As filed with the Securities and Exchange Commission on June 18, 1998
Registration No. 333-____
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
STRUCTURED PRODUCTS CORP.
(Exact name of Registrant as specified in its charter)
Delaware 13-3692801
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Seven World Trade Center
New York, New York 10048
(212) 783-6645
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
Andrew Alter, Secretary
Structured Products Corp.
Seven World Trade Center
New York, New York 10048
(212) 783-6645
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
Al B. Sawyers
Orrick, Herrington & Sutcliffe LLP
666 Fifth Avenue
New York, New York 10103
Approximate date of commencement of proposed sale to the public: From time to
time after this Registration Statement becomes effective 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, 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, 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, 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 executed to be made pursuant to Rule 434,
please check the following box. |_|
CALCULATION OF REGISTRATION FEE
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Title of Securities Amount to be Proposed Maximum Proposed Maximum Amount of
Being Registered Registered (1)(2)(3) Offering Price Per Unit(4) Aggregate Offering Price(4) Registration Fee (1)
Trust Certificates, $1,000,000 100% $1,000,000 $295.00
Trust Shares and Trust Notes
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(1) $ 232,030,000 aggregate principal amount of Trust Certificates registered
by the Registrant under Registration Statement 33-55860 referred to below
are consolidated in this Registration Statement pursuant to Rule 429. All
registration fees in connection with such unsold amount of Trust
Certificates have been previously paid by the Registrant under the
foregoing Registration Statement. Accordingly, the total amount registered
under the Registration Statement as so consolidated as of the date of this
filing is $233,030,000.
(2) In United States dollars or the equivalent thereof in one or more foreign
or composite currencies.
(3) Plus such additional principal amount as may be necessary such that, if one
or more classes of Trust Certificates, Trust Shares or Trust Notes are
issued with original issue discount, the aggregate initial offering price
of all Trust Certificates, Trust Shares and Trust Notes will equal
$1,000,000.
(4) Estimated solely for the purpose of calculating the registration fee.
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 shall thereafter 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 Commission, acting pursuant to said Section 8(a),
may determine.
Pursuant to Rule 429 of the Securities Act of 1933, the prospectus which is
part of this Registration Statement is a combined prospectus and includes all
the information currently required in a prospectus relating to the securities
covered by Registration Statement No. 33-55860
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EXPLANATORY NOTE
This Registration Statement includes two different base prospectuses with
corresponding forms of prospectus supplements for offering series of either (i)
Certificates and Notes or (ii) Certificates, in each case representing the
entire beneficial interest in various trusts to be created from time to time,
the assets of which will consist primarily of securities or receivables, as
applicable, within one of the following categories :(1) a publicly issued debt
security or a pool of such debt securities issued by one or more corporations,
banking organizations or insurance companies; (2) a publicly issued debt
security or pool of such debt securities which represent obligations issued by
or guaranteed by a foreign government, political subdivision or agency or
instrumentality thereof; (3) a publicly issued obligation or obligations of one
or more foreign private issuers; (4) a publicly issued debt security or pool of
such debt securities which represent obligations of the United States of
America, any agency thereof for the payment of which the full faith and credit
of the United States of America is pledged, or a United States governmental
sponsored organization created pursuant to a federal statue; or (5) a pool of
credit card receivables, or interests therein, or publicly issued Credit Card
Securities.
Prospectus Supplement
(To Prospectus Dated )
$
Structured Products Series 19__ - [ ] Trust
$_________[Notional Amount] [(Approximate)], Class ______ Certificates.
[ %] [Variable] Pass Through Rate
[Include additional Classes as applicable]
Structured Products Corp.
Depositor
Each Structured Products Trust Certificates Series 19__ - [ ] offered hereby
will consist of ______ class of Certificates, designated as Class
Certificates(,) [and] Class ______ Certificates [and list others], [all] of
which [only the Class Certificates(,) [and] Class Certificates [and list
others]] (collectively, the "Certificates") and will represent a fractional
undivided beneficial interest in the Structured Products Series 19__ - [ ]
Trust (the "Trust") to be formed pursuant to the Trust Agreement dated as of
______, 19__, between Structured Products Corp. (the "Company" and
_______________, as trustee (the "Owner Trustee") (the "Trust Agreement"). The
property of the Trust will consist [in part] of [SELECT ONE OF THE FOLLOWING
BRACKETED SELECTIONS] [Alternative 1: specify debt security or a pool of such
debt securities issued by one or more corporations, banking organizations or
insurance companies] [Alternative 2: specify obligations of one or more foreign
private issuers] [Alternative 3: specify debt security or pool of such debt
securities which represent obligations of the United States of America, any
agency thereof for the payment of which the full faith and credit of the United
States of America is pledged, or a United States governmental sponsored
organization created pursuant to a federal statue (a "GSE")] [Alternative 4:
specify debt security or pool of such debt securities which represent
obligations issued by or guaranteed by a foreign government, political
subdivision or agency or instrumentality thereof] [Alternative 5: specify pool
of Receivables or interest therein or Credit Card Securities] [$] [ ]
aggregate principal amount of [a %] [floating rate] of [a pool of] [
%] [floating rate] publicly issued [describe securities or receivables]
[maturing in ___ years] issued by [specify issuer] (collectively, the "Term
Assets"), and having the characteristics described herein under "Description of
the Deposited Assets". Terms used but not otherwise defined herein are defined
in the Prospectus attached hereto (the "Prospectus").
The Term Assets will be acquired by the Company and, pursuant to the Trust
Agreement, deposited into the Trust for the benefit of Certificateholders. [The
Term Assets were issued and sold as part of an underwritten public offering in
[ ].] [The Term Assets are obligations of the Term Assets Issuer and]
[explain whether senior or subordinate, and whether subject to any redemption or
put rights]. [Describe any required principal payments or amortization or
accumulation of Term Assets.]
(cover continued on next page)
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THE CERTIFICATES REPRESENT INTEREST IN OR OBLIGATIONS OF THE TRUST ONLY AND NO
NOT REPRESENT AN OBLIGATION OF OR INTEREST IN THE COMPANY OR ANY OF ITS
AFFILIATES. THE CERTIFICATES DO NOT REPRESENT A DIRECT OBLIGATION OF ANY TERM
ASSETS ISSUER OR ANY OF THEIR RESPECTIVE AFFILIATES.
THESE CERTIFICATES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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The Underwriter has agreed to purchase the Certificates from the Company at [ ]%
of the Certificate Principal Balance thereof plus accrued interest, if any, at
the Pass Through Rate calculated from [ ], 19__ (the "Expected Settlement
Date"), subject to the terms and conditions set forth in the Underwriting
Agreement refereed to herein under "Underwriting".
The Underwriter proposes to offer the Certificates from time to time for sale in
negotiated transactions or otherwise at prices determined at the time of sale.
For further information with respect to the plan of distribution and any
discounts, commissions or profits that may be deemed underwriting discounts or
commissions, see "Underwriting."
The Certificates are offered subject to receipt and acceptance by the
Underwriter to prior sale and to the Underwriter's right to reject any order in
whole or in part and to withdraw, cancel or modify the offer without notice. It
is expected that delivery of the [specify applicable classes] Certificates will
be made in book-entry from through the facilities of The Depository Trust
Company on or about the Expected Settlement Date.
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Salomon Smith Barney
The date of this Prospectus Supplement is
(cover page continued)
Distribution on the Certificates will be made[[monthly] [quarterly]
[semi-annually] or[[ ] of each year] [to be conformed to interest payment dates
for Term Assets], or, if any such date is not a business day, then on the
immediately following business day (each, a "Distribution Date") commencing [ ]
(the "Final Distribution Date"), by which date the holders of the Certificates
will receive a distribution of all amounts allocable to principal on such
Certificates or, to the extent specified herein, a pro rate share of any
remaining Term Assets.
As and to the extent described herein, collections received with respect to the
Deposited Assets will be distributed to Certificateholders [of each class] in
the manner and priority described herein. [The rights of the holders of the
Class Certificates [and specify other classes] to receive distributions of such
collections are subordinated to the rights of the holders of the Class ____
Certificates [and specify other classes]. As and to the extent described herein,
losses realized on the Deposited Assets will be borne by the holders of the
Class Certificates [and specify other classes] before such losses will be borne
by the holders of the other classes of Certificates [and the Class ____
Certificates ([and specify other classes)]. To the extent described herein, the
relative priorities of each class of Certificates with respect to collections
from and losses on the Deposited Assets may each change over time, either
permanently or temporarily, upon the occurrence of certain circumstances
specified herein. See "Description of the Certificates-Subordination".
The Term Assets Issuer is not participating in, and will not receive any
proceeds in connection with, this offering.
There is currently no secondary market for the Certificates, and there can be no
assurance that a secondary market for the Certificates will develop or, if it
does develop, that it will continue. See "Risk Factors" in the Prospectus.
The [specify applicable classes] Certificates initially will be represented by
certificates registered in the name of CEDE & Co., as nominee of The Depository
Trust company ("DTC"). The interest of beneficial owners of such Certificates
will be represented by book entries on the records of participating members of
DTC. Definitive certificates will be available for such Certificates only under
the limited circumstances described herein. See "Description of the
Certificates-Definitive Certificates".
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVERALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CERTIFICATES
ATA LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
THE CERTIFICATES OFFERED BY THIS PROSPECTUS SUPPLEMENT WILL CONSTITUTE A
SEPARATE SERIES OF CERTIFICATES BEING OFFERED BY THE COMPANY PURSUANT TO ITS
PROSPECTUS DATED _______, 19__, OF WHICH THIS PROSPECTUS SUPPLEMENT IS A PART
AND WHICH ACCOMPANIES THIS PROSPECTUS SUPPLEMENT. THE PROSPECTUS CONTAINS
IMPORTANT INFORMATION REGARDING THIS OFFERING WHICH IS NOT CONTAINED HEREIN, AND
PROSPECTIVE INVESTORS ARE URGED TO READ THE PROSPECTUS AND THIS PROSPECTUS
SUPPLEMENT IN FULL. IN PARTICULAR, INVESTORS SHOULD CONSIDER CAREFUL THE FACTORS
SET FORTH UNDER "RISK FACTORS" IN THE PROSPECTUS AND IN THIS PROSPECTUS
SUPPLEMENT.
UNTIL _______ 19__, ALL DEALERS EFFECTING TRANSACTIONS IN THE OFFERED
CERTIFICATES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS SUPPLEMENT AND THE PROSPECTUS TO WHICH IT RELATES. THIS
DELIVERY REQUIREMENT IS IN ADDITION OT THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS SUPPLEMENT AND PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH
RESPECT OT THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
S-2
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SUMMARY OF PRINCIPAL ECONOMIC TERMS
The following summary of principal economic terms does not purport to be
complete and is qualified in its entirety by reference to the detailed
information appearing elsewhere herein and in the Prospectus, including under
the heading "Description of the Certificates", "Description of the Term Assets"
and "Description of Credit Support". Certain capitalized terms used herein are
defined elsewhere in the Prospectus Supplement on the pages indicated in the
"Index of Terms" or, to the extent not defined herein, have the meanings
assigned to such terms in the Prospectus.
The Certificates
The Trust........................ Structured Products Series 19__-[ ] Trust.
The Trust will be formed pursuant to the
Trust Agreement dated as of _____, 19__ (the
"Trust Agreement"), between the Company and
the Owner Trustee, dated as of the Expected
Settlement Date.
Certificates Offered............. Structured Products Trust Certificates,
Series 19__-[ ], consisting of Class [ ]
Certificates [,] [and] Class [ ]
Certificates [and specify others]
(collectively, the "Certificates").
[Initial Certificate]
Principal Balance]
Notional amount]................. Class [ ]: [$] [ ].
................................. Class [ ]: [$] [ ].
Final Distribution
Date............................. Class [ ].
................................. Class [ ].
Pass-Through Rates............... [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.]
Original Issue Date ............. [ ].
Cut-off Date .................... [ ].
Distribution Dates .............. [ ], commencing [ ].
Record Dates..................... The [ ] day immediately preceding each
Distribution Date.
Denominations;
Specified Currency............... The Class [ ] Certificates [,] [and] Class
[ ] Certificates [and specify other] will
be denominated and payable in [U.S. dollars]
[ ] [(the "Specified Currency") and will
be available for purchase in minimum
denominations of [$] [ ] and [integral
multiples thereof] [multiples of [$] [ ]
in excess thereof].
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 Certificate.............. Book-entry Certificates with The Depository
Trust Company ("DTC"), except in certain
limited circumstances. See "Description of
the Certificates-Definitive
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S-3
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Certificates". Distributions thereon will be
settled in [immediately available
(same-day)] [clearinghouse(next-day)] funds.
Owner 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".
The Term Assets
Term Assets ..................... [SELECT ONE OF THE FOLLOWING BRACKETED
SELECTIONS] [Alternative 1: specify debt
security or a pool of such debt securities
issued by one or more corporations, banking
organizations or insurance companies]
[Alternative 2: specify obligations of one
or more foreign private issuers]
[Alternative 3: specify debt security or
pool of such debt securities which represent
obligations of the United States of America,
any agency thereof for the payment of which
the full faith and credit of the United
States of America is pledged, or a United
States governmental sponsored organization
created pursuant to a federal statue (a
"GSE")] [Alternative 4: specify debt
security or pool of such debt securities
which represent obligations issued by or
guaranteed by a foreign government,
political subdivision or agency or
instrumentality thereof] [Alternative 5:
specify pool of Receivables or interest
therein or Credit Card Securities] [[ ]%]
[floating rate] [specify security or
receivables] in an aggregate principal
amount of [$][ ].
[Term Assets
Issuer .......................... [Specify issuer or pool] [Trust] issuers].]
Term Assets Original
Issue Date....................... [ ].
Term Asset Scheduled
Final payment
Date ............................ [ ].
[Amortization]
[Accumulation]................... [Describe amortization or accumulation
schedule, if any].
Denominations; Term
Assets Currency.................. The Term Assets are denominated and payable
in [U.S. dollars] [ ] (the "Term Assets
Currency") and are available in minimum
denominations of [$][ ] and [integral
multiples thereof] [multiples of [$][ ] in
excess thereof].
Term Assets
Payment Dates.................... [ ], commencing [ ].
Term Assets Rate................. [ % per annum.] [a [weighted average] rate
per annum equal to [specify interest rate
formula for debt security].]
Term Assets Interest
Accrual Periods ................. [Monthly] [Quarterly] [Semi-annually].
Priority......................... [Describe senior or subordinated status of
Term Assets].
Redemption/Put/
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S-4
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Other Features................... [Describe existence of any redemption, put
or other material features applicable to the
Term Assets].
[Form of Credit Card
Security ........................ Book-entry securities with DTC. ]
Term Asset Trustee............... [ ]. The Term Assets have been issued
pursuant to [an indenture] [a pooling and
servicing agreement] [master pooling and
servicing agreement [as supplemented by a
series supplement] [trust agreement [an
indenture] dated as of [ ], 19[ ] (the "Term
Asset Agreement"), among the Term Asset
Trustee, [the Term Asset Issuer], [Seller]
and [Servicer].
Ratings.......................... [ ] by [ ] [and [ ] by [ ]]. See
"Description of the Term Assets - Ratings of
Term Assets".
Other Deposited Assets
[Provide similar tabular summary description of the principal economic terms of
any credit support or other ancillary or incidental asset]
SUMMARY OF PROSPECTUS SUPPLEMENT
The following summary does not purport to be complete and is qualified in
its entirety by reference to the detained information appearing elsewhere herein
and in the Prospectus.
Depositor ....................... Structured Products Corp., an indirect
wholly-owned subsidiary of Salomon Smith
Barney Holdings, Inc. and an affiliate of
[an] [the] Underwriter (the "Company"). See
"The Company" in the Prospectus.
Certificates..................... The Certificates, each of which represents a
fractional undivided beneficial interest in
the Trust, will be issued pursuant to the
Trust Agreement. The Certificates will
consists of [ ] classes, designated as Class
[ ] Certificates [and] [,] Class [ ]
Certificates [and [specify other classes]],
[all] of which [all but the Class [ ]
Certificates] are being offered hereby
(collectively, the "Certificates").
The Certificate Principal Balance of a
Certificate outstanding at any time
represents the maximum amount that the
holder thereof 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 such holder. [The Notional amount of
the Class [ ] Certificates as of any date of
determination is equal to [specify].
Reference to the Notional amount of the
Class [ ] Certificates is solely for
convenience in determining the basis on
which distributions on the Class [ ]
Certificates are calculated [and determining
the relative voting fights of
Certificateholders of Class [ ] Certificates
for purposes of voting on a class-by-class
basis or otherwise]. The Notional Amount
does not represent the right to receive any
distributions allocable to principal.]
[The Class [ ] Certificates, which are not
being offered hereby, 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 herein
and, thereafter, will be allocated among the
Certificates and the Class [ ] Certificates,
as provided herein. [The Class [ ]
Certificates will be transferred by the
Company to an affiliate on or about
_______,19__ (the "Closing Date"), and may
be sold at any time in accordance with any
restrictions in the Trust Agreement.]]
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S-5
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The Term Assets ................. Interest On the Term Assets accrues At the
Term Assets Rate for each Term Assets
Accrual Period and is payable on each Term
Assets Payment Date. The entire principal
amount of the Term Assets will be payable on
the Term Assets Final Payment Date. [The
Term Assets have a remaining term to
maturity of approximately ____ years.] [As
of the Cut-off Date, the pool of Term Assets
have a weighted average interest rate of
____% and a weighted average remaining term
to maturity of approximately ____ years.]
[Other Deposited
Assets and Credit
Support.......................... The Deposited Assets will also include
[direct obligations of the United States]
[describe any assets which are ancillary or
incidental to the Term Assets, including
hedging contracts such as puts, calls,
interest rate swaps, currency swaps, floors,
caps and collars) (such assets, together
with the Term Assets, the "Deposited
Assets"). See "Description of the Deposited
Assets".
The [Certificateholders] of the [specify
particular classes] 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 thereon.]
Distributions.................... Holders of the Certificates will be entitled
to receive on each Distribution Date, to the
extent of available funds on such
Distribution Date, after payment of the
expenses of the Trust, and its respective
agents, (i) distributions payable in respect
of or allocable to interest at the
applicable Pass-Through Rate on the
applicable Certificate Principal balance,
(ii) distributions payable in respect of or
allocable to principal and (iii) [in the
case of ____________,] distributions
allocable to premium (if any) in an amount
equal to all payments to premium (if any)
received on the Term Assets for the
applicable Collection Period. Distributions
will be made on the Certificates 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 Term Assets
is made after the Term Assets Payment Date
on which such payment was due, then such
amount shall be distributed on the next
occurring Business Day (a "Special
Distribution Date") as if such funds had
been available 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 (as such term is defined in the
Prospectus, "Business Day") prior to the day
on] which the related payment was received
from the Term Assets trustee.
Subordination.................... As to the extent described herein, 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 Class [ ]
Certificates with respect to losses
attributable to principal, premium (if any)
and interest realized on a Deposited Asset
(such losses, "Realized Losses"). See
"Description of the Certificates --
Allocation of Losses; Subordination".
Optional Termination............. At its option, the [Company] may purchase
all the Deposited Assets in the Trust, and
thereby cause the termination of the Trust
and early retirement of the Certificates, on
any Distribution Date on which the aggregate
principal amount of the Deposited Assets
remaining in the Trust is less than [10%] of
the
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S-6
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aggregate principal amount of the Deposited
Assets as of the Cut-off Date [Specify any
other purchase or repurchase option of the
Company or any Holder of Certificates.] See
"Description of the Trust Agreement --
Termination" herein.
Termination of the
Trust............................ The Trust Agreement will terminate upon the
final distribution of Certificateholders of
all amounts due in respect of the Deposited
Assets. [Describe any further termination
events].
Certain Federal
Income Tax
Consequences..................... 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 Economic 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 anytime 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............. See "ERISA Considerations".
RISK FACTORS
[Describe risk factors and special considerations applicable to the specific
Term Assets, other Deposited Assets and the particular structure of the
Certificates being offered, including factors relating to the yield of the
Certificates and risks associated with the Deposited Assets and the terms
thereof, as described elsewhere herein.] See "Risk Factors" and "Maturity and
Yield Considerations" in the Prospectus
No Detailed Information About Term Assets or Term Assets Issuer
This Prospectus Supplement does not provide detailed information with
respect to the Term Assets or the Term Assets Issuer, any risk factors relating
thereto, or any rights or obligations, legal, financial or otherwise, arising
under or related to the Term Assets.
Trust's Relationship to the Company. The Company is not obligated to make
any payments in respect of the Certificates or the Term Assets.
The Term Assets do not represent obligations of the company. Prospective
investors should avail themselves of the same information concerning each
[Issuer] [Seller], [Servicer] and Term Asset as they would if they were
purchasing the Term Assets or similar investments backed by or representing
interests in Receivables.
Maturity and Prepayment Assumptions. The rate of payment of principal of
the Certificates, the aggregate amount of each distribution on, and the yield to
maturity of, the Certificates will depend on the rate of payment of principal of
the Term Assets. [Describe particular risks of particular Classes, if
applicable.] The Term assets are generally subject to early amortization upon
the occurrence of any of the amortization events applicable to such Term assets
as described herein and in the prospectus used in connection with the offering
of such Term Assets (the "Term Assets Prospectus").
The rate of payment of principal of the Certificates may also be affected
by the repurchase by each Term Asset Issuer of the Term Assets issued by such
Term Asset Issuer at a purchase price equal to a percentage of the principal
balance thereof plus accrued and unpaid interest, which right is exercisable
only after the aggregate
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S-7
principal balance of the Term Assets is less than a specified percentage of
their original principal balance. In such event the repurchase price paid by the
Term Asset Issuer would be passed through to the Certificateholders.
No Assurance of Liquidity
There is no assurance that any secondary market will develop or be
maintained for any class of Certificates. While the Underwriter intends to
maintain a secondary market for Certificates, it is not obligated to do so.
There can be no assurance that a secondary market in the Certificates will
develop or, if it does develop, that it will remain in existence for any period
of time. The absence of a secondary market would adversely affect the liquidity
of the Certificates.
FORMATION OF THE TRUST
The Trust will be formed pursuant to the Trust Agreement between the
Company and the Owner Trustee. Concurrently with the execution and delivery of
the Trust Agreement, the Company will deposit the Term Assets (or proceeds of
the offering sufficient to purchase the Term Assets) in the Trust. The Owner
Trustee, on behalf of the Trust, will accept (or purchase) such Term Assets and
will deliver the Certificates to or upon the order of the Company.
The Term Assets will be purchased by the Company in the secondary market
(either directly or through an affiliate of the Company). The Term Asset will
not be acquired from the Term Assets Issuer as part of any distribution by or
pursuant to any agreement with the Term Assets Issuer. The Term Assets Issuer is
not participating in this offering and will not receive any of the proceeds of
the sale of the Term Assets to the Company or the issuance of the Certificates.
DESCRIPTION OF THE DEPOSITED ASSETS
General
This Prospectus Supplement sets forth certain relevant terms with respect
to the Term Assets, but does not provide detailed information with respect to
the Term Assets. This Prospectus Supplement relates only to the Certificates
offered hereby and does not relate to the Deposited Assets. All disclosure
contained herein with respect to the Term Assets is derived from publicly
available documents. [Describe publicly available documents] [The] [Each]
[describe portion that is subject] Term Asset Issuer is subject to the
information reporting requirements of the Exchange Act. Although the Company has
no reason to believe the information concerning the Term Assets, [the] [each]
Term Asset Issuer or each Term Asset Prospectus related to the Term Assets is
not reliable, neither the Company nor any of the Underwriters has participated
in the preparation of such documents, or made any due diligence inquiry with
resect to the information provided therein. There can be no assurance that
events affecting the term Assets or any Term Asset Issuer have not occurred,
which have not yet been publicly disclosed, which would affect the accuracy or
completeness of the publicly available documents described above.
[SELECT ONE OF THE FOLLOWING BRACKETED SELECTIONS] [Alternative 1: specify debt
security or a pool of such debt securities issued by one or more corporations,
banking organizations or insurance companies] [Alternative 2: specify
obligations of one or more foreign private issuers] [Alternative 3: specify debt
security or pool of such debt securities which represent obligations of the
United States of America, any agency thereof for the payment of which the full
faith and credit of the United States of America is pledged, or a United States
governmental sponsored organization created pursuant to a federal statue (a
"GSE")] [Alternative 4: specify debt security or pool of such debt securities
which represent obligations issued by or guaranteed by a foreign government,
political subdivision or agency or instrumentality thereof] [Alternative 5:
specify pool of Receivables or interest therein or Credit Card Securities].
DESCRIPTION OF THE TERM ASSETS
[Use the following where the Term Assets consist of a single public security]
S-8
[The table below sets forth certain of the characteristics of the Term
Assets. The table does not purport to be complete and is subject to, and
qualified in its entirety by reference to, any prospectuses pursuant to which
the Term Assets were offered and sold.
Terms of Term Assets
Term Assets Issuer:
Term Assets: _______, due _______
Dated:
Original Principal Maturity Date:
Original Par Value Amount Issued:
CUSIP Number:
Stated Interest Rate:
Interest Payment Dates:
Mode of Payment of Term Assets:
Par Value Amount of Term Assets Deposited Under Trust
Agreement:
The Term Assets will be held by the Trustee for the Owners of Certificates
as book-entry credits to an account of the Trustee at DTC.
Available Information
The Term Assets Issuer is subject to the information requirements of the
Securities Exchange Act of 1934 and in accordance therewith files reports and
other information with the Commission. Such reports, proxy and information
statements and other information filed by the Term Assets Issuer with the
Commission can be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the Commission's regional offices at 500 West Madison Street, 14th Floor,
Chicago, Illinois 60661 and 75 Park Place, New York, New York 10007. Copies of
such material can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The Commission maintains a Web site at http://www.sec.gov containing
reports, proxy statements and other information regarding registrants that file
electronically with the Commission. [In addition, certain material described
above and other information will also be available for inspection at the offices
of the New York Stock Exchange at 20 Broad Street, New York, New York.]]
[Insert Bracketed Language if Applicable]
[THE FEDERAL NATIONAL MORTGAGE ASSOCIATION
The Federal National Mortgage Association ("Fannie Mae") is a federally
chartered and stockholder-owned corporation organized and existing under the
Federal National Mortgage Association Charter Act, 12 U.S.C. ss. 1716 et seq. It
is the largest investor in home mortgage loans in the United States. Fannie Mae
originally was established in 1938, as a United States government agency to
provide supplemental liquidity to the mortgage market and was transformed into a
stockholder-owned and privately managed corporation by legislation enacted in
1968. Fannie Mae provides funds to the mortgage market by purchasing mortgage
loans from lenders, thereby replenishing their funds for additional lending.
Fannie Mae acquires funds to purchase loans from many capital market investors
that ordinarily may not invest in mortgage loans, thereby expanding the total
amount of funds available for housing. Operating nationwide, Fannie Mae helps to
redistribute mortgage funds from capital-surplus to capital-short areas. Fannie
Mae also issues mortgaged-backed securities ("MBS"). Fannie Mae receives
S-9
guaranty fees for its guaranty of timely payment of principal of and interest on
MBS. Fannie Mae issues MBS primarily in exchange for pools of mortgage loans
from lenders. The issuance of MBS enables Fannie Mae to further its statutory
purpose of increasing the liquidity of residential mortgage loans.
Fannie Mae prepares an Information Statement annually which describes
Fannie Mae, its business and operations and contains Fannie Mae's audited
financial statements. From time to time Fannie Mae prepares supplements to its
Information Statement which include certain unaudited financial data and other
information concerning the business and operations of Fannie Mae. These
documents can be obtained without charge from Paul Paquin, Senior Vice President
- -- Investor Relations, Fannie Mae, 3900 Wisconsin Avenue, N.W., Washington, D.C.
20016 (telephone: (202) 752-7115). Fannie Mae is not subject to the periodic
reporting requirements of the Securities Exchange Act of 1934.]
[THE FEDERAL HOME LOAN MORTGAGE CORPORATION
The Federal Home Loan Mortgage Corporation ("Freddie Mac") is a publicly
held government-sponsored enterprise created on July 24, 1970 pursuant to the
Federal Home Loan Mortgage Corporation Act, Title III of the Emergency Home
Finance Act of 1970, as amended (the "FHLMC Act"). Freddie Mac's statutory
mission is to provide stability in the secondary market for home mortgages, to
respond appropriately to the private capital market and to provide ongoing
assistance to the secondary market for home mortgages (including mortgages
secured by housing for low-and moderate-income families involving a reasonable
economic return to Freddie Mac) by increasing the liquidity of mortgage
investments and improving the distribution of investment capital available for
home mortgage financing. The principal activity of Freddie Mac consists of the
purchase of first lien, conventional, residential mortgages and participation
interests in such mortgages from mortgage lending institutions and the resale of
the mortgages so purchased in the form of guaranteed mortgage securities.
Freddie Mac generally matches and finances its purchases or mortgages with sales
of guaranteed securities. Mortgages retained by Freddie Mac are financed with
short-and long-term debt, cash temporarily held pending disbursement to security
holders, and equity capital.
Freddie Mac prepares an Information Statement annually which describes
Freddie Mac, its business and operations and contains Freddie Mac's audited
financial statements. From time to time Freddie Mac prepares supplements to its
Information Statement which include certain unaudited financial data and other
information concerning the business and operations of Freddie Mac. These
documents can be obtained from Freddie Mac by writing or calling Freddie Mac's
Investor Inquiry Department at 8200 Jones Branch Drive, McLean, Virginia 22102
(outside Washington, D.C. metropolitan area, telephone (800) 336-3672; within
Washington, D.C. metropolitan area, telephone (703) 759-8160). Freddie Mac is
not subject to the periodic reporting requirements of the Securities Exchange
Act of 1934.]
[THE STUDENT LOAN MARKETING ASSOCIATION
The Student Loan Marketing Association ("Sallie Mae") is a
stockholder-owned corporation established by the 1972 amendments to the Higher
Education Act of 1965, as amended, to provide liquidity, primarily through
secondary market and warehousing activities, for lenders participating in the
Federal Family Education Loan ("FFEL") program and the Health Education
Assistance Loan Program. Under the Higher Education Act, Sallie Mae is
authorized to purchase, warehouse, sell and offer participations or pooled
interests in, or otherwise deal in, student loans, including, but not limited
to, loans insured under the FFEL program, and to make commitments for any of the
foregoing. Sallie Mae is also authorized to buy, sell, hold, underwrite and
otherwise deal in obligations of eligible lenders, if such obligations are
issued by such eligible lender for the purpose of making or purchasing federally
guaranteed student loans under the Higher Education Act. As a federally
chartered corporation, Sallie Mae's structure and operational authorities are
subject to revision by amendments to the Higher Education Act of other federal
enactments. Sallie Mae prepares an Information Statement annually which
describes Sallie Mae, its business and operations and contains Sallie Mae's
audited financial statements. From time to time Sallie Mae prepares supplements
to its Information Statement which include certain unaudited financial data and
other information concerning the business and operations of Sallie Mae. These
documents can be obtained without charge upon written request to the Corporate
and Investor Relations Division of Sallie Mae at 1050 Thomas Jefferson Street,
N.W., Washington, D.C. 20007, telephone (202) 298-3010. Sallie Mae is not
subject to the periodic reporting requirements of the Securities Exchange Act of
1934.]
S-10
[THE RESOLUTION FUNDING CORPORATION
The Resolution Funding Corporation ("REFCORP") is a mixed-ownership
government corporation established by Title V of the Financial Institutions
Reform, Recovery, and Enforcement Act of 1989 (the "FIRRE Act"). The sole
purpose of the REFCORP is to provide financing for the Resolution Trust
Corporation (the "RTC"). REFCORP is to be dissolved, as soon as practicable,
after the maturity and full payment of all obligations issued by it. REFCORP is
subject to the general oversight and direction of the Oversight Board, which is
comprised of the Secretary of the Treasury, the Chairman of the Federal Reserve
Board of Governors, the Secretary of Housing and Urban Development and two
independent members from different political parties to be appointed by the
President with the advice and consent of the Senate. The day-to-day operations
of REFRCORP are under the management of a three-member Directorate comprised of
the Director of the Office of Finance of the FHLBs and two members selected by
the Oversight Board from among the presidents of twelve FHLBs. The RTC was
established by the FIRRE Act to manage and resolve cases involving failed
savings and loan institutions pursuant to policies established by the Oversight
Board. The RTC is to manage and resolve cases for which a receiver or
conservator was appointed between January 1, 1989 through August 9, 1992. The
RTC is authorized to issue nonvoting capital certificates to REFCORP in exchange
for the funds transferred from REFCORP to the RTC. The RTC will terminate on or
before December 31, 1996. The FIRRE Act limits the aggregate principal amount of
interest bearing obligations which may be issued by REFCORP to $30 billion,
which amount of obligations was issued in 1989. Pursuant to the FIRRE Act, the
net proceeds of these obligations are used to purchase nonvoting capital
certificates issued by the RTC or to retire previously issued REFCORP
obligations.
Information concerning REFCORP may be obtained from the Resolution Funding
Corporation, Suite 850, 655 Fifteenth Street, N.W., Washington, D.C. 20005.
REFCORP is not subject to the periodic reporting requirements of the Securities
Exchange Act of 1934.]
[THE FEDERAL HOME LOAN BANKS
The Federal Home Loan Banks constitute a system of twelve federally
chartered corporations (collectively, the "FHLBs"). The mission of each FHLB is
to enhance the availability of residential mortgage credit by providing a
readily available, low-cost source of funds to its member institutions. A
primary source of funds for the FHLBs is the proceeds from the sale to the
public of debt instruments issued by the Federal Housing Finance Board, which
are the joint and several obligations of all of the FHLBs. The FHLBs are
supervised and regulated by the Federal Housing Finance Board, which is an
independent federal agency in the executive branch of the United States
government, but obligations of the FHLBs are not obligations of the United
States government.
The Federal Home Loan Bank System produces annual and quarterly financial
reports in connection with the original offering and issuance by the Federal
Housing Finance Board of consolidated bonds and consolidated notes of the FHLBs.
Questions regarding the Federal Home Loan Banks Combined Financial Statement
should be directed to the Deputy Director, Financial Reporting and Operations
Divisions, Federal Housing Finance Board, 1777 F Street, N.W., Washington, D.C.
20006, (202) 406-2901. Copies of the Financial Reports will be furnished upon
request to the Capital Markets Divisions, Office of Finance.]
[TENNESSEE VALLEY AUTHORITY
TVA is a wholly owned corporate agency and instrumentality of the United
States of America established pursuant to the Tennessee Valley Authority Act of
1933, as amended (the "TVA Act"). TVA's objective is to develop the resources of
the Tennessee Valley region in order to strengthen the regional and national
economy and the national defense. The programs of TVA consist of power and
nonpower programs. The power program is required to be self-supporting from
revenues it produces. The TVA Act authorizes TVA to issue evidences of
indebtedness that may only be used to finance its power program. TVA prepares an
Information Statement annually which describes TVA, its business and operations
and contains TVA's audited financial statements. From time to time TVA prepares
supplements to its Information Statement which include certain unaudited
financial data and other information concerning the business and operations of
TVA. These documents can be obtained upon written request directed to Tennessee
Valley Authority, 400 West Summit Hill Drive, Knoxville, Tennessee 37902,
Attention: Vice President and Treasurer, or by calling (615) 632-3366.]
S-11
[FEDERAL FARM CREDIT BANKS
The Farm Credit System is a nationwide system of lending institutions and
affiliated service and other entities (the "System"). Through its Banks ("FCBs")
and related associations, the System provides credit and related services to
farmers, ranchers, producers and harvesters of aquatic products, rural
homeowners, certain farm-related businesses, agricultural and aquatic
cooperatives and rural utilities. System institutions are federally chartered
under the Farm Credit Act of 1971, as amended (the "Farm Credit Act"), and are
subject to regulation by a Federal agency, the Farm Credit Administration (the
"FCA"). The FCBs and associations are not commonly owned or controlled. They are
cooperatively owned, directly or indirectly, by their respective borrowers.
Unlike commercial banks and other financial institutions that lead to the
agricultural sector in addition to other sectors of the economy, under the Farm
Credit Act the System institutions are restricted solely to making loans to
qualified borrowers in the agricultural sector and to certain related
businesses. Moreover, the System is required to make credit and other services
available in all areas of the nation. In order to fulfill its broad statutory
mandate, the System maintains lending units in all 50 states and the
Commonwealth of Puerto Rico.
The System obtains funds for its lending operations primarily from the sale
of debt securities issued under Section 4.2(d) of the Farm Credit Act
("Systemwide Debt Securities"). The FCBs are jointly and severally liable on all
Systemwide Debt Securities. Systemwide Debt Securities are issued by the FCBs
through the Federal Farm Credit Banks Funding Corporation, as agent for the FCBs
(the "Funding Corporation"). Each FCB determines its participation in each issue
of Systemwide Debt Securities based on its funding and operating requirements,
subject to the availability of eligible collateral, to determinations by the
Funding Corporation as to conditions of participation and terms of each
issuance, and to FCA approval.
Important information regarding the FCBs and the Farm Credit System,
including combined financial information, is contained in disclosure information
made available by the Funding Corporation. This information consists of the most
recent Farm Credit System Annual Information Statement and any Quarterly
Information Statements issued subsequent thereto (collectively, "Information
Statements") and certain press releases issued from time to time by the Funding
Corporation. Such information and the Farm Credit System Annual Report to
Investors for the current and two preceding fiscal years are available for
inspection at the Federal Farm Credit Banks Funding Corporation, Investment
Banking Services Department, 10 Exchange Place, Suite 1401, Jersey City, New
Jersey 07302; Telephone: (201) 200-8000. Upon request, the Funding Corporation
will furnish, without charge, copies of the above information.]
[GOVERNMENT TRUST CERTIFICATES
Government Trust Certificates ("GTCs") consist of certificates evidencing
undivided fractional interests in a trust, the assets of which consist of
promissory notes (the "Notes"), payable in U.S. Dollars, of a certain foreign
government, backed by 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 (the "DSAA"), of the due and punctual payment of 90% of
all payments of principal and interest due on the Notes and a security interest
in collateral, consisting of non-callable securities issued or guaranteed by the
United States government or agencies thereof, sufficient to pay the remaining
10% of all payments of principal and interest due on the Notes. Many issuances
of GTCs were undertaken pursuant to Title III of the Foreign Operations, Export
Financing and Related Programs Appropriations Acts (the "Appropriations Acts"),
which permit borrowers to prepay certain eligible high-interest loans made by
the Federal Financing Bank (the "FFB") under the Foreign Military Sales ("FMS")
Credit Program. The Appropriations Acts S-19 permit prepayment of the FMS loans
with the proceeds of new loans and authorize the issuance of a United States
government guaranty covering no more and no less than ninety percent (90%) of
the payments due on each such new loan, in accordance with the requirements of
the Arms Export Control Act, as amended (the "AECA"). It is a condition to the
issuance of Certificates under such program that the DSAA approve the
refinancing of any such FMS loan. Although 90% of all payments of principal and
interest on the Notes are guaranteed by the United States government or agencies
thereof, and 10% of such payments are secured by securities of the United States
government or agencies thereof, the GTCs themselves are not so guaranteed. In
the event of a default on the Notes, the Trustee of the Trust would be required
by the operative documents to make a claim against the United States government
or an agency thereof or would be required to liquidate the collateral securing
the Notes. Payments Under the Guaranty. If the borrower under the Notes (the
"Borrower") fails to deposit with the related trustee (the "Trustee") all
amounts due on the Notes on any Note payment date (each, a "Note
S-12
Payment Date"), the Trustee will first notify the Borrower and, one business day
thereafter, will send a notice to the Director of the DSAA and to the related
depositary (the "Depositary") setting forth the amounts due on the Notes on such
Note Payment Date and the amounts, if any, received from the Borrower. On the
[11th calendar day] following the Note Payment Date, if any amounts due on a
Note remain unpaid, the Trustee will demand payment from DSAA on the applicable
Guaranty in accordance with its terms. On the day the Trustee receives such
payment, it will instruct the Depositary immediately to deliver sufficient funds
to pay the amounts remaining unpaid on the Note.
On the occurrence of an Event of Default (as defined in the related loan
agreement), the Trustee in its discretion may proceed to protect and enforce the
rights of the GTC holders under the Declaration of Trust by a suit, action or
other proceeding. As provided in the loan agreement, the Guaranty and the
Depositary Agreement, the Trustee has the legal power to exercise all the
rights, powers and privileges of a holder of the Note.
The Trustee is required to take all necessary action, as permitted by the
Declaration of Trust and applicable law (i) to enforce payments due from DSAA
under the Guaranty and (ii) to take possession of collateral maturing or paying
interest on or prior to the Note payment date on which default occurred, and to
apply such funds in accordance with the Declaration of Trust for the benefit of
holders of GTCs. The Trustee is required to notify the Borrower upon taking the
foregoing actions. Neither the Trust holding a Note nor DSAA has the right to
accelerate payment of the Note, notwithstanding any failure of the Borrower to
make payment on the Note or other Event of Default with respect to the Note.
[The applicable Prospectus Supplement will specify, to the extent GTCs are
included as Underlying Securities, the waiting period that must elapse before
reimbursement for a default on the Notes, and the delay between payment on the
Notes and payment on the GTCs that is built into the GTCs to protect against a
delay in reimbursement.
In addition, the related Prospectus Supplement will specify, to the extent
applicable: (i) the aggregate principal amount of such GTCs; (ii) the coupon, if
any, borne by such GTCs; (iii) the stated maturity of each GTC; (iv) the
identity of each underlying obligor; and (v) the conditions under which, and the
terms on which, any underlying obligation may be prepaid or redeemed prior to
the stated maturity of the obligation.]]
[AID-GUARANTEED UNDERLYING SECURITIES
General. AID-Guaranteed Underlying Securities consist of notes, bonds,
credit facilities and other debt instruments which are issued or arranged by
intermediary financial institutions ("IFIs") and guaranteed in whole or in part
by AID. Most AID guarantees are established under the auspices of the Private
Sector Investment Program (the "Investment Program"), created in 1983 under
Section 108 of the Foreign Assistance Act of 1961 and administered by AID. The
Investment Program seeks to promote sustainable economic development by
strengthening the private sector in developing countries, primarily through the
facilitation of small business financing needs. In 1988 Congress provided the
Investment Program with loan guarantee authority, and guarantees have become the
Investment Program's principal financing instrument. AID guarantees are backed
by the full faith and credit of the United States government. AID Housing
Guaranty Program. The Housing Guaranty Program (the "Housing Program") is
administered by the AID Office of Housing and Urban Programs. The Housing
Program facilitates collaboration between AID and host-country housing
institution borrowers in both the public and private sectors. Under the Housing
Program AID participates in the planning, structuring and execution of a housing
or shelter finance program. Through the conclusion of "implementation
Agreements" the Housing Program aids developing countries in securing favorable
terms in U.S. capital markets for a U.S. government-guaranteed loan. Payments
under the AID Guarantees. Pursuant to the Fiscal Agency Agreement, if the
Borrower does not deposit with the Fiscal Agent thereunder at or before 12
o'clock noon, New York City time, on any date on which a payment of principal,
interest or maturity amount on the guaranteed AID-Guaranteed Underlying
Securities is due (each, an "AID-Guaranteed Underlying Security Payment Date"),
immediately available funds in an amount sufficient to pay in full any interest
and principal, and any maturity amount, due on such AID-Guaranteed Underlying
Security Payment Date with respect to the guaranteed AID-Guaranteed Underlying
Securities, the Fiscal Agent, acting on behalf of the holders of the guaranteed
AID-Guaranteed Underlying Securities, is obligated to make a demand upon AID,
not later than 2 o'clock p.m., New York City time, on such AID-Guaranteed
Underlying Security Payment Date for payment pursuant to the guarantees.
Pursuant to the guarantees, AID is required, not later than three (3)
Business Days following receipt of such demand, to pay to the demanding
AID-Guaranteed Underlying Securityholders the applicable
S-13
guaranteed amount. Upon receipt by the Fiscal Agent of payments from AID
pursuant to the guarantees, the Fiscal Agent will be required, if such payments
are received at or prior to 12 o'clock noon, New York City time, on any Business
Date, to remit such payments to the registered holders of the guaranteed
AID-S-21 Guaranteed Underlying Securities entitled thereto on such Business Day
and, if such payments are received after such time, to remit such payments to
such registered holders on the next such Business Day.
Each AID-Guaranteed Underlying Securityholder is deemed by the acceptance
of a guaranteed AID-Guaranteed Underlying Security to have irrevocably appointed
the Fiscal Agent as its agent for the purpose of making a demand for payment
upon AID pursuant to the guarantees and receiving any payment to an
AID-Guaranteed Underlying Securityholder by AID pursuant to the guarantees. The
Regulations also provide that any AID-Guaranteed Underlying Securityholder may
make demand for payment on AID under a Guarantee on its own behalf immediately
upon the failure of the Borrower to make any payment when due under such
AID-Guaranteed Underlying Securityholder's guaranteed AID-Guaranteed Underlying
Security. All payments made by AID to the Fiscal Agent pursuant to the
guarantees will be held in trust by the Fiscal Agent solely for the benefit of
the registered holders of the guaranteed AID-Guaranteed Underlying Securities
until remitted to such holders. AID will be discharged from its obligations to
make a payment pursuant to the guarantees upon the making of such payment to the
Fiscal Agent on behalf of the AID-Guaranteed Underlying Securityholders,
provided that such discharge will be effective only as to such payment and to
the extent of the amount of such payment.
Events of Default. As provided by the terms of each AID-Guaranteed
Underlying Security, an Event of Default will be deemed to have occurred if the
borrower fails to make any payment on such AID-Guaranteed Underlying Security on
the applicable Payment Date. On the occurrence of an Event of Default, the
trustee of such AID-Guaranteed Underlying Security (the "Underlying Trustee") or
the Trustee may make demand on AID under the guarantees. However, none of the
Fiscal Agent, the Trustee or AID may accelerate payment of any AID-Guaranteed
Underlying Security, notwithstanding any failure of the borrower to make payment
on the AID-Guaranteed Underlying Securities.
[Use the following where the Term Assets consist of a pool of public securities]
[The Deposited Assets will consist primarily of the Underlying Securities,
which are a pool of [Alternative 1: specify debt security or a pool of such debt
securities issued by one or more corporations, banking organizations or
insurance companies] [Alternative 2: specify obligations of one or more foreign
private issuers] [Alternative 3: specify debt security or pool of such debt
securities which represent obligations of the United States of America, any
agency thereof for the payment of which the full faith and credit of the United
States of America is pledged, or a United States governmental sponsored
organization created pursuant to a federal statue (a "GSE")] [Alternative 4:
specify debt security or pool of such debt securities which represent
obligations issued by or guaranteed by a foreign government, political
subdivision or agency or instrumentality thereof]. The Underlying Securities
will be purchased by the Depositor in the secondary market (either directly or
through an affiliate of the Depositor) 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:
S-14
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
Percentage 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
Percentage of
Aggregate Aggregate
Principal Principal
Rating Number Balance Balance
- -------------- -------------- -------------- --------------
Total
============== ============== ==============
Distribution by Interest Rate of the
Underlying Securities Pool as of the Cut-Off Date
Percentage of
Aggregate Aggregate
Principal Principal
Rating Number Balance Balance
- -------------- -------------- -------------- --------------
Total
============== ============== ==============
As of the Cut-off Date, [all of] [approximately _____% of] such Underlying
Securities were rated [investment grade] [specify particular rating] by at least
one nationally recognized rating agency, and no obligor of any Underlying
Security was in default in the payment of any installments of principal,
interest or premium (if any) with respect thereto. Any such rating of any of the
Underlying Securities is not a recommendation to purchase, hold or sell such
Underlying Security or the Certificates, and there can be no assurance that a
rating will remain for any given period of time or that a rating will not be
lowered or withdrawn entirely by a rating agency if in its judgment
circumstances in the future so warrant. See "Ratings" herein and "Risk
Factors--Ratings of the Certificates" in the accompanying Prospectus regarding
certain considerations applicable to the ratings of the Certificates.]
[Use the following where the Term Assets consist of a pool of Credit Card
Securities of multiple issuers]
S-15
[The Deposited Assets will consist primarily of the Term Assets, which are
a pool of publicly issued Credit Card Securities. The Term Assets will be
purchased by the Company or the Trust in the secondary market (either directly
or through an affiliate of the Company) and will be deposited into the Trust.
The Term Assets will not be acquired either from the respective issuers of the
Term Assets or pursuant to any distribution by or agreement with such issuers.]
DESCRIPTION OF THE TERM ASSETS
Issuer ..........................
Servicer.........................
Trustee .........................
Designation......................
Percentage of total Term Assets pool
Investor amount..................
Series Termination Date (1)......
Certificate Rate.................
Monthly payment Date (2).........
Commencement of Controlled
Amortization/Accumulation Period (3)
Minimum Seller's percentage......
Cash Collateral guaranty (4) Amount .
Percentage of Subordinated
Class ___ Certificates .........
Optional Repurchase Percentage...
Ratings (5)......................
- -------------
(1) Includes defined terms: Series Termination Date and Stated Series
Termination Date.
(2) Includes defined terms: Payment Date and Distribution Date.
(3) Includes defined terms: Controlled Amortization Period, Controlled
Accumulation Period and Controlled Liquidation Period.
(4) A "Cash Collateral guaranty" generally provides, that in the event that a
deficiency exists with respect to a payment of interest and/or principal,
an amount equal to such deficiency may be withdrawn from the case
collateral account and applied to such deficiency up to the amount provided
in the Term Asset Agreement.
(5) As of ____________, 199_.]
S-16
General
This Prospectus Supplement sets forth certain relevant terms with respect
to the Term Assets, but does not provide detailed information with respect to
the Term Assets. This Prospectus Supplement relates only to the Securities
offered hereby and does not relate to the Term Assets.
[Each] [describe portion that is subject] Term Asset Issuer is subject to
the information requirements of the Exchange Act. Accordingly, each such Term
Asset Issuer is required to file reports, and other information with respect to
the Term Asset Issuer with the Commission. Copies of such reports and other
information may be inspected and copied at certain offices of the Commission at
the address listed under "Available Information" in the Prospectus.
Neither the Company nor the Underwriter[s participated in the preparation
of such reports. Such reports and information will have been prepared by the
respective Term Asset Issuer [Servicer] and will not be independently verified
by the Company or the Underwriter. There can be no assurance that events have
not occurred, which have not yet been publicly disclosed, which would affect the
accuracy or completeness of any statements included in such servicer reports or
in the publicly available documents filed by or on behalf of the Term Assets
Issuer.
Although the Company has no reason to believe the information concerning
the Term Assets, the Term Asset Issuer, or each Term Assets Prospectus is not
reliable, the Company has not verified either its accuracy or its completeness.
Such information is as of the date of each related prospectus and comparable
information if given as of the date hereof may be different.
Set forth below is certain information excerpted and summarized from each
Term Assets Prospectus.
[Include information as applicable][The Term Assets of the Trust will
consist solely of initially $_______ aggregate principal amount of ________ __%
Debentures, due _______ issued by the Term Assets Issuer, having the
characteristics described in the Term Assets Prospectus. The Term Assets were
originally issued by the Term Assets Issuer as part of an underwritten public
offering of $_______ aggregate principal amount of such securities, pursuant to
a registration statement on [Form S-3][Insert applicable form/schedule]
(together with all amendments and exhibits thereto, the "Term Assets
Registration Statement"), filed by the Term Assets Issuer with the Securities
and Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended (the "Securities Act"). Distributions are required to be made on the
Term Assets semiannually on the ___ day of each _______ and ______, commencing
________ (each, a "Term Assets Payment Date"), or if such day is not a Business
Day, on the next succeeding Business Day.
The Term Assets deposited in the Trust represent the sole assets of the
Trust that are available to make distributions in respect of the Certificates.
Consequently, the ability of Certificateholders to receive distributions in
respect of the Certificates will depend on the Trust's receipt of payments on,
or in respect of, the Term Assets. This Prospectus Supplement relates only to
the Certificates being offered hereby and does not relate to the Term Assets.
The disclosure under this caption in the Prospectus Supplement is intended
primarily to identify the Term Assets and does not purport to summarize the Term
Assets or to provide information with respect to the Term Assets Issuer. Such
information does not purport to be complete and is qualified in its entirety by,
and should be read in conjunction with, (i) the Term Assets Prospectus, and (ii)
the Term Assets Registration Statement, of which the Term Assets Prospectus is a
part. This Prospectus Supplement relates only to the Certificates offered hereby
and does not relate to an offering of the Term Assets. No representation is made
by the Trust, the Trustee or the Company as to the accuracy or completeness of
the information contained in the Term Assets Prospectus or the Term Assets
Registration Statement.]
[The Term Assets have been issued pursuant to agreements entered into
between various sellers and various trustees. The following summary describes
certain general terms of such agreements, but investors should refer to the
agreements themselves for all the terms governing the Terms Assets.]
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[Each Term Asset represents an interest in Receivables, including the right
to a percentage of cardholder payments on the Receivables. The assets of each
Term Asset Issuer include a pool of Receivables arising under Accounts, funds
collected or to be collected from cardholders in respect of the receivables in
the Accounts, monies on deposit in certain accounts of the Term Asset Issuers
and the right to draw upon various enhancements and may also include the right
to receive certain interchange fees attributed to cardholder charges for
merchandise. Each Term Asset represents the right to receive payments of
interest for the related interest period at the applicable Term Asset Rate (as
defined herein) for such interest period from collections of Receivables and, in
certain circumstances, from draws on applicable enhancement, and payments of
principal during the Term Asset Amortization Period (as defined herein) funded
from collections of Receivables.]
[Each seller of Receivables (each, a "Seller") holds the interest in the
Receivables of a Term Asset Issuer not represented by the Term Assets,
securities of the same series and any other series of securities issued by the
Term Asset Issuer. Such Seller holds an undivided interest in the Term Asset
Issuer (the "Seller's Interest"), including the right to a percentage (the
"Seller's Percentage") of all cardholder payments on the Receivables.]
[The Term Assets will consist of the certificates, notes or loans
representing an interest in or secured by the Receivable and issued by the
following Term Assets Issuers: [details of particular credit card backed
certificates].]
Interest Payments
Interest accrues on the Term Assets at the certificate rate for each class
and series of such securities, from the date of the initial issuance thereof.
Interest at the applicable rate will be paid to the Certificateholders [ ]
[monthly] [quarterly] [semiannually] on the [ ] day of each [ ] (or, if such day
is not a business day, the next succeeding business day).
[Interest on the Term Assets is calculated on the basis of the actual
number of days in the related interest period and a 360-day year.]
The Term Assets bear interest [in the aggregate] at a [weighted average]
rate per annum equal to [__%] [describe rate or method of calculation].
Principal Payments
[Include if applicable; otherwise identify principal payment dates of Term
Assets and redemption features][Generally, principal payments due to the holders
of the Term Assets are scheduled to commence on the first payment date with
respect to a controlled amortization period for a series of Term Assets (a "Term
Asset Controlled Amortization Period") or will be provided for by accumulating
collections on the Receivables for a specified period (a "Term Asset
Accumulation Period") and paid on the schedule final payment date, but in either
case may be paid earlier or later than such date. However, if an [Early
Amortization Event, Payout Event, Liquidation Event or Economic Amortization
Event] (as such terms are defined in Term Asset Agreements) (each such event, a
"Term Assets Early Amortization Event") occurs, [monthly] distributions of
principal to the holders of the Term Assets will begin on the first payment date
following the occurrence of such Term Asset Amortization Event. See "Term Asset
Amortization Events" below.
If a Term Assets Early Amortization Event does not occur, principal will be
distributed to the holder of the Term Assets on the first payments date during
the applicable Term Assets Controlled Amortization Period or at the end of the
Term Asset Accumulation Period. If, however, the amount of principal distributed
on the scheduled final payment date is not sufficient to pay the holders of the
Terms Assets in full, then monthly distributions of principal to the holders of
Term Assets will occur on each Payment Date after the scheduled final payment
date.]
[Include if Applicable][Investor Percentage and Seller]
[Pursuant to the Term Asset Agreements, all amounts collected on
Receivables will be allocated between the investor of the holders of the Term
Assets, the investor interest of any other series and the Seller's Interest by
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reference to the investor percentage of the holders of the Term Assets, the
investor percentage of any other series and the Seller's Percentage.
The Seller's Percentage generally means the excess of 100% over the
aggregate investor percentage of all series issued by such Term Asset Issuer
then outstanding.]
[Include if Applicable][Allocation of Collections]
[The Term Asset Servicer will deposit any payments collected by the Term
Asset Servicer with respect to the Receivables and will generally allocate such
amounts as follows:
[(a) an amount equal to the applicable Seller's Percentage of the aggregate
amount of deposits in respect of Principal Receivable and Finance Charge
Receivables, respectively, will be paid to the holder of the Seller's
Certificate;
(b) an amount equal to the applicable investor percentage of the aggregate
amount of such deposits in respect of Finance Charge Receivables will be
deposited into an account for the benefit of the holders of the Term Assets;
(c) during the Revolving Period, an amount generally equal to the
applicable investor percentage of the aggregate amount of such collections in
respect of Principal Receivables will be paid to the holder of the Seller's
Certificate, provided, however, that such amount may not exceed the amount equal
to the Seller's interest. The term "Seller's Certificate" also encompasses the
terms Exchangeable Seller's Certificate and Exchangeable Transferor's
Certificate. "Principal Receivables" generally consist of amount charged by
cardholders for merchandise and services, amounts advanced as cash advances and
the interest portion of any participation interests. "Finance Charge
Receivables" generally consist of monthly periodic charges, annual fees, cash
advance fees, late charges, over-the-limit fees and all other fees billed to
cardholders, including administrative fees;
(d) during the controlled amortization period, rapid amortization period or
accumulation period, collections of Principal Receivables will be allocated to
the holders of Term Assets based on the investor percentage, subject, during a
controlled amortization period, to a cap.]]
[Term Assets Events of Default][Term Assets Early Amortization Events]
The following is a summary of the typical Term Assets [Events of
Default][Early Amortization Events] for each series of Term Assets. [Any
additional Term Assets Early Amortization Events, unique to a particular series
of Term Asset, will be described following the summary];
[(a) failure to make payments to holders of Term Assets with the time
periods given in the Term Asset Agreements;]
[(b) material breaches of certain representations, warranties or covenants
or failure to observe or perform in a material respect any covenant or agreement
under any Term Asset Agreement;]
[(c) occurrence of a material default by a Term Asset Servicer;]
[(d) failure to maintain the minimum Seller's Percentage;]
[(e) failure to maintain a certain minimum level of Receivables or
Accounts, or the Seller being unable to transfer Receivables or Accounts to Term
Asset Issuer;]
[(f) certain events of bankruptcy or insolvency relating to the Seller;]
[(g) Term Asset Issuer becomes an "investment company" within the meaning
of the Investment Company Act of 11940, as amended;]
S-19
[(h) any reduction of the portfolio yield or excess spread (averaged over
any three consecutive months) to a rate below a certain rate provided in the
Term Asset Agreement for such a period;]
[(i) the available amount of the cash collateral guaranty is less than __%
of the amount of the investor interest for the underlying series of Term
Assets.]
[Describe Additional Term Asset Events of Default or Specific Amortization
Events]
[The pool of Term Assets, together with any other assets described below
any credit Support described under "Description of Credit Support", represents
the sole assets of the Trust that are available to make distributions in respect
of the Certificates.]
