certificate in
connection with the conduct of a trade or business within the United States or
being present in the United States for 183 days or more during a taxable year)
generally will not be subject to federal income tax, and no withholding of
such tax will be required, with respect to any gain realized upon the
disposition or retirement of a certificate.
The applicable prospectus supplement will contain a summary of the
material federal income tax consequences to a foreign certificateholder of the
deposited assets other than underlying debt securities held by the trust.
51
Information Reporting and Backup Withholding. Payments made on the
deposited assets and proceeds from the sale of the certificates will not be
subject to a "backup" withholding tax unless, in general, the foreign
certificateholder fails to comply with certain reporting procedures and is not
an exempt recipient under applicable provisions of the Code.
The federal tax discussion set forth above is intended to address the
anticipated material federal income tax consequences related to the
certificates but may not be applicable depending upon a certificateholder's
particular situation. Certificateholders should consult their own tax advisors
with respect to the tax consequences to them of the ownership and disposition
of the certificates, including the tax consequences under the tax laws of the
United States, states, localities, countries other than the United States and
any other taxing jurisdictions and the possible effects of changes in such tax
laws.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and the Code impose certain requirements on (a) an employee benefit
plan (as defined in Section 3(3) of ERISA), (b) a plan described in Section
4975(e)(i) of the Code or (c) any entity whose underlying assets include Plan
Assets by reason of a plan's investment in the entity, (each, a "Plan)".
In accordance with ERISA's general fiduciary standards, before
investing in a certificate, a Plan fiduciary should determine whether such an
investment is permitted under the governing Plan instruments and appropriate
for the Plan in view of the Plan's overall investment policy and the
composition and diversification of its portfolio. Other provisions of ERISA
and the Code prohibit transactions (including loans or other extensions of
credit) involving the assets of a Plan and persons who have specified
relationships to the Plan ("Parties in Interest" within the meaning of ERISA
or "Disqualified Persons" within the meaning of the Code). Thus, a Plan
fiduciary considering an investment in certificates should also consider
whether such an investment might constitute or give rise to a prohibited
transaction under ERISA or the Code.
Trust Assets as "Plan Assets"
An investment in certificates by a Plan might result in the assets of
the trust being deemed to constitute Plan Assets, which in turn might mean
that certain aspects of such investment, including the operation of the trust,
might be prohibited transactions under ERISA and the Code. Under Section
2510.3-101 of the United States Department of Labor regulations (the
"Regulation"), "Plan Assets" may include an interest in the underlying assets
of an entity (such as a trust) for certain purposes, including the prohibited
transaction provisions of ERISA and the Code, if the Plan acquires an "equity
interest" in such entity. Thus, if a Plan acquired a certificate, for certain
purposes under ERISA and the Code (including the prohibited transaction
provisions) the Plan would be considered to own its share of the underlying
assets of the trust unless (1) such certificate is a "publicly-offered
security" as defined in such Regulation or (2) equity participation by
"benefit plan investors" is not considered "significant" under such
Regulation.
Under the Regulation, a publicly offered security is a security that
is (1) freely transferable, (2) part of a class of securities that is owned by
100 or more investors independent of the issuer and of one another at the
conclusion of the initial offering and (3) either is (A) part of a class of
securities registered under Section 12(b) or 12(g) of the Exchange Act or (B)
sold to the Plan as part of an offering of securities to the public pursuant
to an effective registration statement under the Securities Act and the class
of securities of which such security is a part is registered under the
Exchange Act within 120 days (or such later time as may be allowed by the
Commission) after the end of the fiscal year of the issuer during which the
offering of such securities to the public occurred.
Participation by benefit plan investors in the certificates would not
be significant if immediately after the most recent acquisition of a
certificate, whether or not from the depositor or DBAB, less than 25% of (1)
the value of such class of certificates and (2) the value of any other class
of certificates that is not a publicly offered security under the Regulation,
were held by benefit plan investors, which are defined as Plans and employee
benefit plans not subject to ERISA (for example, governmental plans).
52
It is anticipated that certain offerings of certificates will be
structured so that assets of the trust will not be deemed to constitute Plan
Assets. In such cases, the applicable prospectus supplement will indicate
either that the certificates will be considered publicly-offered securities
under the Regulation or that participation by benefit plan investors will not
be significant for purposes of the Regulation.