[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
Certificateholder to receive distributions in respect of the Certificates will
depend [almost] entirely on the Trust's receipt of payments on the foregoing
Term Assets form [name such obligor]. This Prospectus Supplement relates only to
the Certificates being offered hereby and does not relate to the Term Assets of
[name such obligor]. All information contained in this Prospectus Supplement
regarding [name such obligor] are derived from the publicly available documents
described above. Neither the Company nor the Underwriter has participated in the
preparation of such documents, or takes any responsibility for the accuracy for
the accuracy or completeness of the information provided therein.]
The Deposited Assets will also include [describe any assets which are
ancillary or incidental to the Term Assets, 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 Term Assets] (such assets,
together with the Term Assets, the "Deposited Assets").
[DESCRIPTION OF CREDIT SUPPORT]
For the benefit [solely] of [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 the Company's assignment of the Deposited Assets to the
Trust, the Company will obtain the Letter of Credit from [ ] (the "Letter of
Credit Bank") in favor of the Owner Trustee. 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 may be drawn
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 ______, 19__. The Owner 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 thereon shall be paid to the Letter of Credit Bank to the extent of
any amounts owing, in the manner and priority specified herein.]
[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
S-20
aggregate principal amount of the Certificates covered thereby, provide
information of financial and other matters with respect to the Letter of Credit
Bank.]]
[The Surety Bond]
Simultaneously with the Company's assignment of the Deposited Assets to the
Trust, the Company will obtain the Surety Bond from [ ] (the "Surety") in favor
of the Owner Trustee. The Surety Bond will guaranty [timely] [ultimate]
distributions of the principal of and premium (if any) and interest with respect
to the [Class[ ]] Certificates. The Surety Bond expires on ______, 19__ . The
Owner Trustee will be obligated, in the event of a drawing on the Surety Bond,
to pursue appropriate remedies against the Deposited Assets and other Assets and
other collateral, and any realization thereon shall be paid to the Surety to the
extent of any owing, in the manner and priority specified herein.
[Add language regarding the issuer of the Surety Bond with respect to its
debt ratings, activities in 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 and
address for further information concerning the Surety. In addition, to the
extent that the Surety Bond will cover payment of 20% or more of the aggregate
principal amount of the Certificates covered thereby, provided information of
financial and other matters with respect to the issuer of the Surety Bond.]]
[Reserve Account]
The Company will deposit with the Owner 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 so deposited in such Reserve
Account will be used 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 the Company.]
YIELD ON THE CERTIFICATES
[Describe factors relating to the Deposited Assets, the terms thereof
and the manner and priority in which collections thereon are paid or allocated
to each class of the Certificates, as described elsewhere herein.] See "Maturity
and Yield Considerations" in the Prospectus.
DESCRIPTION OF THE CERTIFICATES
General
The Certificates will consist of [ ] class of Certificates, designated as
Class[ ] [,] [and] Class [ ] [and Class____] Certificates. The Certificates
will be denominated and distributions with respect thereto will be payable in
the Specified . The Certificates will be denominated and distributions with
respect thereto will be payable in 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 [$]_____(approximate) and a [___%] [Variable] Pass-Through
Rate. [The Class [ ] Certificates, which are not being offered hereby, will be
transferred by the Company to an affiliate on the Closing Date, and may be sold
at any time by the Company in accordance with the terms of the Trust Agreement.]
The Certificates [other than the Class [ ] Certificates [and specify
others] (the "Definitive Classes"))] will be issued, maintained and transferred
on the book-entry records of DTC and it Participants in minimum
S-21
denominations of [$ ] and [integral multiplies thereof] [multiplies 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 Balance,
as applicable, of [$ ] and integral multiples thereof, 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 of 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
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 the Company, the "Clearing Agency"), except as provided below. The Company
has been informed by DTC that DTC's nominee will be CEDE & Co. ("CEDE"). No
holder of any such Certificate (a "Security Owner") will be entitled to receive
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 herein, all references to
actions by holders 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 Certificates" in
the Prospectus.
Under the rules, regulations and procedures creating and affecting DTC and
its operations, DTC will take action permitted to be taken by a
Certificateholder (a "Security Owner") only at the direction of one or more
Participants to whose DTC account such 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 such Certificates
evidence such specified Voting Rights. DTC may take conflicting actions with
respect to Voting Rights, to the extent that Participants whose holdings of
Certificates evidence such Voting Rights, authorize divergent action.
Definitive Certificates
Definitive Certificates will be issued to Security Owners or their nominees
respectively, rather than to DTC or its nominee, only if (i) the Company advises
the Owner Trustee in writing that DTC is no longer willing or able to discharge
properly its responsibilities as Clearing Agency with respect to a class of
Certificates [(other than the Definitive Classes)] and the Company is unable to
locate a qualified successor or (ii) the Company, 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 Owner Trustee will reissue such Certificates as Definitive
Certificates issued in the respective principal amounts owned by the individual
owners of such Certificates, and thereafter the Owner Trustee will recognize the
holders of such Definitive Certificates as holders under the Trust Agreement.
Distribution
Collections on the Deposited Assets that are received for a given
Collection Period pursuant to the collection procedures described herein and in
the Prospectus will be applied by 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:
(i) to the Owner Trusteeall unpaid fees and expenses owed thereto and
its respective agents, up to the Allowable Expense Amount (as
defined below) for the related Collection Period;
(ii) [to the providers of Credit Support "Credit Support Providers"], any
amount required to be paid or reimbursed to, or deposited with, any
such person (collectively, "Credit Support Payments");]
S-22
(iii) to the Certificateholders of each Class of such 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 such
Class, commencing with the most highly ranked Class and, to the
extent Available Funds remain available, to each other Class in
accordance with the ranking specified herein under "--Allocation of
Losses; Subordination";
(iv) [to the Credit Support Providers, any Credit Support Payments;]
(v) to the Owner Trustee, all its remaining unpaid fees and expenses and
those of its respective agents not otherwise paid pursuant to clause
(i) above;
(vi) [all remaining amounts, if any, to the Company.]
There can be no assurance that collections received from the Deposited
Assets and any applicable Credit Support relating to the Certificates over a
specified period will be sufficient, after payment of all Allowable Expense
Amounts [and payments of all amounts required to be paid to the Credit Support
Providers] for such period, to make all required distributions on the
Certificates. To the extent Available Funds are insufficient to make any such
distributions due to any such Series or Class, any shortfall will be carried
over and will be distributed on the next Distribution Date on which sufficient
funds exist to pay such shortfalls.
For purposes hereof, 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 such preceding Collection Period.
"Available Funds" for any Distribution Date means the sum of (a) all
amount received on or with respect to the Deposited Assets (including
investment income on Eligible Investment) received during the preceding
Collection Period[,] [and] (b) amounts available as such Distribution Date
pursuant to the Credit Support described herein [and (c) any additional
amount that the [Company] may remit to the Owner 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 Ratings Agency as being consistent with the
rating of such Certificates. Generally, Eligible Investments must be
limited to obligations or securities that mature no later than the business
day prior to the next succeeding Distribution Date.
"Required Interest" for the Certificates or any Class thereof 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 thereof for any
Distribution Date means an amount equal to the product of (a) the Required
Principal for such Certificates on such Distribution Date and (b) the Call
Premium Percentage for such Distribution Date.
"Required Principal" for the Certificates or any Class thereof 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 payable or allocable to such Certificates. The
Certificate Principal Balance of a Certificate outstanding at an time
presents the maximum amount that the holder thereof is entitled to
S-23
receive as distribution payable in respect of or allocate to principal from
the cash flow on the Term Assets, 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 thereof, reduced by the aggregate of (a) all
amounts allocable to principal previously distributed with respect to such
Certificate and (b) any reductions in the Certificate Principal Balance
there deemed to have occurred in connection with allocations of (i)
Realized Losses allocable to principal on the Deposited Assets and (ii)
Extraordinary Trust Expenses, as described herein. [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].]
[Advances]
[Subject to the following limitations, the [Trustee] [Servicer] will be
obligated to advance or advance or cause to be advanced on or before each
Distribution Date its own funds, or other available funds, in an amount equal to
the aggregate of payments of principal, premium (if any) and interest, net of
that portion of the Administrative Fee (as defined herein) attributable to fees
and expenses of the Owner Trustee, that were due during the related Collection
Period and that were delinquent on the related Determination Date (any such
advance, an "Advance").
Advances are required to be made only to the extent they are deemed by the
[Trustee] [Servicer] to be recoverable from related late collections, insurance
proceeds, if any, or Liquidation Proceeds. The purpose of making such Advance is
to maintain a regular cash flow, rather than to guarantee or insure against
losses. The [Trustee] [Servicer] 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 from late collections, insurance
proceeds, if any, and any proceeds from the liquidation of the Deposited Asset
("Liquidation Proceeds") as to which such unreimbursed Advance was made. In
addition, any Advance previously made in respect of any Deposited Asset that are
deemed to be nonrecoverable from related late collections, insurance proceeds,
if any, or Liquidation Proceeds may be reimbursed to the [Trustee] [Servicer]
out of any funds allocable to any of the Deposited Assets prior to the
distributions on the Certificates. [In the event that the Servicer fails in its
obligation to make any such Advance, the Owner Trustee may be obligated to make
any such Advance, to the extent provided in the Trust Agreement.]]
Allocation of Losses; Subordination
The subordination described herein 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.
[Realized Losses 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 is excess
of the Allowable Expense Amount.]
Restriction on Transfer of the Class [ ] Certificates
S-24
Because the Class [ ] Certificates are subordinate to the Class [ ]
Certificates and the Class [ ] Certificates to the extent set forth herein, the
Class [ ] Certificates may not be purchased by or transferred to a Plan except
upon the delivery of an opinion of counsel as described herein. See "ERISA
Considerations".]
DESCRIPTION OF THE TRUST AGREEMENT
General
The Certificates will be issued pursuant to the Trust Agreement, a form of
which is filed as an exhibit to the Registration Statement. A Current Report on
Form 8-K relating to the Certificates containing a copy of the Trust Agreement
as executed will be filed by the Company with the Commission following the
issuance and sale of the Certificates. The Trust created under the Trust
Agreement will consist of (i) the Deposited Assets (exclusive of any Retained
Interest, which is not part of the Trust), (ii) all payments on or collections
in respect of the Deposited Assets due after the Cut-off Date, together with any
proceeds thereof[,] [and] [(iii) any Credit Support in respect of any class or
classes of Certificates] [and (iv) the rights of the Company under the Deposited
Asset Purchase Agreement among the Company and the Deposited Asset Seller]. [In
addition, the Certificateholders of the Certificates may also have the benefit
of certain Credit Support discussed above. See "Description of Credit Support".]
Reference is made to the Prospectus for important information in addition to
that set forth herein 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 herein.
The Owner Trustee
_________________, a_______________, will act as trustee for the
Certificates and the Trust pursuant to the Trust Agreement. The Owner Trustee's
offices are located at [ ] and its telephone number is [ ].
The Trust Agreement will provide that the Owner Trustee and any director,
officer, employee or agent of the Owner 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 Owner Trustee's duties under the Trust
Agreement, other than any loss, liability or expense (i) that constitutes a
specific liability of the Owner Trustee under the Trust Agreement or (ii)
incurred by reason of willful misfeasance, bad faith or negligence in the
performance of the Owner Trustee's duties under the Trust Agreement or as a
result of a breach, or by reason of reckless disregard of the Owner Trustee's
obligations and duties under the Trust Agreement.
Voting Rights
[At all times,] [Subject to the succeeding 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 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 what circumstances voting will be
class-by-class.]
[Specify conditions, if any, under which allocation of Voting Rights might
change from the foregoing percentages].
Voting of Term Assets, Modification of Term Asset Agreement
The Owner Trustee, as holder of the Term Assets, has the right to vote and
give consents and waivers in respect of such Term Assets as permitted by DTC and
except as otherwise limited by the Trust Agreement. In the event that the Owner
Trustee receives a request from DTC, the Term Asset Trustee or the Term Asset
Issuer for it
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consent to any amendment, modification or waiver of the Term Assets, the Term
Asset Agreement or any other documents thereunder or relating thereto, or
receives any other solicitation for any action with respect to the Terms Assets,
the Owner Trustee shall mail notice of such proposed amendment, modification,
waiver or solicitation to each Certificateholders of record as such date. The
Owner 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 Owner Trustee shall consent or vote, or refrain
from consenting or voting, in the same proportion (based on the relative
Certificate Principal Balance and Notional Amounts of the Certificates) as the
Certificates of the Trust were actually voted or not by the Certificateholders
thereof as of date determined by the Owner Trustee prior to the date on which
such consent or vote is required; provided, however, that, notwithstanding
anything to the contrary, the Owner 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 for Federal income tax purpose, (ii)
which would alter the timing or amount of any payment on the Term Assets, except
in the event of a [Term Assets Event of Default] [Term Assets Early Amortization
Event or an event which with the passage of time would become a [Term Assets
Event of Default][Term Assets Early Amortization Event] and with the unanimous
consent of all Outstanding Certificates or (iii) which would result in the
exchange or substitution of any of the outstanding Term Assets pursuant to a
plan for the refunding or refinancing of such Term Assets, but only with the
consent of Certificateholders representing 100% of the aggregate voting rights
of each outstanding Class of the Certificates. The Owner Trustee shall have no
liability for any failure to act resulting from Certificateholders' late return,
directions requested by the Owner Trustee from the Certificateholders.
In the event that an offer is made by the Term Asset Issuer to issue new
obligations in exchange and substitution for any of the Term Assets, pursuant to
a plan for the refunding or refinancing of the Term Assets or any other offer is
made for the Term Assets, the Owner Trustee shall notify the Certificateholders
of such offer as promptly as practicable. The Owner Trustee must reject any such
offer unless an event of default under the Term Asset Agreement has occurred,
the Owner Trustee is directed by the affirmative vote of all of the
Certificateholders to accept such offer and the Owner Trustee has received the
tax opinion described above. Accordingly, a Certificateholder generally would be
required to effect a withdrawal of Requested Term Assets from the Trust in order
to accept such offer. See "--Optional Exchange of Certificates".
If an event of default under the Term Asset Agreement 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 Owner Trustee
shall vote the Term Assets in favor of directing, or take such other action as
may be appropriate to direct, the Term Asset Trustee to declare the unpaid
principal amount of the Term Assets and any accrued and unpaid interest thereon
to be due and payable. In connection with a vote concerning whether to declare
the acceleration of the Term Assets, the Certificateholders' interests of each
Class may differ and the interests of either Class may differ from holders of
other securities of the same series or class.
Termination
The Company 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)] one 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 the Company 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 the Company's 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 thereunder. In the event the Company 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 thereon 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 thereon.]
[Specify alternative allocations method if different from above
S-26
CERTAIN 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.]
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain United States federal income tax
consequences of the ownership of the Certificates as of the date hereof. This
summary is based on the Internal Revenue Code of 1986 (the "Code") as well as
Treasury Regulations and administrative and judicial rulings and practice.
Legislative, judicial and administrative changes may occur, possibly with
retroactive effect, that could alter or modify the continued validity of the
statements and conclusions set forth herein. This summary does not purport to
address all federal income tax matters that may be relevant to particular
Certificateholders. For example, it generally is addressed only to original
purchasers of the Securities that are "U.S. Persons" (as described below), deals
only with Certificates held as capital assets within the meaning of Section 1221
of the Code, and does not address tax consequences to Certificateholders that
may be relevant to investors subject to special rules, such as investors that
are not U.S. Persons, banks, insurance companies, tax-exempt organizations,
dealers in securities or currencies, mutual funds, REITs, natural persons, cash
method taxpayers, S corporations, estates and trusts, investors that hold the
Certificates as part of a hedge, straddle, integrated or conversion transaction,
or Certificateholders whose "functional currency" is not the United States
dollar. Further, it does not address alternative minimum tax consequences or the
indirect effects on the holders of equity interests in a Certificateholder. The
Prospectus Supplement for each series of Securities will describe the
consequences that relate to the specific Certificates issued pursuant thereto.
For these purposes, a U.S. Person is (i) a citizen or resident of the
United States, (ii) a corporation or partnership organized in or under the laws
of the United States, any state thereof or the District of Columbia, or (iii) an
estate or trust that is a United States Person within the meaning of Section
7701(a)(30) of the Code.
Persons considering the purchase of the Certificates should consult their
own tax advisors concerning the application of United States federal income tax
laws, as well as any state, local, foreign or other tax laws, to their
particular situations.
Tax Status of the Trust and the Term Assets
Upon the issuance of the Certificates, Orrick, Herrington & Sutcliffe, LLP,
special tax counsel to the Company, will deliver its opinion generally to the
effect that, assuming compliance with the Trust Agreement (and certain other
documents) and based on certain representations of the Company, for federal
income tax purposes, the Trust will [should] be classified as a grantor trust
and [if the Trust is not determined to be a grantor trust, it will be classified
as a partnership and] not as an association (or publicly traded partnership
treated as an association) taxable as a corporation. Accordingly, each owner of
a Certificate (a "Certificateholder") will be subject to federal income taxation
as if it owned directly the portion of the Deposited Assets allocable to such
Certificates, and as if it paid directly its share of expenses paid by the
Trust. The following discussion assumes that the Term Assets were not issued
with original issue discount ("OID") and, accordingly, the Certificateholders
will not realize OID except with respect to a "stripped interest" (as defined
below).
[Tax Characterization of the Trust
The Depositor and the Administrative Agent, if any, have agreed, and the
Certificateholders 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
Certificateholders, the Depositor 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 Certificateholders 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 corporation unless at least 90% of its gross income
S-27
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 special 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.]
Income of the Certificateholders
In General. For federal income tax purposes, each Certificateholder will be
treated as if such Certificateholder directly owned its pro rata share of the
Term Assets. A Certificateholder will allocate the amount it pays for its
Certificates among the Term Assets and the Deposited Assets in the Trust other
than the Term Assets (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 Certificateholder 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 Term Assets
represented by such 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 Term Assets to the extent the
Certificate is entitled to receive a proportionate amount of all principal and
interest on the Term Assets. A class of Certificates will be considered in its
entirety to represent a stripped interest in the underlying Term Assets if it is
entitled to receive interest on the Term Assets which is disproportionately less
than the principal which it is entitled to receive on the Term Assets, or if it
is entitled to receive all or part of the interest on the Term Assets but no
principal on the Term Assets. In addition, if a class of Certificates is
entitled to receive interest and principal on the Term Assets, but the interest
it is entitled to receive on the Term Assets is disproportionately more than the
principal it is entitled to receive on the Term Assets, it could be argued that
the Certificates represents (a) an interest in the Term Assets that is not a
stripped interest to the extent it represents a proportional amount of all the
principal and interest on the Term Assets and (b) a stripped interest in the
Term Assets to the extent of any additional interest to which it is entitled on
the Term Assets. 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 Term Assets, each Certificateholder 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 Term Assets, income derived from the other Deposited
Assets held by the Trust, and any gain or loss upon collection or disposition of
the Term Assets or other Deposited Assets. The portion of each monthly payment
to a Certificateholder that is allocable to principal on the Term Assets (other
than amounts representing discount, as described below) will represent a
recovery of capital, which will reduce the tax basis of such Certificateholder's
undivided interest in the Term Assets.
To the extent that the portion of the purchase price of a Certificate
allocated to a Certificateholder's undivided interest in the Term Assets is
greater than or less than the portion of the principal balance of the Term
Assets allocable to the Certificate, such interest in the Term Assets will have
been acquired at a premium or discount, as the case may be. In determining
whether a Certificateholder has purchased its interest in the Term Assets 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 Term Assets at
the time of purchase as though such accrued interest were a separate asset,
thus, in each case, reducing the portion of the purchase price allocable to the
Certificateholder's undivided interest in the Term Assets (the "allocated
Purchase Price"). To the extent that the allocated Purchase Price is less than
the principal balance of the Term Assets, the Certificateholder's interest in
such Term Assets will be treated as purchased at a "market discount." The market
discount on the Term Assets 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 the Term
Assets, the Certificateholder'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 Certificateholder who purchases a
Certificate in the initial public offering were equal or almost equal to the
portion
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of the principal balance of the Term Assets that is allocable to the
Certificate, there would be no significant amount of discount or premium with
respect to its interest in such Term Assets. Moreover, if the total purchase
price of a Certificate is equal to the principal amount of the Term Assets
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
Certificateholder's interest in the Term Assets 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 the Term Assets 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 the
Term Assets (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 Certificateholder 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 Certificateholder 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 Term
Assets, 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
"Regulations"), 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 Term Assets to which
the stripped interest (i.e., the Certificateholder) is also entitled. If none of
the amounts payable to a Certificateholder 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
Certificateholder's share of other Deposited Assets and to accrued interest.
The tax treatment of a Certificateholder 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 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 Certificateholder would be required to report on its federal income tax
return its share of the gross income of the Trust, including interest on the
Term Assets and any gain upon sale or disposition by the Trust of the Term
Assets. Such gross income would exceed the Pass-Through Rate on the Certificate
by an amount equal to the Certificateholder's share of the expenses of the Trust
for the period during which it owns a Certificate. Each Certificateholder 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;
such income would be capital gain, short-term or long-term depending upon the
Certificateholder's holding period in the Certificate. The Certificateholder
would be entitled to deduct its share of expenses of the Trust to the extent
described below. Any amounts received by a Certificateholder from any Credit
S-29
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 Certificateholder would report its share of
the income of the Trust under its usual method of accounting. Accordingly,
except as described below, interest on the Term Assets would be includible in a
Certificateholder's gross income when it accrues on the Term Assets, or, in the
case of Certificateholders who are cash basis taxpayers, when received by the
Administrative Agent, if any, or otherwise the Trustee on behalf of
Certificateholders. Because the interest collected on the Term Assets generally
is paid to Certificateholders in the following month, the amount of interest
includible in a Certificateholder'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 Term Assets represented by a Certificate is not treated
as being de minimis, a Certificateholder 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 Certificateholder prior
to the receipt of cash by such Certificateholder. Under the rules described
below, the amounts includible in income by a Certificateholder 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 Certificateholder will be
required, whether such Certificateholder 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 Certificateholder 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 Term Assets, although Treasury regulations allow a
Certificateholder to elect other accrual periods of no more than a year in
length, as long as each scheduled payment on the Term Assets occurs at the end
of an accrual period.
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 Certificateholders 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.
Bond Premium. In the event that a Certificate represents either an
unstripped interest in the Term Assets, 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 Term Assets exceeds the total amount payable on the Term Assets
to the Certificateholder other than qualified stated interest), such premium
will be amortizable by the Certificateholder as an offset to interest income
(with a corresponding reduction in the Certificateholder's basis) under a
constant yield method over the term of the underlying Term Assets 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 Certificateholder
during the year in which the election is made and all debt instruments acquired
thereafter.
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Election to Treat All Interest as Original Issue Discount. Any
Certificateholder 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 Certificateholder'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 such
Certificateholder.
Modification or Exchange of Term Assets
Depending upon the circumstances, it is possible that a modification of the
terms of the Term Assets, or a substitution of other assets for the Term Assets
following a default on the Term Assets, would be a taxable event to
Certificateholders on which they would recognize gain or loss.
[Partnership Taxation
As a partnership, the Trust will not be subject to federal income tax, but
each Certificateholder will be required to separately take into account such
holder's 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 Certificateholders 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 Term Assets that
corresponds to any excess of the principal amount of such class of Certificates
over their initial issue price; and (iv) [any other income economically accruing
for such 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 Certificateholders. 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 such 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 Certificateholders, 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 Certificateholder'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 Term Assets, it intends to make all tax calculations
relating to income and allocations to Certificateholders on an aggregate basis.
Were the Service to require that such calculations be made separately for each
Term Asset, the Trust might be required to incur additional expense but the
Depositor believes that there would not be a material adverse effect on
Certificateholders.
A Certificateholder 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 Certificateholder will constitute (i)
first, a return of capital to the extent of such Certificateholder'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 thereof, gain on the sale
or exchange of such Certificateholder's Certificate. See "Disposition of
Certificates" below. ]
S-31
[Discount and Premium
The Depositor believes that the Term Assets were not issued with original
issue discount ("OID") and, therefore, the Trust should not have OID income.
However, the purchase price paid by the Trust for the Term Assets may be greater
or less than the remaining principal balance of the Term Assets at the time of
purchase. If so, the Term Assets 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 Term Assets 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 Term
Assets being included in income currently as such discount accrues over the life
of the Term Assets. As indicated above in the discussion of "Partnership
Taxation," a portion of such market discount income may be allocated to
Certificateholders.]
Other Deposited Assets of the Trust
[Describe tax consequences of the other Deposited Assets.]
Deductibility of the Trusts's Fees and Expenses
In computing its federal income tax liability, a Certificateholder 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
Certificateholder 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.
Purchase and Sale of a Certificate
A Certificateholder's tax basis in a Certificate generally will equal the
cost of such 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 Term Assets made on such 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 Certificateholder'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 Certificateholder's interest in accrued
market discount not previously taken into income on Term Assets.
[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
Certificateholder'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 such Certificate and, upon sale or other disposition of
some of the Certificates, allocate a pro rata portion of such 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 Term Assets 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 such special
reporting requirements. Thus, to avoid those special reporting requirements, the
Trust will elect to include market discount in income as it accrues.
S-32
If a Certificateholder 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 with respect thereto, such excess will generally give rise to
a capital loss upon the retirement of the Certificate.]
Backup Withholding
Payments made on the Certificates and proceeds from the sale of the
Certificates will not be subject to a "backup" withholding tax of 31% unless, in
general, the Certificateholder fails to comply with certain reporting procedures
and is not an exempt recipient under applicable provisions of the Code.
Foreign Certificateholders
To the extent that amounts paid to Certificateholders that are not United
States persons ("Foreign Certificateholders") are treated as interest with
respect to Term Assets originated after July 18, 1984, such amounts generally
will not be subject to the annual 30% withholding tax, provided that such
Foreign Certificateholder (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 Term Assets 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. [Describe the federal income tax
consequences to Foreign Certificateholders 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. or any political subdivision thereof, or an estate or trust 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 fiduciaries have the authority to
control all of its substantial decisions.
[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 Certificateholders. 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
thereafter distributed to the Certificateholders may be incorrect.]
[Possible Recharacterization of the Trust as a Partnership
As indicated above under "Tax Status of the Trust and the Term Assets" it
is possible that the IRS will seek to recharacterize the Trust as a partnership.
If the IRS were to successfully recharacterize the Trust as a partnership, the
Trust would not be subject to federal income tax. Further, under Treasury
Regulation 1.761-2, certain partnerships may "elect out" of subchapter K of the
Code (partnership tax accounting). Although subject to uncertainty, the Trust
should be eligible for this election. Assuming that it is so eligible and makes
such election, each Certificateholder will be required to report its respective
shares of the items of income, deductions, and credits of the organization on
their respective returns (making such elections as to individual items as may be
appropriate) in a manner consistent with the exclusion of the Trust from
partnership tax accounting. Such reporting should be substantially similar to
the income tax reporting that would be required under the grantor trust rules.
In mutual consideration for each Certificateholder's purchase of a Certificate,
each such Certificateholder is deemed to consent to the Trust's making of a
protective election out of subchapter K of the Code.
S-33
If the election to be excluded from the partnership tax account provisions
of the Code is not effective, among other consequences, (i) the Trust would be
required to account for its income and deductions at the Trust level and to
utilize a taxable year for reporting purposes and (ii) each Certificateholder
would be required to separately take into account such Certificateholder's
distributive share of income and deductions of the Trust. A Certificateholder
would take into account its distributive shares of Trust income and deductions
for each taxable year of the Trust in the Certificateholder's taxable year which
ends with or within the Trust's taxable year. A Certificateholder's share of the
income determined at the trust level would not necessarily be the same as the
income computed at the Certificateholder level; it would not, for example,
necessarily take account of any particular Certificateholder's acquisition price
for its Certificate.]
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and Section 4975 of 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, including an individual retirement account
("IRA") or Keogh plan, or (c) any entity whose underlying assets include plan
assets by reason of a plan's investment in the entity (each, a "Plan").
ERISA and Section 4975 of the Code prohibit certain transactions involving
the assets of a Plan and persons who have specified relationships to the Plan,
i.e., "parties in interest" within the meaning of ERISA or "disqualified
persons" within the meaning of the Code (collectively, "Parties in Interest").
Thus, a Plan fiduciary considering an investment in Certificates should consider
whether such an investment might constitute or give rise to a prohibited
transaction under ERISA or Section 4975 of the Code. The Term Assets Issuer, the
Underwriter, the Trustee and their respective affiliates may be Parties in
Interest with respect to any Plans.
If an investment in Certificates by a Plan were to result in the assets of
the Trust being deemed to constitute "plan assets" of such Plan, certain aspects
of such investment, including the operations of the Trust and the deemed
extension of credit between the Term Assets Issuer and the holder of a
Certificate (as a result of the Term Assets being deemed to be plan assets), as
well as subsequent transactions involving the Trust or its assets, might
constitute or result in prohibited transactions under Section 406 of ERISA and
Section 4975 of the Code unless exemptive relief were available under an
applicable exemption issued by the United States Department of Labor (the
"DOL"). Neither ERISA nor the Code defines the term "plan assets." Under Section
2510.3-101 of the DOL regulations (the "Regulation"), a Plan's assets may
include the assets of an entity if the Plan acquires an "equity interest" in
such entity unless an exception applies under the Regulation. Thus, if a Plan
acquires a Certificate, for certain purposes (including the prohibited
transaction provisions of Section 406 of ERISA and Section 4975 of the Code),
the Plan would be considered to own an undivided interest in the underlying
assets of the Trust unless such Certificate is a "publicly-offered security" or
another exception applies under the Regulation.
The Underwriter expects that the Certificates will satisfy the criteria for
treatment as publicly-offered securities under the Regulation. A
publicly-offered security is 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 at the conclusion of the initial offering, and
(iii) 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.
The Underwriter will verify that there will be at least 100 separate
purchasers (whom the Underwriter has no reason to believe are not independent of
the Company or of one another) at the conclusion of the initial offering. There
is no assurance that the 100 independent investor requirement of the
"public-offered security" exception will, in fact, be satisfied.
Nothing herein shall be construed as a representation that an investment in
the Certificates would meet any or all of the relevant legal requirements with
respect to investments by, or is appropriate for, Plans generally or any
particular Plan. Any Plan or any other entity the assets of which are deemed to
be
S-34
"plan assets," such as an insurance company investing assets of its general
account, proposing to acquire Certificates should consult with its counsel.
METHOD OF DISTRIBUTION
Subject to the terms and conditions set forth in the Underwriting
Agreement, dated as of [ ], 199[ ] (the "Underwriting Agreement"), the Company
has agreed to sell and [Salomon Brothers Inc. (an affiliate of the Company)]
(each of the Underwriters named below, including Salomon Brothers Inc (an
affiliate of the Company)] (the "Underwriter[s]")[,] has [severally] agreed to
purchase, and the [Certificates] [principal amount of each class of Certificates
set forth below opposite its name].
Class [ ] Class [ ] Class [ ]
Certificates Certificates Certificates
------------ ------------ ------------
Salomon Brothers Inc......... $ $ $
Total............
[Salomon Brothers 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.]
The Company 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 the Company 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.
Salomon Brothers Inc is an affiliate of the Company, and the participation
by Salomon Brothers Inc is the offering of the Certificates complies with
Schedule E of the By-Laws of the National Association of Securities Dealers,
Inc. regarding underwriting securities of an affiliate.
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 Ratings Services ("Standard & Poor's")] [ Moody's Investors
Service, Inc. ("Moody's")] [Fitch's Investors Service, L.P. ("Fitch's")] [and]
[Duff & Phelps Credit Rating Company ("Duff & Phelps")] (the "Rating [Agency]
[Agencies]"). The ratings address the likelihood of the receipt by
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 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.
S-35
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.
The Company 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].
S-36
INDEX OF TERMS
Advance.....................................................................24
AECA........................................................................13
AID-Guaranteed Underlying Security Payment Date.............................14
Allocation of Losses; Subordination.........................................23
Allowable Expense Amount....................................................23
Appropriations Acts.........................................................12
Available Funds.............................................................23
Borrower....................................................................13
Business Day.................................................................6
Call Premium Percentage.....................................................23
Cash Collateral guaranty....................................................16
CEDE........................................................................22
Certificates.................................................................1
Clearing Agency.............................................................22
Closing Date.................................................................6
Code........................................................................27
Commission..................................................................17
Company......................................................................1
Credit Support Payments.....................................................23
Credit Support Providers....................................................23
Definitive Classes..........................................................22
Depositary..................................................................13
Deposited Assets.............................................................1
Distribution Date............................................................2
DOL.........................................................................32
DSAA........................................................................12
DTC..........................................................................2
Duff & Phelps...............................................................33
Eligible Investments........................................................23
ERISA.......................................................................32
Expected Settlement Date.....................................................1
Extraordinary Trust Expense.................................................25
Fannie Mae...................................................................9
Farm Credit Act.............................................................12
FCA.........................................................................12
FCBs........................................................................12
Federal Tax Counsel.........................................................27
FFB.........................................................................12
FFEL........................................................................10
FHLBs.......................................................................11
FHLMC Act...................................................................10
Final Distribution Date......................................................2
FIRRE Act...................................................................11
Fitch's.....................................................................33
FMS.........................................................................12
Freddie Mac.................................................................10
Funding Corporation.........................................................12
GSE..........................................................................4
GTCs........................................................................12
Housing Program.............................................................13
IFIs........................................................................13
Information Statements......................................................12
investment company..........................................................20
Investment Program..........................................................13
IRA.........................................................................32
S-37
Letter of Credit Bank.......................................................20
Liquidation Proceeds........................................................24
MBS.........................................................................10
Moody's.....................................................................33
Note Payment Date...........................................................13
Notes.......................................................................12
OID.........................................................................29
Owner Trustee................................................................1
Parties in Interest.........................................................32
Plan........................................................................32
plan assets.................................................................32
Principal Receivables.......................................................19
Prospectus...................................................................1
publicly traded partnership.................................................28
publicly-offered security...................................................32
qualifying income...........................................................28
Rating [Agency] [Agencies]..................................................33
Realized Losses..............................................................6
REFCORP.....................................................................11
Regulation..................................................................32
Required Interest...........................................................24
Required Premium............................................................24
Required Principal..........................................................24
RTC.........................................................................11
Sallie Mae..................................................................10
Securities Act..............................................................17
Security Owner..............................................................22
Seller......................................................................18
Seller's Interest...........................................................18
Seller's Percentage.........................................................18
Service.....................................................................27
Special Distribution Date....................................................6
Specified Currency...........................................................3
Standard & Poor's...........................................................33
Surety......................................................................21
System......................................................................12
Systemwide Debt Securities..................................................12
Term Asset Accumulation Period..............................................18
Term Asset Agreement.........................................................5
Term Asset Controlled Amortization Period...................................18
Term Assets..................................................................1
Term Assets Currency.........................................................4
Term Assets Early Amortization Event........................................18
Term Assets Payment Date....................................................17
Term Assets Prospectus.......................................................7
Term Assets Registration Statement..........................................17
Trust........................................................................1
Trust Agreement..............................................................1
Trustee.....................................................................13
TVA Act.....................................................................11
Underlying Trustee..........................................................14
Underwriter[s]..............................................................32
Underwriting Agreement......................................................32
unrelated business income...................................................28
unrelated debt financed income..............................................28
S-38
Prospectus
Trust Certificates
Trust Shares
(Issuable in Series)
Structured Products Corp.
Depositor
The Trust Certificates or Shares (either the "Certificates") offered hereby and
by supplements (each a "Prospectus Supplement") to this Prospectus will be
offered from time to time in one or more series (each a "Series") and in one or
more classes within each such Series (each a "Class") with an aggregate initial
public offering price or purchase price of up to [$1,000,000] or the equivalent
thereof in one or more foreign or composite currencies, including the European
Currency Unit ("ECU"). Certificates of each respective Series and Class will be
offered on terms to be determined at the time of sale as described in the
related Prospectus Supplement accompanying the delivery of this Prospectus.
Certificates may be sold for United States dollars or for one or more foreign or
composite currencies, and the principal of, premium, if any, and any interest to
be distributed in respect of Certificates may be payable in United States
dollars or in one or more foreign or composite currencies. Each Series and Class
of Certificates may be issuable as individual securities in registered form
without coupons ("Registered Certificates") or in bearer form with or without
coupons attached ("Bearer Certificates") or as one or more global securities in
registered or bearer form (each a "Global Security").
Each Series of Certificates will represent in the aggregate the entire
beneficial ownership interest in securities or receivables (the "Term Assets"),
which in the case of securities issued by one or more issuers (the "Term Assets
Issuers"), together with certain other assets described herein and in the
related Prospectus Supplement (such assets, together with the Term Assets, the
"Deposited Assets"), to be deposited in a trust (the "Trust") for the benefit of
holders of Certificates of such Series ("Certificateholders") by Structured
Products Corp. (the "Company") pursuant to a trust agreement or pooling and
servicing agreement and a series supplement thereto with respect to a given
Series (collectively, the "Trust Agreement") among the Company, as depositor or
transferor, the administrative agent, if any (the "Administrative Agent"), the
servicer, if any (the "Servicer") and the trustee (the "Trustee") named in the
related Prospectus Supplement. The Term Assets consist of a [SELECT ONE OF THE
FOLLOWING BRACKETED SELECTIONS] [Alternative 1: publicly issued, fixed income
debt security or a pool of such debt securities issued by one or more
corporations, banking organizations or insurance companies organized under the
laws of the United States of America or any state, which are subject to the
informational requirements of the Securities and Exchange Act of 1934 and which
in accordance therewith file reports and other information with the Commission]
[Alternative 2: publicly issued, fixed income debt security or a pool of such
debt securities which represent obligations of one or more foreign private
issuers (as such term is defined in Rule 405 of the Securities Act) subject to
the informational requirements of the Securities and Exchange Act of 1934 and
which in accordance therewith file reports and other information with the
Commission] [Alternative 3: publicly issued, fixed income debt security or pool
of such debt securities which represent obligations of the United States of
America, any agency thereof for the payment of which the full faith and credit
of the United States of America is pledged, or a United States governmental
sponsored organization created pursuant to a federal statue (a "GSE")]
[Alternative 4: publicly issued, fixed income debt security or pool of such debt
securities which represent obligations issued by or guaranteed by a foreign
government, political subdivision or agency or instrumentality thereof]
[Alternative 5: one or more pools of revolving credit card, charge card or debit
card receivables (collectively, the "Receivables") generated or to be generated
in the ordinary course of business in a portfolio of revolving credit card,
charge card or debit card accounts (collectively, the "Accounts"), or a publicly
issued asset backed security or pool of asset backed securities ("Credit Card
Securities") representing an interest in or secured by Receivables]. If so
specified in the related Prospectus Supplement, the Trust for a Series of
Certificates may also include, or the Certificateholders of such Certificates
may have the benefit of, any combination of insurance policies, letters of
credit, reserve accounts and other types of rights or assets designed to support
or ensure the servicing and distribution of amounts due in respect of the
Deposited Assets (collectively, "Credit Support"). See "Description of
Certificates" and "Description of Deposited Assets and Credit Support".
Each Class of Certificates of any Series will represent the right, which may be
senior to those of one or more of the other Classes of such Series, to receive
specified portions of payments of principal, interest and certain other amounts
on the Deposited Assets in the manner described herein and in the related
Prospectus Supplement. A Series may include two or more Classes differing as to
the timing, sequential order or amount of distributions of principal, interest
or premium and one or more Classes within such Series may be subordinated in
certain respects to other Classes of such Series.
Except as otherwise provided herein and in the applicable prospectus supplement,
the Company's only obligations with respect to each Series of Certificates will
be, pursuant to certain representations and warranties concerning the Deposited
Assets, to assign and deliver the Deposited Assets and certain related documents
to the applicable Trustee and, in certain cases, to provide for the Credit
Support, if any. The principal obligations of an Administrative Agent, if any is
named in the applicable Prospectus Supplement, with respect to a Series of
Certificates will be pursuant to its contractual administrative obligations and,
only as and to the extent provided in the related Prospectus Supplement, its
obligation to make certain cash advances in the event of payment delinquencies
on the Deposited Assets. See "Description of the Certificates--Advances in
Respect of Delinquencies".
The Certificates of each Series will not represent an obligation of or interest
in the Company, any Administrative Agent or any of their respective affiliates,
except to the limited extent described herein and in the related Prospectus
Supplement. Neither the Certificates nor the Deposited Assets (unless otherwise
specified in such Prospectus Supplement) will be guaranteed or insured by any
governmental agency or instrumentality, or by the Company, any Administrative
Agent or their respective affiliates.
Prospective investors should consider the factors set forth under "Risk
Factors".
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Certificates may be offered and sold to or through underwriters, through
dealers or agents or directly to purchasers, as more fully described under "Plan
of Distribution" and in the related Prospectus Supplement. This Prospectus may
not be used to consummate sales of Certificates offered hereby unless
accompanied by a Prospectus Supplement.
The date of this Prospectus is ________, 1998.\
2
PROSPECTUS SUPPLEMENT
The Prospectus Supplement relating to a Series of Certificates to be
offered thereby and hereby will set forth, among other things, the following
with respect to such Series: (a) the specific designation and aggregate
principal amount, (b) the currency or currencies in which the principal (the
"Specified Principal Currency"), premium, if any (the "Specified Premium
Currency"), and any interest (the "Specified Interest Currency") are
distributable (the Specified Principal Currency, the Specified Premium Currency
and the Specified Interest Currency being collectively referred to as the
"Specified Currency"), (c) 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, (d)
certain information concerning the type, characteristics and specifications of
the Deposited Assets and any Credit Support for such Series or Class, (e) the
relative rights and priorities of each such 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 such Deposited Assets), (f) the name of the Trustee and the
Administrative Agent, if any, for such Series, (g) the Pass Through Rate (as
defined below) or the terms relating to the applicable method of calculation
thereof, (h) the time and place of distribution (each such date, a "Distribution
Date") of any interest, premium (if any) and/or principal, (i) the date of
issue, (j) the scheduled final Distribution Date, if applicable, (k) the
offering price, (l) any exchange, whether mandatory or optional, the redemption
terms and any other specific terms of Certificates of each such Series or Class.
See "Description of Certificates--General" for a listing of other items that may
be specified in the applicable Prospectus Supplement.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). Reports and other information concerning the
Company can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's Regional Offices at Seven World Trade
Center, New York, New York 10048, and Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can
be obtained upon written request addressed to the Commission, Public Reference
Section, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
The Commission maintains a Web site at http://www.sec.gov containing reports,
proxy statements and other information regarding registrants that file
electronically with the Commission. The Company does not intend to send any
financial reports to Certificateholders.
The Company has filed with the Commission a registration statement on Form
S-3 (together with all amendments and exhibits, the "Registration Statement")
under the Securities Act of 1933, as amended (the "Securities Act"), relating to
the Certificates. This Prospectus does not contain all the information set forth
in the Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission. For further information,
reference is hereby made to the Registration Statement.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Certificates shall be deemed to be
incorporated by reference in this Prospectus. Any statement contained herein or
in a document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained herein or in any subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, on the written or oral request of any such person,
a copy of any or all of the documents incorporated herein by reference, except
the exhibits to such documents (unless such exhibits are specifically
incorporated by reference in such documents). Written requests for such copies
should be directed to the Secretary of Structured Products Corp.,
32nd Floor, Room 33-126, Seven World Trade Center, New York, New York 10048.
Telephone requests for such copies should be directed to the Secretary of
Structured Products Corp. at (212) 783-6645.
REPORTS TO CERTIFICATEHOLDERS
Except as otherwise specified in the applicable Prospectus Supplement,
unless and until Definitive Certificates are issued, on each Distribution Date
unaudited reports containing information concerning the related Trust will be
prepared by the related Trustee and sent on behalf of each Trust only to Cede &
Co. ("Cede"), as nominee of DTC and registered holder of the Certificates. See
"Description of Certificates--Global Securities" and "Description of the Trust
Agreement--Reports to Certificateholders; Notice". Such reports will not
constitute financial statements prepared in accordance with generally accepted
accounting principles. The Company, on behalf of each Trust, will cause to be
filed with the Commission such periodic reports as are required under the
Exchange Act.
IMPORTANT CURRENCY INFORMATION
Purchasers are required to pay for each Certificate in the Specified
Principal Currency for such Certificate. Currently, there are limited facilities
in the United States for conversion of U.S. dollars into foreign currencies and
vice versa, and banks do not currently offer non-U.S. dollar checking or savings
account facilities in the United States. However, if requested by a prospective
purchaser of a Certificate having a Specified Principal Currency other than U.S.
dollars, Salomon Brothers Inc (the "Offering Agent") will arrange for the
exchange of U.S. dollars into such Specified Principal Currency to enable the
purchaser to pay for such Certificate. Such request must be made on or before
the fifth Business Day (as defined below) preceding the date of delivery of such
Certificate or by such later date as is determined by the Offering Agent. Each
such exchange will be made by the Offering Agent on such terms and subject to
such conditions, limitations and charges as the Offering Agent may from time to
time establish in accordance with its regular foreign exchange practice. All
costs of exchange will be borne by the purchaser.
References herein to "U.S. dollars", "U.S.$", USD, "dollar" or "$" are to
the lawful currency of the United States.
RISK FACTORS
Limited Liquidity. There will be no market for any Series (or Class within
such Series) of Certificates prior to the issuance thereof, and there can be no
assurance that a secondary market will develop or, if it does develop, that it
will provide Certificateholders with liquidity of investment or will continue
for the life of such Certificates.
Certain Legal Aspects. The applicable Prospectus Supplement may set forth
certain legal considerations that are applicable to a specific Series (or Class
or Classes within such Series) of Certificates being offered in connection with
that Prospectus Supplement or the assets deposited in or assigned to the related
Trust.
Limited Obligations and Interests. The Certificates will not represent a
recourse obligation of or interest in the Company or any of its affiliates.
Unless otherwise specified in the applicable Prospectus Supplement, the
Certificates of each Series will not be insured or guaranteed by any government
agency or instrumentality, the Company, any Person affiliated with the Company
or the Issuer, or any other Person. The obligations, if any, of the Company with
respect to the Certificates of any Series will only be pursuant to certain
limited representations and warranties. The Company does not have, and is not
expected in the future to have, any significant assets with which to satisfy any
claims arising from a breach of any representation or warranty. If, for example,
the Company were required to repurchase a Term Asset with respect to which the
Company has breached a representation or warranty, its only sources of funds to
make such repurchase would be from funds obtained from the enforcement of a
corresponding obligation, if any, on the part of the seller of such Term Asset
to the Company, or from a reserve fund established to provide funds for such
repurchases. The Company has no obligation to establish or maintain any such
reserve fund.
2
Credit Support; Limited Assets. Although the Trust for any Series (or Class
of such Series) of Certificates may include, or the Certificateholders of such
Certificates may have the benefit of, certain assets which are designed to
support the payment upon, or otherwise ensure the servicing or distribution with
respect to, the Deposited Assets related to such Series or Class as described in
the related Prospectus Supplement, the Certificates do not represent obligations
of the Company, any Administrative Agent or any of their affiliates and, unless
otherwise specified in the applicable Prospectus Supplement, are not insured or
guaranteed by the Company, any Administrative Agent, any of their affiliates or
any other person or entity. 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 and any Credit Support identified in the related Prospectus Supplement.
See "Description of Deposited Assets and Credit Support".
Maturity and Redemption Considerations. The timing of distributions of
interest, premium (if any) and principal of any Series (or of any Class within
such Series) of Certificates is affected by a number of factors, including the
performance of the related Deposited Assets, the extent of any early redemption,
repayment, amortization, acceleration of payment rate, slow down of payment rate
or extension of maturity or amortization with respect to the related Term Assets
(or portion thereof) and the manner and priority in which collections from such
Term Assets and any other Deposited Assets are allocated to each Class of such
Series. Certain of these factors may be influenced by a variety of accounting,
tax, economic, social and other factors. The related Prospectus Supplement will
discuss any calls, puts or other redemption options, any extension of maturity
provisions and certain other terms applicable to such Term Assets and any other
Deposited Assets. See also "Maturity and Yield Considerations".
[INCLUDE BRACKETED LANGUAGE IF APPROPRIATE]
[Matters Relating to Receivables. The Receivables may be paid at any time
and there can be no assurance that there will be new Receivables created in the
Accounts, that additional Receivables will be available or that any particular
pattern of accountholder repayments will occur. The actual principal payment
rate on the Receivables will depend on, among other factors, the rate of
accountholder repayments, the timing of the receipt of repayment and the rate of
default by accountholders. Accountholder monthly payment rates with respect to
the Accounts are dependent upon a variety of factors, including seasonal
purchasing and payment habits of accountholders, the availability of other
sources of credit, general economic conditions, tax laws and the terms of the
Accounts (which are subject to change by the owner of such Accounts). No
assurance can be given as to the account holder payment rates which will
actually occur in any future period. The actual principal payment rate on the
Credit Card Securities will, similarly, depend on the payment and default
performance with respect to the Receivables underlying such Credit Card
Securities. As a result of the foregoing, no assurance can be given that a
Security will receive its final principal payment when expected or that
principal payments with respect to a Security will follow any expected pattern.
A decline in the amount of Receivables in the Accounts for any reason
(including the decision by accountholders to use competing sources of credit, an
economic downturn or other factors) could result in the occurrence of an early
amortization event with respect to a Certificate (such an event, an "Early
Amortization Event") and the commencement of the principal repayment of such
Certificate earlier than expected (an "Early Amortization Period"). A decline in
the amount of Receivables in the Accounts relating to a Credit Card Security for
any reason (including the decision by accountholders to use competing sources of
credit, an economic downturn or other factors) could result in the occurrence of
an early amortization event, pay out event or liquidation event with respect to
a Credit Card Security (such an event, a "Term Assets Early Amortization Event")
and the commencement of the principal repayment of such Credit Card Security
earlier than expected (a "Term Assets Early Amortization Period"). See the
related Prospectus Supplement for a discussion of other events, including events
relating to portfolio yield, breaches of representations and warranties,
insolvency or bankruptcy and investment company status, which might lead to the
commencement of the Early Amortization Period with respect to a Security or the
Term Assets Early Amortization Period with respect to a Credit Card Security.
Certain Legal Aspects. Each seller of Receivables (each, a "Seller") to the
Company will warrant in its pooling and servicing agreement, master pooling and
servicing agreement, sale and servicing agreement or trust agreement
(collectively, an "Agreement") that the transfer of the Receivables by it is and
will be either a valid transfer and assignment of all right, title and interest
in the Receivables by it is and will be either a valid transfer and assignment
of all right, title and interest in the Receivables and all proceeds thereof or
the grant of a security interest
3
in the Receivables. The Seller will take certain actions required to perfect the
interest in the Receivables. The Seller will warrant that if the transfer by it
of the Receivables is deemed to be a grant of security interest in the
Receivables, there will be a first priority perfected security interest therein.
If the transfer of the Receivables and all proceeds thereof is deemed to created
a security interest therein, a tax or government lien on property of the Seller
arising before Receivables come into existence may have priority over the
Trust's interest in such Receivables.
If any Seller is a regulated financial institution, to the extent that a
Seller grants a security interest in the Receivables and that security interest
is validly perfected before any insolvency of the Seller and is not granted or
taken in contemplation of insolvency or with the intent to hinder, delay or
defraud the Seller or its creditors, that security interest should not be
subject to avoidance in the event of insolvency and receivership, and payments
to the Trust with respect to the Receivables should not be subject to recovery
by a conservator or receiver for the Seller. If, however, the conservator or
receiver were to assert a contrary position, or were to require the Company, the
Trust to establish its right to those payments by submitting to and completing
the administrative claims procedure established under the Financial Institutions
Reform, Recovery and Enforcement Act of 1989 ("FIRREA"), or the conservator or
receiver were to request a stay of proceedings with respect to the Seller as
provided under FIRREA, delays in payments on the Securities and possible
reductions in the amount of this payments could occur. In the event of a
servicer default under the Agreement, if a conservator or receiver is appointed
for the servicer of the Receivables (the "Servicer"), and no servicer default
other than such conservatorship or receivership or insolvency of the Servicer
exists, the conservator or receiver may have the power to prevent the transfer
of servicing to a successor Servicer. If a conservator or receiver were
appointed for the Seller pursuant to the Agreement, new principal receivables
would not be transferred under the Agreement and the Receivables (or a portion
thereof) allocated in accordance with the Agreement would be sold, thereby
causing early termination of the Agreement and a loss to Certificateholders if
the net proceeds of such sale were insufficient to pay such Certificates in
full. Upon the occurrence of an Early Amortization Event, if a conservator or
receiver was appointed for the Seller and no Early Amortization Event other than
such conservatorship, receivership or insolvency of the Seller existed, the
conservator or receiver may have the power to prevent the early sale,
liquidation or disposition of the Receivables and the commencement of the Early
Amortization Period. In addition, a conservator or receiver for the Seller may
have the power to cause early payment of the Securities.
If any Seller acquired the Receivables from the originator thereof or other
entity subject to the U.S. Bankruptcy Code (any such entity, an "Originator"),
the Originator will have warranted that the sale of Receivables by it to the
Seller is a valid sale. Notwithstanding the foregoing, if the Originator were to
become a debtor in a bankruptcy case and a creditor or trustee in bankruptcy of
the Originator or the Originator were to take the position that the sale of the
Receivables to the Seller should be recharacterized as a pledge, then delays in
payments of collections on the Receivables could occur or (should a court rule
in favor of such creditor, trustee or the Originator) reductions in the amount
of such payments could result.
Assuming the transaction between an Originator and a Seller is treated as a
sale, the assets of the Seller would not generally be part of the Originator's
bankruptcy estate and would not be available to the Originator's creditors. Thee
can be no assurance, however, that a creditor or trustee in bankruptcy of the
Originator might not seek a court order consolidating the assets and liabilities
of the Seller with those of the Originator. If successfully sought, such an
order might make a Seller's assets (including the Receivables) available to the
Originator's creditors in bankruptcy. In addition, the U.S. Court of Appeals for
the Tenth Circuit has concluded that accounts receivable sold by a debtor prior
to a filing for bankruptcy remain property of the debtor's bankruptcy estate.
The foregoing considerations regarding the insolvency or bankruptcy of a
Seller or Originator of Receivables will also be applicable to the issuer of a
Credit Card Security or the person or persons from which such issuer acquired
the Receivable underlying such Credit Card Security.
Consumer Protection Laws. The relationship of cardholder and card issuer is
extensively regulated by Federal and state consumer protection laws. The most
significant of these laws include the Federal Truth-in-Lending Act, Equal Credit
Opportunity Act, Fair Credit Reporting Act, Electronic Funds Transfer Act and,
to the extent that a Seller is a bank, the National Bank Act, as well as the
banking statutes of the state in which the bank is located, and comparable
statutes in the states in which cardholders reside. These statutes impose
disclosure requirements when an account is advertised, when it is opened, at the
end of monthly billing cycles, upon account renewal for accounts on which annual
fees are assessed, and at year end and, in addition, limit cardholder liability
for unauthorized use, prohibit certain discriminatory practice in extending
credit, and impose certain limitations on
4
the type of account-related charges that may be assessed. Federal legislation
requires card issuers to disclose to consumers the interest rates, annual
cardholder fees, grace periods, and balance calculation methods associated with
their accounts. Cardholders are entitled under current law to have payments and
credits applied to the account promptly to receive prescribed notices and to
have billing errors resolved promptly.
Various proposed laws and amendments to existing laws have been introduced
in Congress and certain state and local legislatures that, if enacted, would
further regulate the credit card industry.
The Company may be liable for certain violations of consumer protection
laws that apply to the Receivables, either as assignee of the Seller with
respect to obligations arising before transfer of the Receivables or as a party
directly responsible for obligations arising after the transfer. In addition, a
cardholder may be entitled to assert such violations by way of setoff against
his obligation to pay the amount of Receivables owing. A Seller will covenant in
the Agreement to accept the transfer of all Receivables in an Account if any
Receivable in such account has not been created in compliance in all material
respects with the requirements of such laws, if such noncompliance has a
material adverse effect on the interest of securityholders under such Agreement.
Each Agreement will also provide for the Trust to be indemnified by the Seller
or Servicer, among other things, for any liability arising from such violations.
Application of Federal and state bankruptcy and debtor relief laws would
affect the interest of the Securityholders in the Receivables, if such laws
result in any Receivables being written off as uncollectible.
Competition. The credit card and charge card industries are highly
competitive. There is increased competitive use of advertising, target marketing
and pricing competition in interest rates and annual cardholder fees as both
traditional and new credit card and charge card issuers seek to expand or to
enter the market. As a result of this competition, certain major credit card and
charge card issuers may assess finance charges for selected portions of their
portfolios at rates lower than the rates currently being assessed on the
Accounts. A Seller's ability to compete in the credit card and charge card
industry will affect its ability to generate new Receivables. In addition, the
generation of Receivables by a Seller may be partly or completely dependent upon
sales at one or more retail stores. In such a case, competition in the retail
industry will also affect the Seller's ability to generate new Receivables.
Basis Risk. If so specified in the related Prospectus Supplement, a portion
of the Accounts will have finance charges set at a variable rate above a
designated prime rate or other designated index. A Series offered pursuant
hereto may bear interest at a fixed rate or at a floating rate based on an index
other than the prime rate or other designated index. If there is a decline in
the prime rate or other designated index, the amount of collections of finance
charge Receivables on such Accounts may be reduced, whereas the amounts payable
as interest on such Series and other amounts required to be funded out of
finance charge Receivables with respect to such Series may not be similarly
reduced. In such a case, an Early Amortization Event with respect to such Series
or a Term Assets Early Amortization Event with respect to a Credit Card Security
underlying such Series may occur.
Social, Geographic and Economic Factors. Changes in card use, payment
patters and the rate of defaults by cardholder may result from a variety of
social, economic and geographic factors. Economic factors include the rate of
inflation and relative interest rates offered for various types of loans.
Adverse changes in economic conditions in any states where cardholders are
located could have a direct impact on the timing and amount of payments on a
Series. The Company is unable to determine and has no basis to predict whether,
or to what extent, economic, social or geographic factors will affect future
card use or repayment patters or payments on the Securities of a Series. New
credit card issuers have been entering the market while other issuers have been
seeking to expand market share through increased advertising, target marketing
and pricing competition. Additionally, the use of incentive or affinity programs
(e.g., gift awards for card usage) may affect card usage patters.
A Seller's Ability to Change Terms of the Receivables. Any Seller may have
the right to determine the finance charges and the other fees and charges which
will be applicable from time to time on its Accounts, to alter the minimum
monthly payment required under the Accounts and to change various other terms of
its agreements with cardholders with respect to the Accounts. A decrease in the
finance charges and the other fees and charges assessed on the Accounts would
decrease the effective yield on the Accounts and could result in the occurrence
of an Early Amortization Event with respect to a Series offered pursuant hereto
or a Term Assets Early Amortization
5
Event with respect to a Credit Card Security underlying such Series and
commencement of an Early Amortization Period or Term Assets Early Amortization
Period, as applicable.
Under an Agreement, a Seller may agree that, unless required by law or as
is otherwise necessary, in its good faith judgment, to maintain its credit card
business on a competitive basis, it will not reduce the annual percentage rate
at which finance charges are assessed on the Receivables or the other fees and
changes assessed on the Accounts, if, as a result of such reduction, the Net
Portfolio Yield as of such date would be less than the Base Rate. The terms
"Base Rate" and "Net Portfolio Yield" have the meanings set forth in the
Prospectus Supplement reacting to each Series. The Seller may also covenant that
it will change the terms relating to the Accounts only if the change is made
applicable to the comparable segment of the accounts owned and serviced by the
Seller with characteristics the same as or substantially similar to the Account,
except as otherwise restricted by the terms of the applicable cardholder
agreement. In servicing Accounts, a Servicer will generally be required to
exercise the same care and apply the same policies that it exercises in handling
similar matters for its own comparable accounts. Except as set forth above,
there are generally no restrictions on the ability of a Seller to change the
terms of the Accounts or the Receivables. There can be no assurance that changes
in applicable law, changes in the marketplace or prudent business practice might
not result in a determination by a Seller to decrease finance charges or other
fees and charges for existing accounts, or take actions which would otherwise
change the terms of the Accounts. The foregoing considerations are also
generally applicable to the Receivables and Accounts relating to a Credit Card
Security.
Impact of Additional Accounts. A Seller may be permitted to designate
additional Accounts ("Additional Accounts") the Receivables of which will be
conveyed to the Company, a Trust on a discrete basis or automatically as such
Additional Accounts are created. There can be no assurance that Receivables in
such Additional Accounts will be of the same credit quality as those Receivables
previously conveyed to a Trust. In particular, the Receivables in the Additional
Accounts may be originated using different criteria, be originated by a
different Originator and be of a different type than those in the previously
designated Accounts. The foregoing considerations are also generally applicable
to the Receivables and Accounts relating to a Credit Card Security.]
Tax Considerations. The federal income tax consequences of the purchase,
ownership and disposition of the Certificates and the tax treatment of the Trust
will depend on the specific terms of the Certificates, the Trust, any Credit
Support and the Deposited Assets. Upon the issuance of each Series of
Certificates, the Depositor will cause to be filed with the Commission a Current
Report on Form 8-K containing an opinion of counsel as to federal income tax
matters. See the description under "Federal Income Tax Considerations" in the
related Prospectus Supplement.
Ratings of the Certificates. At the time of issue, the Certificates of any
given Series (or each Class of such Series that is offered hereby) will be rated
in one of the investment grade categories recognized by one or more nationally
recognized rating agencies (a "Rating Agency"). Unless otherwise specified in
the applicable Prospectus Supplement, the rating of any Series or Class of
Certificates is based primarily on the related Deposited Assets and any Credit
Support and the relative priorities of the Certificateholders of such Series or
Class to receive collections from, and to assert claims against, the Trust with
respect to such Deposited Assets and any Credit Support. The rating is not a
recommendation to purchase, hold or sell Certificates, inasmuch as such rating
does not comment as to market price or suitability for a particular investor. In
addition, the rating does not address the likelihood that the principal amount
of any Series or Class will be paid prior to any final legal maturity date.
There can be no assurance that the rating will remain for any given period of
time or that the rating will not be lowered or withdrawn entirely by the Rating
Agency if in its judgment circumstances in the future so warrant. Any Class or
Classes of a given Series of Certificates may not be offered pursuant to this
Prospectus, in which case such Class or Classes may or may not be rated in an
investment grade category by a Rating Agency.
Global Securities. Unless otherwise specified in the related Prospectus
Supplement, the Certificates of each Series (or, if more than one Class exists,
each Class of such Series) will initially be represented by one or more Global
Securities deposited with, or on behalf of, a Depositary (as defined below) and
will not be issued as individual definitive Certificates to the purchasers of
such Certificates. Consequently, unless and until such individual definitive
Certificates of a particular Series or Class are issued, such purchasers will
not be recognized as Certificateholders under the Trust Agreement. Hence, until
such time, such purchasers will only be able to exercise the rights of
Certificateholders indirectly through the Depositary and its respective
participating organizations and, as a result, the ability of any such purchaser
to pledge that Certificate to persons or entities that do not participate in
6
the Depositary's system, or to otherwise act with respect to such Certificate,
may be limited. See "Description of Certificates--Global Securities" and
"Limitations on Issuance of Bearer Certificates" and any further description
contained in the related Prospectus Supplement.
Currency Risks. The Certificates of any given Series (or Class within such
Series) may be denominated in a currency other than U.S. dollars to the extent
specified in the applicable Prospectus Supplement. This Prospectus does not
describe all the risks of an investment in such Certificates, and the Company
disclaims any responsibility to advise prospective purchasers of such risks as
they exist from time to time. Prospective purchasers of such Certificates should
consult their own financial and legal advisors as to the risks entailed by an
investment in such 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. See "Currency
Risks".
Passive Nature of the Trust. Unless otherwise specified in the applicable
Prospectus Supplement, the Trustee with respect to any Series of Certificates
will hold the Deposited Assets for the benefit of the Certificateholders. The
related Deposited Assets will generally be held to maturity and not disposed of,
regardless of adverse events, financial or otherwise, which may affect any
Seller, Term Assets Issuer or the value of the Deposited Assets. Under certain
circumstances the holders of the Certificates may direct the Trustee to dispose
of all or a portion of the Term Assets or take certain other actions in respect
of the Deposited Assets.
In addition, the Prospectus Supplement for each Series of Certificates will
set forth information regarding additional risk factors, if any, applicable to
such Series (and each Class within such Series).
THE COMPANY
The Company was incorporated in the State of Delaware on November 23, 1992,
as an indirect, wholly-owned, limited-purpose finance subsidiary of Salomon Inc,
and a direct subsidiary of Salomon Brothers Holding Company Inc ("SBHCI"). The
Company will not engage in any business or other activities other than issuing
and selling securities from time to time and acquiring, owning, holding,
pledging and transferring assets (including Deposited Assets and Credit Support)
in connection therewith or with the creation of a Trust and in activities
related or incidental thereto. The Company does not have, nor is it expected to
have, any significant unencumbered assets. The Company's principal executive
offices are located at Room 33-126, 32nd Floor, Seven World Trade Center, New
York, New York 10048 (telephone (212) 783-6645).
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 hereby) will be used by the Company to purchase the
related Deposited Assets (or provide a Trust with funds to purchase such
Deposited Assets) and arrange certain Credit Support including, if specified in
the related Prospectus Supplement, making required deposits into any reserve
account or the applicable Certificate Account (as defined below) for the benefit
of the Certificateholders of such Series or Class. Any remaining net proceeds,
if any, will be used by the Company for general corporate purposes.
FORMATION OF THE TRUST
The Company will assign the Deposited Assets (or cash to purchase such
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 such 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 such services (the "Trustee's Fee").
Any Administrative Agent named in the applicable Prospectus Supplement will
perform such tasks as are specified therein and in the Trust Agreement and will
receive a fee for such services (the "Administration Fee") 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
7
obtain an opinion of counsel that no recordation is required to obtain a first
priority perfected security interest in such Deposited Assets.
Unless otherwise stated in the Prospectus Supplement, the Company's
assignment of the Deposited Assets to the Trustee will be without recourse. To
the extent provided in the applicable Prospectus Supplement, the obligations of
an Administrative Agent, if any, so named therein with respect to the Deposited
Assets will consist primarily of its contractual administrative obligations, if
any, under the Trust Agreement, its obligation, if any, to make certain 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 its obligations, if any,
to purchase Deposited Assets as to which there has been a breach of certain
representations and warranties or as to which the documentation is materially
defective. The obligations of an Administrative Agent, if any, named in the
applicable Prospectus Supplement to make advances will be limited to amounts
which any such 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 such purposes. See
"Description of the Trust Agreement--Advances in Respect of Delinquencies".
Unless otherwise provided in the related Prospectus Supplement, each Trust
will consist of (i) such Deposited Assets, or interests therein, exclusive of
any interest in such assets (the "Retained Interest") retained by the Company or
any previous owner thereof, as from time to time are specified in the Trust
Agreement; (ii) such assets as from time to time are identified as deposited in
the related Certificate Account; (iii) property, if any, acquired on behalf of
Certificateholders by foreclosure or repossession and any revenues received
thereon; (iv) those elements of Credit Support, if any, provided with respect to
any Class within such Series that are specified as being part of the related
Trust in the applicable Prospectus Supplement, as described therein and under
"Description of Deposited Assets and Credit Support--Credit Support"; (v) the
rights of the Company under the agreement or agreements entered into by the
Trustee on behalf of the Certificateholders which constitute, or pursuant to
which the Trustee has acquired, such Deposited Assets; and (vi) the rights of
the Trustee in any cash advance, reserve fund or surety bond, if any, as
described under "Description of the Trust Agreement--Advances in Respect at
Delinquencies".
In addition, to the extent provided in the applicable Prospectus
Supplement, the Company will obtain Credit Support for the benefit of the
Certificateholders of any related Series (or Class within such Series) of
Certificates.
MATURITY AND YIELD CONSIDERATIONS
Each Prospectus Supplement will, to the extent applicable, contain
information with respect to the type and maturities of the related Term Assets
and the terms, if any, upon which such Term Assets 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 thereof) or extension of
maturity. The provisions of the Term Assets with respect to the foregoing 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 such Series) may be affected by certain aspects of the Deposited Assets
or any Credit Support or the manner and priorities of allocations of collections
with respect to such Deposited Assets between the Classes of a given Series. The
yield to maturity of any Series (or Class within such Series) may be affected by
any optional or mandatory redemption, repayment, amortization or extension of
maturity of the related Term Assets. A variety of tax, accounting, economic, and
other factors will influence whether any applicable party exercises any right of
redemption, repurchase or extension in respect of its securities. The rate of
redemption may also be influenced by prepayments on the obligations a Term
Assets Issuer holds for its own account. All else remaining equal, if prevailing
interest rates fall significantly below the interest rates on the related Term
Assets, the likelihood of redemption would be expected to increase. There can be
no certainty as to whether any Term Asset redeemable at the option of a Term
Assets Issuer will be repaid prior to its stated maturity.
[Include Bracketed Language as Appropriate]
8
[Collections on the underlying Receivables may vary because among other
things, borrowers may make payments during any month as low as the minimum
monthly payment for such month or as high as the entire outstanding principal
balance plus accrued interest and the fees and charges thereon. It is possible
that borrowers may fail to make the minimum payments. Collections on the
Receivables may also vary due to seasonal purchasing and payment habits of
borrowers. All else remaining equal, if prevailing interest rates fall
significantly below the interest rates on the related Accounts, the likelihood
of repayment of the Receivables would be expected to increase.]
Unless otherwise specified in the related Prospectus Supplement, each of
the Term Assets will be subject to acceleration upon the occurrence of certain
Term Asset Events of Default (as defined below). The maturity and yield on the
Certificates will be affected by any early repayment of the Term Assets as a
result of the acceleration of the Outstanding Debt Securities by the holders
thereof. See "Description of the Deposited Assets".
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 thereon 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
Pass-Through Rate for such Series (or Class) is based on variable or adjustable
interest rates. With respect to any Series of Certificates, disproportionate
principal payments (whether resulting from differences in amortization
schedules, payments due on scheduled maturity or upon early redemption) on the
related Term Assets having interest rates higher or lower than the then
applicable Pass-Through Rates applicable to such Certificates may affect the
yield thereon.
The Prospectus Supplement for each Series of Certificates will set forth
additional information regarding yield and maturity considerations applicable to
such Series (and each Class within such Series) and the related Deposited
Assets, including the applicable Term Assets.
DESCRIPTION OF CERTIFICATES
Each Series (or, if more than one Class exists, the Classes within such
Series) of Certificates will be issued pursuant to a Trust Agreement and a
separate series supplement thereto among the Company, the Administrative Agent,
if any, and the Trustee named in the related Prospectus Supplement, a form of
which Trust Agreement is attached as an exhibit to the Registration Statement.
The provisions of the Trust Agreement (as so supplemented) may vary depending
upon the nature of the Certificates to be issued thereunder and the nature of
the Deposited Assets, Credit Support and related Trust. The following summaries
describe certain provisions of the Trust Agreement which may be applicable to
each Series of Certificates. The applicable Prospectus Supplement for a Series
of Certificates will describe any provision of the Trust Agreement that
materially differs from the description thereof contained 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 hereby
made for a full description of such provisions, including the definition of
certain terms used, and for other information regarding the Certificates. As
used herein with respect to any Series, the term "Certificate" refers to all the
Certificates of that Series, whether or not offered hereby and by the related
Prospectus Supplement, unless the context otherwise requires.
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 such Series) of Certificates to be issued under the Trust Agreement will
represent the entire beneficial ownership interest in the Trust for such Series
created pursuant to the Trust Agreement and each such 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 and Credit Support--Collections".
9
Reference is made to the related Prospectus Supplement for a description of
the following terms of the Series (and if applicable, Classes within such
Series) of Certificates in respect of which this Prospectus and such Prospectus
Supplement are being delivered: (i) the title of such Certificates; (ii) the
Series of such Certificates and, if applicable, the number and designation of
Classes of such Series; (iii) certain information concerning the type,
characteristics and specifications of the Deposited Assets being deposited into
the related Trust by the Company (and, with respect to any Term Asset which at
the time of such deposit represents a significant portion of all such Deposited
Assets and any related Credit Support, certain information concerning the terms
of each such Term Asset, the identity of the issuer [or Seller] thereof and
where publicly available information regarding such issuer [or Seller] may be
obtained); (iv) the limit, if any, upon the aggregate principal amount or
notional amount, as applicable, of each Class thereof; (v) the dates on which or
periods during which such Series or Classes within such Series may be issued
(each, an "Original Issue Date"), the offering price thereof and the applicable
Distribution Dates on which the principal, if any, of (and premium, if any, on)
such Series or Classes within such Series will be distributable; (vi) if
applicable, the relative rights and priorities of each such Class (including the
method for allocating collections from and defaults or losses on the Deposited
Assets to the Certificateholders of each such Class); (vii) whether the
Certificates of such Series or each Class within such Series are Fixed Rate
Certificates or Floating Rate Certificates (each as defined below) and the
applicable interest rate (the "Pass-Through Rate") for each such Class,
including the applicable rate, if fixed (a "Fixed Pass-Through Rate"), or the
terms relating to the particular method of calculation thereof applicable to
such Series or each Class within such Series, if variable (a "Variable
Pass-Through 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 such Series or Class will be distributable and the
related Record Dates, if any; (viii) the option, if any, of any
Certificateholder of such Series or Class to withdraw a portion of the assets of
the Trust in exchange for surrendering such Certificateholder's Certificate or
to put the Certificate to the Company or a third party or of the Company or
Administrative Agent, if any, or another third party to purchase or repurchase
any Deposited Assets (in each case to the extent not inconsistent with the
Company's 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 thereunder) and the periods within which
or the dates on which, and the terms and conditions upon which any such option
may be exercised, in whole or in part; (ix) the rating of such Series or each
Class within such Series offered hereby (provided, however, that one or more
Classes within such Series not offered hereunder may be unrated or may be rated
below investment grade); (x) if other than denominations of $1,000 and any
integral multiple thereof, the denominations in which such Series or Class
within such Series will be issuable; (xi) 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; (xii) whether the
Certificates of such Series or of any Class within such Series are to be issued
as Registered Securities or Bearer Certificates or both and, if Bearer
Certificates are to be issued, whether coupons ("Coupons") will be attached
thereto; whether Bearer Certificates of such Series or Class may be exchanged
for Registered Securities of such Series or Class and the circumstances under
which and the place or places at which any such exchanges, if permitted, may be
made; (xiii) whether the Certificates of such Series or of any Class within such
Series are to be issued in the form of one or more Global Securities and, if so,
the identity of the Depositary (as defined below), if other than The Depository
Trust Company, for such Global Security or Securities; (xiv) if a temporary
Certificate is to be issued with respect to such Series or any Class within such
Series, whether any interest thereon distributable on a Distribution Date prior
to the issuance of a definitive Certificate of such Series or Class will be
credited to the account of the Persons entitled thereto on such Distribution
Date; (xv) if a temporary Global Security is to be issued with respect to such
Series or Class, the terms upon which beneficial interests in such temporary
Global Security may be exchanged in whole or in part for beneficial interests in
a definitive Global Security or for individual Definitive Certificates (as
defined below) of such Series or Class and the terms upon which beneficial
interests in a definitive Global Security, if any, may be exchanged for
individual Definitive Certificates of such Series or Class; (xvi) if other than
U.S. dollars, the Specified Currency applicable to the Certificates of such
Series or Class for purposes of denominations and distributions on such Series
or each Class within such Series and the circumstances and conditions, if any,
when such Specified Currency may be changed, at the election of the Company or a
Certificateholder, and the currency or currencies in which any principal of or
any premium or any interest on such Series or Class are to be distributed
pursuant to such election; (xvii) any additional Administrative Agent
Termination Events (as defined below), if applicable, provided for with respect
to such Class; (xviii) all applicable Required Percentages and Voting Rights
(each as defined below) relating to the manner and percentage of votes of
Certificateholders of such Series and each Class within such Series required
with respect to certain actions by the Company or the applicable Administrative
Agent, if any, or the
10
Trustee; and (xix) any other terms of such Series or Class within such Series of
Certificates not inconsistent with the provisions of the Trust Agreement
relating to such Series.
Unless otherwise indicated in the applicable Prospectus Supplement,
Certificates of each Series (including any Class of Certificates not offered
hereby) 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 such 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 such Series of Certificates will be
described in the applicable Prospectus Supplement. In addition, any risk
factors, the specific terms and other information with respect to the issuance
of any Series or Class within such Series of Certificates on which the principal
of and any premium and interest are distributable in a Specified Currency other
than U.S. dollars will be described in the applicable Prospectus Supplement
relating to such Series or Class. 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 Principal Currency other
than U.S. dollars will be determined on the basis of the noon buying rate in New
York City for cable transfer in foreign currencies as certified for customs
purposes by the Federal Reserve Bank of New York (the "Market Exchange Rate")
for such Specified Principal Currency on the applicable issue date. As specified
in the applicable Prospectus Supplement such determination will be made by the
Company, the Trustee, the Administrative Agent, if any, or an agent thereof as
exchange rate agent for each Series of Certificates (the "Exchange Rate Agent").
Unless otherwise provided 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 therewith.
Bearer Certificates will be transferable by delivery. Provisions with respect to
the exchange of Bearer Certificates will be described in the applicable
Prospectus Supplement. Unless otherwise specified in the applicable Prospectus
Supplement, Registered Securities may not be exchanged for Bearer Certificates.
The Company may at any time purchase Certificates at any price in the open
market or otherwise. Certificates so purchased by the Company may, at the
discretion of the Company, be held or resold or surrendered to the Trustee for
cancellation of such Certificates.
Distributions
Distributions allocable to principal, premium (if any) and interest on the
Certificates of each Series (and Class within such Series) will be made in the
Specified Currency for such Certificates by or on behalf of the Trustee on each
Distribution Date as specified in the related Prospectus Supplement and the
amount of each distribution will be determined as of the close of business on
the date specified in the related Prospectus Supplement (the "Determination
Date"). If the Specified Currency for a given Series or Class within such Series
of Registered Certificates 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 such Series or Class into U.S. dollars in the manner
described in the following paragraph. The Certificateholder of a Registered
Certificate of a given Series or Class within such 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 the Specified Currency by delivery of a
written notice to the Trustee and Administrative Agent, if any, for such Series
not later than fifteen calendar days prior to the applicable Distribution Date,
except under the circumstances described under "Currency Risks--Payment
Currency" below. Such election will remain in 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 such 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
11
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 such Distribution Date, of the aggregate amount payable in such
Specified Currency on such 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 such
distributions. If no such bid quotations are available, such distributions will
be made in such Specified Currency, unless such Specified Currency is
unavailable due to the imposition of exchange controls or to other circumstances
beyond the Company's control, in which case such distributions will be made as
described under "Currency Risks--Payment Currency" below. The applicable
Prospectus Supplement will specify such information with respect to Bearer
Certificates.
Unless otherwise provided in the applicable Prospectus Supplement and
except as provided in the succeeding paragraph, distributions with respect to
Certificates will be made (in the case of Registered Certificates) at the
corporate trust office or agency of the Trustee specified in the applicable
Prospectus Supplement; provided, however, that any such amounts distributable on
the final Distribution Date of a Certificate will be distributed only upon
surrender of such Certificate at the applicable location set forth above. Except
as otherwise provided in the applicable Prospectus Supplement, no distribution
on a Bearer Certificate will be made by mail to an address in the United States
or by wire transfer to an account maintained by the Certificateholder thereof in
the United States.
Unless otherwise specified in the applicable Prospectus Supplement,
distributions on Registered Certificates in U.S. dollars will be made, except as
provided below, by check mailed to the Registered Certificateholders of such
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 Record Date (as defined below) and the
related Distribution Dates, interest for the period beginning on the issue date
for such Series or Class and ending on the last day of the interest accrual
period ending immediately prior to or coincident with such 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 such Series or Class on the
related Record Date. A Certificateholder of $10,000,000 (or the equivalent
thereof in a Specified Principal 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 such 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 provided above), such Certificateholder
shall provide appropriate wire transfer instructions to the Trustee for such
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 such Certificate is other than U.S.
dollars, the financial center of the country issuing such Specified Currency
(which, in the case of ECU, shall be Brussels, Belgium) and (ii) if the
Pass-Through Rate for such 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 Record Date with respect to any
Distribution Date for a Series or Class of Registered Certificates shall be
specified as such in the applicable Prospectus Supplement.
Interest on the Certificates
General. Each Class of Certificates (other than certain Classes of Strip
Certificates) of a given Series may have a different Pass-Through Rate, which
may be a fixed or variable Pass-Through Rate, as described below. In the case of
Strip Certificates with no or, in certain cases, a nominal Certificate Principal
Balance, such distributions of interest will be in an amount (as to any
Distribution Date, "Stripped Interest") described in the related Prospectus
Supplement. For purposes hereof, "Notional Amount" means the notional principal
amount specified in the applicable Prospectus Supplement on which interest on
Strip Certificates with no or, in certain cases, a nominal Certificate Principal
Balance will be made on each Distribution Date. Reference to the Notional Amount
of a Class of Strip Certificates herein or in a Prospectus Supplement does not
indicate that such Certificates represent the right
12
to receive any distributions 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 related Prospectus Supplement.
Fixed Rate Certificates. Each Series (or, if more than one Class exists,
each Class within such Series) of Certificates with a fixed Pass-Through Rate
("Fixed Rate Certificates") 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
Pass-Through Rate stated on the face thereof and in the applicable Prospectus
Supplement until the principal amount thereof is distributed or made available
for payment (or in the case of Fixed Rate Certificates with no or a nominal
principal amount, until the Notional Amount thereof is reduced to zero), except
that, if so specified in the applicable Prospectus Supplement, the Pass-Through
Rate for such 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
such Certificates by one or more rating agencies, in accordance with a schedule
or otherwise, all as described in such 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 such Prospectus Supplement. Each such
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 such Series) of Certificates with a variable Pass-Through Rate
("Floating Rate Certificates") 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 (as defined below) for such
Series or Class at the Initial Pass-Through Rate set forth on the face thereof
and in the applicable Prospectus Supplement. Thereafter, the Pass-Through Rate
on such Series or Class for each Interest Reset Period (as defined below) 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 such Series or Class, and the "Spread
Multiplier" is the percentage that may be specified in the applicable Prospectus
Supplement as being applicable to such Series or Class, except that if so
specified in the applicable Prospectus Supplement, the Spread or Spread
Multiplier on such Series or any such 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 such Certificates by one or more
rating agencies, in accordance with a schedule or otherwise, all as described in
such Prospectus Supplement. The applicable Prospectus Supplement, unless
otherwise specified therein, will designate one of the following Base Rates as
applicable to a Floating Rate Certificate: (i) LIBOR (a "LIBOR Certificate"),
(ii) the Commercial Paper Rate (a "Commercial Paper Rate Certificate"), (iii)
the Treasury Rate (a "Treasury Rate Certificate"), (iv) the Federal Funds Rate
(a "Federal Funds Rate Certificate"), (v) the CD Rate (a "CD Rate Certificate")
or (vi) 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 set forth in such Prospectus Supplement and in
such 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
publication, 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 ("Maximum Pass-Through Rate") and (ii) a minimum limitation, or
floor, on the rate at which interest may accrue during any such interest accrual
period ("Minimum Pass-Through Rate"). In addition to any Maximum Pass-Through
Rate that may be applicable to any Series or Class of Floating Rate
Certificates, the Pass-Through 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 Floating Rate Certificates will be governed by the law
of the State of New York
13
and, under such law as of the date of this Prospectus, the maximum rate of
interest, with certain exceptions, is 25% per annum on a simple interest basis.
The Company will appoint, and enter into agreements with, agents (each a
"Calculation Agent") to calculate Pass-Through 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 Pass-Through 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 such Series of Floating Rate Certificates will be
specified in the applicable Prospectus Supplement; provided, however, that
unless otherwise specified in such Prospectus Supplement, the Pass-Through Rate
in effect for the ten days immediately prior to the Scheduled Final Distribution
Date will be that in effect on the tenth day preceding such Scheduled Final
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, such 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 such 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 such 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 such day
is computed by dividing the Pass-Through Rate in 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 Pass-Through Rate in effect on any
Interest Reset Date will be the applicable rate as reset on such date.
Unless otherwise specified in the applicable Prospectus Supplement, all
percentages resulting from any calculation of the Pass-Through 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 such
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 such Series) of Floating Rate
Certificates will be distributable on the Distribution Dates and for the
interest accrual periods as and to the extent set forth 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 such Series or Class will provide the
Pass-Through Rate then in effect and, if determined, the Pass-Through Rate that
will become effective on the next Interest Reset Date with respect to such
Floating Rate Certificate.
(1) CD Rate Certificates. Each CD Rate Certificate will bear interest for
each Interest Reset Period at the Pass-Through Rate calculated with reference to
the CD Rate and the Spread or Spread Multiplier, if any, specified in such
Certificate and in the applicable Prospectus Supplement.
14
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 such Interest Reset Period (a "CD Rate
Determination Date") for negotiable 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 Calculation
Date (as defined below) pertaining to such CD Rate Determination Date, then the
"CD Rate" for such Interest Reset Period will be the rate on such CD Rate
Determination Date for negotiable 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 Calculation Date such rate is not yet published in
either H.15(519) or Composite Quotations, then the "CD Rate" for such 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 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 related Prospectus Supplement in a denomination of $5,000,000;
provided, however, that if the dealers selected as aforesaid by such Calculation
Agent are not quoting offered rates as mentioned in this sentence, the "CD Rate"
for such Interest Reset Period will be the same as the CD Rate for the
immediately preceding Interest Reset Period (or, if there was no such Interest
Reset Period, the Initial Pass-Through Rate).
The "Calculation Date" pertaining to any CD Rate Determination Date shall
be the first to occur of (a) the tenth calendar day after such CD 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.
(2) Commercial Paper Rate Certificate. Each Commercial Paper Rate
Certificate will bear interest for each Interest Reset Period at the
Pass-Through 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.
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 such Commercial Paper Rate Certificate as of the second
Business Day prior to the Interest Reset Date for such Interest Reset Period (a
"Commercial Paper Rate Determination Date") and shall be the Money Market Yield
(as defined below) on such Commercial Paper Rate Determination Date of the rate
for commercial paper having the Index Maturity specified in the applicable
Prospectus Supplement, as such rate shall be published in H.15(519) under the
heading "Commercial Paper". In the event that such rate is not published prior
to 3:00 p.m., New York City time, on the Calculation Date (as defined below)
pertaining to such Commercial Paper Rate Determination Date, then the
"Commercial Paper Rate" for such Interest Reset Period shall be the Money Market
Yield on such 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 such Calculation Date such rate is not yet published in either
H.15(519) or Composite Quotations, then the "Commercial Paper Rate" for such
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 such Commercial
Paper Rate Determination Date of three leading dealers of commercial paper in
The City of New York selected by the Calculation Agent for such Commercial Paper
Rate Certificate for commercial paper of the specified Index Maturity placed for
an industrial issuer whose bonds are rated "AA" or the equipment by a nationally
recognized rating agency; provided, however, that if the dealers selected as
aforesaid by such Calculation Agent are not quoting offered rates as mentioned
in this sentence, the "Commercial Paper Rate" for such Interest Reset Period
will be the same as the Commercial Paper Rate for the immediately preceding
Interest Reset Period (or, if there was no such Interest Reset Period, the
Initial Pass-Through Rate).
"Money Market Yield" shall be a yield calculated in accordance with the
following formula:
Money Market Yield = D X 36O X 100
-------------
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.
15
The "Calculation Date" pertaining to any Commercial Paper Rate
Determination Date shall be the first to occur of (a) the tenth calendar day
after such 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 Resort Period at the Pass-Through Rate
calculated with name to the Federal Funds 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
"Federal Funds Rate" for each Interest Reset Period shall be the effective rate
on the Interest Reset Date for such Interest Reset Period (a "Federal Funds Rate
Determination Date") for 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 Calculation Date (as
defined below) pertaining to such Federal Funds Rate Determination Date, the
"Federal Funds Rate" for such 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 Calculation Date such rate is not yet published in either H.15(519) or
Composite Quotations, then the "Federal Funds Rate" for such Interest Reset
Period shall be the rate on such Federal Funds Rate Determination Date made
publicly available by, the Federal Reserve Bank of New York which is 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 Calculation Date, the "Federal Funds Rate" for such 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 such Interest Reset Period,
the Initial Pass-Through Rate). Unless otherwise specified in the applicable
Prospectus Supplement, in the case of a Federal Funds Rate Certificate that
resets daily, the Pass-Through Rate on such Certificate for the period from and
including a Monday to but excluding the succeeding Monday will be reset by the
Calculation Agent for such Certificate on such 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 Rates in effect with respect to each such day in
such week.
The "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 Pass-Through Rate calculated with reference to
LIBOR and the Spread or Spread Multiplier, if any, specified in such Certificate
and in the applicable Prospectus Supplement.
With respect to LIBOR indexed to the offered rates 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:
(i) On the second London Banking Day prior to the Interest Reset Date for
such Interest Reset Period (a "LIBOR Determination Date"), the Calculation Agent
for such 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 such Interest
Reset Date, which appear on the Reuters Screen LIBO Page at approximately 11:00
a.m., London time, on such 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 such offered rates appear on the Reuters Screen LIBO Page, "LIBOR" for
such Interest Reset Period will be the arithmetic mean of such offered rates as
determined by the Calculation Agent for such LIBOR Certificate.
(ii) If fewer than two offered rates appear on the Reuters Screen LIBO Page
on such LIBOR Determination Date, the Calculation Agent for such LIBOR
Certificate will request the principal London offices of each of four major
banks in the London interbank market selected by such Calculation Agent to
provide such Calculation Agent with its offered quotations for deposits in U.S.
dollars for the period of the specified Index Maturity, commencing on such
Interest Reset Date, to prime banks in the London interbank market at
approximately 11:00 a.m., London time, on such LIBOR Determination Date and in a
principal amount equal to an amount of not
16
less than $1,000,000 that is representative of a single transaction in such
market at such time. If at least two such quotations are provided, "LIBOR" for
such Interest Reset Period will be the arithmetic mean of such quotations. If
fewer than two such quotations are provided, "LIBOR" for such 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 such LIBOR Certificate at
approximately 11:00 a.m., New York City time, on such LIBOR Determination Date
for loans in U.S. dollars to leading European banks, for the period of the
specified Index Maturity, commencing on such 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 such market at such time; provided,
however, that if fewer than three banks selected as aforesaid by such
Calculation Agent are quoting rates as mentioned in this sentence, "LIBOR" for
such Interest Reset Period will be the same as LIBOR for the immediately
preceding Interest Reset Period (or, if there was no such Interest Reset Period,
the Initial Pass-Through 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 set forth the method for determining such rate.
(5) Treasury Rate Certificates. Each Treasury Rate Certificate will bear
interest for each Interest Reset Period at the Pass-Through 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 (as defined below) for such
Interest Reset Period of direct obligations of the United States ("Treasury
Bills") having the Index Maturity specified in the applicable Prospectus
Supplement, as such 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 such rate is not published prior to 3:00 p.m., New York City time, on
the Calculation Date (as defined below) pertaining to such 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 such 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 provided above by 3:00 p.m., New York City time, on such
Calculation Date, or if no such auction is held on such Treasury Rate
Determination Date, then the "Treasury Rate" for such Interest Reset Period
shall be calculated by the Calculation Agent for such 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 such Treasury Rate Determination Date, of three
leading primary United States government securities dealers selected by such
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 such Calculation Agent are not quoting bid rates as
mentioned in this sentence, then the "Treasury Rate" for such Interest Reset
Period will be the same as the Treasury Rate for the immediately preceding
Interest Reset Period (or, if there was no such Interest Reset Period, the
Initial Pass-Through Rate).
The "Treasury Rate Determination Date" for each Interest Reset Period will
be the day of the week in which the Interest Reset Date for such Interest Reset
Period falls on which Treasury bills would normally be auctioned. Treasury bills
are normally sold at auction on Monday of each week, unless that day is a legal
holiday, in which case the auction is normally held on the following Tuesday,
except that such auction may be held on the preceding Friday. If, as the result
of a legal holiday, an auction is so held on the preceding Friday, such Friday
will be the Treasury Rate Determination Date pertaining to the Interest Reset
Period commencing in the next succeeding week. Unless otherwise specified in the
applicable Prospectus Supplement, if an auction date shall fall on any day that
would otherwise be an Interest Reset Date for a Treasury Rate Certificate, then
such Interest Reset Date shall instead be the Business Day immediately following
such auction date.
The "Calculation Date" pertaining to any Treasury Rate Determination Date
shall be the first to occur of (a) the tenth calendar day after such Treasury
Rate Determination Date or, if such a 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.
17
Principal of the Certificates
Unless the related Prospectus Supplement provides otherwise, 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 holder thereof 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 related
Prospectus Supplement, distributions generally will be applied to undistributed
accrued interest on, then to principal of, and then to premium (if any) on, each
such Certificate of the Class or Classes entitled thereto (in the manner and
priority specified in such Prospectus Supplement) until the aggregate
Certificate Principal Balance of such 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 thereon, and, applicable pursuant to
the terms of the related Series, by the amount of any net losses realized on any
Deposited Asset ("Realized Losses") allocated thereto. The initial aggregate
Certificate Principal Balance of a Series and each Class thereof will be
specified in the related Prospectus Supplement. Distributions of principal of
any Class of Certificates will be made on a pro rata basis among all the
Certificates of such Class. Strip Certificates with no Certificate Principal
Balance will not receive distributions of principal.
Optional Exchange
If a holder may exchange Certificates of any given Series for a pro rata
portion of the Deposited Assets, the applicable Prospectus Supplement will
designate such Series as an "Exchangeable Series". The terms upon which a holder
may exchange Certificates of any Exchangeable Series for a pro rata portion of
the Deposited Assets of the related Trust will be specified in the related
Prospectus Supplement; provided that any right of exchange shall be exerciseable
only to the extent that such exchange would not be inconsistent with the
Company's and such Trust's 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 thereunder. Such terms may
relate to, but are not limited to, the following:
(a) a requirement that the exchanging holder tender to the Trustee
Certificates of each Class within such Exchangeable Series;
(b) a minimum Certificate Principal Balance or Notional Amount, as
applicable, with respect to each Certificate being tendered for exchange;
(c) a requirement that the Certificate Principal Balance or Notional
Amount, as applicable, of each Certificate tendered for exchange be an integral
multiple of an amount specified in the Prospectus Supplement;
(d) specified dates during which a holder may effect such an exchange
(each, an "Optional Exchange Date");
(e) limitations on the right of an exchanging holder to receive any benefit
upon exchange from any Credit Support or other non-Term Assets deposited in the
applicable Trust; and
(f) adjustments to the value of the proceeds of any exchange based upon the
required prepayment of future expense allocations and the establishment of a
reserve for any anticipated Extraordinary Trust Expenses.
Unless otherwise specified in the related Prospectus Supplement, in order
for a Certificate of a given Exchangeable Series (or Class within such
Exchangeable Series) to be exchanged by the applicable Certificateholder, the
Trustee for such Certificate must receive, at least 30 (or such shorter period
acceptable to the Trustee) but not more than 45 days prior to an Optional
Exchange Date (i) such Certificate with the form entitled "Option to Elect
Exchange" on the reverse thereof duly completed, or (ii) in the case of
Registered Certificates, a telegram, telex, facsimile transmission or letter
from a member of a national securities exchange or the National Association of
Securities Dealers, Inc., the Depositary (in accordance with its normal
procedures) or a commercial bank or trust company in the United States setting
forth the name of the holder of such Registered Certificate, the Certificate
Principal Balance or Notional Amount of such Registered Certificate to be
exchanged, the certificate number or a description of the tenor and terms of
such Registered Certificate, a statement that the option to elect exchange is
being exercised thereby and a guarantee that the Registered Certificate to be
exchanged with the form entitled "Option to Elect Exchange" on the reverse of
the Registered Certificate duly completed will be received by
18
such Trustee not later than five Business Days after the date of such telegram,
telex, facsimile transmission or letter. If the procedure described in clause
(ii) of the preceding sentence is followed, then such Registered Certificate and
form duly completed must be received by such Trustee by such fifth Business Day.
Any tender of a Certificate by the holder for exchange shall be irrevocable. The
exchange option may be exercised by the holder of a Certificate for less than
the entire Certificate Principal Balance of such Certificate provided that the
Certificate Principal Balance or Notional Amount, as applicable, of such
Certificate remaining outstanding after redemption is an authorized denomination
and all other exchange requirements set forth in the related Prospectus
Supplement are satisfied. Upon such partial exchange, such Certificate shall be
cancelled and a new Certificate or Certificates for the remaining Certificate
Principal Balance thereof shall be issued (which, in the case of any Registered
Certificate, shall be in the name of the holder of such exchanged Certificate).
Unless otherwise specified in the applicable Prospectus Supplement, because
initially and until Definitive Certificates are issued each Certificate will be
represented by a Global Security, the Depositary's nominee will be the
Certificateholder of such Certificate and therefore will be the only entity that
can exercise a right of exchange. In order to ensure that the Depositary's
nominee will timely exercise a right of exchange with respect to a particular
Certificate, the beneficial owner of such Certificate must instruct the broker
or other direct or indirect participant through which it holds an interest in
such Certificate to notify the Depositary of its desire to exercise a right of
exchange. Different firms have different cut-off times for accepting
instructions from their customers and, accordingly, each beneficial owner should
consult the broker or other direct or indirect participant through which it
holds an interest in a Certificate in order to ascertain the cut-off time by
which such an instruction must be given in order for timely notice to be
delivered to the Depositary.
Unless otherwise provided in the applicable Prospectus Supplement, upon the
satisfaction of the foregoing conditions and any applicable conditions with
respect to the related Deposited Assets, as described in such Prospectus
Supplement, the applicable Certificateholder will be entitled to receive a
distribution of a pro rata share of the Deposited Assets related to the
Exchangeable Series (and Class within such Exchangeable Series) of the
Certificate being exchanged, in the manner and to the extent described in such
Prospectus Supplement. Alternatively, to the extent so specified in the
applicable Prospectus Supplement, the applicable Certificateholder, upon
satisfaction of such conditions, may direct the related Trustee to sell, on
behalf of such Certificateholder, such pro rata share of the Deposited Assets,
in which event the Certificateholder shall be entitled to receive the net
proceeds of such sale, less any costs and expenses incurred by such Trustee in
facilitating such sale, subject to any additional adjustments set forth in the
Prospectus Supplement.
Put Option
If specified in the applicable Prospectus Supplement, a holder may put
Certificates of a given Series to the Company or a third party. The terms upon
which a holder may put its Certificates (including the price) will be specified
in the related Prospectus Supplement; provided, however, any put option shall be
exerciseable only to the extent that such put would not be inconsistent with the
Company's or Trust's continued satisfaction of the applicable requirements for
exemption under 3a-7 under the Investment Company act of 1940 and all applicable
rules, regulations and interpretations thereunder.
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 that will be deposited with, or on behalf of, The Depository
Trust Company, New York, New York (for Registered Certificates denominated and
payable in U.S. dollars), or such other depositary identified in the related
Prospectus Supplement (the "Depositary"), and registered in the name of a
nominee of the Depositary. Global Securities may be issued in either registered
or bearer form and in either temporary or definitive form. See "Limitations on
Issuance of Bearer Certificates" for provisions applicable to Certificate issued
in bearer form. Unless and until it is exchanged in whole or in part for the
individual Certificates represented thereby (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 such Depositary or by a nominee of such
Depositary to such Depositary or another nominee of such Depositary or by such
Depositary or any such nominee to a successor of such Depositary or a nominee of
such successor.
19
The Depository Trust Company has advised the Company as follows: The
Depository Trust Company 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. The Depository Trust Company was created to hold
securities of its participants and to facilitate the clearance and settlement of
securities transactions among the institutions that have accounts with such
Depositary ("participants") in such securities through electronic book-entry
changes in accounts of the participants, thereby eliminating the need for
physical movement of securities certificates. Such Depositary's participants
include securities brokers and dealers (including the Offering Agent), banks,
trust companies, clearing corporations, and certain other organizations, some of
whom (and/or their representatives) own such Depositary. Access to such
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. The Depository
Trust Company has confirmed to the Company that it intends to follow such
procedures.
Upon the issuance of a Global Security, the Depositary for such Global
Security will credit, on its book-entry registration and transfer system, the
respective principal amounts of the individual Certificates represented by such
Global Security to the accounts of its participants. The accounts to be
accredited shall be designated by the underwriters of such Certificates, or, if
such Certificates are offered and sold directly through one or more agents, by
the Company or such 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 such securities. Such limits and such 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 such Global Security, such Depositary or such nominee, as the case may
be, will be considered the sole Certificateholder of the individual Certificates
represented by such Global Security for all purposes. Except as set forth below,
owners of beneficial interests in a Global Security will not be entitled to have
any of the individual Certificates represented by such Global Security
registered in their names, will not receive or be entitled to receive physical
delivery of any such Certificates and will not be considered the
Certificateholder thereof under the Trust Agreement governing such Certificates.
Because the Depositary can only act on behalf of its participants, the ability
of a holder of any Certificate to pledge that Certificate to persons or entries
that do not participate in the Depositary's system, or to otherwise act with
respect to such Certificate, may be limited due to the lack of a physical
certificate for such Certificate.
Subject to the restrictions discussed under "Limitations on Issuance of
Bearer Certificates" below, 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 such Global Security. None of the Company, the
Administrative Agent, if any, the Trustee for such Certificates, any Paying
Agent or the Certificate Registrar for such Certificates will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial interests in such Global Security or for
maintaining, supervising or reviewing any records relating to such beneficial
interests. Receipt by owners of beneficial interests in a temporary Global
Security of payments of principal, premium or interest in respect thereof will
be subject to the restrictions discussed below under "Limitations on Issuance of
Bearer Certificates" below.
The Company 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 of such
Certificates, will credit immediately participants' accounts with payments in
amounts proportionate to their respective beneficial interests in the principal
amount of such Global Security as shown on the records of such Depositary. The
Company also expects that payments by participants to owners of beneficial
interests in such Global Security held through such 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 such participants. Receipt
by owners of beneficial interests in a temporary Global Security of payments of
principal, premium or interest in respect thereof will be subject to the
restrictions discussed below under "Limitations on Issuance of Bearer
Securities".
20
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 Company within ninety days, the Company will issue
individual Definitive Certificates in exchange for the Global Security or
Securities representing such Certificates. In addition, the Company 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 such Class in exchange for the
Global Security or Securities representing such Certificates. Further, if the
Company so specifies with respect to the Certificates of a given Class, an owner
of a beneficial interest in a Global Security representing Certificates of such
Class may, on terms acceptable to the Company and the Depositary for such Global
Security, receive individual Definitive Certificates in exchange for such
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 such Global Security equal in principal
amount to such beneficial interest and to have such Definitive Certificates
registered in its name (if the Certificates of such Class are issuable as
Registered Certificates). Individual Definitive Certificates of such Class so
issued will be issued as (a) Registered Certificates in denominations, unless
otherwise specified by the Company, of $1,000 and integral multiples thereof if
the Certificates or such Class are issuable as Registered Securities, (b) as
Bearer Certificates in the denomination or denominations specified by the
Company if the Certificates of such Class are issuable as Bearer Certificates or
(c) as either Registered or Bearer Certificates, if the Certificates of such
Class are issuable in either form. See, however, "Limitations on Issuance of
Bearer Certificates" below for a description of certain restrictions on the
issuance of individual Bearer Certificates in exchange for beneficial interests
in a Global Security.
The applicable Prospectus Supplement will set forth any specific terms of
the depositary arrangement with respect to any Class or Series of Certificates
being offered thereby to the extent not set forth or different from the
description set forth above.
DESCRIPTION OF DEPOSITED ASSETS AND CREDIT SUPPORT
General
[SELECT ONE OF THE BRACKETED SECTIONS]
[Alternative 1] [Each Certificate of each Series (or if more than one Class
exists, each Class (whether or not each such Class is offered hereby) within
such Series) will represent an ownership interest specified for such Series (or
Class) of Certificates in a designated, publicly issued, fixed income debt
security or a pool of such debt securities (the "Term Assets") issued by one or
more Issuers (the "Term Assets Issuers"), purchased by a Trust with proceeds
from, and at the direction of, the Company or purchased by the Company (or an
affiliate thereof) in the secondary market and assigned to a Trust as described
in the applicable Prospectus Supplement. The Term Assets Issuers will be one or
more corporations, banking organizations or insurance companies organized under
the laws of the United States or any state, which are subject to the
informational requirements of the Exchange Act and which, in accordance
therewith, file reports and other information with the Commission. Based on
information contained in the offering document pursuant to which any Term Assets
Issuer's securities were originally offered (a "Term Asset Prospectus"), the
applicable Prospectus Supplement shall set forth certain information with
respect to the public availability of information with respect to any Term
Assets Issuer the debt securities of which constitute more than ten percent of
the Term Assets for any series of Certificates as of the date of such Prospectus
Supplement ("Concentrated Term Assets"). The specific terms and conditions of
the Term Assets will be set forth in the related Prospectus Supplement.]
[Alternative 2] [Each Certificate of each Series (or if more than one Class
exists, each Class (whether or not each such Class is offered hereby) within
such Series) will represent an ownership interest specified for such Series (or
Class) of Certificates in a designated, publicly issued, fixed income debt
security or a pool of such debt securities (the "Term Assets"), purchased by the
Company (or an affiliate thereof) in the secondary market and assigned to a
Trust as described in the applicable Prospectus Supplement. Each Term Asset will
represent an obligation issued or guaranteed by a foreign government, political
subdivision or agency or instrumentality thereof. Any pool of such publicly
offered foreign government debt securities may include both registered and
unregistered offerings. Each Term Asset or Term Assets in the case of debt
securities with a common obligor, that represents ten percent or more of the
total Term Assets with respect to any Series of Certificates as of the date of
the related Prospectus Supplement
21
("Concentrated Term Assets") will represent an obligation issued or guaranteed
by a foreign government, one of its political subdivisions or an agency or
instrumentality of the foregoing which has offered debt securities in the United
States pursuant to a registration statement filed with the Commission containing
information required by Schedule B of the Securities Act ("Schedule B"), which
qualifies as a "seasoned" issuer under Commission practice and which issuer or
guarantor the Company reasonably believes (based on publicly available
information) is eligible to use Schedule B as of the time of any offering of
Certificates hereunder. The Term Assets may include obligations of any or all of
the following Foreign Governments (which may include obligations guaranteed by
the following): Austria, Australia, Canada, Canadian Provinces, Denmark,
Finland, France, Germany, Ireland, Japan, Norway, Italy, Spain, Sweden and the
United Kingdom. The Prospectus Supplement for any series will set forth the
Foreign Government obligations included in the related Trust.]
[Alternative 3] [Each Certificate of each Series (or if more than one Class
exists, each Class (whether or not each such Class is offered hereby) within
such Series) will represent an ownership interest specified for such Series (or
Class) of Certificates in a designated, publicly issued, fixed income debt
security or pool of such debt securities (the "Term Assets"), purchased by the
Company (or an affiliate thereof) in the secondary market and assigned to a
Trust as described in the applicable Prospectus Supplement. The Term Assets will
represent direct obligations of one or more foreign private issuers (as such
term is defined in Rule 405 of the Securities Act) subject to the informational
requirements of the Exchange Act and which in accordance therewith file reports
and other information with the Commission.]
[Alternative 4] [Each Certificate of each Series (or if more than one Class
exists, each Class (whether or not each such Class is offered hereby) within
such Series) will represent an ownership interest specified for such Series (or
Class) of Certificates in a designated, publicly issued, fixed income debt
security or a pool of such debt securities (the "Term Assets"), purchased by the
Company (or an affiliate thereof) in the secondary market and assigned to a
Trust as described in the applicable Prospectus Supplement. Each Term Asset will
represent an obligation (i) 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") or (ii) of a U.S.
governmental sponsored organization created pursuant to federal statute (a
"GSE"). 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 ("Fannie Mae"), Federal Home Loan Mortgage Association
("Freddie Mae"), Student Loan Marketing Association ("Sallie Mae"), Resolution
Funding Corporation ("REFCORP"), Federal Home Loan Banks ("FHLB") (to the extent
such obligations represent the joint and several obligation of the twelve
Federal Home Loan Banks), Tennessee Valley Authority ("TVA") and Federal Farm
Credit Banks ("FFCB"). GSE debt securities 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) such organization makes publicly available its annual
report which shall include financial statements or similar financial information
with respect to such organization (a "GSE Issuer"). Based on information
contained in the prospectus pursuant to which any GSE Issuer's securities were
originally offered (a "Term Asset Prospectus"), the applicable Prospectus
Supplement will set forth certain 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 Term Assets for any series of
Certificates as of the date of such Prospectus Supplement. The specific terms
and conditions of the Term Assets will be set forth in the related Prospectus
Supplement.]
[Alternative 5] [Each Certificate of each Series (or if more than one Class
exists, each Class (whether or not each such Class is offered hereby) within
such Series) will be secured by or represent an interest specified for such
Series (or Class) of Certificates in certain credit card, charge card or debit
card receivables or securities representing an interest in or secured by such
receivables. The property with respect to each Series will be composed of (a)
the Deposited Assets, which may include (i) one or more pools of receivables
(collectively, the "Receivables") generated or to be generated from time to time
in the ordinary course of business in one or more portfolios or revolving credit
card, charge card or debit card accounts (collectively, the "Accounts"), (ii) a
designated, publicly issued, asset backed security or a pool of such asset
backed securities representing an interest in or secured by Receivables ("Credit
Card Securities") and (iii) one or more derivative products or such other assets
specified in the related Prospectus Supplement, (b) any Credit Support, and (c)
the amount, if any, initially deposited in any trust account for a Series as
specified in the related Prospectus Supplement (including for purposes of
acquiring the Deposited Assets or Credit Support). The Company (or an affiliate
thereof) will purchase the Term Assets in the secondary market and assign or
transfer the Term Assets to a trust or will direct the Trustee to purchase the
specified
22
Term Assets on behalf of the Trust with a portion of the proceeds of the
offering, as described in the applicable Prospectus Supplement.
The Deposited Assets included in a Trust for a Series may consist of any
combination of Receivables and Credit Card Securities, to the extent and as
specified in the related Prospectus Supplement.
The following is a general description of the Deposited Assets expected to
be included with respect to a Series. Specific information regarding the actual
Deposited Assets will be provided in the Prospectus Supplement used to offer a
Series of Certificates and, to the extent not contained in the related
Prospectus Supplement, in a Current Report on Form 8-K to be filed with the
Commission within 15 days after the initial issuance of such Securities.
Receivables
General. The Deposited Assets for a Series may consist, in whole or in
part, of Receivables. The following discussion of the Receivables, the related
Accounts and the terms thereof will be generally applicable to Receivables
underlying a Credit Card Security and the Agreement relating to such Credit Card
Security. The Accounts will consist of the initial Accounts sold by a Seller, as
well as any Additional Accounts added from time to time, but will not include
any removed Accounts. Each Seller will convey to the Company all Receivables
existing on a cut-off date (the "Cut-off Date") in certain Accounts and all
Receivables arising in such Accounts from time to time thereafter. The
Receivables may be payable in U.S. dollars or in any other foreign currency.
After the Cut-off Date, the Seller may convey to the Company the Receivables in
certain Additional Accounts, in accordance with the provisions of the applicable
Agreement. In addition, pursuant to the Agreement, the Seller in some
circumstances will be obligated to designate Additional Accounts the Receivables
in which will be conveyed to the applicable Trust or, in lieu thereof or in
addition thereto, to include or transfer participations in Receivables
("Participants"). The Seller will convey to the applicable Trust all Receivables
in Additional Accounts, whether such Receivables are then existing or thereafter
created.
Pursuant to the Agreement, the Seller will have the right (subject to
certain limitations and conditions), but not the obligation, to remove the
Receivables in certain Accounts ("Removed Accounts").
"Credit Card Receivables" generally consist of periodic finance charges,
annual membership fees, cash advance fees and late charges on amounts charged
for merchandise and services and certain other fees designated by the Seller
("Finance Charge Receivables") and all amounts charged by cardholders for
merchandise and services, amounts advanced to cardholders as cash advances and
certain other fees billed to cardholders on the Accounts ("Principal
Receivables"). In addition, certain interchange attributable to cardholder
charges for merchandise and services in the Accounts may be treated as Finance
Charge Receivables. "Interchange" consists of certain fees received by a credit
card-issuing bank from the VISA and MasterCard International associations as
partial compensation for taking risk, absorbing fraud losses and funding
receivables for a limited period prior to initial billing. Under the VISA and
MasterCard International systems, a portion of the Interchange in connection
with cardholder charges for merchandise and services is passed from banks which
clear the transactions for merchants to credit card-issuing banks. VISA and
MasterCard International may from time to time change the amounts of Interchange
reimbursed to banks issuing their credit cards.
"Credit Card Receivables" consist of amounts charged on designated Accounts
for merchandise and services, and all annual membership fees and certain other
administrative fees billed to the designated Accounts. Receivables originated
under charge card Accounts are not subject to a monthly finance charge.
There are vicious distinctions between credit card Accounts and charge card
Accounts. Credit card Accounts offer revolving credit plans to their customers.
Charge card Accounts generally have no pre-set spending limit and are designated
for use as a convenient method of payment for the purchase of merchandise and
services. Charge card Accounts generally cannot be used as a means of financing
such purchases. Accordingly, the full balance of a month's purchases is billed
to cardmembers and is due upon receipt of the billing statement. By contrast,
revolving credit plans allow customers to make a minimum monthly payment and to
borrow the remaining outstanding balance from the credit issuer up to a
predetermined limit. As a result of these payment requirement differences,
charge card Accounts generally have a high monthly payment rate and balances
which turn over rapidly relative to their charge volume when compared to credit
card Accounts.
23
Another distinction between charge card Accounts and credit card Accounts
is that charge card Account balances are generally not subject to monthly
finance charges. As described above, the full account balance is billed monthly
and is due upon receipt of the billing statement. Cardmembers do not have the
option of using their charge card Accounts to extend payment and to pay a
finance charge on the remaining outstanding balance. Credit card Accounts, by
contrast, do allow customers to pay a specified minimum portion of an
outstanding amount and to finance the balance at a finance charge rate
determined by the credit card issuer. (Because charge card Account balances may
not be assessed finance charges, a portion of collections on Receivables in
charge card Accounts received in any specified collection period will generally
be allocated to allow for interest payments or yield payments based on the
product of such collections and a specified yield factor.) Each related
Prospectus Supplement, where applicable, will describe the yield calculation for
a specific portfolio of charge card Accounts.
Additional Information Relating to Receivables
The related prospectus Supplement for each Series will provide information
with respect to the Receivables included as Term Assets as of the Cut-off Date,
including, among other things, the aggregate principal balance of the
Receivables and whether the Receivables are credit card Receivables, charge card
Receivables or debit card Receivables.
The eligibility criteria which shall apply with respect to the Term Assets
will be specified in the related Prospectus Supplement. The related Prospectus
Supplement will provide information, including, among other things, (a)
underwriting criteria; (b) the loss and delinquency experience for the portfolio
of Receivables; (c) the composition of the portfolio by account balance; and (d)
the geographic distribution of Accounts and Receivables. The related Prospectus
Supplement will also specify any other limitations on the types or
characteristics of Receivables for a Series.
If information of the nature described above with respect to the
Receivables is not known to the Seller at the time the Securities are initially
offered, approximate or more general information of the nature described above
will be provided in the related Prospectus Supplement and additional information
will be set forth in a Current Report on Form 8-K to be filed with the
Commission within 15 days after the initial issuance of such Certificates.
Credit Card Securities
The Credit Securities will consist of certain eligible credit or charge
card asset backed securities which may include certificates representing
undivided interests in, or notes or loans secured by Receivables generated in
Accounts (as described above). Such certificates, notes or loans will have
previously been offered and distributed to the public pursuant to an effective
Registration Statement. Based on information contained in the offering document
pursuant to which any of the Credit Card Securities were originally offered
(each a "Term Assets Prospectus"), the applicable Prospectus Supplement will set
forth certain information with respect to the public availability of information
with respect to any Term Assets Issuer whose securities constitute more than ten
percent of the Term Assets for any Series as of the date of such Prospectus
Supplement ("Concentrated Term Asset"). More specific terms and conditions of
the Term Assets will be set forth in the related Prospectus Supplement.
This Prospectus relates only to the Securities offered hereby and does not
relate to the Credit Card Securities. The following description of Credit Card
Securities generally is intended only to summarize certain characteristics of
the Credit Card Securities permitted to be included in a Series and does not
purport to be a complete description of any particular Credit Card Security and
is qualified in its entirety by reference to the applicable Prospectus
Supplement, the Term Assets Prospectus, if any, and the Agreement with respect
to any Credit Card Security.
General. Each of the Term Assets has been issued pursuant to a pooling and
servicing agreement, a master pooling and servicing agreement, a sale and
servicing agreement, a trust agreement, indenture or similar agreement. The
Seller will have entered into the Agreement with the trustee under such
Agreement (the "Term Assets Trustee"). Receivables underlying an Agreement will
be serviced by the Servicer directly or by one or more sub-servicers who may be
subject to the supervision of such servicer.
The Term Assets Issuer will be a financial institution, corporation, or
other entity engaged generally in the business of issuing credit or charge
cards; any store or merchandiser that issues credit or charge cards; or a
limited
24
purpose corporation or other entity organized for the purpose of, among other
things, establishing trusts and acquiring and selling receivables to such
trusts, and selling beneficial interests in such trusts; or one of such trusts.
If so specified in the related Prospectus Supplement, the Term Assets Issuer may
be an affiliate of the Company. The obligations of the Term Assets Issuer or
Seller will generally be limited to certain representations and warranties with
respect to the assets conveyed by it to the related trust. Unless otherwise
specified in the related Prospectus Supplement, none of the Term Assets Issuer,
the Seller or the Servicer will have guaranteed any of the Credit Card
Securities issued under the Agreement.
Distributions of principal and interest will be made on the Term Assets on
the dates specified in the related Prospectus Supplement. The Term Assets may be
entitled to receive nominal or no principal distributions or nominal or no
interest distributions. Principal and interest distributions will be made on the
Term Assets by the Term Assets Trustee or the Servicer from the proceeds of the
underlying Receivables and certain other underlying assets. The Seller or the
Servicer may have the right to repurchase assets underlying the Term Assets
after a certain date or under other circumstances specified in the related
Prospectus Supplement.