In other instances, however, the offering of certificates may not be
so structured. Thus, the assets of the trust may be deemed to be Plan Assets
and transactions involving the depositor, an underwriter, the trustee, any
trustee with respect to underlying securities, any obligors with respect to
underlying securities or affiliates of such obligors might constitute
prohibited transactions with respect to a Plan holding a certificate unless
(i) one or more prohibited transaction class exemptions ("PTCEs") applies or
(ii) in the case of an issuer of underlying securities, it is not a
Disqualified Person or party in interest with respect to the Plan. Plans
maintained or contributed to by the depositor, an underwriter, the trustee, a
trustee with respect to underlying securities, any issuer of underlying
securities, or any of their affiliates, should not acquire or hold any
certificate.
If the trust is deemed to hold Plan Assets, the underlying securities
would appear to be an indirect loan between the issuer of the underlying
securities and any Plan owning certificates; however, that loan, by itself,
would not constitute prohibited transaction unless that obligor is a party in
interest or Disqualified Person with respect to that Plan.
Prohibited Transaction Exemptions
Prohibited transaction exemptions could apply to the acquisition and
holding of certificates by Plans, and the operation of the trust, including,
but not limited to: PTCE 84-14, an exemption for certain transaction
determined by an independent qualified professional asset manager; PTCE 91-38,
an exemption for certain transactions involving bank collective investment
funds; PTCE 90-1, an exemption for certain transactions involving insurance
company pooled separate accounts; PTCE 95-60, an exemption for certain
transactions involving insurance company pooled general accounts, and PTCE
96-23, an exemption for certain transactions effected by in-house asset
managers.
If the underwriter with respect to an offering of certificates is a
broker-dealer registered under the Exchange Act, and customarily purchases and
sells securities for its own account in the ordinary course of its business as
a broker-dealer, sales of certificates by such underwriter to Plans may be
exempt under PTCE 75-1 if the following conditions are satisfied: (i) the
underwriter is not a fiduciary with respect to the Plan and is party in
interest or Disqualified Person solely by reason of Section 3(14)(B) of ERISA
or Section 4975(e)(2)(B) of the Code or a relationship to a person described
in such Sections, (ii) the transaction is at least as favorable to the Plan as
an arms-length transaction with an unrelated party and is not a prohibited
transaction within the meaning of Section 503(b) of the Code, and (iii) the
Plan maintains for at least six years such records as are necessary to
determine whether the conditions of PTCE 75-1 have been met.
The custodial and other services tendered by the trustee and any
trustee with respect to underlying securities might be exempt pursuant to
Section 408(b)(2) of ERISA and Section 4975(d)(2) of the Code, which exempt
services necessary for the establishment or operation of a Plan under a
reasonable contract or arrangement and for which no more than reasonable
compensation is paid. An arrangement would not be treated as reasonable unless
it can be terminated upon reasonably short notice under the circumstances
without penalty. The statutory exemption for services noted above does not
provide exemptive relief from prohibited transactions described in Section
406(b) of ERISA or Section 4975(c)(1)(E) or (F) of the Code.
The prospectus supplement relating to any offering of certificates
that will result in the trust assets being deemed to constitute Plan Assets
will provide that, by acquiring and holding a certificate, a Plan shall be
deemed to have represented and warranted to the depositor, trustee, and
underwriter that such acquisition and holding of a certificate does not
involve a non-exempt prohibited transaction with respect to such Plan,
including with respect to the activities of the trust.
Any plan or insurance company investing assets of its general account
proposing to acquire certificates should consult with its counsel.
53
UNDERWRITING
Certificates may be offered in any of three ways: (i) through
underwriters or dealers, (ii) directly to one or more purchasers or (iii)
through agents. The applicable prospectus supplement will specify the material
terms of the offering of any series of certificates, which may include the
names of any underwriters, or initial purchasers, the purchase price of the
certificates and the proceeds to the depositor from such sale, whether the
certificates are being offered by the applicable prospectus supplement in
connection with trading activities that may create a short position or are
being issued to cover that short position, any underwriting discounts and
other items constituting underwriters' compensation, any initial public
offering price, any discounts or concessions allowed or reallowed or paid to
dealers, any securities exchanges on which the certificates may be listed, any
restrictions on the sale and delivery of certificates in bearer form and the
place and time of delivery of the certificates to be offered.