Term Assets Early Amortization Events. As specified in the Prospectus
Supplement with respect to any Series, principal payments due to the holders of
the Term Assets will generally either commence on a specified date prior to the
final payment thereof or be provided for through the accumulation of certain
collections in specified accounts to be distributed on the specified final
payment date, but in each case principal may be paid earlier or later than such
dates. However, if certain economic or non-economic events specified in the
related Agreement occur (collectively referred to herein as "Term Assets Early
Amortization Events"), monthly principal distributions to the holders of the
Term Assets may begin on the first payment date following the occurrence of such
Term Assets Early Amortization Event or the month in which such event occurs
(the "Term Assets Early Amortization Period"). Reference is made to the
Prospectus Supplement for a description of the Term Assets Early Amortization
Events relevant to the Concentrated Terms Assets for any Series.
Enhancement Related to Term Assets. Enhancement in the form of the reserve
funds, subordination or other securities or interests issued under the
Agreement, guarantees, letters or credit, cash collateral accounts, insurance
policies or other types of enhancement (collectively, "Term Assets Enhancement")
may be provided with respect to the Receivables underlying the Credit Card
Securities or with respect to the Credit Card Securities themselves. The type,
characteristics and amount of Term Assets Enhancement will be a function of
certain characteristics of the underlying Receivables and other factors and will
have been established for the Credit Card Securities on a basis consistent with
the rating of such securities when they were originally issued.
Underlying Receivables. The Credit Card Securities will represent an
undivided beneficial interest in or be accrued by Receivables generated from
time to time in the ordinary course of business in a portfolio of Accounts,
funds collected or to be collected from cardholders in respect of such
Receivables, the right to receive certain other fees and charges attributable to
cardholders charges for merchandise and services in the Accounts and monies on
deposit in certain accounts maintained pursuant to the Agreement. The
Receivables underlying the Credit Card Securities may consist of either credit
card Receivables, charge card Receivables or debit card Receivables. See "--
Receivables" above.
The related Prospectus Supplement for each Series will provide additional
information with respect to the Accounts and Receivables underlying any
Concentrated Term Asset, including, among other things, the aggregate principal
balance of the Receivables, based on information made publicly available with
respect to the related Term Assets Issuer, and whether the Receivables are
credit card receivables, charge card Receivables or debit card Receivables.]
This Prospectus relates only to the Certificates offered hereby and does
not relate to the Term Assets. The following description of the Term Assets is
intended only to summarize certain characteristics of the Term Assets the
Company is permitted to deposit in a Trust or to direct the Trustee to purchase,
and does not purport to be a complete description of any Term Asset and is
qualified in its entirety by reference to the applicable Prospectus Supplement,
Term Asset Prospectus, or Term Assets Indenture (as defined below).
25
Term Assets
General. Unless otherwise specified in the related Prospectus Supplement
each Term Asset will have been issued pursuant to an agreement (each, a "Term
Assets Indenture") between the Term Assets Issuer and the Term Assets Trustee.
Unless otherwise specified, the Term Assets Indenture and the Term Assets
Trustee will be qualified under the Trust Indenture Act of 1939 (the "Trust
Indenture Act") and the Term Assets Indenture will contain certain provisions
required by the Trust Indenture Act.
Certain Covenants. 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
subsidiary's, ability to: (i) consolidate, merge, or transfer or lease assets;
(ii) incur or suffer to exist any lien, charge, or encumbrance upon any of its
property or assets, or to 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; (iii) declare or pay any cash dividends, or make
any distribution 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 certain
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 Term Assets Indenture related to one or more Term Assets included in a
Trust may include some, all or none of the foregoing provisions or variations
thereof or additional covenants not discussed herein. To the extent that the
Term Assets 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 Term Assets against losses.
The Prospectus Supplement used to offer any Series of Certificates will describe
material covenants in relation to any Concentrated Term Asset and, as
applicable, will describe material covenants which are common to any pool of
Term Assets.
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. Such events of default typically include the
following or variations thereof: (i) 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); (ii) failure by the issuer to observe
or perform any covenant, agreement, or condition contained in the securities or
the indenture which failure is materially adverse to security holders and
continues for a specified period after notice thereof is given to the issuer by
the indenture trustee or the holders of not less than a specified percentage of
the outstanding securities; (iii) 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 such securities, and (iv) certain events
of insolvency or bankruptcy with respect to the Term Assets Issuer.
Remedies. Indentures 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
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 trustee
thereunder to be indemnified by the security holders prior to proceeding to
exercise any right or power under such indenture with respect to such securities
at the request of such 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 such request within a reasonable time.
Each Term Assets Indenture may include some, all or none of the foregoing
provisions or variations thereof or additional events of default not discussed
herein. The Prospectus Supplement with respect to any Series of
26
Certificates will describe the events of default under the Term Assets Indenture
with respect to any Concentrated Term Asset ("Term Asset Events of Default") and
applicable remedies with respect thereto. With respect to any Trust comprised of
a pool of securities, the applicable Prospectus Supplement will describe certain
common Term Asset 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
Term Assets, against losses. If a Term Asset Event of Default occurs and the
Trustee as a holder of the Term Assets is entitled to vote or take such other
action to declare the principal amount of a Term Assets and any accrued and
unpaid interest thereon 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 Term Asset ("Outstanding Debt Securities") in
determining whether to declare the acceleration of the Term Assets.
Subordination. As set forth in the applicable Prospectus Supplement,
certain of the Term Assets with respect to any Trust may be either senior
("Senior Term Assets") or subordinated ("Subordinated Term Assets") in right to
payment to other existing or future indebtedness of the Term Assets Issuer. With
respect to Subordinated Term Assets, 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
Term Assets, if any, may be entitled to receive payment of the full amount due
thereon 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 such securities. Consequently, the Trust as a holder of subordinated
debt may suffer a greater loss than if it held unsubordinated debt of the Term
Assets Issuer. There can be no assurance, however, that in the event of a
bankruptcy or similar proceeding the Trust as a holder of Senior Term Assets
would receive all payments in respect of such securities even if holders of
subordinated securities receive amounts in respect of such 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 Term Assets and the percentage of Senior Term Assets and
Subordinated Term Assets, if any, in a Trust comprised of a pool of securities.
Secured Obligations. Certain of the Term Assets with respect to any Trust
may represent secured obligations of the Term Assets Issuer ("Secured Term
Assets"). Generally, unless an event of default shall have occurred, or with
respect to certain collateral or as otherwise set forth in the indenture
pursuant to which such securities were offered and sold, an issuer of secured
obligations generally 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 certain provisions for release,
substitution or disposition of collateral under certain 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 certain events of default with respect
thereto. 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 such securities pending the sale of any
collateral and prior to or during such 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 such 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 Term Assets Indenture with respect to any Secured Term Asset may
include, some, or all or none of the foregoing provisions or variations thereof.
The Prospectus Supplement used to offer any Series of Certificates which
includes Concentrated Term Assets which are Secured Term Assets, will describe
the security provisions of such Term Assets and the related collateral. With
respect to any Trust comprised of a pool of securities, a substantial portion of
which are Secured Term Assets, the applicable Prospectus Supplement will
disclose certain general information with respect to such security provisions
and the collateral.
Principal Economic Terms of Term Assets
Reference is made to the applicable Prospectus Supplement with respect to
each Series of Certificates for a description of the following terms, as
applicable, of any Concentrated Term Asset: (i) the title and series of such
Term Assets, the aggregate principal amount, denomination and form thereof; (ii)
whether such securities are senior or subordinated to any other obligations of
the issuer; (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 such debt securities; (v) the dates on which, or the range
of dates within which, the principal of (and premium, if any, on) such debt
27
securities will be payable; (vi) the rate or rates or the method of
determination thereof, at which such Term Assets will bear interest, if any
("Term Assets Rate"); the date or dates from which such interest will accrue
("Term Assets Interest Accrual Periods"); and the dates on which such interest
will be payable ("Term Assets Payment Dates"); (vii) the obligation, if any, of
the Term Assets Issuer to redeem the Outstanding Debt Securities pursuant to any
sinking fund or analogous 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 such debt securities may be redeemed or
repurchased, in whole or in part, pursuant to such obligation; (viii) the
periods within which or the dates on which, the prices at which and the terms
and conditions upon which such debt securities may be redeemed, if any, in whole
or in part, at the option of the Term Assets Issuer; (ix) whether the Term
Assets were issued at a price lower than the principal amount thereof; (x) if
other than United States dollars, the foreign or composite currency in which
such debt securities are denominated, or in which payment of the principal of
(and premium, if any) or any interest on such Term Assets will be made (the
"Term Assets Currency"), and the circumstances, if any, when such currency of
payment may be changed; (xi) material events of default or restrictive covenants
provided for with respect to such Term Assets; (xii) the rating thereof, if any;
(xiii) certain characteristics of the Receivables which comprise the underlying
assets for the Concentrated Term Asset including, (A) whether such Receivables
are credit card Receivables, charge card Receivables or debit card Receivables,
(B) the fees and charges associated with such Receivables and (C) the servicing
fee or range or servicing fees with respect to the Receivables (xiv) certain
characteristics of Term Assets Enhancement, if any, such as reserve funds,
insurance policies, letters of credit, cash collateral accounts or guarantees
relating to the Receivables underlying the Concentrated Term Asset or to such
Term Assets itself; (xv) the terms on which the underlying Receivables for such
Concentrated Term Asset may, or are required to, be purchased prior to the
expected final payment of such Concentrated Term Asset; and (xvi) the terms on
which Receivables may be substituted for those originally underlying such
Concentrated Term Asset and (xvii) any other material terms of such Term Assets.
With respect to a Trust comprised of a pool of Term Assets, the related
Prospectus Supplement will, to the extent applicable, describe the composition
of the Term Assets pool [as of the Cut-off Date], certain material events of
default or restrictive covenants common to the Term Assets, and, on an
aggregate, percentage or weighted average basis, as applicable, the
characteristics of the pool with respect to certain terms set forth above in 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 Term Asset,
the applicable Prospectus Supplement will disclose the identity of the
applicable Term Assets Issuer and will describe the existence and type of
certain information that is made publicly available by such Term Assets Issuer
regarding such Term Asset or Term Assets and will disclose where and how
prospective purchasers of the Certificates may obtain such publicly available
information with respect to each such Term Assets Issuer. Such information will
typically consist of such Term Assets Issuer's annual report, which contains
financial statements or similar financial information, and can be obtained from
the Commission, if so specified in the applicable Prospectus Supplement, or from
the office of such Term Assets Issuer identified in the related Prospectus
Supplement. However, the precise nature of such publicly available information
and where and how it may be obtained with respect to any given Term Assets
Issuer will vary, and, as described above, will be set forth in the applicable
Prospectus Supplement.
Other Deposited Assets
In addition to the Term Assets, the Company may also deposit into a given
Trust, or the Trustee on behalf of the Certificateholders of a Trust, may enter
into an agreement constituting or providing for the purchase of, to the extent
described in the related Prospectus Supplement, certain assets related or
incidental to one or more of such Term Assets 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 Term Assets
(including assets obtained through foreclosure or in settlement of claims with
respect thereto) (all such assets for any given Series, together with the
related Term Assets, the "Deposited Assets"). 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 Term
Assets.
Unless otherwise specified in the related 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
28
related Trust and the Certificates of each Class of a given Series possess an
equal and ratable interest in such Deposited Assets. The applicable Prospectus
Supplement 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
such Series. In such event, the other Classes of such 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 such Series (or any Class or group of Classes within such
Series) may have the benefit of, Credit Support for any Class or group of
Classes within such Series. Such 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 set forth whether the Trust for any Class or group of Classes of
Certificates contains, or the Certificateholders of such 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 such Class or Classes and
certain information with respect to the obligors of each such element, including
financial information with respect to any such obligor providing Credit Support
for 20% or more of the aggregate principal amount of such Class or Classes.
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 such Series and any Credit Support obtained for
the benefit of the Certificateholders of such Series (or Classes within such
Series) may be subordinated to the rights of the Certificateholders of one or
more other Classes of such Series to the extent described in the related
Prospectus Supplement. Such subordination accordingly provides some additional
credit support to those Certificateholders of those other Classes. For example,
its losses are realized during a given period on the Deposited Assets relating
to a Series of Certificates such that the collections received thereon are
insufficient to make all distributions on the Certificates of such Series, those
realized losses would be allocated to the Certificateholder of any Class of such
Series that is subordinated to another Class, to the extent and in the manner
provided in the related Prospectus Supplement. In addition, if so provided 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
related Prospectus Supplement.
If so provided in the related Prospectus Supplement, the Credit Support for
any Series or Class of Certificates may include, in addition to the
subordination of certain Classes of such Series and the establishment of a
reserve account, any of the other forms of Credit Support described below. Any
such 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 related
Prospectus Supplement. In addition, if so provided in the applicable Prospectus
Supplement, the obligor of any other forms of Credit Support may be reimbursed
for amounts paid pursuant to such Credit Support out of amounts otherwise
payable to one or more of the Classes of the Certificates of such Series.
Letter of Credit; Surety Bond. The Certificateholders of any Series (or
Class or group of Classes of Certificates within such Series) may, if specified
in the applicable Prospectus Supplement, have the benefit of a letter or letters
of credit (a "Letter of Credit") issued by a bank (a "Letter of Credit Bank") or
a surety bond or bonds (a "Surety Bond") issued by a surety company (a
"Surety"). 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 timely the fees or premiums therefor
unless, as described in the related Prospectus Supplement, the payment of such
fees or premiums is otherwise provided for. 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 Supplement will
describe the manner, priority and source of funds by which any such draws are to
be repaid.
29
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
related Prospectus Supplement, the Trustee or such 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 such 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 such 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 provided in the related Prospectus Supplement, the
Trustee or such other person specified in the Prospectus Supplement will deposit
or cause to be deposited into an account maintained with an eligible institution
(which may be the Trustee) (a "Reserve Account") 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 such 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 may be distributed to
Certificateholders of such Class or group of Classes within such Series, or may
be used for other purposes, in the manner and to the extent provided in the
related Prospectus Supplement. Amounts deposited in any Reserve Account will be
invested in certain permitted investments by, or at the direction of, the
Trustee, the Company or such other person named in the related Prospectus
Supplement.
Collections
The Trust Agreement will establish procedures by which the Trustee or such
other person specified in the Prospectus Supplement is obligated, for the
benefit of the Certificateholders of each Series of Certificates, to administer
the related Deposited Assets, including making collections of all payments made
thereon, depositing from time to time prior to any applicable Distribution Date
such collections into a segregated account maintained or controlled by the
applicable Trustee for the benefit of such Series (each a "Certificate
Account"). An Administration 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 such
collections and other amounts available for distribution to the payment of any
administrative or collection expenses (such as any administrative fee) and
certain 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 such Series (and Classes within such
Series), all in the manner and priorities described in the related 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. There can be no assurance
that 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 will be sufficient, after payment of all
prior expenses and fees for such period, to pay amounts then due and owing to
holders of such Certificates. The applicable Prospectus Supplement will also set
forth the manner and priority by which any Realized Loss 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, may be different from the relative
distribution priority assigned to each such Class for payments of other amounts,
such as interest or premium.
[Include the following if Applicable]
30
[SERVICING OF RECEIVABLES]
[General
The following summaries regarding the servicer (the "Servicer") and the
servicing of the Receivables do not purport to be complete and are qualified in
their entirety by reference to the applicable Agreement. The following
description relates to the servicing of Receivables comprising Deposited Assets.
Though certain of the statements below may be applicable to the Receivables
underlying any Credit Card Security, these summaries do not purport to summarize
the provisions of any Agreement and the statements below are qualified in their
entirety by such Agreements with respect to the Receivables underlying any
Credit Card Security.
Collection Procedures
The Servicer will make reasonable efforts to collect all payments required
to be made under the Receivables and will, consistent with the terms of the
related Agreement for a Series and any applicable Credit Support, follow such
collection procedures as it follows with respect to comparable receivables held
in its own portfolio or serviced by it.
Collections
The Agreement relating to the applicable Receivables or a separate
servicing agreement (a "Servicing Agreement") will establish procedures by which
the Servicer or such other person specified in the Prospectus Supplement is
obligated, for the benefit of the Certificateholders of each Series of
Certificates, to administer the related Deposited Assets, including making
collections of all payments thereon, depositing from time to time prior to any
applicable distribution date (each, a "Distribution Date") such collections into
a segregated account maintained or controlled by the applicable Trustee for the
benefit of such Series (each, a "Collection Account").
Unless otherwise indicated in the related Prospectus Supplement, the
Collection Account will be an account maintained (i) at a depositary
institution, the long-term unsecured debt obligations of which at the time of
any deposit therein are rated as described in the related Prospectus Supplement
and as specified by each Rating Agency rating the Securities of such Series or
(ii) in an account or accounts the deposits in which are insured to the maximum
extent available by the FDIC or which are otherwise maintained in a manner
meeting requirements established by each Rating Agency.
Unless otherwise specified in the related Prospectus Supplement, the funds
held in the Collection Account may be invested, pending remittance to the
Trustee, in certain permitted investments. If so specified in the related
Prospectus Supplement, the Servicer or other specified person, as the case may
be, will be entitled to receive as additional compensation any interest or other
income earned on funds in the Collection Account.
Unless otherwise specified in the related Prospectus Supplement, the
Servicer, the Seller, the Trustee, the Company will deposit into the Collection
Account for each Series, within two business days after the date of receipt
thereof, the following payments and collections received or made by it:
(i) all payments on account of principal, including prepayments, on
the Deposited Assets;
(ii) all payments on account of interest or finance charges on such
Deposited Assets after deducting therefrom, at the discretion of the
Servicer but only to the extent of the amount permitted to be withdrawn or
withheld from the Collection Account in accordance with the applicable
Agreement, the Trustee's Fee and the Servicer's fee (the "Servicer's Fee"),
if any, in respect of such Deposited Assets,
(iii) all amounts received by the Servicer in connection with the
liquidation of Deposited Assets other than amounts required to be paid or
refunded to the obligor pursuant to the terms of the applicable documents
or otherwise pursuant to law ("Liquidation Proceeds"), exclusive of, in the
discretion of the Servicer, but only to the extent of the amount permitted
to be withdrawn from the Collection Account in accordance with the related
Agreement, the Trustee's Fee and Servicer's Fee, if any, in respect of the
such Deposited Assets;
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(iv) all amounts required to be deposited therein from any applicable
Credit Support for such Series pursuant to the related Agreement;
(v) all repurchase prices of any such Deposited Assets repurchased by
the Company, the Seller or the Servicer pursuant to the related Agreement;
(vi) any amounts payable to the applicable person with respect to each
Deposited Asset acquired that has been repurchased or removed by the
Company, the Servicer or the Seller pursuant to the related Agreement, all
amounts received thereon and not distributed as of the date on which the
related repurchase price was determined;
(vii) all amounts payable to the Trustee of such Series for deposit
into the Distribution Account, if any, or for remittance to the
Certificateholders of such Series as provided for in the related Agreement;
and
(viii) all amounts necessary to clear and terminate the Collection
Account pursuant to the related Agreement.
In addition, if the Servicer deposits in the Collection Account for a
Series any amount not required to be deposited therein, it may, at any time,
withdraw such amount from such Collection Account.
The Servicer or an Administration Agent, if any is appointed, will direct
the Trustee, and otherwise the Trustee will make all determinations, as to the
appropriate application of such collections and other amounts available for
distribution to the payment of any administrative of collection expenses (such
as any administrative fee) and certain Credit Support-related ongoing fees (such
as insurance premiums, letter of credit or any required account deposits) and to
the payment of amounts then due and owing on the Certificates of such Series
(and Classes within such Series), all in the manner and priorities described in
the related Prospectus Supplement.
The applicable Prospectus Supplement will specify the collection periods,
if applicable, and Distribution Dates for given Series 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. There can be no assurance that amounts received from the
Deposited Assets and any Credit Support obtained for the benefit of
Certificateholders for particular Series or Classes of Certificates over a
specified period will be sufficient, after payment of all prior expenses and
fees for such period, to pay amounts then due and owing to holders of such
Certificates. The applicable Prospectus Supplement will also set forth the
manner and priority by which any Realized Loss 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 the Certificates or 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 the Certificates or to each Class of
a given Series for purposes of payments of certain amounts, such as principal,
may be different from the relative distribution priority assigned to each such
Class for payments of other amounts, such as interest or premium.
Servicing Fee and Payment of Expenses
Except as otherwise described in the related Prospectus Supplement, the
Servicer will be entitled to the Servicer's Fee in an amount to be determined as
specified in the related Prospectus Supplement. The Servicer's Fee may be fixed
or variable, as specified in the related Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, the
Servicer will pay certain expenses incurred in connection with the servicing of
the Receivables including, without limitation, the payment of the fees and
expenses of the Trustee and independent accountants and payment of expenses
incurred in preparation of reports to Securityholders.
32
The rights of the Servicer to received funds from the Collection Account
for a Series, whether as the Servicer's Fees or other compensation, or for the
reimbursement of expenses or otherwise, may be subordinate to the rights of
Securityholders of such Series.
Evidence as to Compliance
The Trust Agreement or Indenture for a Series may provide that, each year,
a firm of independent public accountants will furnish a statement to the Trustee
to the effect that such firm has examined certain documents and records relating
to the servicing of the Receivables by the Servicer and that, on the basis of
such examination, such firm is of the opinion that the servicing has been
conducted in compliance with the Trust Agreement or Indenture, except for (i)
such exceptions as such firm believes to be immaterial and (ii) such other
exceptions as are set forth in such statement.
The Trust Agreement or Indenture for each Series will provide for delivery
to the Trustee for such Series of an annual statement signed by an officer of
the Servicer to the effect that the Servicer has fulfilled its obligations
thereunder throughout the preceding calendar year.
Certain Matters Regarding the Servicer
The Servicer, if any, for each Series will be identified in the related
Prospectus Supplement. The Servicer may be an affiliate of the Seller and may
have other business relationships with the Company and its affiliates.
If an event of default occurs with respect to the Servicer under an
Agreement, or Servicing Agreement, the Servicer may be replaced by the Trustee
or a successor Servicer. Servicer events of default and the rights of the
Trustee upon such a default will be set forth in the related Prospectus
Supplement.
Unless otherwise provided in the related Prospectus Supplement, the
Servicer may not resign from its obligations and duties under an Agreement or
Servicing Agreement, except (a) upon determination that (i) the performance of
its duties thereunder is no longer permissible under applicable law and (ii)
there is no reasonable action which the Servicer could take to make the
performance of its duties thereunder permissible under applicable law, (b) in
connection with a conveyance, consolidation or merger by the Servicer with any
corporation, or conveyance or transfer of its properties or assets substantially
as an entirety to any other person permitted thereunder or (c) upon the
satisfaction of the following conditions: (i) the acceptance and assumption, by
an agreement supplemental thereto, in form satisfactory to the Trustee, of the
obligations and duties of the Servicer thereunder by a proposed successor
Servicer, (ii) the Servicer having given written notice to each Rating Agency of
such transfer and such Rating Agency having notified the Servicer in Writing to
the effect that its then current rating of the Certificates of any Series will
not be reduced or withdrawn as a result of such transfer, (iii) the written
consent of any provider of Credit Support, if applicable, and (iv) the proposes
successor Servicer being an Eligible Servicer (as defined below).
Notwithstanding anything in an Agreement or Servicing Agreement to the contrary,
any successor Servicer appointed under clause (c) will be deemed to be a
successor Servicer. Any such determination permitting the resignation of the
Servicer will be evidenced as to clause (a) above by an opinion of counsel to
such effect delivered to the Trustee. No such resignation will become effective
until the Trustee or a successor Servicer shall have assumed the
responsibilities and obligations of the Servicer in accordance with an Agreement
or Servicing Agreement.
"Eligible Servicer" means the Trustee or an entity which, at the time of
its appointment as Servicer, (i) is an established financial institution having
capital or a net worth of not less than $100,000,000, (ii) is servicing a
portfolio of credit card or charge card accounts, (iii) is legal qualified and
has the capacity to service the Accounts, or (iv) has demonstrated the ability
to professionally and completely service a portfolio of similar accounts in
accordance with standards of skill and care customary in the industry.
Indemnification
Except to the extent otherwise provided therein, each Agreement or
Servicing Agreement will provide that the Servicer will indemnify the Trust, the
Trustee and the Certificateholders from and against any loss, liability,
expense, damage or injury suffered or sustained by reason of any acts, omissions
or alleged acts or omissions arising out of activities of the Servicer with
respect to the Trust or the Trustee or any co-trustee, including those arising
33
from acts or omissions of the Servicer pursuant to the Agreement or Servicing
Agreement, including but not limited to any judgment, award, settlement,
reasonable attorney's fees and other costs or expenses incurred in connection
with the defense of any actual or threatened action, proceeding or claim;
provided, however, that the Servicer shall not, unless otherwise specified in
the related Prospectus Supplement, indemnify: (i) the Trust or the Trustee if
such acts, omissions or alleged acts or omissions constitute fraud, negligence,
breach or fiduciary duty or misconduct by the Trustee; (ii) the Trust, the
Trustee or the Certificateholders for any liability, cost or expense with
respect to any action taken by the Trust or Trustee at the request of the
Certificateholders nor with respect to any Federal, state or local income or
franchise taxes (or any interest or penalties with respect thereto) required to
be paid by the Trust or the Certificateholders of a Series of any taxing
authority; or (iii) the Trust or Certificateholders for any losses incurred by
any of them as a result of defaulted Receivables or Receivables which are
written off as uncollectible unless such writeoff is caused by a breach of the
Agreement or Servicing Agreement by the Servicer.]
DESCRIPTION OF THE TRUST AGREEMENT
General
The following summary of certain provisions of the Trust Agreement and the
Certificates does not purport to be complete and such 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 particular
sections or defined terms of the Trust Agreement are referred to, such sections
or defined terms are incorporated herein by reference as part of the statement
made, and the statement is qualified in its entirety by such reference.
Assignment of Deposited Assets
At the time of issuance of any Series of Certificates, the Company will
cause the Term Assets 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 Company on or with respect to such 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. Unless otherwise
provided in the Prospectus Supplement, the Trustee will, concurrently with such
assignment, deliver the Certificates to the Company 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. Such schedule will
include certain statistical information with respect to each Term Asset and each
other Deposited Asset as of the Cut-off Date, and in the event any Term Asset
represents ten percent or more of the total Term Assets with respect to any
Series of Certificates, such schedule will include, to the extent applicable,
information regarding the payment terms thereof, the Retained Interest, if any,
with respect thereto, the maturity or term thereof, the rating, if any, thereof
and certain other information with respect thereto.
In addition, the Company 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 such documents
upon receipt thereof or within such period as is permitted in the Prospectus
Supplement, and the Trustee (or such custodian) will hold such documents in
trust for the benefit of the Certificateholders.
With respect to certain types of Deposited Assets specified in the
applicable Prospectus Supplement only if and to the extent provided therein, if
any such document is found to be missing or defective in any material respect,
the Trustee (or such custodian) shall immediately notify the Administrative
Agent, if any, and the Company, and the Administrative Agent, if any, and
otherwise the Trustee shall immediately notify the relevant person who sold the
applicable Deposited Asset to the Company (a "Deposited Asset Provider"). To the
extent specified in the applicable Prospectus Supplement, if the Deposited Asset
Provider cannot cure such omission or defect within 60 days after receipt of
such notice, the Deposited Asset Provider will be obligated, within 90 days of
receipt of such notice, to repurchase the related Deposited Asset from the Trust
at the Purchase Price (as defined below) or provide a substitute for such
Deposited Asset. There can be no assurance that a Deposited Asset Provider will
fulfill this repurchase or substitution obligation. Although the Administrative
Agent, if any, or otherwise an Administrator, on behalf of the Trustee is
obligated to use its best efforts to enforce such obligation, neither such
Administrative Agent nor the Company will be obligated to repurchase or
substitute for such Deposited Asset if the Deposited Asset
34
Provider defaults on its obligation. Unless otherwise specified in the related
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 Company and the Administrative Agent, if any, will make certain
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 such representation of the Company or any such Administrative Agent, as the
case may be, which materially and adversely affects the interests of the
Certificateholders, the Company or any such Administrative Agent, respectively,
will be obligated to cure the breach in all material respects.
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 and will follow or cause to be followed such
collection procedures, if any, 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, the "Credit Support Instruments") and provided
that, except as otherwise expressly set forth 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 third parties they deem
qualified to perform such obligations (each, a "Sub-Administrative Agent), but
the Trustee or Administrative Agent will remain obligated with respect to such
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 such 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 (as defined below).
The agreement between any Administrative Agent or Trustee and a
Sub-Administrative Agent (a "Sub-Administration Agreement") will be consistent
with the terms of the Trust Agreement and such 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.
With respect to any Sub-Administrative Agreement between an Administrative Agent
and a Sub-Administrative Agent, although each such Sub-Administration Agreement
will be a contract solely between such 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 such Administrative
Agent for such Series of Certificates is no longer acting in such capacity, the
Trustee or any successor Administrative Agent must recognize the
Sub-Administrative Agent's rights and obligations under such Sub-Administration
Agreement.
The Administrative Agent or Trustee, as applicable, 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 such fees. However, a Sub-Administrative Agent may be entitled
to a Retained Interest in certain Deposited Assets to the extent provided in the
related 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 such Series. See "--Retained Interest;
Administrative Agent Compensation and Payment of Expenses".
The Administrative Agent or Trustee, as applicable, may require any
Sub-Administrative Agent to agree to indemnify the Administrative Agent or
Trustee, as applicable, for any liability or obligation sustained by the
Administrative Agent or Trustee, as applicable, 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, as administrator with respect to the
Deposited Assets, the Trustee, on behalf of the Certificateholders of
35
a given Series (or any Class or Classes within such Series), will present claims
under each applicable Credit Support Instrument, and will take such reasonable
steps as are necessary to receive payment or to permit recovery thereunder 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 provided 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 such normal practices and procedures as it deems necessary or
advisable to realize upon the defaulted Deposited Asset, provided that, except
as otherwise expressly provided in the applicable Prospectus Supplement, it
shall not be required to expend or risk its own funds or 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 thereon at the
applicable interest rate and (iii) the aggregate amount of expenses incurred by
the Administrative Agent and the Trustee, as applicable, 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 provided 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 such 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 thereof. If so provided, the 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 provided 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 thereof, 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, and otherwise 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 related Prospectus Supplement.
Advances in Respect of Delinquencies
Unless otherwise specified in the applicable Prospectus Supplement, the
Administrative Agent, if any, specified therein 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 provided in the applicable Prospectus Supplement, any such Administrative
Agent will advance on or before each Distribution Date its own funds or funds
held in the Certificate Account for such Series that are not part of the funds
available for distribution for such Distribution Date, in an amount equal to 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 and were
delinquent on the related Determination Date, subject to (i) any such
Administrative Agent's good faith determination that such advances will be
reimbursable from Related Proceeds (as defined below) and (ii) such other
conditions as may be specified in the Prospectus Supplement.
36
Advances, if any, 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 thereto, rather than to guarantee or insure
against losses. Unless otherwise provided in the related Prospectus Supplement,
advances of an Administrative Agent's funds, if any, will be reimbursable only
out of related recoveries on the Deposited Assets (and amounts received under
any form of Credit Support) for such Series with respect to which such advances
were made (as to any Deposited Assets, "Related Proceeds"); provided, however,
that any such advance will be reimbursable from any amounts in the Certificate
Account for such Series to the extent that such Administrative Agent shall
determine, in its sole judgment, that such advance (a "Nonrecoverable Advance")
is not ultimately recoverable from Related Proceeds. If advances have been made
by such Administrative Agent from excess funds in the Certificate Account for
any Series, such Administrative Agent will replace such funds in such
Certificate Account on any future Distribution Date to the extent that funds in
such Certificate Account on such Distribution Date are less than payments
required to be made to Certificateholders on such date. If so specified in the
related Prospectus Supplement, the obligations, if any, of an Administrative
Agent 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 set forth in the
related Prospectus Supplement.
Certain Matters Regarding the Administrative Agent and the Company
An Administrative Agent, if any, for each Series of Certificates under the
Trust Agreement will be named in the related Prospectus Supplement. The entity
serving as Administrative Agent for any such Series may be the Trustee, the
Company, an affiliate of either thereof, the Deposited Asset Provider or any
third party and may have other normal business relationships with the Trustee,
the Company, their affiliates or the Deposited Asset Provider.
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 such resignation, and the appointment of a
successor, will not result in a withdrawal or downgrading of the rating of any
Class of Certificates of such Series or upon a determination that its duties
under the Trust Agreement with respect to such Series are no longer permissible
under applicable law. No such 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 such Series.
The Trust Agreement will further provide that neither such an
Administrative Agent, the Company nor any director, officer, employee, or agent
of the Administrative Agent or the Company 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
Company nor any such person will be protected against any liability that would
otherwise be imposed by reason of willful misfeasance, bad faith or negligence
in the performance of duties thereunder or by reason of reckless disregard of
obligations and duties thereunder. The Trust Agreement may further provide that,
unless otherwise provided in the applicable series supplement thereto, such an
Administrative Agent, the Company and any director, officer, employee or agent
of the Administrative Agent or the Company will be entitled to the
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 negligence in
the performance of duties thereunder or by reason of reckless disregard of
obligations and duties thereunder. In addition, the Trust Agreement will provide
that neither such an Administrative Agent nor the Company 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 involve it in any expense or liability. Each of such
Administrative Agent or the Company any, however, in its discretion undertake
any such action which it may deem necessary or desirable with respect to the
Trust Agreement and the rights and duties of the parties thereto and the
interests of the Certificateholders thereunder. The applicable Prospectus
Supplement will describe how such legal expenses and costs of such action and
any liability resulting therefrom 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.
37
Administrative Agent Termination Events; Rights Upon Administrative Agent
Termination Event
Unless otherwise provided in the related Prospectus Supplement,
"Administrative Agent Termination Events" under the Trust Agreement with respect
to any given Series of Certificates will consist of the following: (i) 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 such failure to the Administrative Agent by the
Trustee or the Company, or to the Administrative Agent, the Company and the
Trustee by the holders of such Certificates evidencing not less than 25% of the
Voting Rights (as defined below); (ii) 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 such Series which
continues unremedied for thirty days after the giving of written notice of such
failure to the Administrative Agent by the Trustee or the Company, or to the
Administrative Agent, the Company and the Trustee by the holders of such
Certificates evidencing not less than 25% of the Voting Rights; and (iii)
certain 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 set forth 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 (as defined below) applicable to each such 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
such 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 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 Company or the
Trustee may, and at the direction of holders of such Certificates evidencing not
less than the "Required Percentage--Administrative Agent Termination" of the
Voting Rights, the Trustee will, terminate all the rights and obligations of
such 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 such Administrative Agent), whereupon the Trustee will succeed to
all the responsibilities, duties and liabilities of such Administrative Agent
under the Trust Agreement with respect to such 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 so to act, it may, or, at the written request of the
holders of such Certificates evidencing not less than the "Required
Percentage--Termination" of the Voting Rights, it will appoint, or petition a
court of competent jurisdiction for the appointment of, an administration agent
with a net worth at the time of such appointment of at least $15,000,000 to act
as successor to such Administrative Agent under the Trust Agreement with respect
to such Series. Pending such appointment, the Trustee is obligated to act in
such 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 to be paid to such successor, which in no event may be greater than
the compensation payable to such Administrative Agent under the Trust Agreement
with respect to such Series.
No Certificateholder will have the right under the Trust Agreement to
institute any proceeding with respect thereto unless such 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" 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 trusts or powers vested in it by the Trust Agreement or
to make any investigation of matters arising thereunder or to institute, conduct
or defend any litigation thereunder or in relation thereto at the request, order
or direction of any of the holders of Certificates covered by the Trust
Agreement, unless such Certificateholders have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities which may be
incurred therein or thereby.
38
Modification and Waiver
Unless otherwise specified in the applicable Prospectus Supplement, the
Trust Agreement for each Series of Certificates may be amended by the Company
and the Trustee with respect to such Series, without notice to or consent of the
Certificateholders, for certain purposes including (i) to cure any ambiguity,
(ii) to correct or supplement any provision therein which may be inconsistent
with any other provision therein or in the Prospectus Supplement, (iii) to add
or supplement any Credit Support for the benefit of any Certificateholders
(provided that if any such 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), (iv) to add to the covenants, restrictions or
obligations of the Company, the Administrative Agent, if any, or the Trustee for
the benefit of the Certificateholders, (v) to add, change or eliminate any other
provisions with respect to matters or questions arising under such Trust
Agreement, so long as (x) any such 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 such
Certificates that such amendment will not cause such Rating Agency to reduce or
withdraw the then current rating thereof, or (vi) 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
Company, and the Trustee, with the consent of the holders of Certificates
evidencing not less than the "Required Percentage--Amendment" 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 such Certificateholders; provided,
however, that in the event such 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 such Series or Class.
Except as otherwise set forth in the applicable Prospectus Supplement, no
such 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 such 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" 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
Company, the Trustee or the Administrative Agent, if any, with certain
restrictive provisions, if any, of the Trust Agreement before the time for such
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 such 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 thereby.
Reports to Certificateholders; Notices
Reports to Certificateholders. Unless otherwise provided 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
provided in the related Prospectus Supplement, will forward or cause to be
forwarded to each such Certificateholder, to the Company and to such 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 Pass-Through Rate, the
Pass-Through Rate applicable to such Distribution Date, as calculated in
accordance with the method specified herein and in the related Prospectus
Supplement;
39
(iii) the amount of compensation received by the Administrative Agent, if
any, and the Trustee for the period relating to such Distribution Date, and such
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 the Prospectus Supplement provides for advances, the aggregate
amount of advances included in such 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 thereon
at the close of business on such Distribution Date;
(vi) the aggregate Certificate Principal Balance or aggregate Notional
Amount, if applicable, of each Class of Certificates (including any Class of
Certificates not offered hereby) at the close of business on such Distribution
Date, separately identifying any reduction in such aggregate Certificate
Principal Balance or aggregate Notional Amount due to the allocation of any
Realized Losses or otherwise;
(vii) as to any Series (or Class within such 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 such Distribution Date.
In the case of information furnished pursuant to subclauses (i) and (iii)
above, the amounts shall be expressed as a U.S. dollar amount (or equivalent
thereof in any other Specified Currency) per minimum denomination of
Certificates or for such other specified portion thereof. Within a reasonable
period of time after the end of each calendar year, the Administrative Agent, if
any, or the Trustee shall furnish to each person who at any time during the
calendar year was a Certificateholder a statement containing the information set
forth in subclauses (i) and (iii) above, aggregated for such calendar year or
the applicable portion thereof during which such person was a Certificateholder.
Such obligation of the Administrative Agent or the Trustee, as applicable, shall
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 provided in the applicable Prospectus Supplement,
any notice required to be given to a holder of a Registered Certificate will be
mailed to the address of such holder set forth in the applicable Certificate
Register. Any notice required to be given to a holder of a Bearer Certificate
will be published in a newspaper of general circulation in the city or cities
specified in the Prospectus Supplement relating to such Bearer Certificate.
Evidence as to Compliance
Unless otherwise specified in the applicable Prospectus Supplement, the
Trust Agreement will provide that on or before a specified date in each year, a
firm of independent public accountants will furnish a statement to the Trustee
to the effect that such firm has examined certain documents and records relating
to the administration of the Deposited Assets during the related 12-month period
(or, in the case of the first such 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), which report should enable the
recipients to determine whether such administration was conducted in compliance
with the terms of the Trust Agreement. Such report shall identify any exceptions
found during the examination.
The Trust Agreement will also provide for delivery to the Company, 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 set forth in the related Prospectus Supplement.
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Replacement Certificates
Unless otherwise provided in the applicable Prospectus Supplement, if a
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 (in the case of Registered Securities) or at the principal London
office of the applicable Trustee (in the case of Bearer Certificates), or such
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 in connection therewith and the furnishing of such evidence and
indemnity as such Trustee may require. Mutilated Certificates must be
surrendered before new Certificates will be issued.
Termination
Unless otherwise provided in the Prospectus Supplement, 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 any such Deposited Asset and (ii) the purchase of all the assets
of the Trust by the party entitled to effect such termination, under the
circumstances and in the manner set forth in the related Prospectus Supplement.
In no event, however, will any trust created by the Trust Agreement continue
beyond the respective date specified in the related 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 such purchase of Deposited Assets and property acquired in respect of
Deposited Assets evidenced by a Series of Certificates shall 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 such
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 therein (such price, a "Purchase Price"). The exercise of
such right will effect early retirement of the Certificates of that Series, but
the right of the person entitled to effect such termination is subject to the
aggregate principal balance of the outstanding Deposited Assets for such 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 related 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 and is not accountable for the use or application by or on
behalf of any Administrative Agent of any funds paid to such Administrative
Agent or its designee in respect of such Certificates or the Deposited Assets,
or deposited into or withdrawn from the related Certificate Account or any other
account by or on behalf of such Administrative Agent. The Trustee is required to
perform only those duties specifically required under the Trust Agreement with
respect to such Series. However, upon receipt of the various certificates,
reports or other instruments required to be furnished to it, the Trustee is
required to examine such documents and to determine whether they conform to the
applicable requirements of the Trust Agreement.
The Trustee
The Trustee for any given Series of Certificates under the Trust Agreement
will be named in the related Prospectus Supplement. The commercial bank,
national banking association or trust company serving as Trustee, will be
unaffiliated with, but may have normal banking relationships with, the Company,
any Administrative Agent and their respective affiliates.
41
LIMITATIONS ON ISSUANCE OF BEARER CERTIFICATES
In compliance with United States Federal income tax laws and regulations,
the Company and any underwriter, agent or dealer participating in the offering
of any Bearer Certificate will agree that, in connection with the original
issuance of such Bearer Certificate and during the period ending 40 days after
the issue date of such Bearer Certificate, they will not offer, sell or deliver
such Bearer Certificate, directly or indirectly, to a U.S. Person or to any
person within the United States, except to the extent permitted under U.S.
Treasury regulations.
Bearer Certificates will bear a legend to the following effect: any United
States Person who holds this obligation will be subject to limitations under the
United States income tax laws, including the limitations provided in Sections
1650(j) and 1287(a) of the Internal Revenue Code". The sections referred to in
the legend provide that, with certain exceptions, a United States taxpayer who
holds Bearer Certificates will not be allowed to deduct any loss with respect
to, and will not be eligible for capital gain treatment with respect to any gain
realized on a sale, exchange, redemption or other disposition of, such Bearer
Certificates.
As used herein, "United States" means the United States of America and its
possessions, and "U.S. Person" means a citizen or resident of the United States,
a corporation, partnership or other entity created or organized in or under the
laws of the United States, or an estate or trust the income of which is subject
to United States Federal income taxation regardless of its source.
Pending the availability of a definitive Global Security or individual
Bearer Certificates, as the case may be, Securities that are issuable as Bearer
Certificates may initially be represented by a single temporary Global Security,
without interest coupons, to be deposited with a common depositary in London for
Morgan Guaranty Trust Company of New York, Brussels Office, as operator of the
Euroclear System ("Euroclear"), and Centrale de Livraison de Valeurs Mobilieres
S.A. ("CEDEL") for credit to the accounts designated by or on behalf of the
purchases thereof. Following the availability of a definitive Global Security in
bearer form, without coupons attached, or individual Bearer Certificates and
subject to any further limitations described in the applicable Prospectus
Supplement, the temporary Global Security will be exchangeable for interests in
such definitive Global Security or for such individual Bearer Certificates,
respectively, only upon receipt of a "Certificate of Non-U.S. Beneficial
Ownership." A "Certificate of Non-U.S. Beneficial Ownership" is a certificate to
the effect that a beneficial interest in a temporary Global Security is owned by
a person that is not a U.S. Person or is owned by or through a financial
institution in compliance with applicable U.S. Treasury regulations. No Bearer
Certificate will be delivered in or to the United States. If so specified in the
applicable Prospectus Supplement, interest on a temporary Global Security will
be distributed to each of Euroclear and CEDEL with respect to that portion of
such temporary Global Security held for its account, but only upon receipt as of
the relevant Distribution Date of a Certificate of Non-U.S. Beneficial
Ownership.
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. Such risks include,
without limitation, the possibility of significant changes in rates of exchange
between the U.S. dollar and such Specified Currency and the possibility of the
imposition or modification of foreign exchange controls with respect to such
Specified Currency. Such risks generally depend on factors over which the
Company 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 such
Certificate below its Pass-Through 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 as well as the availability
of a Specified Currency for making distributions in respect of
42
Certificates denominated in such currency. At present, the Company 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. 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 such Certificate are distributable would not be available. In that
event, such payments will be made in the manner set forth above under
"Description of Certificates--General" or as otherwise specified in the
applicable Prospectus Supplement.
THIS PROSPECTUS DOES NOT DESCRIBE ALL THE RISKS OF AN INVESTMENT IN
CERTIFICATES DENOMINATED IN A CURRENCY OTHER THAN U.S. DOLLARS, AND THE COMPANY
DISCLAIMS ANY RESPONSIBILITY TO ADVISE PROSPECTIVE PURCHASERS OF SUCH RISKS AS
THEY EXIST AT THE DATE OF THIS PROSPECTUS OR AS SUCH RISKS MAY CHANGE FROM TIME
TO TIME. 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 set forth
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, such Certificates.
Any Prospectus Supplement relating to Certificates having a Specified
Currency other than U.S. dollars will contain information concerning historical
exchange rates for such currency against the U.S. dollar, a description of such
currency, any exchange controls affecting such currency and any other required
information concerning such currency.
Payment Currency
Except as set forth below or unless otherwise provided in the applicable
Prospectus Supplement, if distributions in respect of a Certificate are required
to be made in a Specified Currency other than U.S. dollars and such currency is
unavailable due to the imposition of exchange controls or other circumstances
beyond the Company's control or is no longer used by the government of the
country issuing such currency or for the settlement of transactions by public
institutions of or within the international banking community, then all
distributions in respect of such Certificate shall be made in U.S. dollars until
such 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 Market Exchange Rate for such currency or as otherwise
indicated in the applicable Prospectus Supplement.
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 in respect of such 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
such 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 such
Trustee on the basis of the most recently available Market Exchange Rates for
such Components or as otherwise indicated in the applicable Prospectus
Supplement.
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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 such single currency
equal to the sum of the amounts of the consolidated component currencies
expressed in such 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 of such two or more 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
such 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.
PLAN OF DISTRIBUTION
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 set forth the terms of the offering of
any Series of Certificates, which may include the names of any underwriters, or
initial purchasers, the purchase price of such Certificates and the proceeds to
the Company from such sale, 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 such 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 thereby.
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. Such Certificates may
be offered to the public either through underwriting syndicates represented by
managing underwriters or by underwriters without a syndicate. Such managing
underwriters or underwriters in the United States will include Salomon Brothers
Inc, an affiliate of the Company. Unless otherwise set forth in the applicable
Prospectus Supplement, the obligations of the underwriters to purchase such
Certificates will be subject to certain conditions precedent, and the
underwriters will be obligated to purchase all such Certificates if any of such
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 Company from
time to time. Any agent involved in the offer or sale of Certificates will be
named, and any commissions payable by the Company to such agent will be set
forth, in the applicable Prospectus Supplement. Unless otherwise indicated in
the applicable Prospectus Supplement, any such agent will act on a best efforts
basis for the period of its appointment.
If so indicated in the applicable Prospectus Supplement, the Company will
authorize agents, underwriters or dealers to solicit offers by certain specified
institutions to purchase Certificates at the public offering price described in
such Prospectus Supplement pursuant to delayed delivery contracts providing for
payment and delivery on a future date specified in such Prospectus Supplement.
Such contracts will be subject only to those conditions set forth in the
applicable Prospectus Supplement and such Prospectus Supplement will set forth
the commissions payable for solicitation of such contracts.
44
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 Company to
indemnification by the Company against certain civil liabilities, including
liabilities under the Securities Act, or to contribution with respect to
payments that the agents or underwriters may be required to make in respect
thereof. Agents and underwriters may be customers of, engage in transactions
with, or perform services for, the Company or its affiliates in the ordinary
course of business.
Salomon Brothers Inc is an affiliate of the Company and is an indirect
wholly owned subsidiary of Salomon Smith Barney Holdings Inc., the indirect
parent corporation of the Company. Salomon Brothers Inc's participation in the
offer and sale of Certificates complies with the requirements of Rule 2720 of
the National Association of Securities Dealers, Inc. regarding underwriting
securities of an affiliate.
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 hereby.
Any unrated Classes or Classes rated below investment grade may be retained by
the Company or sold at any time to one or more purchasers.
Affiliates of the Underwriters may act as agents or underwriters in
connection with the sale of the Certificates. Any affiliate of the Underwriters
so acting will be named, and its affiliation with the Underwriters described, in
the related Prospectus Supplement. Also, affiliates of the Underwriters may act
as principals or agents in connection with market-making transactions relating
to the Certificates. A Prospectus Supplement will be prepared with respect to
the Certificates for use by such affiliates in connection with offers and sales
related to market-making transactions in the Certificates.
LEGAL OPINIONS
Certain legal matters with respect to the Certificates will be passed upon
for the Company and the underwriters by Orrick, Herrington & Sutcliffe LLP, New
York, New York or other counsel identified in the applicable Prospectus
Supplement.
45
INDEX OF TERMS
Accounts.......................................................................1
Additional Accounts............................................................6
Administration Fee.............................................................7
Administrative Agent...........................................................1
Agreement......................................................................3
Base Rate.....................................................................13
Bearer Certificates............................................................1
Business Day..................................................................12
Calculation Agent.............................................................14
Calculation Date..............................................................15
CD Rate.......................................................................15
CD Rate Certificate...........................................................13
CD Rate Determination Date....................................................15
Cede...........................................................................2
CEDEL.........................................................................42
Certificate Account...........................................................30
Certificate Principal Balance.................................................18
Certificateholders.............................................................1
Certificates...................................................................1
Class..........................................................................1
Collection Account............................................................31
Commercial Paper Rate Certificate.............................................15
Commercial Paper Rate Determination Date......................................15
Commission.....................................................................1
Company........................................................................1
Components....................................................................44
Composite Quotations..........................................................13
Concentrated Term Asset.......................................................25
Concentrated Term Assets......................................................22
Coupons.......................................................................10
Credit Card Receivables...................................................23, 24
Credit Card Securities.........................................................1
Credit Support.................................................................1
Credit Support Instruments....................................................35
Cut-off Date..................................................................23
Day of Valuation..............................................................44
Definitive Certificate........................................................20
Depositary....................................................................20
Deposited Asset Provider......................................................35
Deposited Assets...............................................................1
Determination Date............................................................11
Distribution Date..............................................................1
Early Amortization Event.......................................................3
Early Amortization Period......................................................3
ECU............................................................................1
Eligible Servicer.............................................................34
Euroclear.....................................................................42
Exchange Act...................................................................1
Exchange Rate Agent...........................................................11
Exchangeable Series...........................................................18
Fannie Mae....................................................................22
Federal Funds Rate............................................................16
Federal Funds Rate Certificate................................................13
Federal Funds Rate Determination Date.........................................16
FFCB..........................................................................22
46
FHLB..........................................................................22
Finance Charge Receivables....................................................23
FIRREA.........................................................................4
Fixed Pass-Through Rate.......................................................10
Fixed Rate Certificates.......................................................13
Floating Rate Certificates....................................................13
Freddie Mae...................................................................22
Global Security................................................................1
GSE............................................................................1
GSE Issuer....................................................................22
H.15(519).....................................................................13
Index Maturity................................................................13
Interchange...................................................................23
Interest Reset Date...........................................................14
Interest Reset Period.........................................................14
Letter of Credit..............................................................30
Letter of Credit Bank.........................................................30
LIBOR.........................................................................16
LIBOR Certificate.............................................................13
LIBOR Determination Date......................................................16
Liquidation Proceeds..........................................................32
London Banking Day............................................................12
Market Exchange Rate..........................................................11
Maximum Pass-Through Rate.....................................................14
Minimum Pass-Through Rate.....................................................14
Money Market Yield............................................................16
Nonrecoverable Advance........................................................37
Notional Amount...............................................................13
Offering Agent.................................................................2
Option to Elect Exchange......................................................19
Optional Exchange Date........................................................18
Original Issue Date...........................................................10
Originator.....................................................................4
Outstanding Debt Securities...................................................27
Participants..................................................................23
Pass-Through Rate.............................................................10
Principal Receivables.........................................................23
Prospectus Supplement..........................................................1
Purchase Price................................................................42
Rating Agency..................................................................6
Realized Losses...............................................................18
Receivables....................................................................1
REFCORP.......................................................................22
Registered Certificates........................................................1
Registration Statement.........................................................1
Related Proceeds..............................................................37
Required Percentage...........................................................38
Reserve Account...............................................................30
Retained Interest..............................................................8
Reuters Screen LIBO Page......................................................17
Sallie Mae....................................................................22
SBHCI..........................................................................7
Secured Term Assets...........................................................27
Securities Act.................................................................1
Seller.........................................................................3
Senior Term Assets............................................................27
47
Series.........................................................................1
Servicer.......................................................................1
Servicer's Fee................................................................32
Servicing Agreement...........................................................31
Specified Currency.............................................................1
Specified Interest Currency....................................................1
Specified Premium Currency.....................................................1
Specified Principal Currency...................................................1
Spread........................................................................13
Spread Multiplier.............................................................13
Strip Certificates............................................................10
Stripped Interest.............................................................13
Sub-Administration Agreement..................................................35
Sub-Administrative Agent......................................................35
Subordinated Term Assets......................................................27
Surety........................................................................30
Surety Bond...................................................................30
Term Asset Events of Default..................................................27
Term Asset Prospectus.........................................................22
Term Assets....................................................................1
Term Assets Currency..........................................................28
Term Assets Early Amortization Event...........................................3
Term Assets Early Amortization Events.........................................25
Term Assets Early Amortization Period..........................................3
Term Assets Enhancement.......................................................25
Term Assets Indenture.........................................................26
Term Assets Interest Accrual Periods..........................................28
Term Assets Issuers...........................................................21
Term Assets Payment Dates.....................................................28
Term Assets Prospectus........................................................24
Term Assets Rate..............................................................28
Term Assets Trustee...........................................................25
Treasury Bills................................................................17
Treasury Rate.................................................................17
Treasury Rate Certificate.....................................................13
Treasury Rate Determination Date..............................................18
Trust..........................................................................1
Trust Agreement................................................................1
Trustee........................................................................1
Trustee's Fee..................................................................7
TVA...........................................................................22
U.S. Person...................................................................42
United States.................................................................42
Variable Pass-Through Rate....................................................10
Voting Rights.................................................................38
48
Prospectus Supplement
(To Prospectus Dated ________________________)
$
Structured Products Series 19__ - [_____________] Trust
$______ Class _____ Notes, [ ]% [Variable] Note Interest Rate
[Notional Amount] [(Approximate)], Class Certificates.
[______%] [Variable] Pass Through Rate
Structured Products Corp.
Depositor
Each Structured Products Trust Certificates Series 19__ - [__] offered hereby
will consist of ___ class of Certificates, designated as Class Certificates(,)
[and] Class ___ Certificates [and list others], [all] of which [only the Class
___ Certificates(,) [and] Class ___ Certificates [and list others]]
(collectively, the "Certificates") and will represent a fractional undivided
beneficial interest in the Structured Products Series 19__ - [__] Trust (the
"Trust") to be formed pursuant to the Trust Agreement dated as of ______, 19__,
between Structured Products Corp. (the "Company" and _______________, as trustee
(the "Owner Trustee") (the "Trust Agreement"). The Structured Products Trust
Series 19__ [__] Notes (the "Notes" and, collectively with the Notes, the
"Securities") will be issued pursuant to an indenture dated as of ______, 19__,
between the Trust and _______, as trustee (the "Indenture Trustee") (the
"Indenture"). The property of the Trust will consist [in part] of [SELECT ONE OF
THE FOLLOWING BRACKETED SELECTIONS] [Alternative 1: specify debt security or a
pool of such debt securities issued by one or more corporations, banking
organizations or insurance companies] [Alternative 2: specify obligations of one
or more foreign private issuers] [Alternative 3: specify debt security or pool
of such debt securities which represent obligations of the United States of
America, any agency thereof for the payment of which the full faith and credit
of the United States of America is pledged, or a United States governmental
sponsored organization created pursuant to a federal statue (a "GSE")]
[Alternative 4: specify debt security or pool of such debt securities which
represent obligations issued by or guaranteed by a foreign government, political
subdivision or agency or instrumentality thereof] [Alternative 5: specify pool
of Receivables or interest therein or Credit Card Securities] [$______] [__]
aggregate principal amount of [a [__%] [floating rate] of [a pool of] [__%]
[floating rate] publicly issued [describe securities or receivables] [maturing
in ___ years] issued by [specify issuer] (collectively, the "Term Assets"), and
having the characteristics described herein under "Description of the Deposited
Assets". Terms used but not otherwise defined herein are defined in the
Prospectus attached hereto (the "Prospectus").
The Term Assets will be acquired by the Company and, pursuant to the Trust
Agreement, deposited into the Trust for the benefit of Certificateholders,
subject to the pledge of the indenture. The Trust's rights in, to and under the
Term Assets will be pledged to the Indenture Trustee pursuant to the Indenture.
[The Term Assets were issued and sold as part of an underwritten public offering
in [______________].] [The Term Assets are obligations of the Term Assets Issuer
and] [explain whether senior or subordinate, and whether subject to any
redemption or put rights]. [Describe any required principal payments or
amortization or accumulation of Term Assets.]
(cover continued on next page)
------------
THE SECURITIES REPRESENT INTEREST IN OR OBLIGATIONS OF THE TRUST ONLY AND NO NOT
REPRESENT AN OBLIGATION OF OR INTEREST IN THE COMPANY OR ANY OF ITS AFFILIATES.
THE SECURITIES DO NOT REPRESENT A DIRECT OBLIGATION OF ANY TERM ASSETS ISSUER OR
ANY OF THEIR RESPECTIVE AFFILIATES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-----------
The Underwriter has agreed to purchase the Certificates from the Company at [ ]%
of the Security Principal Balance thereof plus accrued interest, if any, at the
Pass Through Rate calculated from [________], 19__ (the "Expected Settlement
Date"), subject to the terms and conditions set forth in the Underwriting
Agreement refereed to herein under "Underwriting". The Underwriter has agreed to
purchase the Notes from the Company at [_____________]% of the Note Principal
Balance thereof plus accrued interest, if any, at the Note interest Rate
calculated from the Expected Settlement Date, subject to the terms and
conditions set forth in the Underwriting Agreement refereed to herein under
"Underwriting".
The Underwriter proposes to offer the Securities from time to time for sale in
negotiated transactions or otherwise at prices determined at the time of sale.
For further information with respect to the plan of distribution and any
discounts, commissions or profits that may be deemed underwriting discounts or
commissions, see "Underwriting."
The Securities are offered subject to receipt and acceptance by the Underwriter
to prior sale and to the Underwriter's right to reject any order in whole or in
part and to withdraw, cancel or modify the offer without notice. It is expected
that delivery of the [specify applicable classes] Securities will be made in
book-entry from through the facilities of The Depository Trust Company on or
about the Expected Settlement Date.
-----------------
Salomon Smith Barney
The date of this Prospectus Supplement is
(cover page continued)
Distribution on the Certificates will be made[[monthly] [quarterly]
[semi-annually] or[[___________] of each year] [to be conformed to interest
payment dates for Term Assets], or, if any such date is not a business day, then
on the immediately following business day (each, a "Distribution Date")
commencing [___________] (the "Final Distribution Date"), by which date the
holders of the Certificates will receive a distribution of all amounts allocable
to principal on such Certificates or, to the extent specified herein, a pro rate
share of any remaining Term Assets.
Distribution on the Notes will be made on each Distribution Date. The last day
on which payments on the Notes are scheduled to be made is _________ (the
"Scheduled Maturity Date").
As and to the extent described herein, collections received with respect to the
Deposited Assets will be distributed to noteholders and Certificateholders [of
each class] in the manner and priority described herein. [The rights of the
holders of the Class ___ Certificates [and specify other classes] to receive
distributions of such collections are subordinated to the rights of the holders
of the Notes and the Class ___ Certificates[and specify other classes]. As and
to the extent described herein, losses realized on the Deposited Assets will be
borne by the holders of the Class ___ Certificates [and specify other classes]
before such losses will be borne by the holders of the other classes of
Certificates [and the Class ___ Certificates ([and specify other classes)] and
the holders of the Notes. To the extent described herein, the relative
priorities of each class of Certificates and Notes with respect to collections
from and losses on the Deposited Assets may each change over time, either
permanently or temporarily, upon the occurrence of certain circumstances
specified herein. See "Description of the Securities-Subordination".
The Term Assets Issuer is not participating in, and will not receive any
proceeds in connection with, this offering.
There is currently no secondary market for the Securities, and there can be no
assurance that a secondary market for the Securities will develop or, if it does
develop, that it will continue. See "Risk Factors" in the Prospectus.
The [specify applicable classes] Securities initially will be represented by
certificates registered in the name of CEDE & Co., as nominee of The Depository
Trust company ("DTC"). The interest of beneficial owners of such Securities will
be represented by book entries on the records of participating members of DTC.
Definitive certificates will be available for such Securities only under the
limited circumstances described herein. See "Description of the
Securities-Definitive Certificates".
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVERALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES AT A
LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
THE SECURITIES OFFERED BY THIS PROSPECTUS SUPPLEMENT WILL CONSTITUTE A SEPARATE
SERIES OF SECURITIES BEING OFFERED BY THE COMPANY PURSUANT TO ITS PROSPECTUS
DATED _______________, 19__, OF WHICH THIS PROSPECTUS SUPPLEMENT IS A PART AND
WHICH ACCOMPANIES THIS PROSPECTUS SUPPLEMENT. THE PROSPECTUS CONTAINS IMPORTANT
INFORMATION REGARDING THIS OFFERING WHICH IS NOT CONTAINED HEREIN, AND
PROSPECTIVE INVESTORS ARE URGED TO READ THE PROSPECTUS AND THIS PROSPECTUS
SUPPLEMENT IN FULL. IN PARTICULAR, INVESTORS SHOULD CONSIDER CAREFUL THE FACTORS
SET FORTH UNDER "RISK FACTORS" IN THE PROSPECTUS AND IN THIS PROSPECTUS
SUPPLEMENT.
UNTIL __________, 19__, ALL DEALERS EFFECTING TRANSACTIONS IN THE OFFERED
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS SUPPLEMENT AND THE PROSPECTUS TO WHICH IT RELATES. THIS
DELIVERY REQUIREMENT IS IN ADDITION OT THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS SUPPLEMENT AND PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH
RESPECT OT THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
S-2
- --------------------------------------------------------------------------------
SUMMARY OF PRINCIPAL ECONOMIC TERMS
The following summary of principal economic terms does not purport to be
complete and is qualified in its entirety by reference to the detailed
information appearing elsewhere herein and in the Prospectus, including under
the heading "Description of the Securities", "Description of the Term Assets"
and "Description of Credit Support". Certain capitalized terms used herein are
defined elsewhere in the Prospectus Supplement on the pages indicated in the
"Index of Terms" or, to the extent not defined herein, have the meanings
assigned to such terms in the Prospectus.
The Certificates
The Trust........................ Structured Products Series 19__-[ ] Trust.
The Trust will be formed pursuant to the
Trust Agreement dated as of _____, 19__ (the
"Trust Agreement"), between the Company and
the Owner Trustee, dated as of the Expected
Settlement Date.
Certificates Offered............. Structured Products Trust Certificates,
Series 19__-[_], consisting of Class [__]
Certificates [_______,] [and] Class
[_______] Certificates [and specify others]
(collectively, the "Certificates").
[Initial Certificate]
Principal Balance]
Notional amount]................. Class [__]: [$] [________].
................................. Class [__]: [$] [________].
Final Distribution
Date............................. Class [__].
................................. Class [__].
Pass-Through Rates............... [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.]
Original Issue Date ............. [____________].
Cut-off Date .................... [____________].
Distribution Dates .............. [_____________], commencing [____].
Record Dates..................... The [__] day immediately preceding each
Distribution Date.
Denominations;
Specified Currency............... The Class [__] Certificates [,] [and] Class
[__] Certificates [and specify other] will
be denominated and payable in [U.S. dollars]
[___] [(the "Specified Currency") and will
be available for purchase in minimum
denominations of [$] [______] and [integral
multiples thereof] [multiples of [$]
[______] in excess thereof].
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 ("DTC"), except in certain
limited circumstances. See "Description of
the Securities-Definitive
- --------------------------------------------------------------------------------
S-3
- --------------------------------------------------------------------------------
Certificates". Distributions thereon will be
settled in [immediately available
(same-day)] [clearinghouse(next-day)] funds.
Owner 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".
The Notes
The Trust ....................... Structured Products Series 19__-[_] Trust.
Notes Offered.................... Structured Products Trust Notes, Series
19__-[ - [specify others] (collectively, the
"Notes").
[Initial Note]
Principal Balance]
[Notional amount]................ .[$] [_________].
Scheduled Maturity
Date............................. Class [__].
................................. Class [__].
Note Interest Rate............... [The Variable Note Interest Rate applicable
to the calculation of the interest
distributable on any Distribution Date on
the Notes is equal to [describe method for
determining variable rates]. The initial
Variable Notes Rate of the Notes [specify
others] is approximately __% per annum.]
[The Notes Interest Rate applicable to the
calculation of the interest distributable on
any Distribution Date on the Notes is fixed
at __% per annum.]
Original Issue Date.............. [__________].
Cut-off Date..................... [__________].
Distribution Dates............... [__________], commencing [___________].
Record Dates..................... The [__] date immediately preceding each
Distribution Date.
Denominations;
Specified Currency .............. The Class [__] Notes [and specify others]
will be denominated and payable in [U.S.
dollars] [__] [(the "Specified Currency")
and will be available for purchase in
minimum denominations of [$] [______] and
[integral multiples thereof] [multiples of
[$] [______] in excess thereof].
Interest Accrual
Periods.......................... [Monthly] [Quarterly] [Semi-annually] (or in
the case of the first Interest Accrual
Period, from and including the Original
Issue Date to but excluding the first
Distribution Date).
Form of Security................. Book-entry Certificates with The Depository
Trust Company ["DTC"), except in certain
limited circumstances. See "Description of
the Securities-Definitive Certificates".
Distributions thereon will be settled in
[immediately available (same-day)]
[clearinghouse (next-day)] funds.
Indenture Trustee................ _______________________.
Ratings.......................... [______] by [______] [and [______] by
[______]]. See "Ratings".
- --------------------------------------------------------------------------------
S-4
- --------------------------------------------------------------------------------
The Term Assets
Term Assets ..................... [SELECT ONE OF THE FOLLOWING BRACKETED
SELECTIONS] [Alternative 1: specify debt
security or a pool of such debt securities
issued by one or more corporations, banking
organizations or insurance companies]
[Alternative 2: specify obligations of one
or more foreign private issuers]
[Alternative 3: specify debt security or
pool of such debt securities which represent
obligations of the United States of America,
any agency thereof for the payment of which
the full faith and credit of the United
States of America is pledged, or a United
States governmental sponsored organization
created pursuant to a federal statue (a "")]
[Alternative 4: specify debt security or
pool of such debt securities which represent
obligations issued by or guaranteed by a
foreign government, political subdivision or
agency or instrumentality thereof]
[Alternative 5: specify pool of Receivables
or interest therein or Credit Card
Securities] [[__]%] [floating rate] [specify
security or receivables] in an aggregate
principal amount of [$][______].
[Term Assets
Issuer .......................... [Specify issuer or pool] [Trust] issuers].]
Term Assets Original
Issue Date....................... [______].
Term Asset Scheduled
Final payment
Date ............................ [______].
[Amortization]
[Accumulation]................... [Describe amortization or accumulation
schedule, if any].
Denominations; Term
Assets Currency.................. The Term Assets are denominated and payable
in [U.S. dollars] [______] (the "Term Assets
Currency") and are available in minimum
denominations of [$][______] and [integral
multiples thereof] [multiples of [$][______]
in excess thereof].
Term Assets
Payment Dates.................... [______], commencing [______].
Term Assets Rate................. [__% per annum.] [a [weighted average] rate
per annum equal to [specify interest rate
formula for debt security].]
Term Assets Interest
Accrual Periods ................. [Monthly] [Quarterly] [Semi-annually].
Priority......................... [Describe senior or subordinated status of
Term Assets].
Redemption/Put/
Other Features................... [Describe existence of any redemption, put
or other material features applicable to the
Term Assets].
[Form of Credit Card
Security ........................ Book-entry securities with DTC. ]
Term Asset Trustee............... [______]. The Term Assets have been issued
pursuant to [an indenture] [a pooling and
servicing agreement] [master pooling and
servicing agreement [as supplemented by a
series supplement] [trust agreement [an
indenture] dated as
- --------------------------------------------------------------------------------
S-5
- --------------------------------------------------------------------------------
of [__], 19[__] (the "Term Asset
Agreement"), among the Term Asset Trustee,
[the Term Asset Issuer], [Seller] and
[Servicer].
Ratings..........................
[______] by [______] [and [______] by
[______]]. See "Description of the Term
Assets - Ratings of Term Assets".
Other Deposited Assets
[Provide similar tabular summary description of the principal economic terms of
any credit support or other ancillary or incidental asset]
SUMMARY OF PROSPECTUS SUPPLEMENT
The following summary does not purport to be complete and is qualified in
its entirety by reference to the detained information appearing elsewhere herein
and in the Prospectus.
Depositor ....................... Structured Products Corp., an indirect
wholly-owned subsidiary of Salomon Smith
Barney Holdings, Inc. and an affiliate of
[an] [the] Underwriter (the "Company"). See
"The Company" in the Prospectus.
Certificates..................... The Certificates, each of which represents a
fractional undivided beneficial interest in
the Trust, will be issued pursuant to the
Trust Agreement. The Certificates will
consists of [______] classes, designated as
Class [______] Certificates [and] [,] Class
[__] Certificates [and [specify other
classes]], [all] of which [all but the Class
[__] Certificates] are being offered hereby
(collectively, the "Certificates").
The Certificate Principal Balance of a
Certificate outstanding at any time
represents the maximum amount that the
holder thereof 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 such holder. [The Notional amount of
the Class [__] Certificates as of any date
of determination is equal to [specify].
Reference to the Notional amount of the
Class [__] Certificates is solely for
convenience in determining the basis on
which distributions on the Class [__]
Certificates are calculated [and determining
the relative voting fights of
Certificateholders of Class [__]
Certificates for purposes of voting on a
class-by-class basis or otherwise]. The
Notional Amount does not represent the right
to receive any distributions allocable to
principal.]
[The Class [__] Certificates, which are not
being offered hereby, 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 herein
and, thereafter, will be allocated among the
Certificates and the Class [ ] Certificates,
as provided herein. [The Class [ ]
Certificates will be transferred by the
Company to an affiliate on or about
________, 19__ (the "Closing Date"), and may
be sold at any time in accordance with any
restrictions in the Trust Agreement.]]
Notes ........................... The Notes, which are secured by the Trust's
rights in, to and under the Deposited Assets
will be issued pursuant to the Indenture.
The Notes will consist of [__].
The Term Assets ................. Interest On the Term Assets accrues At the
Term Assets Rate for each Term Assets
Accrual Period and is payable on each Term
Assets Payment Date. The entire principal
amount of the Term Assets will be payable on
the Term Assets Final Payment Date. [The
Term Assets have a remaining term to
maturity of approximately ___ years.] [As of
the Cut-off Date, the pool of Term Assets
- --------------------------------------------------------------------------------
S-6
- --------------------------------------------------------------------------------
have a weighted average interest rate of
____% and a weighted average remaining term
to maturity of approximately __ years.]
[Other Deposited
Assets and Credit
Support.......................... The Deposited Assets will also include
[direct obligations of the United States]
[describe any assets which are ancillary or
incidental to the Term Assets, including
hedging contracts such as puts, calls,
interest rate swaps, currency swaps, floors,
caps and collars) (such assets, together
with the Term Assets, the "Deposited
Assets"). See "Description of the Deposited
Assets".
The [Certificateholders] [Noteholders] of
the [specify particular classes] 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 thereon.]
Distributions.................... Holders of the Securities will be entitled
to receive on each Distribution Date, to the
extent of available funds on such
Distribution Date, after payment of the
expenses of the Trust, and its respective
agents, (i) distributions payable in respect
of or allocable to interest at the
applicable Note Interest or Pass-Through
Rate on the applicable Security Principal
balance, (ii) distributions payable in
respect of or allocable to principal and
(iii) [in the case of ____________,]
distributions allocable to premium (if any)
in an amount equal to all payments to
premium (if any) received on the Term Assets
for the applicable Collection Period.
Distributions will be made on the Securities
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
Securities -Distributions".
Special Distribution
Dates............................ If a payment with respect to the Term Assets
is made after the Term Assets Payment Date
on which such payment was due, then such
amount shall be distributed on the next
occurring Business Day (a "Special
Distribution Date") as if such funds had
been available 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 (as such term is defined in the
Prospectus, "Business Day") prior to the day
on] which the related payment was received
from the Term Assets trustee.
Subordination.................... As to the extent described herein, 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 Notes and the
other classes of Certificates with respect
to losses attributable to principal, premium
(if any) and interest realized on a
Deposited Asset (such losses, "Realized
Losses"). See "Description of the Securities
- Allocation of Losses; Subordination".
Optional Termination............. At its option, the [Company] may purchase
all the Deposited Assets in the Trust, and
thereby cause the termination of the Trust,
early retirement of the Certificates and
redemption of the Notes, on any Distribution
Date on which the aggregate principal amount
of the Deposited Assets remaining in the
Trust is less than [10%] of the aggregate
principal amount of the Deposited Assets as
of the Cut-off Date [Specify any other
purchase or repurchase option of the Company
or any Holder of Certificates.] See
"Description of the Trust Agreement -
Termination" herein.
- --------------------------------------------------------------------------------
S-7
- --------------------------------------------------------------------------------
Termination of the
Trust............................ The Trust Agreement will terminate upon the
final distribution of Certificateholders of
all amounts due in respect of the Deposited
Assets. [Describe any further termination
events].
Certain Federal
Income Tax
Consequences..................... 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 Economic Terms - The Certificates
- Ratings". It is a condition to the
issuance of the Notes that the Notes have
the ratings specified above under "Summary
of Principal Economic Terms - the Notes -
Ratings". A security rating is not a
recommendation to buy, sell or hold
securities and may be subject to revision or
withdrawal at anytime 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............. See "ERISA Considerations".
RISK FACTORS
[Describe risk factors and special considerations applicable to the specific
Term Assets, other Deposited Assets and the particular structure of the
Securities being offered, including factors relating to the yield of the
Securities and risks associated with the Deposited Assets and the terms thereof,
as described elsewhere herein.] See "Risk Factors" and "Maturity and Yield
Considerations" in the Prospectus
No Detailed Information About Term Assets or Term Assets Issuer
This Prospectus Supplement does not provide detailed information with
respect to the Term Assets or the Term Assets Issuer, any risk factors relating
thereto, or any rights or obligations, legal, financial or otherwise, arising
under or related to the Term Assets.
Trust's Relationship to the Company. The Company is not obligated to make
any payments in respect of the Notes, the Certificates or the Term Assets.
The Term Assets do not represent obligations of the company. Prospective
investors should avail themselves of the same information concerning each
[Issuer] [Seller], [Servicer] and Term Asset as they would if they were
purchasing the Term Assets or similar investments backed by or representing
interests in Receivables.
Maturity and Prepayment Assumptions. The rate of payment of principal of
the Securities, the aggregate amount of each distribution on, and the yield to
maturity of, the Securities will depend on the rate of payment of principal of
the Term Assets. [Describe particular risks of particular Classes, if
applicable.] The Term assets are generally subject to early amortization upon
the occurrence of any of the amortization events applicable to such Term assets
as described herein and in the prospectus used in connection with the offering
of such Term Assets (the "Term Assets Prospectus").
The rate of payment of principal of the Certificates may also be affected
by the repurchase by each Term Asset Issuer of the Term Assets issued by such
Term Asset Issuer at a purchase price equal to a percentage of the principal
balance thereof plus accrued and unpaid interest, which right is exercisable
only after the aggregate principal balance of the Term Assets is less than a
specified percentage of their original principal balance. In such event the
repurchase price paid by the Term Asset Issuer would be passed through to the
Securityholders.
- --------------------------------------------------------------------------------
S-8
No Assurance of Liquidity
There is no assurance that any secondary market will develop or be
maintained for any class of Securities. While the Underwriter intends to
maintain a secondary market for Securities, it is not obligated to do so. There
can be no assurance that a secondary market in the Securities will develop or,
if it does develop, that it will remain in existence for any period of time. The
absence of a secondary market would adversely affect the liquidity of the
Securities.
FORMATION OF THE TRUST
The Trust will be formed pursuant to the Trust Agreement between the
Company and the Owner Trustee. Concurrently with the execution and delivery of
the Trust Agreement, the Company will deposit the Term Assets (or proceeds of
the offering sufficient to purchase the Term Assets) in the Trust. The Owner
Trustee, on behalf of the Trust, will accept (or purchase) such Term Assets,
will pledge the Term asset to the Indenture Trustee pursuant to the Indenture
and will deliver the Securities to or upon the order of the Company.
The Term Assets will be purchased by the Company in the secondary market
(either directly or through an affiliate of the Company). The Term Asset will
not be acquired from the Term Assets Issuer as part of any distribution by or
pursuant to any agreement with the Term Assets Issuer. The Term Assets Issuer is
not participating in this offering and will not receive any of the proceeds of
the sale of the Term Assets to the Company or the issuance of the Securities.
DESCRIPTION OF THE DEPOSITED ASSETS
General
This Prospectus Supplement sets forth certain relevant terms with respect
to the Term Assets, but does not provide detailed information with respect to
the Term Assets. This Prospectus Supplement relates only to the Securities
offered hereby and does not relate to the Deposited Assets. All disclosure
contained herein with respect to the Term Assets is derived from publicly
available documents. [Describe publicly available documents] [The] [Each]
[describe portion that is subject] Term Asset Issuer is subject to the
information reporting requirements of the Exchange Act. Although the Company has
no reason to believe the information concerning the Term Assets, [the] [each]
Term Asset Issuer or each Term Asset Prospectus related to the Term Assets is
not reliable, neither the Company nor any of the Underwriters has participated
in the preparation of such documents, or made any due diligence inquiry with
resect to the information provided therein. There can be no assurance that
events affecting the term Assets or any Term Asset Issuer have not occurred,
which have not yet been publicly disclosed, which would affect the accuracy or
completeness of the publicly available documents described above.
[SELECT ONE OF THE FOLLOWING BRACKETED SELECTIONS] [Alternative 1: specify debt
security or a pool of such debt securities issued by one or more corporations,
banking organizations or insurance companies] [Alternative 2: specify
obligations of one or more foreign private issuers] [Alternative 3: specify debt
security or pool of such debt securities which represent obligations of the
United States of America, any agency thereof for the payment of which the full
faith and credit of the United States of America is pledged, or a United States
governmental sponsored organization created pursuant to a federal statue (a
"GSE")] [Alternative 4: specify debt security or pool of such debt securities
which represent obligations issued by or guaranteed by a foreign government,
political subdivision or agency or instrumentality thereof] [Alternative 5:
specify pool of Receivables or interest therein or Credit Card Securities].
DESCRIPTION OF THE TERM ASSETS
[Use the following where the Term Assets consist of a single public security]
S-9
[The table below sets forth certain of the characteristics of the Term
Assets. The table does not purport to be complete and is subject to, and
qualified in its entirety by reference to, any prospectuses pursuant to which
the Term Assets were offered and sold.
Terms of Term Assets
Term Assets Issuer:
Term Assets: _______, due _______
Dated:
Original Principal Maturity Date:
Original Par Value Amount Issued:
CUSIP Number:
Stated Interest Rate:
Interest Payment Dates:
Mode of Payment of Term Assets:
Par Value Amount of Term Assets Deposited Under Trust
Agreement:
The Term Assets will be held by the Trustee for the Owners of Securities as
book-entry credits to an account of the Trustee at DTC.
Available Information
The Term Assets Issuer is subject to the information requirements of the
Securities Exchange Act of 1934 and in accordance therewith files reports and
other information with the Commission. Such reports, proxy and information
statements and other information filed by the Term Assets Issuer with the
Commission can be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the Commission's regional offices at 500 West Madison Street, 14th Floor,
Chicago, Illinois 60661 and 75 Park Place, New York, New York 10007. Copies of
such material can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The Commission maintains a Web site at http://www.sec.gov containing
reports, proxy statements and other information regarding registrants that file
electronically with the Commission. [In addition, certain material described
above and other information will also be available for inspection at the offices
of the New York Stock Exchange at 20 Broad Street, New York, New York.]]
[Insert Bracketed Language if Applicable]
[THE FEDERAL NATIONAL MORTGAGE ASSOCIATION
The Federal National Mortgage Association ("Fannie Mae") is a federally
chartered and stockholder-owned corporation organized and existing under the
Federal National Mortgage Association Charter Act, 12 U.S.C. ss. 1716 et seq. It
is the largest investor in home mortgage loans in the United States. Fannie Mae
originally was established in 1938, as a United States government agency to
provide supplemental liquidity to the mortgage market and was transformed into a
stockholder-owned and privately managed corporation by legislation enacted in
1968. Fannie Mae provides funds to the mortgage market by purchasing mortgage
loans from lenders, thereby replenishing their funds for additional lending.
Fannie Mae acquires funds to purchase loans from many capital market investors
that ordinarily may not invest in mortgage loans, thereby expanding the total
amount of funds available for housing. Operating nationwide, Fannie Mae helps to
redistribute mortgage funds from capital-surplus to capital-short areas. Fannie
Mae also issues mortgaged-backed securities ("MBS"). Fannie Mae receives
S-10
guaranty fees for its guaranty of timely payment of principal of and interest on
MBS. Fannie Mae issues MBS primarily in exchange for pools of mortgage loans
from lenders. The issuance of MBS enables Fannie Mae to further its statutory
purpose of increasing the liquidity of residential mortgage loans.
Fannie Mae prepares an Information Statement annually which describes
Fannie Mae, its business and operations and contains Fannie Mae's audited
financial statements. From time to time Fannie Mae prepares supplements to its
Information Statement which include certain unaudited financial data and other
information concerning the business and operations of Fannie Mae. These
documents can be obtained without charge from Paul Paquin, Senior Vice President
- -- Investor Relations, Fannie Mae, 3900 Wisconsin Avenue, N.W., Washington, D.C.
20016 (telephone: (202) 752-7115). Fannie Mae is not subject to the periodic
reporting requirements of the Securities Exchange Act of 1934.]
[THE FEDERAL HOME LOAN MORTGAGE CORPORATION
The Federal Home Loan Mortgage Corporation ("Freddie Mac") is a publicly
held government-sponsored enterprise created on July 24, 1970 pursuant to the
Federal Home Loan Mortgage Corporation Act, Title III of the Emergency Home
Finance Act of 1970, as amended (the "FHLMC Act"). Freddie Mac's statutory
mission is to provide stability in the secondary market for home mortgages, to
respond appropriately to the private capital market and to provide ongoing
assistance to the secondary market for home mortgages (including mortgages
secured by housing for low-and moderate-income families involving a reasonable
economic return to Freddie Mac) by increasing the liquidity of mortgage
investments and improving the distribution of investment capital available for
home mortgage financing. The principal activity of Freddie Mac consists of the
purchase of first lien, conventional, residential mortgages and participation
interests in such mortgages from mortgage lending institutions and the resale of
the mortgages so purchased in the form of guaranteed mortgage securities.
Freddie Mac generally matches and finances its purchases or mortgages with sales
of guaranteed securities. Mortgages retained by Freddie Mac are financed with
short-and long-term debt, cash temporarily held pending disbursement to security
holders, and equity capital.
Freddie Mac prepares an Information Statement annually which describes
Freddie Mac, its business and operations and contains Freddie Mac's audited
financial statements. From time to time Freddie Mac prepares supplements to its
Information Statement which include certain unaudited financial data and other
information concerning the business and operations of Freddie Mac. These
documents can be obtained from Freddie Mac by writing or calling Freddie Mac's
Investor Inquiry Department at 8200 Jones Branch Drive, McLean, Virginia 22102
(outside Washington, D.C. metropolitan area, telephone (800) 336-3672; within
Washington, D.C. metropolitan area, telephone (703) 759-8160). Freddie Mac is
not subject to the periodic reporting requirements of the Securities Exchange
Act of 1934.]
[THE STUDENT LOAN MARKETING ASSOCIATION
The Student Loan Marketing Association ("Sallie Mae") is a
stockholder-owned corporation established by the 1972 amendments to the Higher
Education Act of 1965, as amended, to provide liquidity, primarily through
secondary market and warehousing activities, for lenders participating in the
Federal Family Education Loan ("FFEL") program and the Health Education
Assistance Loan Program. Under the Higher Education Act, Sallie Mae is
authorized to purchase, warehouse, sell and offer participations or pooled
interests in, or otherwise deal in, student loans, including, but not limited
to, loans insured under the FFEL program, and to make commitments for any of the
foregoing. Sallie Mae is also authorized to buy, sell, hold, underwrite and
otherwise deal in obligations of eligible lenders, if such obligations are
issued by such eligible lender for the purpose of making or purchasing federally
guaranteed student loans under the Higher Education Act. As a federally
chartered corporation, Sallie Mae's structure and operational authorities are
subject to revision by amendments to the Higher Education Act of other federal
enactments. Sallie Mae prepares an Information Statement annually which
describes Sallie Mae, its business and operations and contains Sallie Mae's
audited financial statements. From time to time Sallie Mae prepares supplements
to its Information Statement which include certain unaudited financial data and
other information concerning the business and operations of Sallie Mae. These
documents can be obtained without charge upon written request to the Corporate
and Investor Relations Division of Sallie Mae at 1050 Thomas Jefferson Street,
N.W., Washington, D.C. 20007, telephone (202) 298-3010. Sallie Mae is not
subject to the periodic reporting requirements of the Securities Exchange Act of
1934.]
S-11
[THE RESOLUTION FUNDING CORPORATION
The Resolution Funding Corporation ("REFCORP") is a mixed-ownership
government corporation established by Title V of the Financial Institutions
Reform, Recovery, and Enforcement Act of 1989 (the "FIRRE Act"). The sole
purpose of the REFCORP is to provide financing for the Resolution Trust
Corporation (the "RTC"). REFCORP is to be dissolved, as soon as practicable,
after the maturity and full payment of all obligations issued by it. REFCORP is
subject to the general oversight and direction of the Oversight Board, which is
comprised of the Secretary of the Treasury, the Chairman of the Federal Reserve
Board of Governors, the Secretary of Housing and Urban Development and two
independent members from different political parties to be appointed by the
President with the advice and consent of the Senate. The day-to-day operations
of REFRCORP are under the management of a three-member Directorate comprised of
the Director of the Office of Finance of the FHLBs and two members selected by
the Oversight Board from among the presidents of twelve FHLBs. The RTC was
established by the FIRRE Act to manage and resolve cases involving failed
savings and loan institutions pursuant to policies established by the Oversight
Board. The RTC is to manage and resolve cases for which a receiver or
conservator was appointed between January 1, 1989 through August 9, 1992. The
RTC is authorized to issue nonvoting capital certificates to REFCORP in exchange
for the funds transferred from REFCORP to the RTC. The RTC will terminate on or
before December 31, 1996. The FIRRE Act limits the aggregate principal amount of
interest bearing obligations which may be issued by REFCORP to $30 billion,
which amount of obligations was issued in 1989. Pursuant to the FIRRE Act, the
net proceeds of these obligations are used to purchase nonvoting capital
certificates issued by the RTC or to retire previously issued REFCORP
obligations.
Information concerning REFCORP may be obtained from the Resolution Funding
Corporation, Suite 850, 655 Fifteenth Street, N.W., Washington, D.C. 20005.
REFCORP is not subject to the periodic reporting requirements of the Securities
Exchange Act of 1934.]
[THE FEDERAL HOME LOAN BANKS
The Federal Home Loan Banks constitute a system of twelve federally
chartered corporations (collectively, the "FHLBs"). The mission of each FHLB is
to enhance the availability of residential mortgage credit by providing a
readily available, low-cost source of funds to its member institutions. A
primary source of funds for the FHLBs is the proceeds from the sale to the
public of debt instruments issued by the Federal Housing Finance Board, which
are the joint and several obligations of all of the FHLBs. The FHLBs are
supervised and regulated by the Federal Housing Finance Board, which is an
independent federal agency in the executive branch of the United States
government, but obligations of the FHLBs are not obligations of the United
States government.
The Federal Home Loan Bank System produces annual and quarterly financial
reports in connection with the original offering and issuance by the Federal
Housing Finance Board of consolidated bonds and consolidated notes of the FHLBs.
Questions regarding the Federal Home Loan Banks Combined Financial Statement
should be directed to the Deputy Director, Financial Reporting and Operations
Divisions, Federal Housing Finance Board, 1777 F Street, N.W., Washington, D.C.
20006, (202) 406-2901. Copies of the Financial Reports will be furnished upon
request to the Capital Markets Divisions, Office of Finance.]
[TENNESSEE VALLEY AUTHORITY
TVA is a wholly owned corporate agency and instrumentality of the United
States of America established pursuant to the Tennessee Valley Authority Act of
1933, as amended (the "TVA Act"). TVA's objective is to develop the resources of
the Tennessee Valley region in order to strengthen the regional and national
economy and the national defense. The programs of TVA consist of power and
nonpower programs. The power program is required to be self-supporting from
revenues it produces. The TVA Act authorizes TVA to issue evidences of
indebtedness that may only be used to finance its power program. TVA prepares an
Information Statement annually which describes TVA, its business and operations
and contains TVA's audited financial statements. From time to time TVA prepares
supplements to its Information Statement which include certain unaudited
financial data and other information concerning the business and operations of
TVA. These documents can be obtained upon written request directed to Tennessee
Valley Authority, 400 West Summit Hill Drive, Knoxville, Tennessee 37902,
Attention: Vice President and Treasurer, or by calling (615) 632-3366.]
S-12
[FEDERAL FARM CREDIT BANKS
The Farm Credit System is a nationwide system of lending institutions and
affiliated service and other entities (the "System"). Through its Banks ("FCBs")
and related associations, the System provides credit and related services to
farmers, ranchers, producers and harvesters of aquatic products, rural
homeowners, certain farm-related businesses, agricultural and aquatic
cooperatives and rural utilities. System institutions are federally chartered
under the Farm Credit Act of 1971, as amended (the "Farm Credit Act"), and are
subject to regulation by a Federal agency, the Farm Credit Administration (the
"FCA"). The FCBs and associations are not commonly owned or controlled. They are
cooperatively owned, directly or indirectly, by their respective borrowers.
Unlike commercial banks and other financial institutions that lead to the
agricultural sector in addition to other sectors of the economy, under the Farm
Credit Act the System institutions are restricted solely to making loans to
qualified borrowers in the agricultural sector and to certain related
businesses. Moreover, the System is required to make credit and other services
available in all areas of the nation. In order to fulfill its broad statutory
mandate, the System maintains lending units in all 50 states and the
Commonwealth of Puerto Rico.
The System obtains funds for its lending operations primarily from the sale
of debt securities issued under Section 4.2(d) of the Farm Credit Act
("Systemwide Debt Securities"). The FCBs are jointly and severally liable on all
Systemwide Debt Securities. Systemwide Debt Securities are issued by the FCBs
through the Federal Farm Credit Banks Funding Corporation, as agent for the FCBs
(the "Funding Corporation"). Each FCB determines its participation in each issue
of Systemwide Debt Securities based on its funding and operating requirements,
subject to the availability of eligible collateral, to determinations by the
Funding Corporation as to conditions of participation and terms of each
issuance, and to FCA approval.
Important information regarding the FCBs and the Farm Credit System,
including combined financial information, is contained in disclosure information
made available by the Funding Corporation. This information consists of the most
recent Farm Credit System Annual Information Statement and any Quarterly
Information Statements issued subsequent thereto (collectively, "Information
Statements") and certain press releases issued from time to time by the Funding
Corporation. Such information and the Farm Credit System Annual Report to
Investors for the current and two preceding fiscal years are available for
inspection at the Federal Farm Credit Banks Funding Corporation, Investment
Banking Services Department, 10 Exchange Place, Suite 1401, Jersey City, New
Jersey 07302; Telephone: (201) 200-8000. Upon request, the Funding Corporation
will furnish, without charge, copies of the above information.]
[GOVERNMENT TRUST CERTIFICATES
Government Trust Certificates ("GTCs") consist of certificates evidencing
undivided fractional interests in a trust, the assets of which consist of
promissory notes (the "Notes"), payable in U.S. Dollars, of a certain foreign
government, backed by 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 (the "DSAA"), of the due and punctual payment of 90% of
all payments of principal and interest due on the Notes and a security interest
in collateral, consisting of non-callable securities issued or guaranteed by the
United States government or agencies thereof, sufficient to pay the remaining
10% of all payments of principal and interest due on the Notes. Many issuances
of GTCs were undertaken pursuant to Title III of the Foreign Operations, Export
Financing and Related Programs Appropriations Acts (the "Appropriations Acts"),
which permit borrowers to prepay certain eligible high-interest loans made by
the Federal Financing Bank (the "FFB") under the Foreign Military Sales ("FMS")
Credit Program. The Appropriations Acts S-19 permit prepayment of the FMS loans
with the proceeds of new loans and authorize the issuance of a United States
government guaranty covering no more and no less than ninety percent (90%) of
the payments due on each such new loan, in accordance with the requirements of
the Arms Export Control Act, as amended (the "AECA"). It is a condition to the
issuance of Certificates under such program that the DSAA approve the
refinancing of any such FMS loan. Although 90% of all payments of principal and
interest on the Notes are guaranteed by the United States government or agencies
thereof, and 10% of such payments are secured by securities of the United States
government or agencies thereof, the GTCs themselves are not so guaranteed. In
the event of a default on the Notes, the Trustee of the Trust would be required
by the operative documents to make a claim against the United States government
or an agency thereof or would be required to liquidate the collateral securing
the Notes. Payments Under the Guaranty. If the borrower under the Notes (the
"Borrower") fails to deposit with the related trustee (the "Trustee") all
amounts due on the Notes on any Note payment date (each, a "Note
S-13
Payment Date"), the Trustee will first notify the Borrower and, one business day
thereafter, will send a notice to the Director of the DSAA and to the related
depositary (the "Depositary") setting forth the amounts due on the Notes on such
Note Payment Date and the amounts, if any, received from the Borrower. On the
[11th calendar day] following the Note Payment Date, if any amounts due on a
Note remain unpaid, the Trustee will demand payment from DSAA on the applicable
Guaranty in accordance with its terms. On the day the Trustee receives such
payment, it will instruct the Depositary immediately to deliver sufficient funds
to pay the amounts remaining unpaid on the Note.
On the occurrence of an Event of Default (as defined in the related loan
agreement), the Trustee in its discretion may proceed to protect and enforce the
rights of the GTC holders under the Declaration of Trust by a suit, action or
other proceeding. As provided in the loan agreement, the Guaranty and the
Depositary Agreement, the Trustee has the legal power to exercise all the
rights, powers and privileges of a holder of the Note.
The Trustee is required to take all necessary action, as permitted by the
Declaration of Trust and applicable law (i) to enforce payments due from DSAA
under the Guaranty and (ii) to take possession of collateral maturing or paying
interest on or prior to the Note payment date on which default occurred, and to
apply such funds in accordance with the Declaration of Trust for the benefit of
holders of GTCs. The Trustee is required to notify the Borrower upon taking the
foregoing actions. Neither the Trust holding a Note nor DSAA has the right to
accelerate payment of the Note, notwithstanding any failure of the Borrower to
make payment on the Note or other Event of Default with respect to the Note.
[The applicable Prospectus Supplement will specify, to the extent GTCs are
included as Underlying Securities, the waiting period that must elapse before
reimbursement for a default on the Notes, and the delay between payment on the
Notes and payment on the GTCs that is built into the GTCs to protect against a
delay in reimbursement.
In addition, the related Prospectus Supplement will specify, to the extent
applicable: (i) the aggregate principal amount of such GTCs; (ii) the coupon, if
any, borne by such GTCs; (iii) the stated maturity of each GTC; (iv) the
identity of each underlying obligor; and (v) the conditions under which, and the
terms on which, any underlying obligation may be prepaid or redeemed prior to
the stated maturity of the obligation.]]
[AID-GUARANTEED UNDERLYING SECURITIES
General. AID-Guaranteed Underlying Securities consist of notes, bonds,
credit facilities and other debt instruments which are issued or arranged by
intermediary financial institutions ("IFIs") and guaranteed in whole or in part
by AID. Most AID guarantees are established under the auspices of the Private
Sector Investment Program (the "Investment Program"), created in 1983 under
Section 108 of the Foreign Assistance Act of 1961 and administered by AID. The
Investment Program seeks to promote sustainable economic development by
strengthening the private sector in developing countries, primarily through the
facilitation of small business financing needs. In 1988 Congress provided the
Investment Program with loan guarantee authority, and guarantees have become the
Investment Program's principal financing instrument. AID guarantees are backed
by the full faith and credit of the United States government. AID Housing
Guaranty Program. The Housing Guaranty Program (the "Housing Program") is
administered by the AID Office of Housing and Urban Programs. The Housing
Program facilitates collaboration between AID and host-country housing
institution borrowers in both the public and private sectors. Under the Housing
Program AID participates in the planning, structuring and execution of a housing
or shelter finance program. Through the conclusion of "implementation
Agreements" the Housing Program aids developing countries in securing favorable
terms in U.S. capital markets for a U.S. government-guaranteed loan. Payments
under the AID Guarantees. Pursuant to the Fiscal Agency Agreement, if the
Borrower does not deposit with the Fiscal Agent thereunder at or before 12
o'clock noon, New York City time, on any date on which a payment of principal,
interest or maturity amount on the guaranteed AID-Guaranteed Underlying
Securities is due (each, an "AID-Guaranteed Underlying Security Payment Date"),
immediately available funds in an amount sufficient to pay in full any interest
and principal, and any maturity amount, due on such AID-Guaranteed Underlying
Security Payment Date with respect to the guaranteed AID-Guaranteed Underlying
Securities, the Fiscal Agent, acting on behalf of the holders of the guaranteed
AID-Guaranteed Underlying Securities, is obligated to make a demand upon AID,
not later than 2 o'clock p.m., New York City time, on such AID-Guaranteed
Underlying Security Payment Date for payment pursuant to the guarantees.
Pursuant to the guarantees, AID is required, not later than three (3)
Business Days following receipt of such demand, to pay to the demanding
AID-Guaranteed Underlying Securityholders the applicable
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guaranteed amount. Upon receipt by the Fiscal Agent of payments from AID
pursuant to the guarantees, the Fiscal Agent will be required, if such payments
are received at or prior to 12 o'clock noon, New York City time, on any Business
Date, to remit such payments to the registered holders of the guaranteed
AID-S-21 Guaranteed Underlying Securities entitled thereto on such Business Day
and, if such payments are received after such time, to remit such payments to
such registered holders on the next such Business Day.
Each AID-Guaranteed Underlying Securityholder is deemed by the acceptance
of a guaranteed AID-Guaranteed Underlying Security to have irrevocably appointed
the Fiscal Agent as its agent for the purpose of making a demand for payment
upon AID pursuant to the guarantees and receiving any payment to an
AID-Guaranteed Underlying Securityholder by AID pursuant to the guarantees. The
Regulations also provide that any AID-Guaranteed Underlying Securityholder may
make demand for payment on AID under a Guarantee on its own behalf immediately
upon the failure of the Borrower to make any payment when due under such
AID-Guaranteed Underlying Securityholder's guaranteed AID-Guaranteed Underlying
Security. All payments made by AID to the Fiscal Agent pursuant to the
guarantees will be held in trust by the Fiscal Agent solely for the benefit of
the registered holders of the guaranteed AID-Guaranteed Underlying Securities
until remitted to such holders. AID will be discharged from its obligations to
make a payment pursuant to the guarantees upon the making of such payment to the
Fiscal Agent on behalf of the AID-Guaranteed Underlying Securityholders,
provided that such discharge will be effective only as to such payment and to
the extent of the amount of such payment.
Events of Default. As provided by the terms of each AID-Guaranteed
Underlying Security, an Event of Default will be deemed to have occurred if the
borrower fails to make any payment on such AID-Guaranteed Underlying Security on
the applicable Payment Date. On the occurrence of an Event of Default, the
trustee of such AID-Guaranteed Underlying Security (the "Underlying Trustee") or
the Trustee may make demand on AID under the guarantees. However, none of the
Fiscal Agent, the Trustee or AID may accelerate payment of any AID-Guaranteed
Underlying Security, notwithstanding any failure of the borrower to make payment
on the AID-Guaranteed Underlying Securities.
[Use the following where the Term Assets consist of a pool of public securities]
[The Deposited Assets will consist primarily of the Underlying Securities,
which are a pool of [Alternative 1: specify debt security or a pool of such debt
securities issued by one or more corporations, banking organizations or
insurance companies] [Alternative 2: specify obligations of one or more foreign
private issuers] [Alternative 3: specify debt security or pool of such debt
securities which represent obligations of the United States of America, any
agency thereof for the payment of which the full faith and credit of the United
States of America is pledged, or a United States governmental sponsored
organization created pursuant to a federal statue (a "GSE")] [Alternative 4:
specify debt security or pool of such debt securities which represent
obligations issued by or guaranteed by a foreign government, political
subdivision or agency or instrumentality thereof]. The Underlying Securities
will be purchased by the Depositor in the secondary market (either directly or
through an affiliate of the Depositor) 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:
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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
Percentage 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
Percentage of
Aggregate Aggregate
Remaining Term Principal Principal
to Maturity Number Balance Balance
----------- ------ ------- -------
Total
============= =============== ===================
Distribution by Interest Rate of the
Underlying Securities Pool as of the Cut-Off Date
Percentage of
Aggregate Aggregate
Principal Principal
Interest Rate Range Number Balance Balance
------------------- ------ ------- -------
Total
============= =============== ===================
As of the Cut-off Date, [all of] [approximately ___% of] such Underlying
Securities were rated [investment grade] [specify particular rating] by at least
one nationally recognized rating agency, and no obligor of any Underlying
Security was in default in the payment of any installments of principal,
interest or premium (if any) with respect thereto. Any such rating of any of the
Underlying Securities is not a recommendation to purchase, hold or sell such
Underlying Security or the Certificates, and there can be no assurance that a
rating will remain for any given period of time or that a rating will not be
lowered or withdrawn entirely by a rating agency if in its judgment
circumstances in the future so warrant. See "Ratings" herein and "Risk
Factors--Ratings of the Certificates" in the accompanying Prospectus regarding
certain considerations applicable to the ratings of the Certificates.]
[Use the following where the Term Assets consist of a pool of Credit Card
Securities of multiple issuers]
S-16
[The Deposited Assets will consist primarily of the Term Assets, which are
a pool of publicly issued Credit Card Securities. The Term Assets will be
purchased by the Company or the Trust in the secondary market (either directly
or through an affiliate of the Company) and will be deposited into the Trust.
The Term Assets will not be acquired either from the respective issuers of the
Term Assets or pursuant to any distribution by or agreement with such issuers.]
DESCRIPTION OF THE TERM ASSETS
Issuer ..........................
Servicer.........................
Trustee .........................
Designation......................
Percentage of total Term Assets pool
Investor amount..................
Series Termination Date (1)......
Certificate Rate.................
Monthly payment Date (2).........
Commencement of Controlled
Amortization/Accumulation Period (3)
Minimum Seller's percentage......
Cash Collateral guaranty (4) Amount .
Percentage of Subordinated
Class ___ Certificates .........
Optional Repurchase Percentage...
Ratings (5)......................
- -------------
(1) Includes defined terms: Series Termination Date and Stated Series
Termination Date.
(2) Includes defined terms: Payment Date and Distribution Date.
(3) Includes defined terms: Controlled Amortization Period, Controlled
Accumulation Period and Controlled Liquidation Period.
(4) A "Cash Collateral guaranty" generally provides, that in the event that a
deficiency exists with respect to a payment of interest and/or principal,
an amount equal to such deficiency may be withdrawn from the case
collateral account and applied to such deficiency up to the amount provided
in the Term Asset Agreement.
(5) As of ____________, 199_.]
S-17
General
This Prospectus Supplement sets forth certain relevant terms with respect
to the Term Assets, but does not provide detailed information with respect to
the Term Assets. This Prospectus Supplement relates only to the Securities
offered hereby and does not relate to the Term Assets.
[Each] [describe portion that is subject] Term Asset Issuer is subject to
the information requirements of the Exchange Act. Accordingly, each such Term
Asset Issuer is required to file reports, and other information with respect to
the Term Asset Issuer with the Commission. Copies of such reports and other
information may be inspected and copied at certain offices of the Commission at
the address listed under "Available Information" in the Prospectus.
Neither the Company nor the Underwriter[s participated in the preparation
of such reports. Such reports and information will have been prepared by the
respective Term Asset Issuer [Servicer] and will not be independently verified
by the Company or the Underwriter. There can be no assurance that events have
not occurred, which have not yet been publicly disclosed, which would affect the
accuracy or completeness of any statements included in such servicer reports or
in the publicly available documents filed by or on behalf of the Term Assets
Issuer.
Although the Company has no reason to believe the information concerning
the Term Assets, the Term Asset Issuer, or each Term Assets Prospectus is not
reliable, the Company has not verified either its accuracy or its completeness.
Such information is as of the date of each related prospectus and comparable
information if given as of the date hereof may be different.
Set forth below is certain information excerpted and summarized from each
Term Assets Prospectus.
[Include information as applicable][The Term Assets of the Trust will
consist solely of initially $_______ aggregate principal amount of ________ __%
Debentures, due _______ issued by the Term Assets Issuer, having the
characteristics described in the Term Assets Prospectus. The Term Assets were
originally issued by the Term Assets Issuer as part of an underwritten public
offering of $_______ aggregate principal amount of such securities, pursuant to
a registration statement on [Form S-3][Insert applicable form/schedule]
(together with all amendments and exhibits thereto, the "Term Assets
Registration Statement"), filed by the Term Assets Issuer with the Securities
and Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended (the "Securities Act"). Distributions are required to be made on the
Term Assets semiannually on the ___ day of each _______ and ______, commencing
________ (each, a "Term Assets Payment Date"), or if such day is not a Business
Day, on the next succeeding Business Day.
The Term Assets deposited in the Trust represent the sole assets of the
Trust that are available to make distributions in respect of the Securities.
Consequently, the ability of Securityholders to receive distributions in respect
of the Securities will depend on the Trust's receipt of payments on, or in
respect of, the Term Assets. This Prospectus Supplement relates only to the
Securities being offered hereby and does not relate to the Term Assets.
The disclosure under this caption in the Prospectus Supplement is intended
primarily to identify the Term Assets and does not purport to summarize the Term
Assets or to provide information with respect to the Term Assets Issuer. Such
information does not purport to be complete and is qualified in its entirety by,
and should be read in conjunction with, (i) the Term Assets Prospectus, and (ii)
the Term Assets Registration Statement, of which the Term Assets Prospectus is a
part. This Prospectus Supplement relates only to the Securities offered hereby
and does not relate to an offering of the Term Assets. No representation is made
by the Trust, the Trustee or the Company as to the accuracy or completeness of
the information contained in the Term Assets Prospectus or the Term Assets
Registration Statement.]
[The Term Assets have been issued pursuant to agreements entered into
between various sellers and various trustees. The following summary describes
certain general terms of such agreements, but investors should refer to the
agreements themselves for all the terms governing the Terms Assets.]
S-18
[Each Term Asset represents an interest in Receivables, including the right
to a percentage of cardholder payments on the Receivables. The assets of each
Term Asset Issuer include a pool of Receivables arising under Accounts, funds
collected or to be collected from cardholders in respect of the receivables in
the Accounts, monies on deposit in certain accounts of the Term Asset Issuers
and the right to draw upon various enhancements and may also include the right
to receive certain interchange fees attributed to cardholder charges for
merchandise. Each Term Asset represents the right to receive payments of
interest for the related interest period at the applicable Term Asset Rate (as
defined herein) for such interest period from collections of Receivables and, in
certain circumstances, from draws on applicable enhancement, and payments of
principal during the Term Asset Amortization Period (as defined herein) funded
from collections of Receivables.]
[Each seller of Receivables (each, a "Seller") holds the interest in the
Receivables of a Term Asset Issuer not represented by the Term Assets,
securities of the same series and any other series of securities issued by the
Term Asset Issuer. Such Seller holds an undivided interest in the Term Asset
Issuer (the "Seller's Interest"), including the right to a percentage (the
"Seller's Percentage") of all cardholder payments on the Receivables.]
[The Term Assets will consist of the certificates, notes or loans
representing an interest in or secured by the Receivable and issued by the
following Term Assets Issuers: [details of particular credit card backed
certificates].]
Interest Payments
Interest accrues on the Term Assets at the certificate rate for each class
and series of such securities, from the date of the initial issuance thereof.
Interest at the applicable rate will be paid to the Certificateholders [______]
[monthly] [quarterly] [semiannually] on the [__] day of each [______] (or, if
such day is not a business day, the next succeeding business day).
[Interest on the Term Assets is calculated on the basis of the actual
number of days in the related interest period and a 360-day year.]
The Term Assets bear interest [in the aggregate] at a [weighted average]
rate per annum equal to [__%] [describe rate or method of calculation].
Principal Payments
[Include if applicable; otherwise identify principal payment dates of Term
Assets and redemption features][Generally, principal payments due to the holders
of the Term Assets are scheduled to commence on the first payment date with
respect to a controlled amortization period for a series of Term Assets (a "Term
a Asset Controlled Amortization Period") or will be provided for by accumulating
collections on the Receivables for a specified period (a "Term Asset
Accumulation Period") and paid on the schedule final payment date, but in either
case may be paid earlier or later than such date. However, if an [Early
Amortization Event, Payout Event, Liquidation Event or Economic Amortization
Event] (as such terms are defined in Term Asset Agreements) (each such event, a
"Term Assets Early Amortization Event") occurs, [monthly] distributions of
principal to the holders of the Term Assets will begin on the first payment date
following the occurrence of such Term Asset Amortization Event. See "Term Asset
Amortization Events" below.
If a Term Assets Early Amortization Event does not occur, principal will be
distributed to the holder of the Term Assets on the first payments date during
the applicable Term Assets Controlled Amortization Period or at the end of the
Term Asset Accumulation Period. If, however, the amount of principal distributed
on the scheduled final payment date is not sufficient to pay the holders of the
Terms Assets in full, then monthly distributions of principal to the holders of
Term Assets will occur on each Payment Date after the scheduled final payment
date.]
[Include if Applicable][Investor Percentage and Seller's Percentage]
[Pursuant to the Term Asset Agreements, all amounts collected on
Receivables will be allocated between the investor of the holders of the Term
Assets, the investor interest of any other series and the Seller's Interest by
S-19
reference to the investor percentage of the holders of the Term Assets, the
investor percentage of any other series and the Seller's Percentage.
The Seller's Percentage generally means the excess of 100% over the
aggregate investor percentage of all series issued by such Term Asset Issuer
then outstanding.]
[Include if Applicable][Allocation of Collections]
[The Term Asset Servicer will deposit any payments collected by the Term
Asset Servicer with respect to the Receivables and will generally allocate such
amounts as follows:
[(a) an amount equal to the applicable Seller's Percentage of the aggregate
amount of deposits in respect of Principal Receivable and Finance Charge
Receivables, respectively, will be paid to the holder of the Seller's
Certificate;
(b) an amount equal to the applicable investor percentage of the aggregate
amount of such deposits in respect of Finance Charge Receivables will be
deposited into an account for the benefit of the holders of the Term Assets;
(c) during the Revolving Period, an amount generally equal to the
applicable investor percentage of the aggregate amount of such collections in
respect of Principal Receivables will be paid to the holder of the Seller's
Certificate, provided, however, that such amount may not exceed the amount equal
to the Seller's interest. The term "Seller's Certificate" also encompasses the
terms Exchangeable Seller's Certificate and Exchangeable Transferor's
Certificate. "Principal Receivables" generally consist of amount charged by
cardholders for merchandise and services, amounts advanced as cash advances and
the interest portion of any participation interests. "Finance Charge
Receivables" generally consist of monthly periodic charges, annual fees, cash
advance fees, late charges, over-the-limit fees and all other fees billed to
cardholders, including administrative fees;
(d) during the controlled amortization period, rapid amortization period or
accumulation period, collections of Principal Receivables will be allocated to
the holders of Term Assets based on the investor percentage, subject, during a
controlled amortization period, to a cap.]]
[Term Assets Events of Default][Term Assets Early Amortization Events]
The following is a summary of the typical Term Assets [Events of
Default][Early Amortization Events] for each series of Term Assets. [Any
additional Term Assets Early Amortization Events, unique to a particular series
of Term Asset, will be described following the summary];
[(a) failure to make payments to holders of Term Assets with the time
periods given in the Term Asset Agreements;]
[(b) material breaches of certain representations, warranties or covenants
or failure to observe or perform in a material respect any covenant or agreement
under any Term Asset Agreement;]
[(c) occurrence of a material default by a Term Asset Servicer;]
[(d) failure to maintain the minimum Seller's Percentage;]
[(e) failure to maintain a certain minimum level of Receivables or
Accounts, or the Seller being unable to transfer Receivables or Accounts to Term
Asset Issuer;]
[(f) certain events of bankruptcy or insolvency relating to the Seller;]
[(g) Term Asset Issuer becomes an "investment company" within the meaning
of the Investment Company Act of 11940, as amended;]
S-20
[(h) any reduction of the portfolio yield or excess spread (averaged over
any three consecutive months) to a rate below a certain rate provided in the
Term Asset Agreement for such a period;]
[(i) the available amount of the cash collateral guaranty is less than __%
of the amount of the investor interest for the underlying series of Term
Assets.]
[Describe Additional Term Asset Events of Default or Specific Amortization
Events]
[The pool of Term Assets, together with any other assets described below
any credit Support described under "Description of Credit Support", represents
the sole assets of the Trust that are available to make distributions in respect
of the Certificates.]
[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 Securities.] Consequently, the ability of
Securityholder to receive distributions in respect of the Securities will depend
[almost] entirely on the Trust's receipt of payments on the foregoing Term
Assets form [name such obligor]. This Prospectus Supplement relates only to the
Securities being offered hereby and does not relate to the Term Assets of [name
such obligor]. All information contained in this Prospectus Supplement regarding
[name such obligor] are derived from the publicly available documents described
above. Neither the Company nor the Underwriter has participated in the
preparation of such documents, or takes any responsibility for the accuracy for
the accuracy or completeness of the information provided therein.]
The Deposited Assets will also include [describe any assets which are
ancillary or incidental to the Term Assets, 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 Term Assets] (such assets,
together with the Term Assets, the "Deposited Assets").
[DESCRIPTION OF CREDIT SUPPORT]
For the benefit [solely] of the [Notes] [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 the Company's assignment of the Deposited Assets to the
Trust, the Company will obtain the Letter of Credit from [__________] (the
"Letter of Credit Bank") in favor of the Owner Trustee. 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 may
be drawn 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 Security 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 _____________, 19__. The
[Indenture][Owner] 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 thereon shall be paid to the Letter of
Credit Bank to the extent of any amounts owing, in the manner and priority
specified herein.]
[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
S-21
aggregate principal amount of the Securities covered thereby, provide
information of financial and other matters with respect to the Letter of Credit
Bank.]]
[The Surety Bond]
Simultaneously with the Company's assignment of the Deposited Assets to the
Trust, the Company will obtain the Surety Bond from [________] (the "Surety") in
favor of the [Indenture][Owner] Trustee. The Surety Bond will guaranty [timely]
[ultimate] distributions of the principal of and premium (if any) and interest
with respect to the [Notes] [Offered] [Class[__]] Certificates. The Surety Bond
expires on ___________, 19__. The [Indenture][Owner] Trustee will be obligated,
in the event of a drawing on the Surety Bond, to pursue appropriate remedies
against the Deposited Assets and other Assets and other collateral, and any
realization thereon shall be paid to the Surety to the extent of any owing, in
the manner and priority specified herein.
[Add language regarding the issuer of the Surety Bond with respect to its
debt ratings, activities in 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 and
address for further information concerning the Surety. In addition, to the
extent that the Surety Bond will cover payment of 20% or more of the aggregate
principal amount of the Securities covered thereby, provided information of
financial and other matters with respect to the issuer of the Surety Bond.]]
[Reserve Account]
The Company will deposit with the [Indenture][Owner] Trustee on the Closing
Date cash, letters of credit and short-term investments acceptable to the Rating
Agency initially rating the Securities in the amount of [$]_____________.
[Collections with respect to the Deposited Assets not distributed with respect
to the Securities shall be deposited in the Reserve Account.] Amounts so
deposited in such Reserve Account will be used to make payments of principal of
and premium (if any) and interest on the Securities 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 the Company.]
YIELD ON THE CERTIFICATES
[Describe factors relating to the Deposited Assets, the terms thereof and
the manner and priority in which collections thereon are paid or allocated to
the Notes and each class of the Certificates, as described elsewhere herein.]
See "Maturity and Yield Considerations" in the Prospectus.
DESCRIPTION OF THE SECURITIES
General
The Certificates will consist of [__] class of Certificates, designated as
Class [__] [,] [and] Class [__] [and Class____] Certificates. The Certificates
will be denominated and distributions with respect thereto will be payable in
the Specified Currency. The Certificates will be denominated and distributions
with respect thereto will be payable in 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 [$]_____(approximate) and a [___%] [Variable] Pass-Through
Rate. [The Class [__] Certificates, which are not being offered hereby, will be
transferred by the Company to an affiliate on the Closing Date, and may be sold
at any time by the Company in accordance with the terms of the Trust Agreement.]
S-22
The Certificates [other than the Class [__] Certificates [and specify
others] (the "Definitive Classes"))] will be issued, maintained and transferred
on the book-entry records of DTC and it Participants in minimum denominations of
[$______] and [integral multiplies thereof] [multiplies of [$________] in excess
thereof]. [The Class [__] Certificates [and specify any others] will be offered
in registered, certificated form, in minimum percentage interests corresponding
to the initial Notional Amounts or Certificate Principal Balance, as applicable,
of [$_______] and integral multiples thereof, 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 [$________]
plus the excess of the initial aggregate Notional Amount of Certificate
Principal Balance, as applicable, of such class over the greatest integral
multiple of [$________] that is not more than such initial aggregate Notional
Amount or Certificate Principal Balance, as applicable.]
The Notes will be denominated and distributions with respect thereto will
be payable in the Specified Currency.