If underwriters are used in the sale, certificates will be acquired
by the underwriters for their own account and may be resold from time to time
in one or more transactions, including negotiated transactions, at a fixed
public offering price or at varying prices determined at the time of sale.
Certificates may be offered to the public either through underwriting
syndicates represented by managing underwriters or by underwriters without a
syndicate. The managing underwriters or underwriters in the United States will
include DBAB. Unless otherwise specified in the applicable prospectus
supplement, the obligations of the underwriters to purchase the certificates
will be subject to certain conditions precedent and the underwriters will be
obligated to purchase all of the certificates if any certificates are
purchased. Any initial public offering price and any discounts or concessions
allowed or reallowed or paid to dealers may be changed from time to time.
Certificates may also be sold through agents designated by the
depositor from time to time. Any agent involved in the offer or sale of
certificates will be named, and any commissions payable by the depositor to
such agent will be specified, in the applicable prospectus supplement. Unless
otherwise indicated in the applicable prospectus supplement, any agent will
act on a best-efforts basis for the period of its appointment.
If so specified in the applicable prospectus supplement, the
depositor will authorize agents, underwriters or dealers to solicit offers by
certain specified institutions to purchase certificates at the public offering
price described in that prospectus supplement pursuant to delayed delivery
contracts providing for payment and delivery on a date specified in that
prospectus supplement. Those contracts will be subject only to those
conditions specified in the applicable prospectus supplement. The prospectus
supplement will also set forth the commissions payable for solicitation of
those contracts. Any underwriters, dealers or agents participating in the
distribution of certificates may be deemed to be underwriters and any
discounts or commissions received by them on the sale or resale of
certificates may be deemed to be underwriting discounts and commissions under
the Securities Act. Agents and underwriters may be entitled under agreements
entered into with the depositor to indemnification by the depositor against
certain civil liabilities, including liabilities under the Securities Act, or
to contribution with respect to payments that the agents or underwriters or
their affiliates may be required to make in respect thereof. Agents and
underwriters and their affiliates may be customers of, engage in transactions
with, or perform services for, the depositor or its affiliates in the ordinary
course of business.
As to each series of certificates, only those classes rated in one of
the investment grade rating categories by a rating agency will be offered by
this prospectus. Any unrated classes or classes rated below investment grade
may be retained by the depositor or sold at any time to one or more
purchasers.
LEGAL MATTERS
The validity of the certificates will be passed upon for the
depositor and the underwriters by Sidley Austin Brown & Wood LLP, New York,
New York or other counsel identified in the applicable prospectus supplement.
54
Part II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The expenses expected to be incurred in connection with the issuance
and distribution of the securities being registered, other than underwriting
compensation, are as set forth below. All such expenses, except for the SEC
registration and filling fees, are estimated:
SEC Registration Fee $125,000.00
Legal Fees and Expenses $200,000.00
Accounting Fees and Expenses $40,000.00
Trustee's Fees and Expenses $12,000.00
(including counsel Fees)
Blue Sky Qualification Fees $12,500.00
and expenses
Printing and Engraving Fees $100,000.00
Rating Agency Fees $100,000.00
Miscellaneous $20,000.00
----------
Total $609,500.00
===========
- --------------
* All amounts, except the SEC Registration Fee, are estimates of aggregate
expenses incurred or to be incurred in connection the issuance and
distribution of Securities in an aggregate principal amount assume for
these purposes to be equal to $500,000,000 of Securities registered
hereby.
** To be filed by amendment.
Item 15. Indemnification of Directors and Officers.
Under Section 8(b) of the proposed form of Underwriting Agreement,
the Underwriters are obligated under certain circumstances to indemnify
certain controlling persons of the registrant against certain liabilities,
including liabilities under the Securities Act of 1933, as amended.
The registrant's Certificate of Incorporation provides for
indemnification of directors and officers of the registrant to the full extent
permitted by Delaware law.
Section 145 of the Delaware General Corporation Law provides, in
substance, that Delaware corporations shall have the power, under specified
circumstances, to indemnify their directors, officers, employees and agents in
connection with actions, suits or proceedings brought against them by a third
party or in the right of the corporation, by reason of the fact that they were
or are such directors, officers, employees or agents, against expenses
incurred in any such action, suit or proceeding. The Delaware General
Corporation Law also provides that the registrant may purchase insurance on
behalf of any such director, officer, employee or agent.