The Notes [and specify others] will be issued, maintained and transferred
on the book-entry records of DTC and it Participants in minimum denominations of
[$________] and [integral multiples thereof] [multiples of [$_________] in
excess thereof.]
The Notes and 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 the Company, the "Clearing Agency"),
except as provided below. The Company has been informed by DTC that DTC's
nominee will be CEDE & Co. ("CEDE"). No holder of any such Note or Certificate
(a "Security Owner") will be entitled to receive certificate representing such
person's interest, except as set forth below under " - Definitive Securities".
Unless and until Definitive Securities are issued under the limited
circumstances described herein, all references to actions by holders with
respect to any such Notes or Certificates shall refer to actions taken by DTC
upon instructions from its Participants. See "-" Definitive Securities" "below
and "Description of Securities - Global Securities" in the Prospectus.
Under the rules, regulations and procedures creating and affecting DTC and
its operations, DTC will take action permitted to be taken by a Securityholder
(a "Security Owner") only at the direction of one or more Participants to whose
DTC account such Securities 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 such Securities evidence such specified
Voting Rights. DTC may take conflicting actions with respect to Voting Rights,
to the extent that Participants whose holdings of Securities evidence such
Voting Rights, authorize divergent action.
Definitive Securities
Definitive Securities will be issued to Security Owners or their nominees
respectively, rather than to DTC or its nominee, only if (i) the Company advises
the Owner Trustee or Indenture Trustee in writing that DTC is no longer willing
or able to discharge properly its responsibilities as Clearing Agency with
respect to a class of Securities [(other than the Definitive Classes)] and the
Company is unable to locate a qualified successor or (ii) the Company, 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 Securities. Upon surrender by DTC of the
definitive certificates representing the Securities [(other than the Definitive
Classes of Securities)] and receipt of instructions for re-registration, the
Owner Trustee or Indenture Trustee will reissue such Securities as Definitive
Securities issued in the respective principal amounts owned by the individual
owners of such Securities, and thereafter the Owner Trustee or Indenture Trustee
will recognize the holders of such Definitive Securities as holders under the
Trust Agreement or Indenture, as applicable.
Distribution
Collections on the Deposited Assets that are received for a given
Collection Period pursuant to the collection procedures described herein and in
the Prospectus will be applied by on each applicable Distribution Date
S-23
to the following distributions in the following order of priority, solely to the
extent of Available Funds (as defined below) on such Distribution Date:
(i) to the Owner Trustee and the Indenture Trustee, all unpaid fees and
expenses owed thereto and its respective agents, up to the Allowable
Expense Amount (as defined below) for the related Collection Period;
(ii) [to the providers of Credit Support "Credit Support Providers"], any
amount required to be paid or reimbursed to, or deposited with, any
such person (collectively, "Credit Support Payments");]
(iii)to the Securityholders of each Class of such 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 such Class, commencing
with the most highly ranked Class and, to the extent Available Funds
remain available, to each other Class in accordance with the ranking
specified herein under "--Allocation of Losses; Subordination";
(iv) [to the Credit Support Providers, any Credit Support Payments;]
(v) to the Owner Trustee and the Indenture Trustee, all its remaining
unpaid fees and expenses and those of its respective agents not
otherwise paid pursuant to clause (i) above;
(vi) [all remaining amounts, if any, to the Company.]
There can be no assurance that collections received from the Deposited
Assets and any applicable Credit Support relating to the Securities over a
specified period will be sufficient, after payment of all Allowable Expense
Amounts [and payments of all amounts required to be paid to the Credit Support
Providers] for such period, to make all required distributions on the
Securities. To the extent Available Funds are insufficient to make any such
distributions due to any such Series or Class, any shortfall will be carried
over and will be distributed on the next Distribution Date on which sufficient
funds exist to pay such shortfalls.
For purposes hereof, 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 such preceding Collection Period.
"Available Funds" for any Distribution Date means the sum of (a) all
amount received on or with respect to the Deposited Assets (including
investment income on Eligible Investment) received during the preceding
Collection Period[,] [and] (b) amounts available as such Distribution Date
pursuant to the Credit Support described herein [and (c) any additional
amount that the [Company] may remit to the Owner 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 Securities, those
investments acceptable to the Ratings Agency as being consistent with the
rating of such Securities. Generally, Eligible Investments must be limited
to obligations or securities that mature no later than the business day
prior to the next succeeding Distribution Date.
S-24
"Required Interest" for the Securities or any Class thereof on any
given Distribution Date means the accrued and unpaid interest on the
outstanding Security Principal Balance [or Notional Amount] of such
Securities, computed at the applicable Note Interest Rate or Pass-Through
Rate.
"Required Premium" for the Securities or any Class thereof for any
Distribution Date means an amount equal to the product of (a) the Required
Principal for such Securities on such Distribution Date and (b) the Call
Premium Percentage for such Distribution Date.
"Required Principal" for the Securities or any Class thereof 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 payable or allocable to such Securities. The Security
Principal Balance of a Security outstanding at an time presents the maximum
amount that the holder thereof is entitled to receive as distribution
payable in respect of or allocate to principal from the cash flow on the
Term Assets, the other assets in the Trust and any Credit Support obtained
for the benefit of such holder. The Security Principal balance of any class
of Securities [(other than the Class [__] Certificates)] as of any date of
determination is equal to the initial Security Principal Balance thereof,
reduced by the aggregate of (a) all amounts allocable to principal
previously distributed with respect to such Security and (b) any reductions
in the Security Principal Balance there deemed to have occurred in
connection with allocations of (i) Realized Losses allocable to principal
on the Deposited Assets and (ii) Extraordinary Trust Expenses, as described
herein. [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].]
[Advances]
[Subject to the following limitations, the [Trustee] [Servicer] will be
obligated to advance or advance or cause to be advanced on or before each
Distribution Date its own funds, or other available funds, in an amount equal to
the aggregate of payments of principal, premium (if any) and interest, net of
that portion of the Administrative Fee (as defined herein) attributable to fees
and expenses of the Owner Trustee or Indenture Trustee, that were due during the
related Collection Period and that were delinquent on the related Determination
Date (any such advance, an "Advance").
Advances are required to be made only to the extent they are deemed by the
[Trustee] [Servicer] to be recoverable from related late collections, insurance
proceeds, if any, or Liquidation Proceeds. The purpose of making such Advance is
to maintain a regular cash flow, rather than to guarantee or insure against
losses. The [Trustee] [Servicer] 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 from late collections, insurance
proceeds, if any, and any proceeds from the liquidation of the Deposited Asset
("Liquidation Proceeds") as to which such unreimbursed Advance was made. In
addition, any Advance previously made in respect of any Deposited Asset that are
deemed to be nonrecoverable from related late collections, insurance proceeds,
if any, or Liquidation Proceeds may be reimbursed to the [Trustee] [Servicer]
out of any funds allocable to any of the Deposited Assets prior to the
distributions on the Securities. [In the event that the Servicer fails in its
obligation to make any such Advance, the Owner Trustee may be obligated to make
any such Advance, to the extent provided in the Trust Agreement.]]
Allocation of Losses; Subordination
S-25
The subordination described herein provided by the Class [__] Certificates
[and the Class [__] Certificates] is designed to protect holders of the Notes
and 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 Notes and
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.
[Realized Losses 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 is excess
of the Allowable Expense Amount.]
Restriction 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 herein, the
Class [__] Certificates may not be purchased by or transferred to a Plan except
upon the delivery of an opinion of counsel as described herein. See "ERISA
Considerations".]
DESCRIPTION OF THE TRUST AGREEMENT
General
The Certificates will be issued pursuant to the Trust Agreement, a form of
which is filed as an exhibit to the Registration Statement. A Current Report on
Form 8-K relating to the Certificates containing a copy of the Trust Agreement
as executed will be filed by the Company with the Commission following the
issuance and sale of the Certificates. The Trust created under the Trust
Agreement will consist of (i) the Deposited Assets (exclusive of any Retained
Interest, which is not part of the Trust), (ii) all payments on or collections
in respect of the Deposited Assets due after the Cut-off Date, together with any
proceeds thereof[,] [and] [(iii) any Credit Support in respect of any class or
classes of Certificates] [and (iv) the rights of the Company under the Deposited
Asset Purchase Agreement among the Company and the Deposited Asset Seller]. [In
addition, the Certificateholders of the Certificates may also have the benefit
of certain Credit Support discussed above. See "Description of Credit Support".]
Reference is made to the Prospectus for important information in addition to
that set forth herein 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 herein.
The Owner Trustee
_________________, a_______________, will act as trustee for the
Certificates and the Trust pursuant to the Trust Agreement. The Owner Trustee's
offices are located at [____] and its telephone number is [______].
The Trust Agreement will provide that the Owner Trustee and any director,
officer, employee or agent of the Owner 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 Owner Trustee's duties under the Trust
Agreement, other than any loss, liability or expense (i) that constitutes a
specific liability of the Owner Trustee under the Trust Agreement or (ii)
incurred by reason of willful misfeasance, bad faith or negligence in the
performance of the Owner Trustee's duties under the Trust Agreement or as a
result of a breach, or by reason of reckless disregard of the Owner Trustee's
obligations and duties under the Trust Agreement.
Voting Rights
S-26
[At all times,] [Subject to the succeeding 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 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 what circumstances voting will be
class-by-class.]
[Specify conditions, if any, under which allocation of Voting Rights might
change from the foregoing percentages].
Voting of Term Assets, Modification of Term Asset Agreement
The Owner Trustee, as holder of the Term Assets, has the right to vote and
give consents and waivers in respect of such Term Assets as permitted by DTC and
except as otherwise limited by the Trust Agreement or the Indenture. In the
event that the Owner Trustee receives a request from DTC, the Term Asset Trustee
or the Term Asset Issuer for it consent to any amendment, modification or waiver
of the Term Assets, the Term Asset Agreement or any other documents thereunder
or relating thereto, or receives any other solicitation for any action with
respect to the Terms Assets, the Owner Trustee shall mail notice of such
proposed amendment, modification, waiver or solicitation to each Securityholders
of record as such date. The Owner Trustee shall request instructions from the
Securityholders as to whether or not to consent to or vote to accept such
amendment, modification, waiver, or solicitation. The Owner Trustee shall
consent or vote, or refrain from consenting or voting, in the same proportion
(based on the relative [Note][Certificate] Principal Balance and Notional
Amounts of the [Notes][Certificates], as applicable) as the [Note][Certificates]
of the Trust were actually voted or not by the [Noteholders][Certificateholders]
thereof as of date determined by the Owner Trustee prior to the date on which
such consent or vote is required; provided, however, that, notwithstanding
anything to the contrary, the Owner 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 for Federal income tax purpose, (ii)
which would alter the timing or amount of any payment on the Term Assets, except
in the event of a [Term Assets Event of Default] [Term Assets Early Amortization
Event or an event which with the passage of time would become a [Term Assets
Event of Default][Term Assets Early Amortization Event] and with the unanimous
consent of all Outstanding [Notes][Certificates] or (iii) which would result in
the exchange or substitution of any of the outstanding Term Assets pursuant to a
plan for the refunding or refinancing of such Term Assets except in the event of
a default under the Indenture and only with the consent of Securityholders
representing 100% of the aggregate voting rights of each outstanding Class of
the Securities. The Owner Trustee shall have no liability for any failure to act
resulting from Securityholders' late return, directions requested by the Owner
Trustee from the Securityholders.
In the event that an offer is made by the Term Asset Issuer to issue new
obligations in exchange and substitution for any of the Term Assets, pursuant to
a plan for the refunding or refinancing of the Term Assets or any other offer is
made for the Term Assets, the Owner Trustee shall notify the Securityholders of
such offer as promptly as practicable. The Owner Trustee must reject any such
offer unless an event of default under the Term Asset Agreement has occurred,
the Owner Trustee is directed by the affirmative vote of all of the
Securityholders to accept such offer and the Owner Trustee has received the tax
opinion described above. Accordingly, a Securityholder generally would be
required to effect a withdrawal of Requested Term Assets from the Trust in order
to accept such offer. See "--Optional Exchange of Certificates".
If an event of default under the Term Asset Agreement occurs and is
continuing and if directed by all the holders of outstanding Class [__]
Securities and, unless the Class [__] Securities are no longer outstanding, by
all the holders of outstanding Class [__] Securities, the Owner Trustee shall
vote the Term Assets in favor of directing, or take such other action as may be
appropriate to direct, the Term Asset Trustee to declare the unpaid principal
amount of the Term Assets and any accrued and unpaid interest thereon to be due
and payable. In connection with a vote concerning whether to declare the
acceleration of the Term Assets, the Securityholders' interests of each Class
may differ and the interests of either Class may differ from holders of other
securities of the same series or class.
Termination
S-27
The Company 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)] one 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 the Company 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 the Company's 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 thereunder. In the event the Company 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 [Note][Certificate] Principal Balance or Notional Amount, as
applicable, plus with respect to the [Notes][Certificates] [one month's] [three
month's] [specify other period] interest thereon 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 [Notes][Certificates], any previously accrued but
unpaid interest thereon.] [Specify alternative allocations method if different
from above.]
DESCRIPTION OF THE INDENTURE
[Describe material provisions of Indenture not described in Prospectus, if
any.]
____________, a____________, will acts as trustee pursuant to the
Indenture. The Indenture Trustee's offices are located at
[____________________________________] and its telephone number is [__].
CERTAIN 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.]
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain United States federal income tax
consequences of the ownership of the Certificates and Notes as of the date
hereof. This summary is based on the Internal Revenue Code of 1986 (the "Code")
as well as Treasury Regulations and administrative and judicial rulings and
practice. Legislative, judicial and administrative changes may occur, possibly
with retroactive effect, that could alter or modify the continued validity of
the statements and conclusions set forth herein. This summary does not purport
to address all federal income tax matters that may be relevant to particular
Securityholders. For example, it generally is addressed only to original
purchasers of the Securities that are "U.S. Persons" (as described below), deals
only with Securities held as capital assets within the meaning of Section 1221
of the Code, and does not address tax consequences to Securityholders that may
be relevant to investors subject to special rules, such as investors that are
not U.S. Persons, banks, insurance companies, tax-exempt organizations, dealers
in securities or currencies, mutual funds, REITs, natural persons, cash method
taxpayers, S corporations, estates and trusts, investors that hold the
Securities as part of a hedge, straddle, integrated or conversion transaction,
or Securityholders whose "functional currency" is not the United States dollar.
Further, it does not address alternative minimum tax consequences or the
indirect effects on the holders of equity interests in a Securityholder. The
Prospectus Supplement for each series of Securities will describe the
consequences that relate to the specific Securities issued pursuant thereto.
For these purposes, a U.S. Person is (i) a citizen or resident of the
United States, (ii) a corporation or partnership organized in or under the laws
of the United States, any state thereof or the District of Columbia, or (iii) an
estate or trust that is a United States Person within the meaning of Section
7701(a)(30) of the Code.
Persons considering the purchase of the Securities should consult their own
tax advisors concerning the application of United States federal income tax
laws, as well as any state, local, foreign or other tax laws, to their
particular situations.
Tax Status of the Trust and the Term Assets
S-28
Upon the issuance of the Securities, Orrick, Herrington & Sutcliffe, LLP,
special tax counsel to the Company, will deliver its opinion generally to the
effect that, assuming compliance with the Trust Agreement (and certain other
documents) and based on certain representations of the Company, for federal
income tax purposes, the Trust will [should] be classified as a grantor trust
and [if the Trust is not determined to be a grantor trust, it will be classified
as a partnership and] not as an association (or publicly traded partnership
treated as an association) taxable as a corporation. Accordingly, each owner of
a Certificate (a "Certificateholder") will be subject to federal income taxation
as if it owned directly the portion of the Deposited Assets allocable to such
Certificates, and as if it paid directly its share of expenses paid by the
Trust. The following discussion assumes that the Term Assets were not issued
with original issue discount ("OID") and, accordingly, the Certificateholders
will not realize OID except with respect to a "stripped interest" (as defined
below).
[Tax Characterization of the Trust
The Depositor and the Administrative Agent, if any, have agreed, and the
Certificateholders 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
Certificateholders, the Depositor 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 Certificateholders 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 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 special 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.]
Income of the Noteholders
Treatment of the Notes as Indebtedness. Upon issuance of the Notes, special
tax counsel will deliver its opinion generally to the effect that the Notes
constitute indebtedness for federal income tax purposes. The discussion below
assumes that the Notes will be so classified.
Interest Income on the Notes. Except as discussed in the following
paragraph, the Notes will not be considered issued with original issue discount
("OID"). The stated interest thereon will be taxable to a Noteholder (a
"Noteholder") as ordinary interest income when received or accrued in accordance
with such Noteholder's method of tax accounting. Under Treasury regulations (the
"OID regulations"), a purchaser of a Note issued with a de minimis amount of OID
must include such OID in income, on a pro rata basis, as principal payments are
made on the Note. It is believed that any prepayment premium paid as a result of
a mandatory redemption will be taxable as contingent interest when it becomes
fixed and unconditionally payable. A purchaser who buys a Note for more or less
than its principal amount will generally be subject, respectively, to the
premium amortization or market discount rules of the Code.
Sale or Other Disposition. If a Noteholder sells a Note, such Noteholder
will recognize gain or loss in an amount equal to the difference between the
amount realized on the sale and the Noteholder's adjusted tax basis in the Note.
The adjusted tax basis of a Note to a particular Noteholder will equal the
holder's cost for the Note, increased by any market discount, acquisition
discount, OID and gain previously included by such Noteholder in income with
respect to the Note and decreased by the amount of bond premium (if any)
previously amortized and by the amount of principal payments previously received
by such Noteholder with respect to such Note. Any such gain or loss will be
capital gain or loss if the Note was held as a capital asset, except for gain
representing accrued interest and accrued market discount not previously
included in income. Capital losses generally may be used only to offset capital
gains.
S-29
Foreign Holders. Interest payments made (or accrued) to a Noteholder who is
a nonresident alien, foreign corporation or other non-United States person that
has no connection with the United States other than holding its Note (a "foreign
person") generally will be considered "portfolio interest," and generally will
not be subject to United States federal income tax and withholding tax, if the
interest is not effectively connected with the conduct of a trade or business
within the United States by the foreign person and the foreign person (i) is not
actually or constructively a "10 percent shareholder" of the Trust or the Seller
(including a holder of 10% of the outstanding Certificates) or a "controlled
foreign corporation" with respect to which the Trust or the Seller is a "related
person" within the meaning of the Code and (ii) provides the Indenture Trustee
or other person who is otherwise required to withhold U.S. tax with respect to
the Notes with an appropriate statement (on Form W-8 or a similar form), signed
under penalties of perjury, certifying that the beneficial owner of the Note is
a foreign person and providing the foreign person's name and address. If a Note
is held through a securities clearing organization or certain other financial
institutions, the organization or institution may provide the relevant signed
statement to the withholding agent; in that case, however the signed statement
must be accompanied by a Form W-8 or substitute form provided by the foreign
person that owns the Note. If such interest is not portfolio interest, then it
will be subject to United States federal income and withholding tax at a rate of
30 percent, unless reduced or eliminated pursuant to an applicable tax treaty.
Any capital gain realized on the sale, redemption, retirement or other
taxable disposition of a Note by a foreign person will be exempt from United
States federal income and withholding tax, provided that (i) such gain is not
effectively connected with the conduct of a trade or business in the United
States by the foreign person and (ii) in the case of an individual foreign
person, the foreign person is not present in the United States for 183 days or
more in the taxable year.
Backup Withholding. Each holder of a Note (other than an exempt holder such
as a corporation, tax-exempt organization, qualified pension and profit-sharing
trust, individual retirement account or nonresident alien who provides
certification as to status as a nonresident) will be required to provide, under
penalties of perjury, a certificate containing the holder's name, address,
correct federal taxpayer identification number and a statement that the holder
is not subject to backup withholding. Should a nonexempt Noteholder fail to
provide the required certification, the Trust will be required to withhold 31
percent of the amount otherwise payable to the holder, and remit the withheld
amount to the IRS as a credit against the holder's federal income tax liability.
Possible Alternative Treatments of the Notes. If, contrary to the opinion
of special tax counsel, the IRS successfully asserted that one or more of the
Notes did not represent debt for federal income tax purposes, the Notes might be
treated as equity interests in the Trust. If so treated, the Trust might be
taxable as a corporation (and the taxable corporation would not be able to
reduce its taxable income by deductions for interest expense on Notes
recharacterized as equity). Alternatively, the Trust might be treated as a
publicly traded partnership that would not be taxable as a corporation because
it would meet certain qualifying income tests. Nonetheless, treatment of the
Notes as equity interests in such a publicly traded partnership could have
adverse tax consequences to certain Noteholders. For example, income to certain
tax-exempt entities (including pension funds) might be "unrelated debt financed
income" (if the Trust had other indebtedness) or "unrelated business income";
income to foreign holders generally would be subject to U.S. tax and U.S. tax
return filing and withholding requirements, and individual Noteholders might be
subject to certain limitations on their ability to deduct their share of Trust
expenses.
Income of the Certificateholders
In General. For federal income tax purposes, each Certificateholder will be
treated as if such Certificateholder directly owned its pro rata share of the
Term Assets. A Certificateholder will allocate the amount it pays for its
Certificates among the Term Assets and the Deposited Assets in the Trust other
than the Term Assets (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 Certificateholder 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 Term Assets
represented by such 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 Term Assets to the extent the
Certificate
S-30
is entitled to receive a proportionate amount of all principal and interest on
the Term Assets. A class of Certificates will be considered in its entirety to
represent a stripped interest in the underlying Term Assets if it is entitled to
receive interest on the Term Assets which is disproportionately less than the
principal which it is entitled to receive on the Term Assets, or if it is
entitled to receive all or part of the interest on the Term Assets but no
principal on the Term Assets. In addition, if a class of Certificates is
entitled to receive interest and principal on the Term Assets, but the interest
it is entitled to receive on the Term Assets is disproportionately more than the
principal it is entitled to receive on the Term Assets, it could be argued that
the Certificates represents (a) an interest in the Term Assets that is not a
stripped interest to the extent it represents a proportional amount of all the
principal and interest on the Term Assets and (b) a stripped interest in the
Term Assets to the extent of any additional interest to which it is entitled on
the Term Assets. 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 Term Assets, each Certificateholder 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 Term Assets, income derived from the other Deposited
Assets held by the Trust, and any gain or loss upon collection or disposition of
the Term Assets or other Deposited Assets. The portion of each monthly payment
to a Certificateholder that is allocable to principal on the Term Assets (other
than amounts representing discount, as described below) will represent a
recovery of capital, which will reduce the tax basis of such Certificateholder's
undivided interest in the Term Assets.
To the extent that the portion of the purchase price of a Certificate
allocated to a Certificateholder's undivided interest in the Term Assets is
greater than or less than the portion of the principal balance of the Term
Assets allocable to the Certificate, such interest in the Term Assets will have
been acquired at a premium or discount, as the case may be. In determining
whether a Certificateholder has purchased its interest in the Term Assets 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 Term Assets at
the time of purchase as though such accrued interest were a separate asset,
thus, in each case, reducing the portion of the purchase price allocable to the
Certificateholder's undivided interest in the Term Assets (the "allocated
Purchase Price"). To the extent that the allocated Purchase Price is less than
the principal balance of the Term Assets, the Certificateholder's interest in
such Term Assets will be treated as purchased at a "market discount." The market
discount on the Term Assets 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 the Term
Assets, the Certificateholder'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 Certificateholder who purchases a
Certificate in the initial public offering were equal or almost equal to the
portion of the principal balance of the Term Assets that is allocable to the
Certificate, there would be no significant amount of discount or premium with
respect to its interest in such Term Assets. Moreover, if the total purchase
price of a Certificate is equal to the principal amount of the Term Assets
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
Certificateholder's interest in the Term Assets 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 the Term Assets 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 the
Term Assets (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 Certificateholder 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 Certificateholder 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
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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 Term
Assets, 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
"Regulations"), 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 Term Assets to which
the stripped interest (i.e., the Certificateholder) is also entitled. If none of
the amounts payable to a Certificateholder 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
Certificateholder's share of other Deposited Assets and to accrued interest.
The tax treatment of a Certificateholder 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 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 Certificateholder would be required to report on its federal income tax
return its share of the gross income of the Trust, including interest on the
Term Assets and any gain upon sale or disposition by the Trust of the Term
Assets. Such gross income would exceed the Pass-Through Rate on the Certificate
by an amount equal to the Certificateholder's share of the expenses of the Trust
for the period during which it owns a Certificate. Each Certificateholder 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;
such income would be capital gain, short-term or long-term depending upon the
Certificateholder's holding period in the Certificate. The Certificateholder
would be entitled to deduct its share of expenses of the Trust to the extent
described below. Any amounts received by a Certificateholder 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 Certificateholder would report its share of
the income of the Trust under its usual method of accounting. Accordingly,
except as described below, interest on the Term Assets would be includible in a
Certificateholder's gross income when it accrues on the Term Assets, or, in the
case of Certificateholders who are cash basis taxpayers, when received by the
Administrative Agent, if any, or otherwise the Trustee on behalf of
Certificateholders. Because the interest collected on the Term Assets generally
is paid to Certificateholders in the following month, the amount of interest
includible in a Certificateholder'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 Term Assets represented by a Certificate is not treated
as being de minimis, a Certificateholder 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 Certificateholder prior
to the receipt of cash by such Certificateholder. Under the rules described
below, the amounts includible in income by a Certificateholder on
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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 Certificateholder will be
required, whether such Certificateholder 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 Certificateholder 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 Term Assets, although Treasury regulations allow a
Certificateholder to elect other accrual periods of no more than a year in
length, as long as each scheduled payment on the Term Assets occurs at the end
of an accrual period.
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 Certificateholders 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.
Bond Premium. In the event that a Certificate represents either an
unstripped interest in the Term Assets, 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 Term Assets exceeds the total amount payable on the Term Assets
to the Certificateholder other than qualified stated interest), such premium
will be amortizable by the Certificateholder as an offset to interest income
(with a corresponding reduction in the Certificateholder's basis) under a
constant yield method over the term of the underlying Term Assets 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 Certificateholder
during the year in which the election is made and all debt instruments acquired
thereafter.
Election to Treat All Interest as Original Issue Discount. Any
Certificateholder 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 Certificateholder'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 such
Certificateholder.
Modification or Exchange of Term Assets
Depending upon the circumstances, it is possible that a modification of the
terms of the Term Assets, or a substitution of other assets for the Term Assets
following a default on the Term Assets, would be a taxable event to
Certificateholders on which they would recognize gain or loss.
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[Partnership Taxation
As a partnership, the Trust will not be subject to federal income tax, but
each Certificateholder will be required to separately take into account such
holder's 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 Certificateholders 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 Term Assets that
corresponds to any excess of the principal amount of such class of Certificates
over their initial issue price; and (iv) [any other income economically accruing
for such 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 Certificateholders. 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 such 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 Certificateholders, 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 Certificateholder'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 Term Assets, it intends to make all tax calculations
relating to income and allocations to Certificateholders on an aggregate basis.
Were the Service to require that such calculations be made separately for each
Term Asset, the Trust might be required to incur additional expense but the
Depositor believes that there would not be a material adverse effect on
Certificateholders.
A Certificateholder 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 Certificateholder will constitute (i)
first, a return of capital to the extent of such Certificateholder'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 thereof, gain on the sale
or exchange of such Certificateholder's Certificate. See "Disposition of
Certificates" below.]
[Discount and Premium
The Depositor believes that the Term Assets were not issued with original issue
discount ("OID") and, therefore, the Trust should not have OID income. However,
the purchase price paid by the Trust for the Term Assets may be greater or less
than the remaining principal balance of the Term Assets at the time of purchase.
If so, the Term Assets 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 Term
Assets 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 Term Assets
being included in income currently as such discount accrues over the life of the
Term Assets. As indicated above in the discussion of "Partnership Taxation," a
portion of such market discount income may be allocated to Certificateholders.]
Other Deposited Assets of the Trust
[Describe tax consequences of the other Deposited Assets.]
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Deductibility of the Trusts's Fees and Expenses
In computing its federal income tax liability, a Certificateholder 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
Certificateholder 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.
Purchase and Sale of a Certificate
A Certificateholder's tax basis in a Certificate generally will equal the
cost of such 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 Term Assets made on such 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 Certificateholder'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 Certificateholder's interest in accrued
market discount not previously taken into income on Term Assets.
[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
Certificateholder'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 such Certificate and, upon sale or other disposition of
some of the Certificates, allocate a pro rata portion of such 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 Term Assets 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 such special
reporting requirements. Thus, to avoid those special reporting requirements, the
Trust will elect to include market discount in income as it accrues.
If a Certificateholder 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 with respect thereto, such excess will generally give rise to
a capital loss upon the retirement of the Certificate.]
Backup Withholding
Payments made on the Certificates and proceeds from the sale of the
Certificates will not be subject to a "backup" withholding tax of 31% unless, in
general, the Certificateholder fails to comply with certain reporting procedures
and is not an exempt recipient under applicable provisions of the Code.
Foreign Certificateholders
To the extent that amounts paid to Certificateholders that are not United
States persons ("Foreign Certificateholders") are treated as interest with
respect to Term Assets originated after July 18, 1984, such amounts generally
will not be subject to the annual 30% withholding tax, provided that such
Foreign Certificateholder (i)
S-35
fulfills certain certification requirements, (ii) does not own at least 10% of
the total combined voting power of all classes of stock of the Term Assets
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. [Describe the federal income tax consequences to Foreign
Certificateholders 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. or any political subdivision thereof, or an estate or trust 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 fiduciaries have the authority to
control all of its substantial decisions.
[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 Certificateholders. 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
thereafter distributed to the Certificateholders may be incorrect.]
[Possible Recharacterization of the Trust as a Partnership
As indicated above under "Tax Status of the Trust and the Term Assets" it
is possible that the IRS will seek to recharacterize the Trust as a partnership.
If the IRS were to successfully recharacterize the Trust as a partnership, the
Trust would not be subject to federal income tax. Further, under Treasury
Regulation 1.761-2, certain partnerships may "elect out" of subchapter K of the
Code (partnership tax accounting). Although subject to uncertainty, the Trust
should be eligible for this election. Assuming that it is so eligible and makes
such election, each Certificateholder will be required to report its respective
shares of the items of income, deductions, and credits of the organization on
their respective returns (making such elections as to individual items as may be
appropriate) in a manner consistent with the exclusion of the Trust from
partnership tax accounting. Such reporting should be substantially similar to
the income tax reporting that would be required under the grantor trust rules.
In mutual consideration for each Certificateholder's purchase of a Certificate,
each such Certificateholder is deemed to consent to the Trust's making of a
protective election out of subchapter K of the Code.
If the election to be excluded from the partnership tax account provisions
of the Code is not effective, among other consequences, (i) the Trust would be
required to account for its income and deductions at the Trust level and to
utilize a taxable year for reporting purposes and (ii) each Certificateholder
would be required to separately take into account such Certificateholder's
distributive share of income and deductions of the Trust. A Certificateholder
would take into account its distributive shares of Trust income and deductions
for each taxable year of the Trust in the Certificateholder's taxable year which
ends with or within the Trust's taxable year. A Certificateholder's share of the
income determined at the trust level would not necessarily be the same as the
income computed at the Certificateholder level; it would not, for example,
necessarily take account of any particular Certificateholder's acquisition price
for its Certificate.]
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and Section 4975 of 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, including an individual retirement account
("IRA") or Keogh plan, or (c) any entity whose underlying assets include plan
assets by reason of a plan's investment in the entity (each, a "Plan").
S-36
ERISA and Section 4975 of the Code prohibit certain transactions involving
the assets of a Plan and persons who have specified relationships to the Plan,
i.e., "parties in interest" within the meaning of ERISA or "disqualified
persons" within the meaning of the Code (collectively, "Parties in Interest").
Thus, a Plan fiduciary considering an investment in the Securities should
consider whether such an investment might constitute or give rise to a
prohibited transaction under ERISA or Section 4975 of the Code. The Term Assets
Issuer, the Underwriter, the Owner Trustee and their respective affiliates may
be Parties in Interest with respect to any Plans.
If an investment in a Security by a Plan were to result in the assets of
the Trust being deemed to constitute "plan assets" of such Plan, certain aspects
of such investment, including the operations of the Trust and the deemed
extension of credit between the Term Assets Issuer and the holder of the
Security (as a result of the Term Assets being deemed to be plan assets), as
well as subsequent transactions involving the Trust or its assets, might
constitute or result in prohibited transactions under Section 406 of ERISA and
Section 4975 of the Code unless exemptive relief were available under an
applicable exemption issued by the United States Department of Labor (the
"DOL"). Neither ERISA nor the Code defines the term "plan assets." Under Section
2510.3-101 of the DOL regulations (the "Regulation"), a Plan's assets may
include the assets of an entity if the Plan acquires an "equity interest" in
such entity unless an exception applies under the Regulation.
The Regulation defines the term "equity interest" as any interest in an
entity other than an instrument which is treated as indebtedness under
applicable local law and which has no "substantial equity features." [Although
there is no authority directly on point, the Notes should be treated as
indebtedness under applicable local law and should not be treated as having any
substantial equity features.] The Regulation states that a beneficial interest
in a trust (such as a Certificate) is an equity interest. Thus, if a Plan
acquires a Certificate, for certain purposes (including the prohibited
transaction provisions of Section 406 of ERISA and Section 4975 of the Code),
the Plan would be considered to own an undivided interest in the underlying
assets of the Trust unless such Certificate is a "publicly-offered security" or
another exception applies under the Regulation.
[The Underwriter expects that the Certificates will satisfy the criteria
for treatment as publicly-offered securities under the Regulation.] A
publicly-offered security is 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 at the conclusion of the initial offering, and
(iii) 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. [The
Underwriter will verify that there will be at least 100 separate purchasers
(whom the Underwriter has no reason to believe are not independent of the
Company or of one another) at the conclusion of the initial offering. There is
no assurance that the 100 independent investor requirement of the
"public-offered security" exception will, in fact, be satisfied.]
Without regard to whether the Securities are treated as equity interests in
the Trust, exemptive relief from the prohibited transaction rules of ERISA and
Section 4975 of the Code could be available if a Security is acquired in
accordance with one or more "class exemptions" issued by the DOL, such as
Prohibited Transaction Class Exemption ("PTCE") 96-23 (the "in-house asset
manager" exemption), PTCE 95-60 (the insurance company general account
exemption), PTCE 91-38 (the bank collective investment fund exemption), PTCE
90-1 (the insurance company pooled separate account exemption), PTCE 84-14 (the
"qualified professional asset manager" exemption) or PTCE 75-1 (the
broker-dealer exemption). There is no assurance that any of these exemptions,
even if all of the conditions specified therein are satisfied, will apply to all
transactions involving the acquisition of the Security and the operation of the
Trust.
Each purchaser of a [Security] [Note] [Certificate] and each fiduciary who
causes any entity to purchase a [Security] [Note] [Certificate] will be deemed
to have represented and warranted that either (i) it is neither a Plan nor an
entity the assets of which are deemed to be "plan assets" or (ii) its purchase
and holding of such [Security] [Note] [Certificate] will not constitute or
result in a non-exempt prohibited transaction. In this regard, prospective Plan
investors as to which the Term Assets Issuer, the Underwriter or any of their
affiliates may be a Party in Interest should consider whether adequate exemptive
relief is available under any of the class exemptions mentioned above.
S-37
Nothing herein shall be construed as a representation that an investment in
the Securities meet any or all of the relevant legal requirements with respect
to investments by, or is appropriate for, Plans generally or any particular
Plan. Any Plan or any other entity the assets of which are deemed to be "plan
assets," such as an insurance company investing assets of its general account,
proposing to acquire Securities should consult with its counsel.
METHOD OF DISTRIBUTION
Subject to the terms and conditions set forth in the Underwriting
Agreement, dated as of [________], 199[_] (the "Underwriting Agreement"), the
Company has agreed to sell and [Salomon Brothers Inc. (an affiliate of the
Company)] (each of the Underwriters named below, including Salomon Brothers Inc
(an affiliate of the Company)] (the "Underwriter[s]")[,] has [severally] agreed
to purchase, the Notes and the [Certificates] [principal amount of each class of
Certificates set forth below opposite its name].
Class [ ] Class [ ] Class [ ]
Notes [ ] Certificates Certificates Certificates
---------- ------------ ------------ ------------
Salomon Brothers Inc......... $ $ $ $
Total............
[Salomon Brothers Inc has] [The several Underwriters have] agreed, subject
to the terms and conditions set forth in the Underwriting Agreement, to purchase
all Certificates and Notes offered hereby if any of such Securities 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.]
The Company has been advised by the Underwriter[s that [it] [they]
propose[s] to offer the Securities 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 Securities 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 Securities for whom they may act as agents. The Underwriter[s] and any
dealers that participate with the Underwriter[s] in the distribution of
Securities may be deemed to be underwriters, and any profit on the resale of
Securities by them may be deemed to be underwriting discounts or commissions
under the Securities Act.
The Underwriting Agreement provides that the Company 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.
Salomon Brothers Inc is an affiliate of the Company, and the participation
by Salomon Brothers Inc is the offering of the Certificates complies with
Schedule E of the By-Laws of the National Association of Securities Dealers,
Inc. regarding underwriting securities of an affiliate.
RATINGS
It is a condition to the issuance of the Certificates that the Certificates
be rated not lower than _________. It is a condition to the issuance of the
Notes that the Notes be rated not lower than ________ [specify ratings
applicable to each class] by [Standard & Poor's Ratings Services ("Standard &
Poor's")] [ Moody's Investors Service, Inc. ("Moody's")] [Fitch's Investors
Service, L.P. ("Fitch's")] [and] [Duff & Phelps Credit Rating Company ("Duff &
Phelps")] (the "Rating [Agency] [Agencies]"). The ratings address the likelihood
of the receipt by Securityholders of payments required under the Trust Agreement
or Indenture, as applicable, 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 Notes and each class of the Certificates with respect
to collections and losses with respect to the
S-38
Deposited Assets. The rating on the Certificates or the Notes 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.
The Company has not requested a rating on the Securities 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 Securities, or, if
it does, what rating would be assigned by any such other rating agency. A rating
on the Securities by another rating agency, if assigned at all, may be lower
than the ratings assigned to the Securities by the Rating [Agency] [Agencies].
S-39
INDEX OF TERMS
10 percent shareholder........................................................30
Advance.......................................................................25
AECA..........................................................................14
AID-Guaranteed Underlying Security Payment Date...............................15
Allocation of Losses; Subordination...........................................24
Allowable Expense Amount......................................................24
Appropriations Acts...........................................................13
Available Funds...............................................................24
Available Information.........................................................18
Borrower......................................................................14
Business Day...................................................................7
Call Premium Percentage.......................................................24
capital assets................................................................28
Cash Collateral guaranty......................................................17
CEDE..........................................................................23
Certificates...................................................................1
Clearing Agency...............................................................23
Closing Date...................................................................6
Code..........................................................................28
Commission....................................................................18
Company........................................................................1
controlled foreign corporation................................................30
Credit Support Payments.......................................................24
Credit Support Providers......................................................24
Definitive Classes............................................................23
Depositary....................................................................14
Deposited Assets...............................................................7
disqualified persons..........................................................34
Distribution Date..............................................................2
DSAA..........................................................................13
DTC............................................................................2
Duff & Phelps.................................................................36
Eligible Investments..........................................................24
equity interest...............................................................35
ERISA.........................................................................34
Expected Settlement Date.......................................................1
Extraordinary Trust Expense...................................................26
Fannie Mae....................................................................10
FCA...........................................................................13
FCBs..........................................................................13
Federal Tax Counsel...........................................................28
FFB...........................................................................13
FFEL..........................................................................11
FHLBs.........................................................................12
FHLMC Act.....................................................................11
Final Distribution Date........................................................2
Finance Charge Receivables....................................................20
FIRRE Act.....................................................................12
FMS...........................................................................13
foreign person................................................................30
Freddie Mac...................................................................11
Funding Corporation...........................................................13
GSE............................................................................1
GTCs..........................................................................13
S-40
Housing Program...............................................................14
IFIs..........................................................................14
implementation Agreements.....................................................14
Indenture......................................................................1
Indenture Trustee..............................................................1
Information Statements........................................................13
investment company............................................................20
Investment Program............................................................14
IRA...........................................................................34
Letter of Credit..............................................................21
Liquidation Proceeds..........................................................25
Maturity and Yield Considerations..............................................8
MBS...........................................................................11
Moody's.......................................................................36
Note Payment Date.............................................................14
Notes..........................................................................1
OID...........................................................................29
OID regulations...............................................................29
Owner Trustee..................................................................1
Parties in Interest...........................................................34
Plan..........................................................................34
plan assets...................................................................34
portfolio interest............................................................30
Principal Receivables.........................................................20
Prospectus.....................................................................1
PTCE..........................................................................35
publicly-offered security.....................................................35
qualifying income.............................................................29
Rating [Agency] [Agencies]....................................................36
Realized Losses................................................................7
REFCORP.......................................................................12
Regulation....................................................................35
related person................................................................30
Required Interest.............................................................25
Required Premium..............................................................25
Required Principal............................................................25
RTC...........................................................................12
Sallie Mae....................................................................11
Scheduled Maturity Date........................................................2
Securities.....................................................................1
Securities Act................................................................18
Security Owner................................................................23
Seller........................................................................19
Seller's Interest.............................................................19
Seller's Percentage...........................................................19
Service.......................................................................28
Short-Term Note...............................................................29
Special Distribution Date......................................................7
Specified Currency.............................................................3
Standard & Poor's.............................................................36
substantial equity features...................................................35
Surety........................................................................22
System........................................................................13
Systemwide Debt Securities....................................................13
Term a Asset Controlled Amortization Period...................................19
Term Asset Accumulation Period................................................19
S-41
Term Asset Agreement...........................................................5
Term Assets....................................................................1
Term Assets Currency...........................................................5
Term Assets Early Amortization Event..........................................19
Term Assets Payment Date......................................................18
Term Assets Prospectus.........................................................8
Term Assets Registration Statement............................................18
Trust..........................................................................1
Trust Agreement................................................................3
Trustee.......................................................................14
TVA Act.......................................................................12
Underlying Trustee............................................................15
Underwriter[s]................................................................36
Underwriting...................................................................1
Underwriting Agreement........................................................35
unrelated business income.....................................................30
unrelated debt financed income................................................30
S-42
Prospectus
Notes
Trust Certificates
Trust Shares
(Issuable in Series)
Structured Products Corp.
The Notes (the "Notes") and Trust Certificates or Shares (either, the
"Certificates" and, collectively with the Notes, the "Securities") offered
hereby and by supplements (each a "Prospectus Supplement") to this Prospectus
will be offered from time to time in one or more series (each a "Series") and in
one or more classes within each such Series (each a "Class") with an aggregate
initial public offering price or purchase price of up to [$1,000,000] or the
equivalent thereof in one or more foreign or composite currencies, including the
European Currency Unit ("ECU"). Securities of each respective Series and Class
will be offered on terms to be determined at the time of sale as described in
the related Prospectus Supplement accompanying the delivery of this Prospectus.
Securities may be sold for United States dollars or for one or more foreign or
composite currencies, and the principal of, premium, if any, and any interest to
be distributed in respect of Securities may be payable in United States dollars
or in one or more foreign or composite currencies. Each Series and Class of
Securities may be issuable as individual securities in registered form without
coupons ("Registered Securities") or in bearer form with or without coupons
attached ("Bearer Securities") or as one or more global securities in registered
or bearer form (each a "Global Security").
Each Series of Notes will be secured by, and each Series of Certificates will
represent beneficial ownership interests in, securities or receivables (the
"Term Assets"), together with certain other assets described herein and in the
related Prospectus Supplement (such assets, together with the Term Assets, the
"Deposited Assets") to be (i) sold by Structured Products Corp. (the "Company")
to a business trust, owner trust or other special purposes, bankruptcy-remote
entity established by the Company (any such entity, an "SPV"), and pledged to
the indenture trustee (the "Indenture Trustee") named in the related Prospectus
Supplement for the benefit of holders of the Notes of such Series pursuant to an
indenture and a series supplement thereto with respect to a given Series
(collectively, the "Indenture") between the SPV, as issuer, and the Indenture
Trustee or (ii) deposited in or transferred to a trust (the "Trust") for the
benefit of holders of Certificates of such Series by the Company pursuant to a
trust agreement or pooling and servicing agreement and a series supplement
thereto with respect to a given Series (collectively, the "Trust Agreement")
among the Company, as depositor or transferor, the administrative agent, if any
(the "Administrative Agent"), the servicer, if any (the "Servicer") and the
trustee (the "Certificate Trustee"). If so specified in the related Prospectus
Supplement, Certificates representing beneficial interests in the applicable SPV
will also be offered hereby. The Term Assets consist of a [SELECT ONE OF THE
BRACKETED SECTIONS][Alternative 1: publicly issued, fixed income debt security
or a pool of such debt securities issued by one or more corporations, banking
organizations or insurance companies organized under the laws of the United
States of America or any state, which are subject to the informational
requirements of the Securities and Exchange Act of 1934 and which in accordance
therewith file reports and other information with the Commission] [Alternative
2: publicly issued, fixed income debt security or a pool of such debt securities
which represent obligations of one or more foreign private issuers (as such term
is defined in Rule 405 of the Securities Act) subject to the informational
requirements of the Securities and Exchange Act of 1934 and which in accordance
therewith file reports and other information with the Commission] [Alternative
3: publicly issued, fixed income debt security or pool of such debt securities
which represent obligations of the United States of America, any agency thereof
for the payment of which the full faith and credit of the United States of
America is pledged, or a United States governmental sponsored organization
created pursuant to a federal statute (a "GSE")] [Alternative 4: publicly
issued, fixed income debt security or pool of such debt securities which
represent obligations issued by or guaranteed by a foreign government, political
subdivision or agency or instrumentality thereof] [Alternative 5: one or more
pools of revolving credit card, charge card or debit card receivables
(collectively, the "Receivables") generated or to be generated in the ordinary
course of business in a portfolio of revolving credit card, charge card or debit
card accounts (collectively, the "Accounts"), or a publicly issued asset backed
security or pool of asset backed securities ("Credit Card Securities")
representing an interest in or secured by Receivables]. If so specified in the
related Prospectus Supplement, a Series of Securities may also include or be
secured by, or the holders of such Securities (the "Securityholders") may have
the benefit of, any combination of insurance policies, letters of credit,
reserve accounts and other types of rights or assets designed to support or
ensure the servicing and distribution of amounts due in respect of the Deposited
Assets (collectively, "Credit Support"). See "Description of Securities" and
"Description of Deposited Assets and Credit Support."
Each Class of Securities of any Series will represent the right, which might be
senior to those of one or more of the other Classes of such Series, to receive
specified portions of payments of principal, interest and certain other amounts
on the Deposited Assets in the manner described herein and in the related
Prospectus Supplement. A Series may include two or more Classes differing as to
the timing, sequential order or amount of distributions of principal, interest
or premium and one or more Classes within such Series may be subordinated in
certain respects to the Classes of such Series.
Except as otherwise provided herein and in the applicable Prospectus Supplement,
the Company's only obligations with respect to each Series of Securities will
be, pursuant to certain representations and warranties concerning the Deposited
Assets, to assign and deliver the Deposited Assets and Certain related documents
to the applicable SPV or Trustee and, in certain cases, to provide for the
Credit Support, if any. The principal obligations of an Administrative Agent, if
any is named in the applicable Prospectus Supplement, with respect to a Series
of Securities will be pursuant to its contractual administrative obligations
and, only as and to the extent provided in the related Prospectus Supplement,
its obligation to make certain cash advances in the event of payment
delinquencies on the Deposited Assets. See "Description of the Securities -
Advances in Respect of Delinquencies."
The Securities of each Series will not represent an obligation of or interest in
the Company, any SPV, any Administrative Agent or any of their respective
affiliates, except to the limited extent described herein and in the related
Prospectus Supplement. Neither the Securities nor the
Deposited Assets (unless otherwise specified in such Prospectus Supplement) will
be guaranteed or insured by any governmental agency or instrumentality, or by
the Company, any SPV, any Administrative Agent or their respective affiliates.
Prospective investors should consider the factors set forth under "Risk Factors"
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Securities may be offered and sold to or through underwriters, through
dealers or agents or directly to purchasers, as more fully described under "Plan
of Distribution" and in the related Prospectus Supplement. This Prospectus may
not be used to consummate sales of Securities offered hereby unless accompanied
by a Prospectus Supplement.
The date of this Prospectus is __________, 1998
PROSPECTUS SUPPLEMENT
The Prospectus Supplement relating to a Series of Securities to be offered
thereby and hereby will set forth, among other things, the following with
respect to such Series: (a) the specific designation and aggregate principal
amount, (b) the currency or currencies in which the principal (the "Specified
Principal Currency"), premium, if any (the "Specified Premium Currency"), and
any interest (the "Specified Interest Currency") are distributable (the
Specified Principal Currency, the Specified Premium Currency and the Specified
Interest Currency being collectively referred to as the "Specified Currency"),
(c) 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, (d) certain information concerning the
type, characteristics and specifications of the Deposited Assets and any Credit
Support for such Series or Class, (e) the relative rights and priorities of each
such Class (including the method for allocating collections from the Deposited
Assets to the Securityholders of each Class and the relative ranking of the
claims of the Securityholders of each Class to such Deposited Assets), (f) the
name of the Trustee and the Administrative Agent, if any, for such Series, (g)
the Note Interest Rate or Pass-Through Rate (each as defined below) or the terms
relating to the applicable method of calculation thereof, (h) the time and place
of distribution (each such date a "Distribution Date") of any interest, premium
(if any) and/or principal, (i) the date of issue, (j) the scheduled final
Distribution Date, if applicable, (k) the offering price, (1) any exchange,
whether mandatory or optional, the redemption terms and any other specific terms
of Securities of each such Series or Class. See "Description of
Securities--General" for a listing of other items that may be specified in
the applicable Prospectus Supplement.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). Reports and other information concerning the
Company can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's Regional Offices at Seven World Trade
Center, New York, New York 10048, and Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can
be obtained upon written request addressed to the Commission, Public Reference
Section, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
The Commission maintains a Web site at http://www.sec.gov containing reports,
proxy statements and other information regarding registrants that file
electronically with the Commission. The Company does not intend to send any
financial reports to Securityholders.
The Company has filed with the Commission a registration statement on Form
S-3 (together with all amendments and exhibits, the "Registration Statement")
under the Securities Act of 1933, as amended (the "Securities Act"), relating to
the Securities. This Prospectus does not contain all the information set forth
in the Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission. For further information,
reference is hereby made to the Registration Statement.
2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Securities shall be deemed to be
incorporated by reference in this Prospectus. Any statement contained herein or
in a document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained herein or in any subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, on the written or oral request of any such person,
a copy of any or all of the documents incorporated herein by reference, except
the exhibits to such documents (unless such exhibits are specifically
incorporated by reference in such documents). Written requests for such copies
should be directed to the Secretary of Structured Products Corp., 32nd Floor,
Room 33-126, Seven World Trade Center, New York, New York 10048. Telephone
requests for such copies should be directed to the Secretary of Structured
Products Corp. at (212) 783-6645.
REPORTS TO SECURITYHOLDERS
Except as otherwise specified in the applicable Prospectus Supplement,
unless and until Definitive Securities are issued, on each Distribution Date
unaudited reports containing information concerning the related Trust will be
prepared by the related Trustee and sent on behalf of each Trust only to Cede &
Co. ("Cede"), as nominee of DTC and registered holder of the Securities. See
"Description of Securities-Global Securities" and "Description of the Trust
Agreement-Reports to Securityholders; Notice". Such reports will not constitute
financial statements prepared in accordance with generally accepted accounting
principles. The Company, on behalf of each Trust, will cause to be filed with
the Commission such periodic reports as are required under the Exchange Act.
IMPORTANT CURRENCY INFORMATION
Purchasers are required to pay for each Security in the Specified Principal
Currency for such Security. Currently, there are limited facilities in the
United States for conversion of U.S. dollars into foreign currencies and vice
versa, and banks do not currently offer non-U.S. dollar checking or savings
account facilities in the United States. However, if requested by a prospective
purchaser of a Security having a Specified Principal Currency other than U.S.
dollars, Salomon Brothers Inc (the "Offering Agent") will arrange for the
exchange of U.S. dollars into such Specified Principal Currency to enable the
purchaser to pay for such Security. Such request must be made on or before the
fifth Business Day (as defined below) preceding the date of delivery of such
Security or by such later date as is determined by the Offering Agent. Each such
exchange will be made by the Offering Agent on such terms and subject to such
conditions, limitations and charges as the Offering Agent may from time to time
establish in accordance with its regular foreign exchange practice. All costs of
exchange will be borne by the purchaser.
References herein to "U.S. dollars," "U.S.$", "USD", "dollar" or "$" are to
the lawful currency of the United States.
RISK FACTORS
Limited Liquidity. There will be no market for any Series (or Class within
such Series) of Securities prior to the issuance thereof, and there can be no
assurance that a secondary market will develop or, if it does develop, that it
will provide Securityholders with liquidity of investment or will continue for
the life of such Securities.
Certain Legal Aspects. The applicable Prospectus Supplement may set forth
certain legal considerations that are applicable to a specific Series (or Class
or Classes within such Series) or Securities being offered in connection with
that Prospectus Supplement or the assets deposited in or assigned to the related
Trust.
3
Limited Obligations and Interests. The Securities will not represent a
recourse obligation of or interest in the Company, any SPV or any of their
respective affiliates. The Securities of each Series will not be insured or
guaranteed by any government agency or instrumentality, the Company, any SPV,
any Person affiliated with the Company or any SPV, or any other Person. The
obligations, if any, of the Company with respect to the Securities of any Series
will only be pursuant to certain limited representations and warranties. The
Company does not have, and is not expected in the future to have, any
significant assets with which to satisfy any claims arising from a breach of any
representation or warranty. If, for example, the Company were required to
repurchase a Term Assets with respect to which the Company has breached a
representation or warranty, its only sources of funds to make such repurchase
would be from funds obtained from the enforcement of a corresponding obligation,
if any, on the part of the seller of such Term Assets to the Company, or from a
reserve fund established to provide funds for such repurchases. The Company has
no obligation to establish or maintain any such reserve fund.
Credit Support; Limited Assets. Although any Series (or Class of such
Series) of Securities may include or be secured by, or the Securityholders of
such Securities may have the benefit of, certain assets which are designed to
support the payment upon, or otherwise ensure the servicing or distribution with
respect to, the Deposited Assets related to such Series or Class as described in
the related Prospectus Supplement, the Securities do not represent recourse
obligations of the Company, any SPV, any Administrative Agent, any Servicer or
any of their respective affiliates and, unless otherwise specified in the
applicable Prospectus Supplement, are not insured or guaranteed by the Company,
any SPV, any Administrative Agent, any Servicer, any of their affiliates or any
other person or entity. Accordingly, Securityholders' receipt of distributions
in respect of the Securities will depend entirely on the performance of an
receipt of payments with respect to the Deposited Assets and any Credit Support
identified in the related Prospectus Supplement. See "Description of Deposited
Assets and Credit Support."
Maturity and Redemption Considerations. The timing of distributions of
interest, premium (if any) and principal of any Series (or of any Class within
such Series) of Securities may be affected by a number of factors, including the
performance of the related Deposited Assets, the extent of any early redemption,
repayment, amortization, acceleration of payment rate, slow down of payment rate
or extension of maturity or amortization with respect to the related Deposited
Assets (or portion thereof) and the manner and priority in which the collections
from the Term Assets and any other Deposited Assets are allocated to each Class
of such Series. Certain of these factors may be influenced by a variety of
accounting, tax, economic, social and other factors.
[INCLUDE BRACKETED LANGUAGE IF APPROPRIATE]
[Matters Relating to Receivables. The Receivables may be paid at any time
and there can be no assurance that there will be new Receivables created in the
Accounts, that additional Receivables will be available or that any particular
pattern of accountholder repayments will occur. The actual principal payment
rate on the Receivables will depend on, among other factors, the rate of
accountholder repayments, the timing of the receipt of repayment and the rate of
default by accountholders. Accountholder monthly payment rates with respect to
the Accounts are dependent upon a variety of factors, including seasonal
purchasing and payment habits of accountholders, the availability of other
sources of credit, general economic conditions, tax laws and the terms of the
Accounts (which are subject to change by the owner of such Accounts). No
assurance can be given as to the accountholdcr payment rates which will actually
occur in any future period. The actual principal payment rate on the Credit Card
Securities will, similarly, depend on the payment and default performance with
respect to the Receivables underlying such Credit Card Securities. As a result
of the foregoing, no assurance can be given that a Security will receive its
final principal payment when expected or that principal payments with respect to
a Security will follow any expected pattern.
A decline in the amount of Receivables in the Accounts for any reason
(including the decision by accountholders to use competing sources of credit, an
economic downturn or other factors) could result in the occurrence of an early
amortization event with respect to a Security (such an event, an "Early
Amortization Event") and the commencement of the principal repayment of such
Security earlier than expected (an "Early Amortization Period"). A decline in
the amount of Receivables in the Accounts relating to a Credit Card Security for
any reason (including the decision by accountholders to use competing sources of
credit, an economic downturn or other factors) could result in the occurrence of
an early amortization event, pay out event or liquidation event with respect to
a Credit Card Security (such an event, a "Term Assets Early Amortization Event")
and the commencement of the
4
principal repayment of such Credit Card Security earlier than expected (a "Term
Assets Early Amortization Period"). See the related Prospectus Supplement for a
discussion of other events, including events relating to portfolio yield,
breaches of representations and warranties, insolvency or bankruptcy and
investment company status, which might lead to the commencement of the Early
Amortization Period with respect to a Security or the Term Assets Early
Amortization Period with respect to a Credit Card Security.
Certain Legal Aspects. Each seller of Receivables (each, a "Seller") to the
Company will warrant in its pooling and servicing agreement, master pooling and
servicing agreement, sale and servicing agreement or trust agreement
(collectively, an "Agreement") that the transfer of the Receivables by it is and
will be either a valid transfer and assignment of all right, title and interest
in the Receivables by it is and will be either a valid transfer and assignment
of all right, title and interest in the Receivables and all proceeds thereof or
the grant of a security interest in the Receivables. The Seller will take
certain actions required to perfect the interest in the Receivables. The Seller
will warrant that if the transfer by it of the Receivables is deemed to be a
grant of security interest in the Receivables, there will be a first priority
perfected security interest therein. If the transfer of the Receivables and all
proceeds thereof is deemed to created a security interest therein, a tax or
government lien on property of the Seller arising before Receivables come into
existence may have priority over the Trust's or the SPV's interest in such
Receivables.
If any Seller is a regulated financial institution, to the extent that a
Seller grants a security interest in the Receivables and that security interest
is validly perfected before any insolvency of the Seller and is not granted or
taken in contemplation of insolvency or with the intent to hinder, delay or
defraud the Seller or its creditors, that security interest should not be
subject to avoidance in the event of insolvency and receivership, and payments
to the Trust or the SPV with respect to the Receivables should not be subject to
recovery by a conservator or receiver for the Seller. If, however, the
conservator or receiver were to assert a contrary position, or were to require
the Company, the Trust or the SPV to establish its right to those payments by
submitting to and completing the administrative claims procedure established
under the Financial Institutions Reform, Recovery and Enforcement Act of 1989
("FIRREA"), or the conservator or receiver were to request a stay of proceedings
with respect to the Seller as provided under FIRREA, delays in payments on the
Securities and possible reductions in the amount of this payments could occur.
In the event of a servicer default under the Agreement, if a conservator or
receiver is appointed for the servicer of the Receivables (the "Servicer"), and
no servicer default other than such conservatorship or receivership or
insolvency of the Servicer exists, the conservator or receiver may have the
power to prevent the transfer of servicing to a successor Servicer. If a
conservator or receiver were appointed for the Seller pursuant to the Agreement,
new principal receivables would not be transferred under the Agreement and the
Receivables (or a portion thereof) allocated in accordance with the Agreement
would be sold, thereby causing early termination of the Agreement and a loss to
Securityholders if the net proceeds of such sale were insufficient to pay such
Securities in full. Upon the occurrence of an Early Amortization Event, if a
conservator or receiver was appointed for the Seller and no Early Amortization
Event other than such conservatorship, receivership or insolvency of the Seller
existed, the conservator or receiver may have the power to prevent the early
sale, liquidation or disposition of the Receivables and the commencement of the
Early Amortization Period. In addition, a conservator or receiver for the Seller
may have the power to cause early payment of the Securities.
If any Seller acquired the Receivables from the originator thereof or other
entity subject to the U.S. Bankruptcy Code (any such entity, an "Originator"),
the Originator will have warranted that the sale of Receivables by it to the
Seller is a valid sale. Notwithstanding the foregoing, if the Originator were to
become a debtor in a bankruptcy case and a creditor or trustee in bankruptcy of
the Originator or the Originator were to take the position that the sale of the
Receivables to the Seller should be recharacterized as a pledge, then delays in
payments of collections on the Receivables could occur or (should a court rule
in favor of such creditor, trustee or the Originator) reductions in the amount
of such payments could result.
Assuming the transaction between an Originator and a Seller is treated as a
sale, the assets of the Seller would not generally be part of the Originator's
bankruptcy estate and would not be available to the Originator's creditors. Thee
can be no assurance, however, that a creditor or trustee in bankruptcy of the
Originator might not seek a court order consolidating the assets and liabilities
of the Seller with those of the Originator. If successfully sought, such an
order might make a Seller's assets (including the Receivables) available to the
Originator's creditors
5
in bankruptcy. In addition, the U.S. Court of Appeals for the Tenth Circuit has
concluded that accounts receivable sold by a debtor prior to a filing for
bankruptcy remain property of the debtor's bankruptcy estate.
The foregoing considerations regarding the insolvency or bankruptcy of a
Seller or Originator of Receivables will also be applicable to the issuer of a
Credit Card Security or the person or persons from which such issuer acquired
the Receivable underlying such Credit Card Security.
Consumer Protection Laws. The relationship of cardholder and card issuer is
extensively regulated by Federal and state consumer protection laws. The most
significant of these laws include the Federal Truth-in-Lending Act, Equal Credit
Opportunity Act, Fair Credit Reporting Act, Electronic Funds Transfer Act and,
to the extent that a Seller is a bank, the National Bank Act, as well as the
banking statutes of the state in which the bank is located, and comparable
statutes in the states in which cardholders reside. These statutes impose
disclosure requirements when an account is advertised, when it is opened, at the
end of monthly billing cycles, upon account renewal for accounts on which annual
fees are assessed, and at year end and, in addition, limit cardholder liability
for unauthorized use, prohibit certain discriminatory practice in extending
credit, and impose certain limitations on the type of account-related charges
that may be assessed. Federal legislation requires card issuers to disclose to
consumers the interest rates, annual cardholder fees, grace periods, and balance
calculation methods associated with their accounts. Cardholders are entitled
under current law to have payments and credits applied to the account promptly
to receive prescribed notices and to have billing errors resolved promptly.
Various proposed laws and amendments to existing laws have been introduced
in Congress and certain state and local legislatures that, if enacted, would
further regulate the credit card industry.
The Company or the SPV may be liable for certain violations of consumer
protection laws that apply to the Receivables, either as assignee of the Seller
with respect to obligations arising before transfer of the Receivables or as a
party directly responsible for obligations arising after the transfer. In
addition, a cardholder may be entitled to assert such violations by way of
setoff against his obligation to pay the amount of Receivables owing. A Seller
will covenant in the Agreement to accept the transfer of all Receivables in an
Account if any Receivable in such account has not been created in compliance in
all material respects with the requirements of such laws, if such noncompliance
has a material adverse effect on the interest of securityholders under such
Agreement. Each Agreement will also provide for the Trust to be indemnified by
the Seller or Servicer, among other things, for any liability arising from such
violations.
Application of Federal and state bankruptcy and debtor relief laws would
affect the interest of the Securityholders in the Receivables, if such laws
result in any Receivables being written off as uncollectible.
Competition. The credit card and charge card industries are highly
competitive. There is increased competitive use of advertising, target marketing
and pricing competition in interest rates and annual cardholder fees as both
traditional and new credit card and charge card issuers seek to expand or to
enter the market. As a result of this competition, certain major credit card and
charge card issuers may assess finance charges for selected portions of their
portfolios at rates lower than the rates currently being assessed on the
Accounts. A Seller's ability to compete in the credit card and charge card
industry will affect its ability to generate new Receivables. In addition, the
generation of Receivables by a Seller may be partly or completely dependent upon
sales at one or more retail stores. In such a case, competition in the retail
industry will also affect the Seller's ability to generate new Receivables.
Basis Risk. If so specified in the related Prospectus Supplement, a portion
of the Accounts will have finance charges set at a variable rate above a
designated prime rate or other designated index. A Series offered pursuant
hereto may bear interest at a fixed rate or at a floating rate based on an index
other than the prime rate or other designated index. If there is a decline in
the prime rate or other designated index, the amount of collections of finance
charge Receivables on such Accounts may be reduced, whereas the amounts payable
as interest on such Series and other amounts required to be funded out of
finance charge Receivables with respect to such Series may not be similarly
reduced. In such a case, an Early Amortization Event with respect to such Series
or a Term Assets Early Amortization Event with respect to a Credit Card Security
underlying such Series may occur.
6
Social, Geographic and Economic Factors. Changes in card use, payment
patters and the rate of defaults by cardholder may result from a variety of
social, economic and geographic factors. Economic factors include the rate of
inflation and relative interest rates offered for various types of loans.
Adverse changes in economic conditions in any states where cardholders are
located could have a direct impact on the timing and amount of payments on a
Series. The Company is unable to determine and has no basis to predict whether,
or to what extent, economic, social or geographic factors will affect future
card use or repayment patters or payments on the Securities of a Series. New
credit card issuers have been entering the market while other issuers have been
seeking to expand market share through increased advertising, target marketing
and pricing competition. Additionally, the use of incentive or affinity programs
(e.g., gift awards for card usage) may affect card usage patters.
A Seller's Ability to Change Terms of the Receivables. Any Seller may have
the right to determine the finance charges and the other fees and charges which
will be applicable from time to time on its Accounts, to alter the minimum
monthly payment required under the Accounts and to change various other terms of
its agreements with cardholders with respect to the Accounts. A decrease in the
finance charges and the other fees and charges assessed on the Accounts would
decrease the effective yield on the Accounts and could result in the occurrence
of an Early Amortization Event with respect to a Series offered pursuant hereto
or a Term Assets Early Amortization Event with respect to a Credit Card Security
underlying such Series and commencement of an Early Amortization Period or Term
Assets Early Amortization Period, as applicable.
Under an Agreement, a Seller may agree that, unless required by law or as
is otherwise necessary, in its good faith judgment, to maintain its credit card
business on a competitive basis, it will not reduce the annual percentage rate
at which finance charges are assessed on the Receivables or the other fees and
changes assessed on the Accounts, if, as a result of such reduction, the Net
Portfolio Yield as of such date would be less than the Base Rate. The terms
"Base Rate" and "Net Portfolio Yield" have the meanings set forth in the
Prospectus Supplement reacting to each Series. The Seller may also covenant that
it will change the terms relating to the Accounts only if the change is made
applicable to the comparable segment of the accounts owned and serviced by the
Seller with characteristics the same as or substantially similar to the Account,
except as otherwise restricted by the terms of the applicable cardholder
agreement. In servicing Accounts, a Servicer will generally be required to
exercise the same care and apply the same policies that it exercises in handling
similar matters for its own comparable accounts. Except as set forth above,
there are generally no restrictions on the ability of a Seller to change the
terms of the Accounts or the Receivables. There can be no assurance that changes
in applicable law, changes in the marketplace or prudent business practice might
not result in a determination by a Seller to decrease finance charges or other
fees and charges for existing accounts, or take actions which would otherwise
change the terms of the Accounts. The foregoing considerations are also
generally applicable to the Receivables and Accounts relating to a Credit Card
Security.
Impact of Additional Accounts. A Seller may be permitted to designate
additional Accounts ("Additional Accounts") the Receivables of which will be
conveyed to the Company, a SPV or Trust on a discrete basis or automatically as
such Additional Accounts are created. There can be no assurance that Receivables
in such Additional Accounts will be of the same credit quality as those
Receivables previously conveyed to an SPV or a Trust. In particular, the
Receivables in the Additional Accounts may be originated using different
criteria, be originated by a different Originator and be of a different type
than those in the previously designated Accounts. The foregoing considerations
are also generally applicable to the Receivables and Accounts relating to a
Credit Card Security.]
Tax Considerations. The Federal income tax consequences of the purchase,
ownership and disposition of the Securities and the tax treatment of any Trust
will depend on the specific terms of the Securities, any Trust, any Credit
Support and the Deposited Assets. See the description under "Certain Federal
Income Tax Considerations" in the related Prospectus Supplement.
Rating of the Securities. At the time of issue, the Securities of any given
Series (or each Class of such Series that is offered hereby) will be rated in
one of the investment grade categories by one or more nationally recognized
rating agencies (a "Rating Agency"). Unless otherwise specified in the
applicable Prospectus Supplement, the rating of any Series or Class of
Securities is based primarily on the related Deposited Assets and any Credit
Support and the relative priorities of the Securityholders of such Series or
Class to receive collections
7
from, and to assert claims against, such Deposited Assets and any Credit
Support. The rating is not a recommendation to purchase, hold or sell
Securities, inasmuch as such rating does not comment as to market price or
suitability for a particular investor. In addition, the rating does not address
the likelihood that the principal amount of any Series or Class will be paid
prior to any final legal maturity date. There can be no assurance that the
rating will remain for any given period of time or that the rating will not be
lowered or withdrawn entirely by the Rating Agency if in its judgment
circumstances in the future so warrant. Any Class or Classes of a given Series
of Securities may not be offered pursuant to this Prospectus, in which case such
Class or Classes may or may not be rated in an investment grade category by a
Rating Agency.
Global Securities. Unless otherwise specified in the related Prospectus
Supplement, the Securities of each Series (or, if more than one Class exists,
each Class of such Series) will initially be represented by one or more Global
Securities deposited with, or on behalf of, a Depositary (as defined below) and
will not be issued as individual definitive Securities to the purchasers of such
Securities. Consequently, unless and until such individual definitive Securities
of a particular Series or Class are issued, such purchasers will not be
recognized as Securityholders under the applicable Indenture or Trust Agreement.
Hence, until such time, such purchasers will only be able to exercise the rights
of Securityholders indirectly through the Depositary and its respective
participating organizations and, as a result, the ability of any such purchaser
to pledge that Security to persons or entities that do not participate in the
Depositary's system, or to otherwise act with respect to such Security, may be
limited. See "Description of Securities Global Securities" and "Limitations on
Issuance of Bearer Securities" and any further description contained in the
related Prospectus Supplement.
Currency Risks. The Securities of any given Series (or Class within such
Series) may be denominated in a currency other than U.S. dollars to the extent
specified in the applicable Prospectus Supplement. The Prospectus does not
describe all the risks of an investment in such Securities, and the Company
disclaims any responsibility to advise prospective purchasers of such risks as
they exist from time to time. Prospective purchasers of such Securities should
consult their own financial and legal advisors as to the risks entailed by an
investment in such Securities denominated in a currency other than U.S. dollars.
Such Securities are not an appropriate investment for persons who are
unsophisticated with respect to foreign currency transactions. See "Currency
Risks."
Passive Nature of Holding of Deposited Assets. Unless otherwise specified
in the applicable Prospectus Supplement, the Indenture Trustee with respect to
any Series of Notes (an "Indenture Trustee") will hold the Deposited Assets (or
interest therein) pledged to the Noteholders pursuant to the applicable
Indenture. The related Deposited Assets will generally be held to maturity and
not disposed of, regardless of adverse events, financial or otherwise, which may
affect any Seller, any Term Assets Issuer or the value of the Deposited Assets.
Under certain circumstances the holders of the Securities may direct the Trustee
to dispose of all or a portion of the Deposited Assets or take certain other
actions in respect of the Deposited Assets.
In addition, the Prospectus Supplement for each Series of Securities will
set forth information regarding additional risk factors, if any, applicable to
such Series (and each Class within such Series).
THE COMPANY
The Company was incorporated in the State of Delaware on November 23, 1992,
as an indirect, wholly-owned, limited-purpose finance subsidiary of Salomon Inc.
The Company will not engage in any business or other activities other than
issuing and selling securities from time to time and acquiring, owning, holding,
pledging and transferring assets (including Deposited Assets and Credit Support)
in connection therewith or with the creation of a SPV or a Trust and in
activities related or incidental thereto. The Company does not have, nor is it
expected to have, any significant unencumbered assets. The Company's principal
executive offices are located at Room 33-126, 32nd Floor, Seven World Trade
Center, New York, New York 10048 (telephone (212) 783-6645).
In the event that the Company establishes an SPV for purposes of the
issuance of Securities, the SPV applicable to any Series will be described in
the related Prospectus Supplement. Each SPV will be a special purpose,
bankruptcy-remote entity and may take the form of a business trust, an owner
trust or a limited liability company.
8
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 Securities
(whether or not offered hereby) will be used by the Company or an SPV to
purchase the related Deposited Assets (or provide a Trust with funds to purchase
such Deposited Assets) and arrange certain Credit Support including, if
specified in the related prospectus Supplement, making required deposits into
any reserve account or other account for the benefit of the Securityholders of
such Series or Class. Any remaining net proceeds, if any, will be used by the
Company for general corporate purposes.
ASSIGNMENT OF DEPOSITED ASSETS;
FORMATION OF TRUST
The Company or an SPV will assign or transfer the Deposited Assets for each
Series of Certificates to the Certificate Trustee, for the benefit of the
Certificateholders of such Series, and the Certificate Trustee will pledge the
Deposited Assets for each Series of Notes to the Indenture Trustee named in the
applicable Prospectus Supplement, in its capacity as indenture Trustee for the
benefit of the Noteholders of such Series. The term "Trustee," as used herein,
refers to the Indenture Trustee or the Certificate Trustee, as applicable. The
Trustee named in the applicable Prospectus Supplement will administer the
Deposited Assets pursuant to the Indenture or the Trust Agreement and will
receive a fee for such services (the "Trustee's Fee"). Any Administrative Agent
named in the applicable Prospectus Supplement will perform such tasks as are
specified therein and in the Indenture or the Trust Agreement and will receive a
fee for such services (the "Administration Fee") as specified in the Prospectus
Supplement.
Unless otherwise stated in the Prospectus Supplement, the pledge, transfer
or assignment of the Deposited Assets to the Trustee will be without recourse.
To the extent provided in the applicable Prospectus Supplement, the obligations
of an Administrative Agent, if any, so named therein with respect to the
Deposited Assets will consist primarily of its contractual administrative
obligations, if any, under the Indenture or the Trust Agreement, its obligation,
if any, to make certain cash advances in the event of delinquencies in payments
on or with respect to any Deposited Assets and its obligations, if any, to
purchase Deposited Assets as to which there has been a breach of certain
representations and warranties or as to which the documentation is materially
defective. The obligations of an Administrative Agent, if any, named in the
applicable Prospectus Supplement to make advances will be limited to amounts
which any such 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 such purposes.
Unless otherwise provided in the related Prospectus Supplement, each Series
of Notes will be secured by, and each Series of Certificates will represent a
beneficial interest in, (i) such Deposited Assets, or interests therein,
exclusive of any interest in such assets (the "Retained Interest") retained by
the Company, any SPV or any previous owner thereof, as from time to time are
specified in the applicable Indenture or Trust Agreement; (ii) such assets as
from time to time are identified as deposited in the related Certificate
Account; (iii) property, if any, acquired on behalf of Securityholders by
foreclosure or repossession and any revenues received thereon; (iv) those
elements of Credit Support, if any, provided with respect to any Class within
such Series that are specified as such in the applicable Prospectus Supplement,
as described therein and under "Description of Deposited Assets and Credit
Support - Credit Support": (v) the rights of the Company or an SPV under the
agreement or agreements entered into by the Trustee on behalf of the
Securityholders which constitute, or pursuant to which the Trustee has acquired,
such Deposited Assets; and (vi) the rights of the Trustee in any cash advance,
reserve fund or surety bond, if any.
In addition, to the extent provided in the applicable Prospectus
Supplement, the Company will obtain Credit Support for the benefit of the
Securityholders of any related Series (or Class within such Series) of
Securities.
MATURITY AND YIELD CONSIDERATIONS
Each Prospectus Supplement will, to the extent applicable, contain
information with respect to the type and, if applicable, maturities of the
related Term Assets and the terms, if any, upon which such Term Assets may be
subject to early redemption (either by the applicable obligor or pursuant to a
third-party call option), repayment (at
9
the option of the holders thereof), amortization or extension of maturity or
amortization. The provisions of the Term Assets with respect to the foregoing
will, unless otherwise specified in the applicable Prospectus Supplement, affect
the weighted average life of the related Series of Securities.
The effective yield to holders of the Securities of any Series (and Class
within such Series) may be affected by various features of the Deposited Assets
or any Credit Support or the manner and priorities of allocations of collections
with respect to such Deposited Assets between the Classes of a given Series. The
yield to maturity of any Series (or Class within such Series) may be affected by
any optional or mandatory redemption, repayment, amortization or extension of
maturity of the related Term Assets. A variety of tax, accounting, economic, and
other factors will influence whether any applicable party exercises any right of
redemption, repurchase or extension in respect of its Securities. The rate of
redemption may also be influenced by prepayments on the obligations a Term
Assets Issuer holds for its own account. All else remaining equal, if prevailing
interest rates fall significantly below the interest rates on the related Term
Assets, the likelihood of redemption would be expected to increase. There can be
no certainty as to whether any Term Asset redeemable at the option of a Term
Assets Issuer will be repaid prior to its stated maturity.
[Include Bracketed Language as Appropriate]
[Collections on the underlying Receivables may vary because among other
things, borrowers may make payments during any month as low as the minimum
monthly payment for such month or as high as the entire outstanding principal
balance plus accrued interest and the fees and charges thereon. It is possible
that borrowers may fail to make the minimum payments. Collections on the
Receivables may also vary due to seasonal purchasing and payment habits of
borrowers. All else remaining equal, if prevailing interest rates fall
significantly below the interest rates on the related Accounts, the likelihood
of repayment of the Receivables would be expected to increase.]
Unless otherwise specified in the related Prospectus Supplement, each of
the Term Assets will be subject to acceleration upon the occurrence of certain
Term Assets Events of Default (as defined below). The maturity and yield on the
Securities will be affected by any early repayment of the Term Assets as a
result of the occurrence of the acceleration of the Outstanding Debt Securities
by the holders thereof. See "Description of the Deposited Assets".
The extent to which the yield to maturity of such Securities 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 thereon is sensitive to
the rate and timing of payments on the Deposited Assets.
The yield to maturity of any Series (or Class) of Securities will also be
affected by variations in the interest rates applicable to, and the
corresponding payments in respect of, such Securities, to the extent that the
applicable Note Interest Rate or Pass-Through Rate for such Series (or Class) is
based on variable or adjustable interest rates. With respect to any Series of
Securities, disproportionate principal payments (whether resulting from
differences in amortization schedules, payments due on scheduled maturity or
upon early redemption or amortization) on the related Term Assets having
interest rates higher or lower than the then applicable Note Interest Rates or
Pass-Through Rates applicable to such Securities may affect the yield thereon.
The Prospectus Supplement for each Series of Securities will set forth
additional information regarding yield and maturity considerations applicable to
such Series (and each Class within such Series) and the related Deposited
Assets, including the applicable Term Assets.
DESCRIPTION OF SECURITIES
Each Series (or, if more than one Class exists, the Classes within such
Series) of Notes will be issued pursuant to an Indenture. A form of Indenture is
attached as an exhibit to the Registration Statement. The
10
provisions of the applicable Indenture may vary depending upon the nature of the
Notes to be issued thereunder and the nature of the Deposited Assets and the
Credit Support of a Series.
Each Series (or, if more than one Class exists, the Classes within such
Series) of Certificates representing beneficial interests in a Trust will be
issued pursuant to a Trust Agreement. A form of Trust Agreement is attached as
an exhibit to the Registration Statement. The provisions of the applicable Trust
Agreement may vary depending on the nature of the Deposited Assets and the
Credit Support of a Series. The following summaries describe certain provisions
of the Indenture and Trust Agreement which may be applicable to each Series of
Securities. The applicable Prospectus Supplement for a Series of Securities will
describe any provision of the Indenture or Trust Agreement that materially
differs from the description thereof contained in this Prospectus. The following
summaries do not purport to be complete and are subject to the detailed
provisions of the forms of Indenture and Trust Agreement to which reference is
hereby made for a full description of such provisions, including the definition
of certain terms used, and for other information regarding the Securities. As
used herein with respect to any Series, the term "Security" refers to all the
Securities of that Series, whether or not offered hereby and by the related
Prospectus Supplement, unless the context otherwise requires.
General
There is no limit on the amount of Securities that may be issued under the
Indenture or the Trust Agreement, and the Indenture and the Trust Agreement will
provide that Securities of the applicable Series may be issued in multiple
Classes. The Series (or Classes within such Series) of Certificates to be issued
under the Trust Agreement will represent the entire beneficial ownership
interest in the Trust for such Series created pursuant to the Trust Agreement
and each such Class will be entitled to 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. The Series (or Classes within such Series) of
Notes to be issued under the Indenture will represent the entire indebtedness of
the applicable Trust secured by the Deposited Assets with respect to such Series
and each such Class will be entitled to certain relative priorities to receive
specified collections from the assets securing the Notes, as described in the
applicable Prospectus Supplement.
Reference is made to the related Prospectus Supplement for a description of
the following terms of the Series (and if applicable, Classes within such
Series) of Securities in respect of which this Prospectus and such Prospectus
Supplement are being delivered: (i) the title of such Securities; (ii) the
Series of such Securities and, if applicable, the number and designation of
Classes of such Series; (iii) certain information concerning the type,
characteristics and specifications of the Deposited Assets being deposited into
the related Trust by the Company or the applicable SPV (and, with respect to any
Term Assets which at the time of such deposit represents a significant portion
of all such Deposited Assets and any related Credit Support, certain information
concerning the terms of each such Term Assets, the identity of the issuer [or
Seller] thereof and where publicly available information regarding such issuer
[or Seller] may be obtained); (iv) the limit, if any, upon the aggregate
principal amount or notional amount, as applicable, of each Class thereof, (v)
the dates on which or periods during which such Series or Classes within such
Series may be issued (each, an "Original Issue Date"), the offering price
thereof and the applicable Distribution Dates on which the principal, if any, of
(and premium, if any, on) such Series or Classes within such Series will be
distributable; (vi) if applicable, the relative rights and priorities of each
such Class (including the method for allocating collections from and defaults or
losses on the Deposited Assets to the Securityholders of each such Class); (vii)
whether the Securities of such Series or each Class within such Series are Fixed
Rate Securities or Floating Rate Securities (each as defined below) and the
applicable interest rate (the "Note Interest Rate," in the case of Notes, or the
"Pass-Through Rate," in the case of Certificates) for each such Class, including
the applicable rate, if fixed (a "Fixed Rate"), or the terms relating to the
particular method of calculation thereof applicable to such Series or each Class
within such Series, if variable (a "Variable 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 such Series or
Class will be distributable and the related Record Dates, if any; (viii) the
option, if any, of any Securityholder of such Series or Class to withdraw a
portion of the assets of the Trust in exchange for surrendering such
Securityholder's Security or to put such Security to the Company, an SPV or a
third party, or of the Company, an SPV or Administrative Agent, if any, or
another third party to purchase or repurchase any Deposited Assets or Securities
(in each case to the extent not inconsistent with the Company's continued
satisfaction of the applicable requirements for exemption under Rule 3a-7 under
the Investment Company Act of
11
1940 and all applicable rules, regulations and interpretations thereunder) and
the periods within which or the dates on which, and the terms and conditions
upon which any such option may be exercised, in whole or in part; (ix) the
rating of such Series or each Class within such Series offered hereby (provided,
however, that one or more Classes within such Series not offered hereunder may
be unrated or may be rated below investment grade); (x) if other than
denominations of $1,000 and any integral multiple thereof, the denominations in
which such Series or Class within such Series will be issuable; (xi) whether the
Securities 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 Securities"), and the applicable terms
thereof; (xii) whether the Securities of such Series or of any Class within such
Series are to be issued as Registered Securities or Bearer Securities or both
and, if Bearer Securities are to be issued, whether coupons ("Coupons") will be
attached thereto; whether Bearer Securities of such Series or Class may be
exchanged for Registered Securities of such Series or Class and the
circumstances under which and the place or places at which any such exchanges,
if permitted, may be made; (xiii) whether the Securities of such Series or of
any Class within such Series are to be issued in the form of one or more Global
Securities and, if so, the identity of the Depositary (as defined below), if
other than The Depository Trust Company, for such Global Security or Securities;
(xiv) if a temporary Security is to be issued with respect to such series or any
Class within such Series, whether any interest thereon distributable on a
Distribution Date prior to the issuance of a definitive Security of such Series
or Class will be credited to the account of the Persons entitled thereto on such
Distribution Date; (xv) if a temporary Global Security is to be issued with
respect to such Series or Class, the terms upon which beneficial interests in
such temporary Global Security may be exchanged in whole or in part for
beneficial interests in a definitive Global Security or for individual
Definitive Securities (as defined below) of such Series or Class and the terms
upon which beneficial interests in a definitive Global Security, if any, may be
exchanged for individual Definitive Securities of such Series or Class; (xvi) if
other than U.S. dollars, the Specified Currency applicable to the Securities of
such Series or Class for purposes of denominations and distributions on such
Series or each Class within such Series and the circumstances and conditions, if
any, when such Specified Currency may be changed, at the election of the
Company, an SPV or a Securityholder and the currency or currencies in which any
principal of or any premium or any interest on such Series or Class are to be
distributed pursuant to such election; (xvii) any additional Administrative
Agent Termination Events (as defined below), if applicable, provided for with
respect to such Class; (xviii) all applicable Required Percentages and Voting
Rights (each as defined below) relating to the manner and percentage of votes of
Securityholders of such Series and each Class within such Series required with
respect to certain actions by the Company, an SPV or the applicable
Administrative Agent, if any, or the Trustee; and (xix) any other terms of such
Series or Class within such Series of Securities not inconsistent with the
provisions of the Indenture or the Trust Agreement relating to such Series.
Unless otherwise indicated in the applicable Prospectus Supplement,
Securities of each Series (including any Class of Securities not offered hereby)
will be issued only as Registered Securities in denominations of $1,000 and any
integral multiple thereof and will be payable only in U.S. dollars. The
authorized denominations of Registered Securities of a given Series or Class
within such 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 such Series of Securities will be
described in the applicable Prospectus Supplement. In addition, any risk
factors, the specific terms and other information with respect to the issuance
of any Series or Class within such Series of Securities on which the principal
of and any premium and interest are distributable in a Specified Currency other
than U.S. dollars will be described in the applicable Prospectus Supplement
relating to such Series or Class. Unless otherwise specified in the applicable
Prospectus Supplement, the U.S. dollar equivalent of the public offering price
or purchase price of a Security having a Specified Principal 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 (the "Market Exchange Rate") for such
Specified Principal Currency on the applicable issue date. As specified in the
applicable prospectus Supplement, such determination will be made by the
Company, the applicable SPV, the Trustee, the Administrative Agent, if any, or
an agent thereof as exchange rate agent for each Series of Securities (the
"Exchange Rate Agent").
Unless otherwise provided in the applicable Prospectus Supplement,
Registered Securities may be transferred or exchanged for like Securities 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, as applicable, subject to the
limitations provided in the
12
Indenture or the Trust Agreement, without the payment of any service charge,
other than any tax or governmental charge payable in connection therewith.
Bearer Securities will be transferable by delivery. Provisions with respect to
the exchange of Bearer Securities will be described in the applicable Prospectus
Supplement. Unless otherwise specified in the applicable Prospectus Supplement,
Registered Securities may not be exchanged for Bearer Securities. The Company or
the applicable SPV may at any time purchase Securities at any price in the open
market or otherwise. Securities so purchased by the Company or the applicable
SPV may, at the discretion of the Company or the applicable SPV, be held or
resold or surrendered to the Trustee for cancellation of such Securities.
Distributions
Distributions allocable to principal, premium (if any) and interest on the
Securities of each Series (and Class within such Series) will be made in the
Specified Currency for such Securities by or on behalf of the Trustee on each
Distribution Date as specified in the related Prospectus Supplement and the
amount of each distribution will be determined as of the close of business on
the date specified in the related Prospectus Supplement (the "Determination
Date"). If the Specified Currency for a given Series or Class within such 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 Security of such
Series or Class into U.S. dollars in the manner described in the following
paragraph. The Securityholder of a Registered Security of a given Series or
Class within such Series denominated in a Specified Currency other than U.S.
dollars may (if the applicable Prospectus Supplement and such Security so
indicate) elect to receive all distributions in respect of such Security in the
Specified Currency by delivery of a written notice to the Trustee and
Administrative Agent, if any, for such Series not later than fifteen calendar
days prior to the applicable Distribution Date, except under the circumstances
described under "Currency Risks - Payment Currency" below. Such election will
remain in 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 Registered Security of a given Series or Class within such Series having
a Specified Currency other than U.S. dollars, the amount of any U.S. dollar
distribution in respect of such Registered Security 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 such Distribution Date, of the aggregate amount payable in such
Specified Currency on such payment date in respect of all Registered Securities.
All currency exchange costs will be borne by the Securityholders of such
Registered Securities by deductions from such distributions. If no such bid
quotations are available, such distributions will be made in such Specified
Currency, unless such Specified Currency is unavailable due to the imposition of
exchange controls or to other circumstances beyond the Company's control, in
which case such distributions will be made as described under "Currency Risks -
Payment Currency" below. The applicable Prospectus Supplement will specify such
information with respect to Bearer Securities.
Unless otherwise provided in the applicable Prospectus Supplement and
except as provided in the succeeding paragraph, distributions with respect to
Securities will be made (in the case of Registered Securities) at the corporate
trust office or agency of the Trustee specified in the applicable Prospectus
Supplement; provided, however, that any such amounts distributable on the final
Distribution Date of a Security will be distributed only upon surrender of such
Security at the applicable location set forth above. Except as otherwise
provided in the applicable Prospectus Supplement, no distribution on a Bearer
Security will be made by mail to an address in the United States or by wire
transfer to an account maintained by the Securityholder thereof in the United
States.
Unless otherwise specified in the applicable Prospectus Supplement,
distributions on Registered Securities in U.S. dollars will be made, except as
provided below, by check mailed to the Registered Securityholders of such
Securities (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 Securities issued between a Record Date (as defined below) and the
related Distribution Date, interest for the period beginning on the issue date
for such Series or Class and ending on
13
the last day of the interest accrual period ending immediately prior to or
coincident with such Distribution Date will, unless otherwise specified in the
applicable Prospectus Supplement, be distributed on the next succeeding
Distribution Date to the Registered Securityholders of the Registered Securities
of such Series or Class on the related Record Date. A Securityholder of
$10,000,000 (or the equivalent thereof in a Specified Principal Currency other
than U.S. dollars) or more in aggregate principal amount of Registered
Securities 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 such Series not later than fifteen calendar days prior to the
applicable Distribution Date. Simultaneously with the election by any
Securityholder to receive payments in a Specified Currency other than U.S.
dollars (as provided above), such Securityholder shall provide appropriate write
transfer instructions to the Trustee for such 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 Security 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 such Security is other than U.S. dollars, the
financial center of the country issuing such Specified Currency (which, in the
case of ECU, shall be Brussels, Belgium) and (ii) if the Note Interest Rate or
Pass-Through Rate for such Security is based on LIBOR, a London Banking Day.
"London Banking Day" with respect to any Security means any day on which
dealings in deposits in the Specified Currency of such Security are transacted
in the London interbank market. The Record Date with respect to any Distribution
Date for a Series or Class of Registered Securities shall be specified as such
in the applicable Prospectus Supplement.
Interest on the Securities
General. Each Class of Securities (other than certain Classes of Strip
Securities) of a given Series may have a different Note Interest Rate or
Pass-Through Rate, as the case may be, which may be a fixed or variable rate, as
described below. In the case of Strip Securities with no or, in certain cases, a
nominal Security Principal Balance, such distributions of interest will be in an
amount (as to any Distribution Date, "Stripped Interest") described in the
related Prospectus Supplement. For purposes hereof, "Notional Amount" means the
notional principal amount specified in the applicable Prospectus Supplement on
which interest on Strip Securities with no or, in certain cases, a nominal
Security Principal Balance will be made on each Distribution Date. Reference to
the Notional Amount of a Class of Strip Securities herein or in a Prospectus
Supplement does not indicate that such Securities 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 related Prospectus Supplement.
Fixed Rate Securities. Each Series (or, if more than one Class exists, each
Class within such Series) of Securities with a fixed Note Interest Rate or
Pass-Through Rate ("Fixed Rate Securities") will bear interest, on the
outstanding Security 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 rate stated on the face thereof and in the applicable Prospectus
Supplement until the principal amount thereof is distributed or made available
for payment (or in the case of Fixed Rate Securities with no or a nominal
principal amount, until the Notional Amount thereof is reduced to zero), except
that, if so specified in the applicable Prospectus Supplement, the Note Interest
Rate or Pass-Through Rate for such 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 such Securities by one or more rating agencies, in accordance
with a schedule or otherwise, all as described in such Prospectus Supplement.
Unless otherwise set forth in the applicable Prospectus Supplement, interest on
each Series or Class of Fixed Rate Securities will be distributable in arrears
on each Distribution Date specified in such Prospectus Supplement. Each such
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 Securities will be
computed on the basis of a 360-day year of twelve 30-day months.
Floating Rate Securities. Each Series (or, if more than one Class exists,
each Class within such Series) of Securities with a variable Note Interest Rate
or Pass-Through Rate ("Floating Rate Securities") will bear interest, on
14
the outstanding Security Principal Balance (or Notional Amount, if applicable),
from its Original Issue Date to the first interest Reset Date (as defined below)
for such Series or Class at the Initial Note Interest Rate or Pass-Through Rate
set forth on the face thereof and in the applicable Prospectus Supplement.
Thereafter, the Note Interest Rate or the Pass-Through Rate on such Series or
Class for each Interest Reset period (as defined below) 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 such Series or Class, and the "Spread Multiplier" is the
percentage that may be specified in the applicable Prospectus Supplement as
being applicable to such Series or Class, except that if so specified in the
applicable Prospectus Supplement, the Spread or Spread Multiplier on such Series
or any such Class or Classes of Floating Rate Securities may be subject to
adjustment from time to time in response to designated changes in the rating
assigned to such Securities by one or more rating agencies, in accordance with a
schedule or otherwise, all as described in such Prospectus Supplement. The
applicable Prospectus Supplement, unless otherwise specified therein, will
designate one of the following Base Rates as applicable to a Floating Rate
Security: (i) LIBOR (a "LIBOR Security"), (ii) the Commercial Paper Rate (a
"Commercial Paper Rate Security"), (iii) the Treasury Rate (a "Treasury Rate
Security"), (iv) the Federal Funds Rate (a "Federal Funds Rate Security"), (v)
the CD Rate (a "CD Rate Security") or (vi) 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 set forth
in such Prospectus Supplement and in such Security. The "Index Maturity" for any
Series or Class of Floating Rate Securities 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 publication, 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
Securities 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 ("Maximum Rate") and (ii) a minimum limitation, or floor, on the rate
at which interest may accrue during any such interest accrual period ("Minimum
Rate"). In addition to any Maximum Rate that may be applicable to any Series or
Class of floating Rate Securities, the Note Interest Rate or Pass-Through Rate
applicable to any Series or Class of Floating Rate Securities 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 Floating Rate
Securities will be governed by the law of the State of New York and, under such
law as of the date of this Prospectus, the maximum rate of interest, with
certain exceptions, is 25% per annum on a simple interest basis.
The Company will appoint, and enter into agreements with, agents (each a
"Calculation Agent") to calculate Note Interest Rates or Pass-Through Rates on
each Series or Class of Floating Rate Securities. The applicable Prospectus
Supplement will set forth the identity of the Calculation Agent for each Series
or Class of Floating Rate Securities. 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 Securities of a given
Series or Class.
The Note Interest Rates or Pass-Through Rate on each Class of Floating Rate
Securities 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 such Series of Floating Rate
Securities will be specified in the applicable Prospectus Supplement; provided,
however, that unless otherwise specified in such Prospectus Supplement, the Note
Interest Rates or Pass-Through Rate in effect for the ten days immediately prior
to the Scheduled Final Distribution Date will be that in effect on the tenth day
preceding such Scheduled Final Distribution Date. If an Interest Reset Date for
any Class of Floating Rate Securities would otherwise be a day that is not a
Business Day, such Interest Reset Date will occur on a prior or succeeding
Business Day specified in the applicable Prospectus Supplement.
15
Unless otherwise specified in the applicable Prospectus Supplement,
interest payable in respect of Floating Rate Securities shall be the accrued
interest from and including the Original Issue Date of such 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 Security, accrued interest shall be
calculated by multiplying the Security Principal Balance of such Security (or,
in the case of a Strip Security with no or a nominal Security 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 such day is computed by dividing
the Note Interest Rate or Pass-Through Rate is in effect on such day by 360, in
the case of LIBOR Securities, Commercial Paper Rate Securities, Federal Funds
Rate Securities and CD Rate Securities or by the actual number of days in the
year, in the case of Treasury Rate Securities. For purposes of making the
foregoing calculation, the variable Note Interest Rate or Pass-Through Rate in
effect on any Interest Reset Date will be the applicable rate as reset on such
date.
Unless otherwise specified in the applicable Prospectus Supplement, all
percentages resulting from any calculation of the Note Interest Rate or
Pass-Through Rate on a Floating Rate Security 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 such
calculation on Floating Rate Securities 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 such Series) of Floating Rate
Securities will be distributable on the Distribution Dates and for the interest
accrual periods as and to the extent set forth in the applicable Prospectus
Supplement.
Upon the request of the holder of any Floating Rate Security of a given
Series or Class, the Calculation Agent for such Series or Class will provide the
Note Interest Rate or Pass-Through Rate then in effect and, if determined, the
Note Interest Rate or Pass-Through Rate that will become effective on the next
Interest Reset Date with respect to such Floating Rate Security.
(1) CD Rate Securities. Each CD Rate Security will bear interest for each
Interest Reset Period at the Note Interest Rate or Pass-Through Rate calculated
with reference to the CD Rate and the Spread or Spread Multiplier, if any,
specified in such Security 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 such Interest Reset Period (a "CD Rate
Determination Date") for negotiable 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 Calculation Date
(as defined below) pertaining to such CD Rate Determination Date, then the "CD
Rate" for such Interest Reset Period will be the rate on such CD Rate
Determination Date for negotiable 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 Calculation Date such rate is not yet published in
either H. 15(519) or Composite Quotations, then the "CD Rate" for such Interest
Reset Period will be calculated by the Calculation Agent for such CD Rate
Security 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 selected by the Calculation Agent for such CD Rate
Security 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 related Prospectus Supplement in a denomination of $5,000,000;
provided, however, that if the dealers selected as aforesaid by such Calculation
Agent are not quoting offered rates as mentioned in this sentence, the "CD Rate"
for such Interest Reset Period will be the same as the CD Rate for the
immediately
16
preceding Interest Reset Period (or, if there was no such Interest Reset Period,
the Initial Note Interest Rate or Pass-Through Rate).
The "Calculation Date" pertaining to any CD Rate Determination Date shall
be the first to occur of (a) the tenth calendar day after such CD 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.
(2) Commercial Paper Rate Securities. Each Commercial Paper Rate Security
will bear interest for each Interest Reset Period at the Note Interest Rate or
Pass-Through Rate calculated with reference to the Commercial Paper Rate and the
Spread or Spread Multiplier, if any, specified in such Security and in the
applicable Prospectus Supplement.
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 such Commercial Paper Rate Security as of the second
Business Day prior to the Interest Reset Date for such Interest Reset Period (a
"Commercial Paper Rate Determination Date") and shall be the Money Market Yield
(as defined below) on such Commercial Paper Rate Determination Date of the rate
for commercial paper having the Index Maturity specified in the applicable
Prospectus Supplement, as such rate shall be published in H.15(519) under the
heading "Commercial Paper." In the event that such rate is not published prior
to 3:00 p.m., New York City time, on the Calculation Date (as defined below)
pertaining to such Commercial Paper Rate Determination Date, then the
"Commercial Paper Rate" for such Interest Reset Period shall be the Money Market
Yield on such 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 such Calculation Date such rate is not yet published in either H.
15(519) or Composite Quotations, then the "Commercial Paper Rate' for such
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 such Commercial
paper Rate Determination Date of three leading dealers of commercial paper in
The City of New York selected by the Calculation Agent for such Commercial Paper
Rate Security 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 such Calculation Agent are not quoting offered rates as mentioned
in this sentence, the "Commercial Paper Rate" for such Interest Reset Period
will be the same as the Commercial Paper Rate for the immediately preceding
Interest Reset Period (or, if there was no such Interest Reset Period, the
Initial Note Interest Rate or Pass-Through Rate).
"Money Market Yield" shall be a yield calculated in accordance with the
following formula:
Money Market Yield = D X 360 x 100
-------------
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 "Calculation " pertaining to any Commercial Paper Rate Determination
Date shall be the first to occur of (a) the tenth calendar day after such
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 Securities. Each Federal Funds Rate Security will
bear interest for each Interest Reset Period at the Note Interest Rate or
Pass-Through Rate calculated with reference to the Federal Funds Rate and the
Spread or Spread Multiplier, if any, specified in such Security 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 such Interest Reset Period (a "Federal Funds Rate
Determination Date") for 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 Calculation
17
Date (as defined below) pertaining to such Federal Funds Rate Determination
Date, the "Federal Funds Rate" for such 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 Calculation Date such rate is not yet published in
either H. 15(519) or Composite Quotations, then the "Federal Funds Rate" for
such Interest Reset Period shall be the rate on such Federal Funds Rate
Determination Date made publicly available by the Federal Reserve Bank of New
York which is 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 Calculation Date, the "Federal Funds Rate" for such
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 such
Interest Reset Period, the Initial Note Interest Rate or Pass-Through Rate).
Unless otherwise specified in the applicable Prospectus Supplement, in the case
of a Federal Funds Rate Security that resets daily, the Note Interest Rate or
Pass-Through Rate on such Security for the period from and including a Monday to
but excluding the succeeding Monday will be reset by the Calculation Agent for
such Security on such 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
Rates in effect with respect to each such day in such week.
The "Calculation Date" pertaining to any Federal Funds Rate Determination
Date shall be the next succeeding Business Day.
(4) LIBOR Securities. Each LIBOR Security will bear interest for each
Interest Reset Period at the Pass-Through Rate calculated with reference to
LIBOR and the Spread or Spread Multiplier, if any, specified in such, Security
and in the applicable Prospectus Supplement.
With respect to LIBOR indexed to the offered rates 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 Security as follows:
(i) On the second London Banking Day prior to the Interest Reset Date
for such Interest Reset Period (a "LIBOR Determination Date"), the
Calculation Agent for such LIBOR Security 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 such Interest Reset Date, which appear on the Reuters Screen
LIBO Page at approximately 11:00 a.m., London time, on such 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
such offered rates appear on the Reuters Screen LIBO Page, "LIBOR" for such
Interest Reset Period will be the arithmetic mean of such offered rates as
determined by the Calculation Agent for such LIBOR Security
(ii) If fewer than two offered rates appear on the Reuters Screen LIBO
Page on such LIBOR Determination Date, the Calculation Agent for such LIBOR
Security will request the principal London offices of each of four major
banks in the London interbank market selected by such Calculation Agent
with its offered quotations for deposits in U.S. dollars for the period of
the specified Index Maturity, commencing on such Interest Reset Date, to
prime banks in the London interbank market at approximately 11:00 a.m.,
London time, on such 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 such market at such time. If at least two such
quotations are provided, "LIBOR" for such Interest Reset Period will be the
arithmetic mean of such quotations. If fewer than two such quotations are
provided, "LIBOR" for such 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 such LIBOR Security at approximately 11:00
a.m., New York City time, on such LIBOR Determination Date for loans in
U.S. dollars to leading European banks, for the period of the specified
Index Maturity, commencing on such 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 such market at such time;
provided, however, that if fewer than three banks selected as aforesaid by
such Calculation Agent are quoting rates as mentioned in this sentence,
"LIBOR" for such Interest Reset Period will be the same as
18
LIBOR for the immediately preceding Interest Reset Period (or, if there was
no such Interest Reset Period, the Initial Note Interest Rate or
Pass-Through Rate).
If LIBOR with respect to any LIBOR Security is indexed to the offered rates
for deposits in a currency other than U.S. dollars, the applicable Prospectus
Supplement will set forth the method for determining such rate.
(5)Treasury Rate Securities. Each Treasury Rate Security will bear interest
for each Interest Reset Period at the Pass-Through Rate calculated with
reference to the Treasury Rate and the Spread or Spread Multiplier, if any,
specified in such Security 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 (as defined below) for such
Interest Reset Period of direct obligations of the United States ("Treasury
bills") having the Index Maturity specified in the applicable Prospectus
Supplement, as such 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 such rate is not published prior to 3:00 p.m., New York City
time, on the Calculation Date (as defined below) pertaining to such 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 such 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 provided above by 3:00 p.m., New York City time, on
such Calculation Date, or if no such auction is held on such Treasury Rate
Determination Date, then the "Treasury Rate" for such Interest Reset Period
shall be calculated by the Calculation Agent for such Treasury Rate Security 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 such Treasury Rate Determination Date, of three
leading primary United States government securities dealers selected by such
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 such Calculation Agent are not quoting bid rates as
mentioned in this sentence, then the "Treasury Rate" for such Interest Reset
Period will be the same as the Treasury Rate for the immediately preceding
Interest Reset Period (or, if there was no such Interest Reset Period, the
Initial Note Interest Rate or Pass-Through Rate).
The "Treasury Rate Determination Date" for each Interest Reset Period will
be the day of the week in which the Interest Reset Date for such Interest Reset
Period falls on which Treasury bills would normally be auctioned. Treasury bills
are normally sold at auction on Monday of each week, unless that day is a legal
holiday, in which case the auction is normally held on the following Tuesday,
except that such auction may be held on the preceding Friday. If, as the result
of a legal holiday, an auction is so held on the preceding Friday, such Friday
will be the Treasury Rate Determination Date pertaining to the Interest Reset
Period commencing in the next succeeding week. Unless otherwise specified in the
applicable Prospectus Supplement, if an auction date shall fall on any day that
would otherwise be an Interest Reset Date for a Treasury Rate Security, then
such Interest Reset Date shall instead be the Business Day immediately following
such auction date.
The "Calculation Date" pertaining to any Treasury Rate Determination Date
shall be the first to occur of (a) the tenth calendar day after such Treasury
Rate Determination Date or, if such a 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 Securities
Unless the related Prospectus Supplement provides otherwise, each Security
(other than certain Classes of Strip Securities) will have a "Security Principal
Balance" which, at any time, will equal the maximum amount that the holder
thereof will be entitled to receive in respect of principal out of the future
cash flow on the Deposited Assets and other assets securing such Note or
included in the related Trust. Unless otherwise specified in the related
Prospectus Supplement, distributions generally will be applied to undistributed
accrued interest on, then to principal of, and then to premium (if any) on, each
such Security of the Class or
19
Classes entitled thereto (in the manner and priority specified in such
Prospectus Supplement) until the aggregate Security Principal Balance of such
Class or Classes has been reduced to zero. The outstanding Security Principal
Balance of a Security will be reduced to the extent of distributions of
principal thereon, and, if applicable pursuant to the terms of the related
Series, by the amount of any net losses realized on any Deposited Asset
("Realized Losses") allocated thereto. The initial aggregate Security Principal
Balance of a Series and each Class thereof will be specified in the related
Prospectus Supplement. Distributions of principal of any Class of Securities
will be made on a pro rata basis among all the Securities of such Class. Strip
Securities with no Security Principal Balance will not receive distributions of
principal.
Optional Exchange
If a holder may exchange Securities of any given Series for a pro rata
portion of the Deposited Assets, the applicable Prospectus Supplement will
designate such Series as an "Exchangeable Series". The terms upon which a holder
may exchange Securities of any Exchangeable Series for a pro rata portion of the
Deposited Assets will be specified in the related Prospectus Supplement;
provided, however, that any right of exchange shall be exercisable only to the
extent that such exchange would not be inconsistent with the Company's and any
SPV's or Trust's 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 thereunder. Such terms may
relate to, but are not limited to, the following:
(a) a requirement that the exchanging holder tender to the Trustee
Securities of each Class within such Exchangeable Series;
(b) a minimum Security Principal Balance or Notional Amount, as
applicable, with respect to each Security being tendered for exchange;
(c) a requirement that the Security Principal Balance or Notional
Amount, as applicable, of each Security tendered for exchange be an
integral multiple of an amount specified in the Prospectus Supplement;
(d) specified dates during which a holder may effect such an exchange
(each, an "Optional Exchange Date");
(e) limitations on the right of an exchanging holder to receive any
benefit upon exchange from any Credit Support or other non-Term Assets
deposited in the applicable Trust; and
(f) adjustments to the value of the proceeds of any exchange based
upon the required prepayment of future expense allocations and the
establishment of a reserve for any anticipated Extraordinary Trust
Expenses.
Unless otherwise specified in the related Prospectus Supplement, in order
for a Security of a given Exchangeable Series (or Class within such Exchangeable
Series) to be exchanged by the applicable Securityholder, the Trustee for such
Security must receive, at least 30 (or such shorter period acceptable to the
Trustee) but not more than 45 days prior to an Optional Exchange Date (i) such
Security with the form entitled "Option to Elect Exchange" on the reverse
thereof duly completed, or (ii) in the case of Registered Securities, a
telegram, telex, facsimile transmission or letter from a member of a national
securities exchange or the National Association of Securities Dealers, Inc., the
Depositary (in accordance with its normal procedures) or a commercial bank or
trust company in the United States setting forth the name of the holder of such
Registered Security, the Security Principal Balance or Notional Amount of such
Registered Security to be exchanged, the certified number or a description of
the tenor and terms of such Registered Security, a statement that the option to
elect exchange is being exercised thereby and a guarantee that the Registered
Security to be exchanged with the form entitled "Option to Elect Exchange" on
the reverse of the Registered Security duly completed will be received by such
Trustee not later than five Business Days after the date of such telegram,
telex, facsimile transmission or letter. If the procedure described in clause
(ii) of the preceding sentence is followed, then such Registered Security and
form duly completed must be received by such Trustee by such fifth Business Day.
Any tender of Security by the holder for exchange shall be irrevocable. The
exchange option may be exercised by the holder of a Security for less than the
entire Security Principal Balance of
20
such Security provided that the Security Principal Balance or Notional Amount,
as applicable, of such Security remaining outstanding after redemption is an
authorized denomination and all other exchange requirements set forth in the
related Prospectus Supplement are satisfied. Upon such partial exchange, such
Security shall be cancelled and a new Security or Securities for the remaining
Security Principal Balance thereof shall be issued (which, in the case of any
Registered Security, shall be in the name of the holder of such exchanged
Security).
Unless otherwise specified in the applicable Prospectus Supplement, because
initially and until Definitive Securities are issued each Security will be
represented by a Global Security, the Depositary's nominee will be the
Securityholder of such Security and therefore will be the only entity that can
exercise a right of exchange. In order to ensure that the Depositary's nominee
will timely exercise a right of exchange with respect to a particular Security,
the beneficial owner of such Security must instruct the broker or other direct
or indirect participant through which it holds an interest in such Security to
notify the Depositary of its desire to exercise a right of exchange. Different
firms have different cut-off times for accepting instructions from their
customers, and, accordingly, each beneficial owner should consult the broker or
other direct or indirect participant through which it holds an interest in a
Security in order to ascertain the cut-off time by which such an instruction
must be given in order for timely notice to be delivered to the Depositary.
Unless otherwise provided in the applicable Prospectus Supplement, upon the
satisfaction of the foregoing conditions and any applicable conditions with
respect to the related Deposited Assets, as described in such Prospectus
Supplement, the applicable Securityholder will be entitled to receive a
distribution of a pro rata share of the Deposited Assets related to the
Exchangeable Series (and Class within such Exchangeable Series) of the Security
being exchanged, in the manner and to the extent described in such Prospectus
Supplement. Alternatively, to the extent so specified in the applicable
Prospectus Supplement, the applicable Securityholder, upon satisfaction of such
conditions, may direct the related Trustee to sell, on behalf of such
Securityholder, such pro rata share of the Deposited Assets, in which event the
Securityholder shall be entitled to receive the net proceeds of such sale, less
any costs and expenses incurred by such Trustee in facilitating such sale,
subject to any additional adjustments set forth in the Prospectus Supplement.
Put Option
If specified in the applicable Prospectus Supplement, a holder may put
Securities of a given Series to the Company, an SPV or a third party. The terms
upon which a holder may put its Securities (including the price) will be
specified in the related Prospectus Supplement; provided, however, the any put
option shall be exercisable only to the extent that such put would not be
inconsistent with the Company's and any SPV's or Trust's continued satisfaction
of the applicable requirements for exemption under 3a-7 under the Investment
Company act of 1940 and all applicable rules, regulations and interpretations
thereunder.
Global Securities
Unless otherwise specified in the applicable Prospectus Supplement, all
Securities 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 that will be deposited with, or on behalf of. The Depository Trust
Company, New York, New York (for Registered Securities denominated and payable
in U.S. dollars), or such other depositary identified in the related Prospectus
Supplement (the "Depositary"), and registered in the name of a nominee of the
Depositary. Global Securities may be issued in either registered or bearer form
and in either temporary or definitive form. See "Limitations on Issuance of
Bearer Securities" for provisions applicable to Securities issued in bearer
form. Unless and until it is exchanged in whole or in part for the individual
Securities represented thereby (each a "Definitive Security"), a Global Security
may not be transferred except as a whole by the Depositary for such Global
Security to a nominee of such Depositary or by a nominee of such Depositary to
such Depositary or another nominee of such Depositary or by such Depositary or
any such nominee to a successor of such Depositary or a nominee of such
successor.
The Depository Trust Company has advised the Company as follows: The
Depository Trust Company 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
21
agency" registered pursuant to the provisions of Section 17A of the Exchange
Act. The Depository Trust Company was created to hold securities of its
participants and to facilitate the clearance and settlement of securities
transactions among the institutions that have accounts with such Depositary
("participants") in such securities through electronic book-entry changes in
accounts of the participants, thereby eliminating the need for physical movement
of securities certificates. Such Depositary's participants include securities
brokers and dealers (including the Offering Agent), banks, trust companies,
clearing corporations, and certain other organizations, some of whom (and/or
their representatives) own such Depositary. Access to such 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. The Depository Trust Company has
confirmed to the Company that it intends to follow such procedures.
Upon the issuance of a Global Security, the Depositary for such Global
Security will credit, on its book-entry registration and transfer system, the
respective principal amounts of the individual Securities represented by such
Global Security to the accounts of its participants. The accounts to be
accredited shall be designated by the underwriters of such Securities, or, if
such Securities are offered and sold directly through one or more agents, by the
Company, or such agent or agents. Ownership of beneficial interests in 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
such securities. Such limits and such 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 such Global Security, such Depositary or such nominee, as the case may
be, will be considered the sole Securityholder of the individual Securities
represented by such Global Security for all purposes. Except as set forth below,
owners of beneficial interests in a Global Security will not be entitled to have
any of the individual Securities represented by such Global Security registered
in their names, will not receive or be entitled to receive physical delivery of
any such Securities and will not be considered the Securityholder thereof.
Because the Depositary can only act on behalf of its participants, the ability
of a holder of any Security to pledge that Security to persons or entities that
do not participate in the Depositary's system, or to otherwise act with respect
to such Security, may be limited due to the lack of a physical certificate for
such Security.
Subject to the restrictions discussed under "Limitations on Issuance of
Bearer Securities" below, distributions of principal of (and premium, if any)
and any interest on individual Securities represented by a Global Security will
be made to the Depositary or its nominee, as the case may be, as the
Securityholder of such Global Security. None of the Company, the applicable SPV,
the Administrative Agent, if any, the Trustee for such Securities, any Paying
Agent or the Security Registrar for such Securities will have any responsibility
or liability for any aspect of the records relating to or payments made on
account of beneficial interests in such Global Security or for maintaining,
supervising or reviewing any records relating to such beneficial interests.
The Company expects that the Depositary for Securities 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 of such Securities,
will credit immediately participants' accounts with payments in amounts
proportionate to their respective beneficial interests in the principal amount
of payments by participants to owners of beneficial interests in such Global
Security as shown on the records of such Depositary. The Company also expects
that payments by participants to owners of beneficial interests in such Global
Security held through such 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 such participants. Receipt by owners of beneficial
interests in a temporary Global Security of payments of principal, premium or
interest in respect thereof will be subject to the restrictions discussed below
under "Limitations on Issuance of Bearer Securities".
If the Depositary for Securities 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 Company within 90 days, the Company will issue individual
Definitive Securities in exchange for the Global Security or Securities
representing such Securities. In
22
addition, the Company may at any time and in its sole discretion determine not
to have any Securities of a given Class represented by one or more Global
Securities and, in such event, will issue individual Definitive Securities of
such Class in exchange for the Global Security or Securities representing such
Securities. Further, if the Company so specifies with respect to the Securities
of a given Class, an owner of a beneficial interest in a Global Security
representing Securities of such Class may, on terms acceptable to the Company
and the Depositary for such Global Security, receive individual Definitive
Securities in exchange for such 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 Securities of the Class represented by such
Global Security equal in principal amount to such beneficial interest and to
have such Definitive Securities registered in its name (if the Securities of
such Class are issuable as Registered Securities). Individual Definitive
Securities of such Class so issued will be issued (a) as Registered Securities
in denominations, unless otherwise specified by the Company, of $1,000 and
integral multiples thereof if the Securities or such Class are issuable as
Registered Securities, (b) as Bearer Securities in the denomination or
denominations specified by the Company if the Securities of such Class are
issuable as Bearer Securities or (c) as either Registered or Bearer Securities,
if the Securities of such Class are issuable in either form. See, however,
"Limitations on Issuance of Bearer Securities" below for a description of
certain restrictions on the issuance of individual Bearer Securities in exchange
for beneficial interests in a Global Security.
The applicable Prospectus Supplement will set forth any specific terms of
the depositary arrangement with respect to any Class or Series of Securities
being offered thereby to the extent not set forth or different from the
description set forth above.