Item 16. Exhibits:
(a) Financial Statements:
None
(b) Exhibits:
II-1
1.1 Form of Underwriting Agreement*
3.1 Form of Certification of Incorporation of DB Depositor Inc.
3.2 Form of Bylaws of DB Depositor Inc.
4.1 Form of Trust Agreement, with form of Certificate attached
thereto
5.1 Opinion of Sidley Austin Brown & Wood LLP as to legality
(including consent of such firm)
8.1 Opinion of Sidley Austin Brown & Wood LLP as to certain tax
matters (including consent of such firm)*
23.1 Consents of Sidley Austin Brown & Wood LLP (included in
Exhibits 5.1 and 8.1)*
24.1 Power of Attorney (included on signature page to the
amendment to the registration statement)*
25.1(a) Statement of Eligibility of Trustee
---------------------
* Previously filed.
Item 17. Undertakings.
(a) Undertaking Pursuant to Rule 415.
The registrant hereby undertakes:
(1) To file, curing any period in which offers or sales are
being made, a post-effective amendment to this registration
statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933, as amended;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration
statement (or the most recent post-effective
amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the
information set forth in the registration statement;
and
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in
the registration statement or any material change of
such information in the registration statement.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933,as amended, each such post-effective
amendment shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold
at the termination of the offering.
II-2
(b) Filing Incorporating Subsequent Exchange Act
Documents by Reference.
The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of
1933, as amended, each filing of the registrant's annual report
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of
1934, as amended (and, where applicable, each filing of an employee
benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934, as amended), that is incorporated by
reference in the registration statement shall be deemed to be a new
registration statement relating to the securities offered therein,
and the offering of such securities at the time shall be deemed to be
the initial bona fide offering thereof.
(c) Undertaking in respect of indemnification.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended, may be permitted to directors,
officers and controlling persons of the registrant, pursuant to the
foregoing provisions, or otherwise, the registrant has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and
is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being
registered, the registrant, as the case may be, will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication
of such issue.
(d) Undertaking in respect to the eligibility of
the Trustee.
The undersigned registrant hereby undertakes to file an application
for the purpose of determining the eligibility of the trustee to act
under subsection (a) of Section 310 of the Trust Indenture Act in
accordance with the rules and regulations prescribed by the
Commission under Section 305(b)(2) of the Act.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the undersigned hereby certifies on behalf of DB Depositor Inc. (the
"Company") that he has reasonable grounds to believe that the Company meets
all of the requirements for filing on Form S-3 and the Company has duly caused
this Amendment to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on the 28th of September, 2001.
DB DEPOSITOR INC.
By: *
-------------------------------
Richard Ferguson
Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Amendment to the Registration Statement has been signed below by
the following persons in the capacities and on the dates indicated.
Signature Position Date
* Chairman of the Board September 28, 2001
-----------------------------------
Richard Ferguson
* Director, Senior Vice President and September 28, 2001
-----------------------------------
Douglas Barnard Treasurer (Principal Accounting and
Financial Officer)
/s/ Nigel Cree Director September 28, 2001
-----------------------------------
Nigel Cree
* President and Chief Executive Officer September 28, 2001
-----------------------------------
Donna Milrod
*/s/ Nigel Cree
-----------------------------------
Nigel Cree
Attorney-in-fact
II-4
EXHIBIT INDEX
Exhibit No. Description
1.1 Form of Underwriting Agreement*
3.1 Form of Certification of Incorporation of DB Depositor
Inc.
3.2 Form of Bylaws of DB Depositor Inc.
4.1 Form of Trust Agreement, with form of Certificate attached
thereto
5.1 Opinion of Sidley Austin Brown & Wood LLP as to legality
(including consent of such firm)
8.1 Opinion of Sidley Austin Brown & Wood LLP as to certain
tax matters (including consent of such firm)*
23.3 Consents of Sidley Austin Brown & Wood LLP (included in
Exhibits 5.1 and 8.1)*
24.1 Power of Attorney (included on signature page to Amendment
No. 1 to the Registration Statement)*
25.1(a) Statement of Eligibility of Trustee
- ---------------------
* Previously filed.
II-5