DESCRIPTION OF DEPOSITED ASSETS AND CREDIT SUPPORT
General
[SELECT ONE OF THE BRACKETED SECTIONS]
[Alternative 1] [Each Certificate of each Series (or if more than one Class
exists, each Class (whether or not each such Class is offered hereby) within
such Series) will represent an ownership interest, subject to the interests of
the Noteholders, specified for such Series (or Class) of Certificates in a
designated, publicly issued, fixed income debt security or a pool of such debt
Certificates (the "Term Assets") issued by one or more Issuers (the "Term Assets
Issuers"), purchased by a Trust with proceeds from, and at the direction of, the
Company or purchased by the Company (or an affiliate thereof) in the secondary
market and assigned to a Trust as described in the applicable Prospectus
Supplement. The Term Assets Issuers will be one or more corporations, banking
organizations or insurance companies organized under the laws of the United
States or any state, which are subject to the informational requirements of the
Exchange Act and which, in accordance therewith, file reports and other
information with the Commission. Based on information contained in the offering
document pursuant to which any Term Assets Issuer's securities were originally
offered (a "Term Asset Prospectus"), the applicable Prospectus Supplement shall
set forth certain information with respect to the public availability of
information with respect to any Term Assets Issuer the debt securities of which
constitute more than ten percent of the Term Assets for any series of Securities
as of the date of such Prospectus Supplement ("Concentrated Term Assets"). The
specific terms and conditions of the Term Assets will be set forth in the
related Prospectus Supplement.]
[Alternative 2] [Each Certificate of each Series (or if more than one Class
exists, each Class (whether or not each such Class is offered hereby) within
such Series) will represent an ownership interest, subject to the interests of
the Noteholders, specified for such Series (or Class) of Certificates in a
designated, publicly issued, fixed income debt security or a pool of such debt
securities (the "Term Assets"), purchased by the Company (or an affiliate
thereof) in the secondary market and assigned to a Trust as described in the
applicable Prospectus Supplement. Each Term Asset will represent an obligation
issued or guaranteed by a foreign government, political subdivision or agency or
instrumentality thereof. Any pool of such publicly offered foreign government
debt securities may include both registered and unregistered offerings. Each
Term Asset or Term Assets in the case of debt securities with a common obligor,
that represents ten percent or more of the total Term Assets with respect to any
Series of Securities as of the date of the related Prospectus Supplement
("Concentrated Term Assets") will represent an obligation issued or guaranteed
by a foreign government, one of its political subdivisions or an agency or
23
instrumentality of the foregoing which has offered debt securities in the United
States pursuant to a registration statement filed with the Commission containing
information required by Schedule B of the Securities Act ("Schedule B"), which
qualifies as a "seasoned" issuer under Commission practice and which issuer or
guarantor the Company reasonably believes (based on publicly available
information) is eligible to use Schedule B as of the time of any offering of
Securities hereunder. The Term Assets may include obligations of any or all of
the following Foreign Governments (which may include obligations guaranteed by
the following): Austria, Australia, Canada, Canadian Provinces, Denmark,
Finland, France, Germany, Ireland, Japan, Norway, Italy, Spain, Sweden and the
United Kingdom. The Prospectus Supplement for any series will set forth the
Foreign Government obligations included in the related Trust.]
[Alternative 3] [Each Certificate of each Series (or if more than one Class
exists, each Class (whether or not each such Class is offered hereby) within
such Series) will represent an ownership interest, subject to the interests of
the Noteholders, specified for such Series (or Class) of Certificates in a
designated, publicly issued, fixed income debt security or pool of such debt
securities (the "Term Assets"), purchased by the Company (or an affiliate
thereof) in the secondary market and assigned to a Trust as described in the
applicable Prospectus Supplement. The Term Assets will represent direct
obligations of one or more foreign private issuers (as such term is defined in
Rule 405 of the Securities Act) subject to the informational requirements of the
Exchange Act and which in accordance therewith file reports and other
information with the Commission.]
[Alternative 4] [Each Certificate of each Series (or if more than one Class
exists, each Class (whether or not each such Class is offered hereby) within
such Series) will represent an ownership interest, subject to the interests of
the Noteholders specified for such Series (or Class) of Certificates in a
designated, publicly issued, fixed income debt security or a pool of such debt
securities (the "Term Assets"), purchased by the Company (or an affiliate
thereof) in the secondary market and assigned to a Trust as described in the
applicable Prospectus Supplement. Each Term Asset will represent an obligation
(i) 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") or (ii) of a U.S. governmental
sponsored organization created pursuant to federal statute (a "GSE"). 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 ("Fannie Mae"), Federal Home Loan Mortgage Association ("Freddie
Mae"), Student Loan Marketing Association ("Sallie Mae"), Resolution Funding
Corporation ("REFCORP"), Federal Home Loan Banks ("FHLB") (to the extent such
obligations represent the joint and several obligation of the twelve Federal
Home Loan Banks), Tennessee Valley Authority ("TVA") and Federal Farm Credit
Banks ("FFCB"). GSE debt securities 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) such organization makes publicly available its annual
report which shall include financial statements or similar financial information
with respect to such organization (a "GSE Issuer"). Based on information
contained in the prospectus pursuant to which any GSE Issuer's securities were
originally offered (a "Term Asset Prospectus"), the applicable Prospectus
Supplement will set forth certain 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 Term Assets for any series of
Securities as of the date of such Prospectus Supplement. The specific terms and
conditions of the Term Assets will be set forth in the related Prospectus
Supplement.]
[Alternative 5][Each Certificate of each Series (or if more than one Class
exists, each Class (whether or not each such Class is offered hereby) within
such Series) will represent an ownership interest, subject to the interests of
the Noteholders, specified for such Series (or Class) of Certificates in certain
credit card, charge card or debit card receivables or securities representing an
interest in or secured by such receivables. The property with respect to each
Series will be composed of (a) the Deposited Assets, which may include (i) one
or more pools of receivables (collectively, the "Receivables") generated or to
be generated from time to time in the ordinary course of business in one or more
portfolios or revolving credit card, charge card or debit card accounts
(collectively, the "Accounts"), (ii) a designated, publicly issued, asset backed
security or a pool of such asset backed securities representing an interest in
or secured by Receivables ("Credit Card Securities") and (iii) one or more
derivative products or such other assets specified in the related Prospectus
Supplement, (b) any Credit Support, and (c) the amount, if any, initially
deposited in any trust account for a Series as specified in the related
Prospectus Supplement (including for purposes of
24
acquiring the Deposited Assets or Credit Support). The Company (or an affiliate
thereof) will purchase the Term Assets in the secondary market and assign or
transfer the Term Assets to a trust or an SPV or will direct the Trustee to
purchase the specified Term Assets on behalf of the Trust with a portion of the
proceeds of the offering, as described in the applicable Prospectus Supplement.
The Deposited Assets included in a Trust for a Series may consist of any
combination of Receivables and Credit Card Securities, to the extent and as
specified in the related Prospectus Supplement.
The following is a general description of the Deposited Assets expected to
be included with respect to a Series. Specific information regarding the actual
Deposited Assets will be provided in the Prospectus Supplement used to offer a
Series of Notes or Certificates and, to the extent not contained in the related
Prospectus Supplement, in a Current Report on Form 8-K to be filed with the
Commission within 15 days after the initial issuance of such Securities.
Receivables
General. The Deposited Assets for a Series may consist, in whole or in
part, of Receivables. The following discussion of the Receivables, the related
Accounts and the terms thereof will be generally applicable to Receivables
underlying a Credit Card Security and the Agreement relating to such Credit Card
Security. The Accounts will consist of the initial Accounts sold by a Seller, as
well as any Additional Accounts added from time to time, but will not include
any removed Accounts. Each Seller will convey to the Company or the applicable
SPV all Receivables existing on a cut-off date (the "Cut-off Date") in certain
Accounts and all Receivables arising in such Accounts from time to time
thereafter. The Receivables may be payable in U.S. dollars or in any other
foreign currency. After the Cut-off Date, the Seller may convey to the Company
or the applicable SPV the Receivables in certain Additional Accounts, in
accordance with the provisions of the applicable Agreement. In addition,
pursuant to the Agreement, the Seller in some circumstances will be obligated to
designate Additional Accounts the Receivables in which will be conveyed to the
applicable Trust or the applicable SPV or, in lieu thereof or in addition
thereto, to include or transfer participations in Receivables ("Participants").
The Seller will convey to the applicable Trust or the applicable SPV all
Receivables in Additional Accounts, whether such Receivables are then existing
or thereafter created.
Pursuant to the Agreement, the Seller will have the right (subject to
certain limitations and conditions), but not the obligation, to remove the
Receivables in certain Accounts ("Removed Accounts").
"Credit Card Receivables" generally consist of periodic finance charges,
annual membership fees, cash advance fees and late charges on amounts charged
for merchandise and services and certain other fees designated by the Seller
("Finance Charge Receivables") and all amounts charged by cardholders for
merchandise and services, amounts advanced to cardholders as cash advances and
certain other fees billed to cardholders on the Accounts ("Principal
Receivables"). In addition, certain interchange attributable to cardholder
charges for merchandise and services in the Accounts may be treated as Finance
Charge Receivables. "Interchange" consists of certain fees received by a credit
card-issuing bank from the VISA and MasterCard International associations as
partial compensation for taking risk, absorbing fraud losses and funding
receivables for a limited period prior to initial billing. Under the VISA and
MasterCard International systems, a portion of the Interchange in connection
with cardholder charges for merchandise and services is passed from banks which
clear the transactions for merchants to credit card-issuing banks. VISA and
MasterCard International may from time to time change the amounts of Interchange
reimbursed to banks issuing their credit cards.
"Credit Card Receivables" consist of amounts charged on designated Accounts
for merchandise and services, and all annual membership fees and certain other
administrative fees billed to the designated Accounts. Receivables originated
under charge card Accounts are not subject to a monthly finance charge.
There are vicious distinctions between credit card Accounts and charge card
Accounts. Credit card Accounts offer revolving credit plans to their customers.
Charge card Accounts generally have no pre-set spending limit and are designated
for use as a convenient method of payment for the purchase of merchandise and
services. Charge card Accounts generally cannot be used as a means of financing
such purchases. Accordingly, the full
25
balance of a month's purchases is billed to cardmembers and is due upon receipt
of the billing statement. By contrast, revolving credit plans allow customers to
make a minimum monthly payment and to borrow the remaining outstanding balance
from the credit issuer up to a predetermined limit. As a result of these payment
requirement differences, charge card Accounts generally have a high monthly
payment rate and balances which turn over rapidly relative to their charge
volume when compared to credit card Accounts.
Another distinction between charge card Accounts and credit card Accounts
is that charge card Account balances are generally not subject to monthly
finance charges. As described above, the full account balance is billed monthly
and is due upon receipt of the billing statement. Cardmembers do not have the
option of using their charge card Accounts to extend payment and to pay a
finance charge on the remaining outstanding balance. Credit card Accounts, by
contrast, do allow customers to pay a specified minimum portion of an
outstanding amount and to finance the balance at a finance charge rate
determined by the credit card issuer. (Because charge card Account balances may
not be assessed finance charges, a portion of collections on Receivables in
charge card Accounts received in any specified collection period will generally
be allocated to allow for interest payments or yield payments based on the
product of such collections and a specified yield factor.) Each related
Prospectus Supplement, where applicable, will describe the yield calculation for
a specific portfolio of charge card Accounts.
Additional Information Relating to Receivables
The related prospectus Supplement for each Series will provide information
with respect to the Receivables included as Term Assets as of the Cut-off Date,
including, among other things, the aggregate principal balance of the
Receivables and whether the Receivables are credit card Receivables, charge card
Receivables or debit card Receivables.
The eligibility criteria which shall apply with respect to the Term Assets
will be specified in the related Prospectus Supplement. The related Prospectus
Supplement will provide information, including, among other things, (a)
underwriting criteria; (b) the loss and delinquency experience for the portfolio
of Receivables; (c) the composition of the portfolio by account balance; and (d)
the geographic distribution of Accounts and Receivables. The related Prospectus
Supplement will also specify any other limitations on the types or
characteristics of Receivables for a Series.
If information of the nature described above with respect to the
Receivables is not known to the Seller at the time the Securities are initially
offered, approximate or more general information of the nature described above
will be provided in the related Prospectus Supplement and additional information
will be set forth in a Current Report on Form 8-K to be filed with the
Commission within 15 days after the initial issuance of such Certificates.
Credit Card Securities
The Credit Securities will consist of certain eligible credit or charge
card asset backed securities which may include certificates representing
undivided interests in, or notes or loans secured by Receivables generated in
Accounts (as described above). Such certificates, notes or loans will have
previously been offered and distributed to the public pursuant to an effective
Registration Statement. Based on information contained in the offering document
pursuant to which any of the Credit Card Securities were originally offered
(each a "Term Assets Prospectus"), the applicable Prospectus Supplement will set
forth certain information with respect to the public availability of information
with respect to any Term Assets Issuer whose securities constitute more than
[ten percent] of the Term Assets for any Series as of the date of such
Prospectus Supplement ("Concentrated Term Asset"). More specific terms and
conditions of the Term Assets will be set forth in the related Prospectus
Supplement.
This Prospectus relates only to the Securities offered hereby and does not
relate to the Credit Card Securities. The following description of Credit Card
Securities generally is intended only to summarize certain characteristics of
the Credit Card Securities permitted to be included in a Series and does not
purport to be a complete description of any particular Credit Card Security and
is qualified in its entirety by reference to the applicable Prospectus
Supplement, the Term Assets Prospectus, if any, and the Agreement with respect
to any Credit Card Security.
26
General. Each of the Term Assets has been issued pursuant to a pooling and
servicing agreement, a master pooling and servicing agreement, a sale and
servicing agreement, a trust agreement, indenture or similar agreement. The
Seller will have entered into the Agreement with the trustee under such
Agreement (the "Term Assets Trustee"). Receivables underlying an Agreement will
be serviced by a servicer directly or by one or more sub-servicers who may be
subject to the supervision of such servicer.
The Term Assets Issuer will be a financial institution, corporation, or
other entity engaged generally in the business of issuing credit or charge
cards; any store or merchandiser that issues credit or charge cards; or a
limited purpose corporation or other entity organized for the purpose of, among
other things, establishing trusts and acquiring and selling receivables to such
trusts, and selling beneficial interests in such trusts; or one of such trusts.
If so specified in the related Prospectus Supplement, the Term Assets Issuer may
be an affiliate of the Company. The obligations of the Term Assets Issuer or
Seller will generally be limited to certain representations and warranties with
respect to the assets conveyed by it to the related trust. Unless otherwise
specified in the related Prospectus Supplement, none of the Term Assets Issuer,
the Seller or the Servicer will have guaranteed any of the Credit Card
Securities issued under the Agreement.
Distributions of principal and interest will be made on the Term Assets on
the dates specified in the related Prospectus Supplement. The Term Assets may be
entitled to receive nominal or no principal distributions or nominal or no
interest distributions. Principal and interest distributions will be made on the
Term Assets by the Term Assets Trustee or the Servicer from the proceeds of the
underlying Receivables and certain other underlying assets. The Seller or the
Servicer may have the right to repurchase assets underlying the Term Assets
after a certain date or under other circumstances specified in the related
Prospectus Supplement.
Term Assets Early Amortization Events. As specified in the Prospectus
Supplement with respect to any Series, principal payments due to the holders of
the Term Assets will generally either commence on a specified date prior to the
final payment thereof or be provided for through the accumulation of certain
collections in specified accounts to be distributed on the specified final
payment date, but in each case principal may be paid earlier or later than such
dates. However, if certain economic or non-economic events specified in the
related Agreement occur (collectively referred to herein as "Term Assets Early
Amortization Events"), monthly principal distributions to the holders of the
Term Assets may begin on the first payment date following the occurrence of such
Term Assets Early Amortization Event or the month in which such event occurs
(the "Term Assets Early Amortization Period"). Reference is made to the
Prospectus Supplement for a description of the Term Assets Early Amortization
Events relevant to the Concentrated Terms Assets for any Series.
Enhancement Related to Term Assets. Enhancement in the form of the reserve
funds, subordination or other securities or interests issued under the
Agreement, guarantees, letters or credit, cash collateral accounts, insurance
policies or other types of enhancement (collectively, "Term Assets Enhancement")
may be provided with respect to the Receivables underlying the Credit Card
Securities or with respect to the Credit Card Securities themselves. The type,
characteristics and amount of Term Assets Enhancement will be a function of
certain characteristics of the underlying Receivables and other factors and will
have been established for the Credit Card Securities on a basis consistent with
the rating of such securities when they were originally issued.
Underlying Receivables. The Credit Card Securities will represent an
undivided beneficial interest in or be accrued by Receivables generated from
time to time in the ordinary course of business in a portfolio of Accounts,
funds collected or to be collected from cardholders in respect of such
Receivables, the right to receive certain other fees and charges attributable to
cardholders charges for merchandise and services in the Accounts and monies on
deposit in certain accounts maintained pursuant to the Agreement. The
Receivables underlying the Credit Card Securities may consist of either credit
card Receivables, charge card Receivables or debit card Receivables. See "--
Receivables" above.
The related Prospectus Supplement for each Series will provide additional
information with respect to the Accounts and Receivables underlying any
Concentrated Term Asset, including, among other things, the aggregate principal
balance of the Receivables, based on information made publicly available with
respect to the related Term Assets Issuer, and whether the Receivables are
credit card receivables, charge card Receivables or debit card Receivables.]
27
Term Assets
General. Unless otherwise specified in the related Prospectus Supplement
each Term Asset will have been issued pursuant to an agreement (each, a "Term
Assets Indenture") between the Term Assets Issuer and the Term Assets Trustee.
Unless otherwise specified, the Term Assets Indenture and the Term Assets
Trustee will be qualified under the Trust Indenture Act of 1939 (the "Trust
Indenture Act") and the Term Assets Indenture will contain certain provisions
required by the Trust Indenture Act.
Certain Covenants. 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
subsidiary's, ability to: (i) consolidate, merge, or transfer or lease assets;
(ii) incur or suffer to exist any lien, charge, or encumbrance upon any of its
property or assets, or to 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; (iii) declare or pay any cash dividends, or make
any distribution 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 certain
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 Term Assets Indenture related to one or more Term Assets included in a
Trust may include some, all or none of the foregoing provisions or variations
thereof or additional covenants not discussed herein. To the extent that the
Term Assets 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 Term Assets against losses.
The Prospectus Supplement used to offer any Series of Securities will describe
material covenants in relation to any Concentrated Term Asset and, as
applicable, will describe material covenants which are common to any pool of
Term Assets.
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. Such events of default typically include the
following or variations thereof: (i) 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); (ii) failure by the issuer to observe
or perform any covenant, agreement, or condition contained in the securities or
the indenture which failure is materially adverse to security holders and
continues for a specified period after notice thereof is given to the issuer by
the indenture trustee or the holders of not less than a specified percentage of
the outstanding securities; (iii) 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 such securities, and (iv) certain events
of insolvency or bankruptcy with respect to the Term Assets Issuer.
Remedies. Indentures 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
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 trustee
thereunder to be indemnified by the security holders prior to proceeding to
exercise any right or power under such indenture with respect to such securities
at the request of such 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 such request within a reasonable time.
28
Each Term Assets Indenture may include some, all or none of the foregoing
provisions or variations thereof or additional events of default not discussed
herein. The Prospectus Supplement with respect to any Series of Securities will
describe the events of default under the Term Assets Indenture with respect to
any Concentrated Term Asset ("Term Asset Events of Default") and applicable
remedies with respect thereto. With respect to any Trust comprised of a pool of
securities, the applicable Prospectus Supplement will describe certain common
Term Asset 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
Term Assets, against losses. If a Term Asset Event of Default occurs and the
Trustee as a holder of the Term Assets is entitled to vote or take such other
action to declare the principal amount of a Term Assets and any accrued and
unpaid interest thereon to be due and payable, the Securityholders' objectives
may differ from those of holders of other securities of the same series and
class as any Term Asset ("Outstanding Debt Securities") in determining whether
to declare the acceleration of the Term Assets.
Subordination. As set forth in the applicable Prospectus Supplement,
certain of the Term Assets with respect to any Trust may be either senior
("Senior Term Assets") or subordinated ("Subordinated Term Assets") in right to
payment to other existing or future indebtedness of the Term Assets Issuer. With
respect to Subordinated Term Assets, 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
Term Assets, if any, may be entitled to receive payment of the full amount due
thereon 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 such securities. Consequently, the Trust as a holder of subordinated
debt may suffer a greater loss than if it held unsubordinated debt of the Term
Assets Issuer. There can be no assurance, however, that in the event of a
bankruptcy or similar proceeding the Trust as a holder of Senior Term Assets
would receive all payments in respect of such securities even if holders of
subordinated securities receive amounts in respect of such securities. Reference
is made to the Prospectus Supplement used to offer any Series of Securities for
a description of any subordination provisions with respect to any Concentrated
Term Assets and the percentage of Senior Term Assets and Subordinated Term
Assets, if any, in a Trust comprised of a pool of securities.
Secured Obligations. Certain of the Term Assets with respect to any Trust
may represent secured obligations of the Term Assets Issuer ("Secured Term
Assets"). Generally, unless an event of default shall have occurred, or with
respect to certain collateral or as otherwise set forth in the indenture
pursuant to which such securities were offered and sold, an issuer of secured
obligations generally 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 certain provisions for release,
substitution or disposition of collateral under certain 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 certain events of default with respect
thereto. 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 such securities pending the sale of any
collateral and prior to or during such 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 such 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 Term Assets Indenture with respect to any Secured Term Asset may
include, some, or all or none of the foregoing provisions or variations thereof.
The Prospectus Supplement used to offer any Series of Securities which includes
Concentrated Term Assets which are Secured Term Assets, will describe the
security provisions of such Term Assets and the related collateral. With respect
to any Trust comprised of a pool of securities, a substantial portion of which
are Secured Term Assets, the applicable Prospectus Supplement will disclose
certain general information with respect to such security provisions and the
collateral.
Principal Economic Terms of Term Assets
Reference is made to the applicable Prospectus Supplement with respect to
each Series of Securities for a description of the following terms, as
applicable, of any Concentrated Term Asset: (i) the title and series of such
29
Term Assets, the aggregate principal amount, denomination and form thereof; (ii)
whether such securities are senior or subordinated to any other obligations of
the issuer; (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 such debt securities; (v) the dates on which, or the range
of dates within which, the principal of (and premium, if any, on) such debt
securities will be payable; (vi) the rate or rates or the method of
determination thereof, at which such Term Assets will bear interest, if any
("Term Assets Rate"); the date or dates from which such interest will accrue
("Term Assets Interest Accrual Periods"); and the dates on which such interest
will be payable ("Term Assets Payment Dates"); (vii) the obligation, if any, of
the Term Assets Issuer to redeem the Outstanding Debt Securities pursuant to any
sinking fund or analogous 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 such debt securities may be redeemed or
repurchased, in whole or in part, pursuant to such obligation; (viii) the
periods within which or the dates on which, the prices at which and the terms
and conditions upon which such debt securities may be redeemed, if any, in whole
or in part, at the option of the Term Assets Issuer; (ix) whether the Term
Assets were issued at a price lower than the principal amount thereof; (x) if
other than United States dollars, the foreign or composite currency in which
such debt securities are denominated, or in which payment of the principal of
(and premium, if any) or any interest on such Term Assets will be made (the
"Term Assets Currency"), and the circumstances, if any, when such currency of
payment may be changed; (xi) material events of default or restrictive covenants
provided for with respect to such Term Assets; (xii) the rating thereof, if any;
(xiii) certain characteristics of the Receivables which comprise the underlying
assets for the Concentrated Term Asset including, (A) whether such Receivables
are credit card Receivables, charge card Receivables or debit card Receivables,
(B) the fees and charges associated with such Receivables and (C) the servicing
fee or range or servicing fees with respect to the Receivables (xiv) certain
characteristics of Term Assets Enhancement, if any, such as reserve funds,
insurance policies, letters of credit, cash collateral accounts or guarantees
relating to the Receivables underlying the Concentrated Term Asset or to such
Term Assets itself; (xv) the terms on which the underlying Receivables for such
Concentrated Term Asset may, or are required to, be purchased prior to the
expected final payment of such Concentrated Term Asset; and (xvi) the terms on
which Receivables may be substituted for those originally underlying such
Concentrated Term Asset and (xviii) any other material terms of such Term
Assets.
With respect to a Trust comprised of a pool of Term Assets, the related
Prospectus Supplement will, to the extent applicable, describe the composition
of the Term Assets pool [as of the Cut-off Date], certain material events of
default or restrictive covenants common to the Term Assets, and, on an
aggregate, percentage or weighted average basis, as applicable, the
characteristics of the pool with respect to certain terms set forth above in 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 Term Asset,
the applicable Prospectus Supplement will disclose the identity of the
applicable Term Assets Issuer and will describe the existence and type of
certain information that is made publicly available by such Term Assets Issuer
regarding such Term Asset or Term Assets and will disclose where and how
prospective purchasers of the Securities may obtain such publicly available
information with respect to such Term Assets Issuer. Such information will
typically consist of such Term Asset Issuer's annual report, which contains
financial statements or similar financial information, and can be obtained from
the Commission, if so specified in the applicable Prospectus Supplement, or from
the office of such Term Assets Issuer identified in the related Prospectus
Supplement. However, the precise nature of such publicly available information
and where and how it may be obtained with respect to any given Term Assets
Issuer will vary, and, as described above, will be set forth in the applicable
Prospectus Supplement.
Other Deposited Assets
In addition to the Term Assets, the Company may also deposit into a given
Trust, or the Trustee on behalf of the Securityholders of a Trust, may enter
into an agreement constituting or providing for the purchase of, to the extent
described in the related Prospectus Supplement, certain assets related or
incidental to one or more of such Term Assets 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 Term Assets
(including assets obtained through foreclosure or in
30
settlement of claims with respect thereto) (all such assets for any given
Series, together with the related Term Assets, the "Deposited Assets"). 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 Term Assets.
Unless otherwise specified in the related Prospectus Supplement, the
Deposited Assets for a given Series of Securities will not constitute Deposited
Assets for any other Series of Securities and the Securities of each Class of a
given Series will possess an equal and ratable interest in such Deposited
Assets. The applicable Prospectus Supplement 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 such Series. In such event, the other Classes
of such Series will not possess any security or 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
Securities, such Series may include, or the Securityholders of such Series (or
any Class or group of Classes within such Series) may have the benefit of,
Credit Support for any Class or group of Classes within such Series. Such 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 set forth whether any Class or group of
Classes of Securities of a Series includes, or the Securityholders of such
Securities 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 such
Class or Classes and certain information with respect to the obligors of each
such element, including financial information with respect to any such obligor
providing Credit Support for 20% or more of the aggregate principal amount of
such Class or Classes.
Subordination. As discussed below under "-- Collections," the rights of the
Securityholder of any given Class within a Series of Securities to receive
collections payable to such Series and any Credit Support obtained for the
benefit of the Securityholders of such Series (or Classes within such Series)
may be subordinated to the rights of the Securityholders or one or more other
Classes of such Series to the extent described in the related Prospectus
Supplement. Such subordination accordingly provides some additional credit
support to those Securityholders of those other Classes. For example, if losses
are realized during a given period on the Deposited Assets relating to a Series
of Securities such that the collections received thereon are insufficient to
make all distributions on the Securities of such Series, those realized losses
would be allowed to the Securityholders of any Class of such Series that is
subordinated to another Class, to the extent and in the manner provided in the
related Prospectus Supplement. If a Series includes both Notes and Certificates,
the Certificates will generally be subordinated to the Notes to the extent
described in the Prospectus Supplement. In addition, if so provided in the
applicable Prospectus Supplement, certain amounts otherwise payable to
Securityholders 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 related Prospectus Supplement.
If so provided in the related Prospectus Supplement, the Credit Support for
any Series or Class of Securities may include, in addition to the subordination
of certain Classes of such Series and the establishment of a reserve account,
any of the other forms of Credit Support described below. Any such 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
Securityholders of such Class or as otherwise specified in the related
Prospectus Supplement. In addition, if so provided in the applicable Prospectus
Supplement, the obligor of any other forms of Credit Support may be reimbursed
for amounts paid pursuant to such Credit Support out of amounts otherwise
payable to one or more of the Classes of the Securities of such Series.
Letter of Credit; Surety Bond. The Securityholders of any Series (or Class
or group of Classes of Securities within such Series) may, if specified in the
applicable Prospectus Supplement, have the benefit of a letter or letters of
credit (a "Letter of Credit") issued by a bank (a "Letter of Credit Bank") or a
surety bond or bonds (a "Surety Bond") issued by a surety company (a "Surety").
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
31
through payment of claims) and to pay timely the fees or premiums therefor
unless, as described in the related Prospectus Supplement, the payment of such
fees or premiums is otherwise provided for. 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 Supplement will
describe 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
related Prospectus Supplement, the Trustee or such 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 such 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 such 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 provided in the related Prospectus Supplement, the
Trustee or such other person specified in the Prospectus Supplement will deposit
or cause to be deposited into an account maintained with an eligible institution
(which may be the Trustee) (a "Reserve Account") 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 such 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 Securities, in the manner and priority specified in
the applicable Prospectus Supplement. Amounts may be distributed to
Securityholders of such Class or group of Classes within such Series, or may be
used for other purposes, in the manner and to the extent provided in the related
Prospectus Supplement. Amounts deposited in any Reserve Account will be invested
in certain permitted investments by, or at the direction of, the Trustee, the
Company, the applicable SPV or such other person named in the related Prospectus
Supplement.
[INCLUDE BRACKETED LANGUAGE IF APPROPRIATE]
32
[SERVICING OF RECEIVABLES]
[General
The following summaries regarding the servicer (the "Servicer") and the
servicing of the Receivables do not purport to be complete and are qualified in
their entirety by reference to the applicable Agreement. The following
description relates to the servicing of Receivables comprising Deposited Assets.
Though certain of the statements below may be applicable to the Receivables
underlying any Credit Card Security, these summaries do not purport to summarize
the provisions of any Agreement and the statements below are qualified in their
entirety by such Agreements with respect to the Receivables underlying any
Credit Card Security.
Collection Procedures
The Servicer will make reasonable efforts to collect all payments required
to be made under the Receivables and will, consistent with the terms of the
related Agreement for a Series and any applicable Credit Support, follow such
collection procedures as it follows with respect to comparable receivables held
in its own portfolio or serviced by it.
Collections
The Agreement relating to the applicable Receivables or a separate
servicing agreement (a "Servicing Agreement") will establish procedures by which
the Servicer or such other person specified in the Prospectus Supplement is
obligated, for the benefit of the Noteholders and Certificateholders of each
Series of Notes and Certificates, as applicable, to administer the related
Deposited Assets, including making collections of all payments thereon,
depositing from time to time prior to any applicable distribution date (each, a
"Distribution Date") such collections into a segregated account maintained or
controlled by the applicable Trustee for the benefit of such Series (each, a
"Collection Account").
Unless otherwise indicated in the related Prospectus Supplement, the
Collection Account will be an account maintained (i) at a depositary
institution, the long-term unsecured debt obligations of which at the time of
any deposit therein are rated as described in the related Prospectus Supplement
and as specified by each Rating Agency rating the Securities of such Series or
(ii) in an account or accounts the deposits in which are insured to the maximum
extent available by the FDIC or which are otherwise maintained in a manner
meeting requirements established by each Rating Agency.
Unless otherwise specified in the related Prospectus Supplement, the funds
held in the Collection Account may be invested, pending remittance to the
Trustee, in certain permitted investments. If so specified in the related
Prospectus Supplement, the Servicer or other specified person, as the case may
be, will be entitled to receive as additional compensation any interest or other
income earned on funds in the Collection Account.
Unless otherwise specified in the related Prospectus Supplement, the
Servicer, the Seller, the Trustee, the Company or an SPV, as appropriate, will
deposit into the Collection Account for each Series, within two business days
after the date of receipt thereof, the following payments and collections
received or made by it:
(i) all payments on account of principal, including prepayments, on
the Deposited Assets;
(ii) all payments on account of interest or finance charges on such
Deposited Assets after deducting therefrom, at the discretion of the
Servicer but only to the extent of the amount permitted to be withdrawn or
withheld from the Collection Account in accordance with the applicable
Agreement, the Trustee's Fee and the Servicer's fee (the "Servicer's Fee"),
if any, in respect of such Deposited Assets,
(iii) all amounts received by the Servicer in connection with the
liquidation of Deposited Assets other than amounts required to be paid or
refunded to the obligor pursuant to the terms of the applicable documents
or otherwise pursuant to law ("Liquidation Proceeds"), exclusive of, in the
discretion
33
of the Servicer, but only to the extent of the amount permitted to be
withdrawn from the Collection Account in accordance with the related
Agreement, the Trustee's Fee and Servicer's Fee, if any, in respect of the
such Deposited Assets;
(iv) all amounts required to be deposited therein from any applicable
Credit Support for such Series pursuant to the related Agreement;
(v) all repurchase prices of any such Deposited Assets repurchased by
the Company, the SPV, the Seller or the Servicer pursuant to the related
Agreement;
(vi) any amounts payable to the applicable person with respect to each
Deposited Asset acquired that has been repurchased or removed by the
Company, the SPV, the Servicer or the Seller pursuant to the related
Agreement, all amounts received thereon and not distributed as of the date
on which the related repurchase price was determined;
(vii) all amounts payable to the Trustee of such Series for deposit
into the Distribution Account, if any, or for remittance to the Noteholders
or Certificateholders of such Series as provided for in the related
Agreement; and
(viii) all amounts necessary to clear and terminate the Collection
Account pursuant to the related Agreement.
In addition, if the Servicer deposits in the Collection Account for a
Series any amount not required to be deposited therein, it may, at any time,
withdraw such amount from such Collection Account.
The Servicer or an Administration Agent, if any is appointed, will direct
the Trustee, and otherwise the Trustee will make all determinations, as to the
appropriate application of such collections and other amounts available for
distribution to the payment of any administrative of collection expenses (such
as any administrative fee) and certain Credit Support-related ongoing fees (such
as insurance premiums, letter of credit or any required account deposits) and to
the payment of amounts then due and owing on the Notes and Certificates of such
Series (and Classes within such Series), all in the manner and priorities
described in the related Prospectus Supplement.
The applicable Prospectus Supplement will specify the collection periods,
if applicable, and Distribution Dates for given Series 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. There can be no assurance that amounts received from the
Deposited Assets and any Credit Support obtained for the benefit of Noteholders
or Certificateholders for particular Series or Classes of Notes or Certificates
over a specified period will be sufficient, after payment of all prior expenses
and fees for such period, to pay amounts then due and owing to holders of such
Notes and Certificates. The applicable Prospectus Supplement will also set forth
the manner and priority by which any Realized Loss 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 the Notes and Certificates or to Classes of
a given Series of Notes or 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 the Notes and
Certificates or to each Class of a given Series for purposes of payments of
certain amounts, such as principal, may be different from the relative
distribution priority assigned to each such Class for payments of other amounts,
such as interest or premium.
Servicing Fee and Payment of Expenses
Except as otherwise described in the related Prospectus Supplement, the
Servicer will be entitled to the Servicer's Fee in an amount to be determined as
specified in the related Prospectus Supplement. The Servicer's Fee may be fixed
or variable, as specified in the related Prospectus Supplement.
34
Unless otherwise specified in the related Prospectus Supplement, the
Servicer will pay certain expenses incurred in connection with the servicing of
the Receivables including, without limitation, the payment of the fees and
expenses of the Trustee and independent accountants and payment of expenses
incurred in preparation of reports to Securityholders.
The rights of the Servicer to received funds from the Collection Account
for a Series, whether as the Servicer's Fees or other compensation, or for the
reimbursement of expenses or otherwise, may be subordinate to the rights of
Securityholders of such Series.
Evidence as to Compliance
The Trust Agreement or Indenture for a Series may provide that, each year,
a firm of independent public accountants will furnish a statement to the Trustee
to the effect that such firm has examined certain documents and records relating
to the servicing of the Receivables by the Servicer and that, on the basis of
such examination, such firm is of the opinion that the servicing has been
conducted in compliance with the Trust Agreement or Indenture, except for (i)
such exceptions as such firm believes to be immaterial and (ii) such other
exceptions as are set forth in such statement.
The Trust Agreement or Indenture for each Series will provide for delivery
to the Trustee for such Series of an annual statement signed by an officer of
the Servicer to the effect that the Servicer has fulfilled its obligations
thereunder throughout the preceding calendar year.
Certain Matters Regarding the Servicer
The Servicer, if any, for each Series will be identified in the related
Prospectus Supplement. The Servicer may be an affiliate of the Seller and may
have other business relationships with the Company and its affiliates.
If an event of default occurs with respect to the Servicer under an
Agreement, or Servicing Agreement, the Servicer may be replaced by the Trustee
or a successor Servicer. Servicer events of default and the rights of the
Trustee upon such a default will be set forth in the related Prospectus
Supplement.
Unless otherwise provided in the related Prospectus Supplement, the
Servicer may not resign from its obligations and duties under an Agreement or
Servicing Agreement, except (a) upon determination that (i) the performance of
its duties thereunder is no longer permissible under applicable law and (ii)
there is no reasonable action which the Servicer could take to make the
performance of its duties thereunder permissible under applicable law, (b) in
connection with a conveyance, consolidation or merger by the Servicer with any
corporation, or conveyance or transfer of its properties or assets substantially
as an entirety to any other person permitted thereunder or (c) upon the
satisfaction of the following conditions: (i) the acceptance and assumption, by
an agreement supplemental thereto, in form satisfactory to the Trustee, of the
obligations and duties of the Servicer thereunder by a proposed successor
Servicer, (ii) the Servicer having given written notice to each Rating Agency of
such transfer and such Rating Agency having notified the Servicer in Writing to
the effect that its then current rating of the Notes and Certificates of any
Series will not be reduced or withdrawn as a result of such transfer, (iii) the
written consent of any provider of Credit Support, if applicable, and (iv) the
proposes successor Servicer being an Eligible Servicer (as defined below).
Notwithstanding anything in an Agreement or Servicing Agreement to the contrary,
any successor Servicer appointed under clause (c) will be deemed to be a
successor Servicer. Any such determination permitting the resignation of the
Servicer will be evidenced as to clause (a) above by an opinion of counsel to
such effect delivered to the Trustee. No such resignation will become effective
until the Trustee or a successor Servicer shall have assumed the
responsibilities and obligations of the Servicer in accordance with an Agreement
or Servicing Agreement.
"Eligible Servicer" means the Trustee or an entity which, at the time of
its appointment as Servicer, (i) is an established financial institution having
capital or a net worth of not less than $100,000,000, (ii) is servicing a
portfolio of credit card or charge card accounts, (iii) is legal qualified and
has the capacity to service the Accounts, or (iv) has demonstrated the ability
to professionally and completely service a portfolio of similar accounts in
accordance with standards of skill and care customary in the industry.
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Indemnification
Except to the extent otherwise provided therein, each Agreement or
Servicing Agreement will provide that the Servicer will indemnify the Trust, the
Trustee and the Securityholders from and against any loss, liability, expense,
damage or injury suffered or sustained by reason of any acts, omissions or
alleged acts or omissions arising out of activities of the Servicer with respect
to the Trust or the Trustee or any co-trustee, including those arising from acts
or omissions of the Servicer pursuant to the Agreement or Servicing Agreement,
including but not limited to any judgment, award, settlement, reasonable
attorney's fees and other costs or expenses incurred in connection with the
defense of any actual or threatened action, proceeding or claim; provided,
however, that the Servicer shall not, unless otherwise specified in the related
Prospectus Supplement, indemnify: (i) the Trust or the Trustee if such acts,
omissions or alleged acts or omissions constitute fraud, negligence, breach or
fiduciary duty or misconduct by the Trustee; (ii) the Trust, the Trustee or the
Securityholders for any liability, cost or expense with respect to any action
taken by the Trust or Trustee at the request of the Securityholders nor with
respect to any Federal, state or local income or franchise taxes (or any
interest or penalties with respect thereto) required to be paid by the Trust or
the Securityholders of a Series of any taxing authority; or (iii) the Trust or
Securityholders for any losses incurred by any of them as a result of defaulted
Receivables or Receivables which are written off as uncollectible unless such
writeoff is caused by a breach of the Agreement or Servicing Agreement by the
Servicer.]
DESCRIPTION OF THE INDENTURE
General
The following summary of certain provisions of the Indenture and the Notes
do not purport to be complete and such summary is qualified in its entirety by
reference to the detailed provisions of the form of Indenture filed as an
exhibit to the Registration Statement. Wherever defined terms of the Indenture
are referred to, such defined terms are incorporated herein by reference as part
of the statement made, and the statement is qualified in its entirety by such
reference.
Certain Covenants
The applicable SPV (the "Issuer") may not liquidate or dissolve, without
the consent of the holders of at least 66 2/3 % of the Voting Rights of each
Series of Notes. The Issuer also may not consolidate or merge with or into any
other Person or convey or transfer its properties and assets substantially as an
entirety unless (i) such consolidation or merger shall have been consented to by
holders of at least 66 2/3% of the Voting Rights or each Series of Notes, (ii)
the Person (if other than the Issuer) formed in or surviving such transaction or
acquiring such assets is a Person organized under the laws of the United States
of America or any State and shall have expressly assumed, by supplemental
indenture in form satisfactory to the Indenture Trustee, the due and punctual
payment of principal of and interest on all Notes and the performance of every
applicable covenant of the Indenture to be performed by the Issuer, (iii)
immediately after giving effect to such transaction, no Default or Event of
Default shall have occurred and be continuing, (iv) the Indenture Trustee shall
have received a letter from each Rating Agency rating any outstanding Notes to
the effect that the rating issued with respect to such Notes is confirmed
notwithstanding the consummation of such transaction and (v) the Indenture
Trustee shall have received from the Issuer an Officer's Certificate and an
Opinion of Counsel, each to the effect that, among other things, such
transaction complies with the foregoing requirements. "Voting Rights" evidenced
by any Note will be the portion of the voting rights of all the Notes in the
related Series allocated in the manner described in the related Prospectus
Supplement.
The Issuer may not incur, assume, have outstanding or guarantee any
indebtedness except pursuant to the Indenture and subject to the conditions and
limitations set forth therein.
Modification of Indenture
Except as set forth below, with the consent of the holders of not less than
a majority of the Voting Rights of each Series or Class of such Series of Notes
to be affected, the Indenture Trustee and the Issuer may amend the
36
Indenture or execute a supplemental indenture to add provisions to or change or
eliminate any provisions of the Indenture relating to such Series or modify the
rights of the holders of the Notes of that Series.
Without the consent of the holder of each outstanding Note affected, except
as provided below, no such amendment or supplemental indenture may (i) change
any Distribution Date or the Final Scheduled Distribution Date of any Note or
reduce the principal amount thereof, the Note Interest Rate for any Note or the
Redemption Price with respect thereto, or change the provisions of the Indenture
relating to the application of the Trust Estate to payment of principal of or
interest on the affected Notes, or change any place of payment where, or the
coin or currency in which, any affected Note or any interest thereon is payable,
or impair the right to institute suit for the enforcement of the provisions of
the Indenture regarding payment, (ii) reduce the percentage of Voting Rights of
the Notes of the affected Series (or Class of such Series), the consent of the
holders of which is required for the authorization of any amendment or
supplemental indenture or for any waiver of compliance with certain provisions
of the Indenture or certain defaults thereunder and their consequences, (iii)
modify or alter the provisions of the Indenture defining the term "Outstanding",
(iv) permit the creation of any lien ranking prior to or on a parity with the
lien of the Indenture with respect to any part of the property subject to the
lien of the Indenture or terminate the lien of the Indenture on any property at
any time subject thereto or deprive the holder of any Note of the security
afforded by the lien of the Indenture, (v) reduce the percentage of the Voting
Rights of the Notes of any Series (or Class of such Series), the consent of the
holders of which is required to direct the Indenture Trustee to liquidate the
Deposited Assets for such Series (or Class of such Series), (vi) modify any of
the provisions of the Indenture if such modification affects the calculation of
the amount of any payment of interest or principal due and payable on any Note
on any Distribution Date or to affect the rights of the holders of Notes of any
Series (or Class of such Series) to the benefit of any provisions for the
mandatory redemption of Notes of such Series (or Class of such Series) to the
benefit of any provisions for the mandatory redemption of Notes of such Series
(or Class of such Series) contained therein, or (vii) modify the provisions of
the Indenture regarding any modifications of such Indenture requiring consent of
the holders of Notes, except to increase the percentage or number of holders
required to consent to such modification of such Indenture or to provide that
additional provisions of the Indenture cannot be modified or waived without the
consent of the holder of each Note affected thereby.
The Issuer and the Indenture Trustee may also amend the Indenture or enter
into supplemental indentures, without obtaining the consent of holders of any
Series, to cure any ambiguity or to correct or supplement any provision of the
Indenture or any supplemental indenture which may be defective or inconsistent
with any other provision, or to make or to amend any other provisions with
respect to matters or questions arising under the Indenture or any supplemental
indenture, provided that such action shall not materially adversely affect the
interests of the holders of the Notes. Such amendments may also be made and such
supplemental indenture may also be entered into without the consent of
Noteholders to set forth the terms of and security for additional Series, to
evidence the succession of another person to the Issuer, to add to the
conditions, limitations and restrictions on certain terms of any Series and to
covenants of the Issuer, to surrender any right or power conferred on the
Issuer, to convey, transfer, assign, mortgage or pledge any property to the
Indenture Trustee, to correct or amplify the description of any property subject
to the lien of the Indenture, to modify the Indenture to the extent necessary to
effect the Indenture Trustee's qualification under the Trust Indenture Act of
1939, as amended (the "TIA") or comply with the requirements of the TIA, to
provide for the issuance of Notes of any Series, to make any amendment necessary
or desirable to maintain the federal income tax status of the Issuer and to
amend the provisions of the Indenture relating to authentication and delivery of
a Series with respect to which a supplemental indenture has not theretofore been
authorized or to evidence and provide for the acceptance of appointment by a
successor trustee.
Events of Default
An "Event of Default" with respect to any Series is defined in the
Indenture as being: (i) a continuing default for five days in the payment of
interest on any Note of such Series; (ii) a continuing default for five days in
the payment of principal when due of any Note of such Series; (iii) the
impairment of the validity or effectiveness of the Indenture or any grant
thereunder, or the subordination, termination or discharge of the lien of the
Indenture with respect to such Series, or the release of any Person from any
covenants or obligations under the Indenture with respect to such Series, or the
release of any Person from any covenants or obligations under the Indenture with
respect to such Series, unless otherwise expressly permitted, or the creation of
any lien, charge, security interest,
37
mortgage or other encumbrance with respect to any part of the property subject
to the lien of the Indenture, or any interest in or proceeds of such property,
unless otherwise expressly permitted, or the failure of the lien of the
Indenture to constitute a valid first priority security interest in the property
subject to the lien of the Indenture and the continuation of any of such
defaults for a period of 30 days after notice to the Issuer by the Indenture
Trustee or to the Issuer and the Indenture Trustee by the holders of at least
25% of the Voting Rights of such Series; (iv) a default in the observance of, or
breach of, any covenant or negative covenant of the Issuer made in the
Indenture, or a material breach of any representation or warranty of the Issuer
made in the Indenture or in any certificate or other document delivered pursuant
thereto or in connection therewith as of the time when the same shall have been
made, and the continuation of any such default or breach for a period of 60 days
after notice to the Issuer by the Indenture Trustee or to the Issuer and the
Indenture Trustee by the holders of at least 25% of the Voting Rights of such
Series (unless the default or breach is with respect to certain covenants
specified in the Indenture not requiring such continuation or notice); and (v)
certain events of bankruptcy, insolvency, receivership or reorganization of the
Issuer. Notwithstanding the foregoing, if a Series includes a Class of
subordinated Notes, the Indenture for such a Series may provide that certain
defaults which relate only to such subordinated Notes will not constitute an
Event of Default with respect to the Notes, under certain circumstances, and it
may limit the rights of holders of subordinated Notes to direct the Indenture
Trustee to pursue remedies with respect to such defaults, or other Events of
Default. Such limitations, if any, will be specified in the related Prospectus
Supplement.
If an Event of Default with respect to any Series occurs and is continuing,
the Indenture Trustee may, and on the written request of the holders of at least
25% of the Voting Rights of such Series shall, declare all Notes of such Series
to be due and payable, together with accrued and unpaid interest thereon. Such
declaration may in certain circumstances be rescinded by the holders of a
majority of the Voting Rights of such Series.
The Indenture provides that the Indenture Trustee shall, within 90 days
after the occurrence of an Event of Default with respect to a Series, mail to
the holders of such Series of all uncured or unwaived defaults known to it,
provided, however, that (a) except in the case of an Event of Default in the
payment of the principal or purchase price of or interest on any Note, the
Indenture Trustee shall be protected in withholding such notice if it determines
in good faith that the withholding of such notice is in the interest of the
Noteholders of such Series, and (b) in the case of default specified in clause
(iv) of the first paragraph of this "Event of Default" subsection, the Indenture
Trustee is not required to give such notice until at least 30 days after the
occurrence of such default or breach and that, in the case of any default or
breach specified in clause (v) of the first paragraph of this "Events of
Default" subsection, the Indenture Trustee is not required to give notice until
at least 60 days after the occurrence of such default or breach.
An Event of Default with respect to one Series will not necessarily be an
Event of Default with respect to any other Series, but an Event of Default with
respect to one Class of a Series shall be an Event of Default with respect to
all Classes of such Series.
If, following an Event of Default with respect to any Series, the Notes of
such Series have been declared to be due and payable, the Indenture Trustee in
its sole discretion may, but shall not be obligated to refrain from liquidating
the related Deposited Assets if (i) the Indenture Trustee determines that the
amounts receivable with respect to such Deposited Assets will be sufficient to
pay (a) all principal of and interest on the Notes in accordance with their
terms without regard to the declaration of acceleration and (b) all sums due the
Indenture Trustee and any other administrative amounts required to be paid under
the Indenture and (ii) holders of the requisite percentage of the Notes of such
Series have not directed the Indenture Trustee to sell the related Deposited
Assets as so specified in the Indenture. In addition, the Indenture Trustee is
prohibited from selling the Trust Estate following certain Events of Default
unless (a) the amounts receivable with respect to the Deposited Assets are not
sufficient to pay in full the principal of and accrued interest on the Notes of
such Series, and to pay sums due the Indenture Trustee and other administrative
expenses specified in the Indenture and the Indenture Trustee obtains the
consent of holders of 66-2/3 % of the Voting Rights of such Series or (b) the
Indenture Trustee obtains the consent of 100% of the Voting Rights of such
Series. The proceeds of a sale of assets will be applied to the payment of
amounts due the Indenture Trustee and other administrative expenses specified in
the Indenture and then distributed pro rata among the Noteholders of such Series
(without regard to Class, provided that subordinated notes will be subordinate
to senior Notes of the Series to the extent provided in the related Prospectus
Supplement) according to the amounts due and payable on the Notes for principal
and interest at the time such proceeds are distributed by the Indenture Trustee.
38
The Indenture Trustee will not deemed to have knowledge of any Event of
Default or default described in clauses (iv) through (vi) of the first paragraph
of this "Events of Default" subsection unless an officer in the Indenture
Trustee's corporate trust department has actual knowledge thereof. Subject to
the provisions of the Indenture relating to the duties of the Indenture Trustee,
in case an Event of Default shall occur and be continuing, the Indenture Trustee
will be under no obligation to exercise any of the rights or powers under the
Indenture at the request or direction of any of the Noteholders of a Series,
unless such Noteholders shall have offered to the Indenture Trustee reasonable
security or indemnity. Subject to such provisions for indemnification and
certain limitations contained in the Indenture the holders of a majority of the
Voting Rights of a Series (or of such Classes specified in the related
Prospectus Supplement) will have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Indenture Trustee
or exercising any trust or power conferred on the Indenture Trustee with respect
to the Series. In addition, the holders of a majority of the Voting Rights of a
Series (or of such Classes specified in the related Prospectus Supplement) may,
in certain cases, waive any default with respect to such Series, except a
default in payment of principal or interest or in respect of a covenant or
provision which cannot be modified without the consent of all Noteholders
affected.
No holder of Notes of a Series will have the right to institute any
Proceeding with respect to the Indenture, unless (i) such holder previously has
given to the Indenture Trustee written notice of a continuing Event of Default
with respect to such Series and has offered the Indenture Trustee satisfactory
indemnity, (ii) the holders of not less than 25% of the Voting Rights of such
Series have made written request on the Indenture Trustee to institute such
Proceeding and have offered satisfactory indemnity, (iii) the Indenture Trustee
has, for 60 days after receipt of such notice, request and offer of indemnity,
failed to institute any such Proceeding, and (iv) no direction inconsistent with
such written request has been given to the Indenture Trustee during such 60-day
period by the holders of a majority of the Voting Rights of such Series;
provided, however, that if the Indenture Trustee receives conflicting requests
and indemnities from two or more groups of Noteholders each representing less
than a majority of the Voting Rights of such Series, the Indenture Trustee may
in its sole discretion determine what action with respect to the Proceeding, if
any, shall be taken.
Reports to Noteholders
The Indenture Trustee will prepare and forward to each Noteholder on each
Distribution Date (whether or not such Noteholder receives a payment on such
date), or as soon thereafter as is practicable, a statement setting forth, to
the extent applicable to any Series, among other things:
(i) with respect to a Series, the amount of such distribution
allocable to principal on the Deposited Assets, separately identifying the
aggregate amount of any redemptions or prepayments included therein;
(ii) with respect to a Series, the amount of such distribution
allocable to interest on the Deposited Assets; (iii) the aggregate
outstanding principal balance of the Deposited Assets as of the opening of
business on the immediately following date, after giving effect to
distributions allocated to principal reported under (i) above;
(iv) the aggregate outstanding principal amount of the Notes of such
Series as of the immediately following date, after giving effect to
distributions allocated to principal reported under (i) above and the
payment on such Distribution Date;
(v) in the case of Floating Rate Securities, the Note Interest Rate
applicable to the distribution being made;
(vi) if applicable, the amount of any shortfall (i.e., the difference
between the aggregate amounts of principal and interest which Noteholders
would have received if there were sufficient available funds to distribute
and the amounts actually distributed);
(vii) in the case of any Credit Support described in the related
Prospectus Supplement, the amount of coverage of such Credit Support as of
the close of business on the applicable Distribution Date;
39
(viii)in the case of any Series which includes subordinated Notes, the
subordinated amount, if any, determined as of the related Distribution Date
and if the distribution of the holders of senior Notes is less than their
required distribution, the amount of the shortfall;
(ix) the amount of any withdrawal from any applicable Reserve Account
included in amounts actually distributed to Noteholders and the remaining
balance of the Reserve Account, if any, on such Distribution Date, after
giving effect to distributions made on such date; and
(x) such other information as may be specified in the Indenture.
In addition, within a reasonable period of time after the end of each
calendar year, the Indenture Trustee will furnish to each Noteholder of record
at any time during such calendar year: (A) the aggregate of amounts reported
pursuant to (i) through (iii), (vi), and (xi) above for such calendar year and
(B) such information specified in the Indenture to enable Noteholders to prepare
their tax returns, including the amount of original issue discount accrued on
the Notes, if applicable. Information in the Distribution Date reports and
annual reports provided to the Noteholders will not have been examined and
reported upon by an independent public accountant.
Authentication and Delivery of Notes
The Issuer may from time to time deliver Notes executed by it to the
Indenture Trustee and order that the Indenture Trustee authenticate such Notes.
On the receipt of such Notes and such order and subject to the Issuer's
compliance with certain conditions specified in the Indenture, the Indenture
Trustee will authenticate and deliver such Notes as the Issuer may direct. The
Indenture Trustee will be authorized to appoint an Authenticating Agent for
purposes of authenticating and delivering the Series of Notes.
Satisfaction and Discharge of the Indenture
The Indenture will be discharged as to a Series (except with respect to
certain continuing rights specified in the Indenture), (i)(a) on the delivery to
the Indenture Trustee for cancellation of all of the Notes of such Series other
than Notes which have been mutilated, lost or stolen and have been replaced or
paid and Notes for which money has been deposited in trust for the full payment
thereof (and thereafter repaid to the Issuer and discharged from such trust) as
provided in the Indenture, or (b) at such time as all Notes of such Series not
previously cancelled by the Indenture Trustee have become, or, within one year
will become, due and payable or called for redemption and the Issuer shall have
deposited with the Indenture Trustee an amount sufficient to repay all of the
Notes and (ii) the Issuer shall have paid all other amounts payable under the
Indenture with respect to such Series.
Annual Compliance Statements
The Issuer will be required to file annually with the Indenture Trustee a
written statement as to fulfillment of its obligations under the Indenture.
The Indenture will provide that on or before a specified date in each year,
a firm of independent public accountants will furnish a statement to the
Indenture Trustee to the effect that such firm has examined certain documents
and records relating to the administration of the Deposited Assets during the
related 12-month period (or, in the case of the first such 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 accounting and auditing procedures considered appropriate under
the circumstances, such firm is of the opinion that such administration was
conducted in compliance with the terms of the Indenture, except for such
exceptions as such firm shall believe to be immaterial and such other exceptions
as shall be set forth in such report.
The Indenture will also provide for delivery to the Issuer, on or before a
specified date in each year, of an annual statement signed by two officers of
the Indenture Trustee to the effect that the Indenture Trustee has fulfilled its
obligations under the Indenture throughout the preceding year with respect to
any Series of Notes.
40
Copies of the annual issuer's statement, accountants' statement and the
statement of officers of the Indenture Trustee may be obtained by Noteholders
without charge upon written request to either the Indenture Trustee, at the
address set forth in the related Prospectus Supplement.
Pass Through of Voting Rights
The Indenture Trustee shall seek instructions from Noteholders of a Series
in connection with any vote, consent or waiver required in respect of any
related Deposited Asset. Except as otherwise provided in the Prospectus
Supplement, the Indenture Trustee shall direct any action or cast any vote as
the holder of such Deposited Asset in proportion to the aggregate outstanding
principal amount of Notes held by Noteholders of such Series taking the
corresponding position. The Prospectus Supplement will specify whether and under
what circumstances voting in such cases will be by Class.
List of Noteholders
Three or more holders of a Series that have each owned the Notes for at
least six months may, by written application to the Indenture Trustee, request
access to the list maintained by the Indenture Trustee of all holders of the
same Series or of all Notes, as specified in the request, for the purpose of
communicating with other Noteholders with respect to their rights under the
Indenture. The Indenture Trustee may choose not to give such Noteholders access
to the list of Noteholders if it wishes to mail the communication on behalf of
the requesting Noteholders, at their expense, to all Noteholders. If the
Indenture Trustee objects to the proposed mailing on the grounds that it would
be contrary to the best interests of the Noteholders or a violation of
applicable law, it may request permission from the Commission not to make the
proposed mailing.
Meetings of Noteholders
Meetings of Noteholders may be called at any time and from time to time to
(i) give any notice to the Issuer or to the Indenture Trustee, give directions
to the Indenture Trustee, consent to the waiver of any Default or Event of
Default under the Indenture, or to take any other action authorized to be taken
by Noteholders in connection therewith, (ii) remove the Indenture Trustee and to
appoint a successor Indenture Trustee, (iii) consent to the execution of
supplemental indentures or (iv) take any other action authorized to be taken by
or on behalf of the Noteholders of any specified percentage of the Voting Rights
of the Notes. Such meetings may be called by the Indenture Trustee, the Issuer
or by the holders of 10% in Voting Rights of any such Series.
Indenture Trustee's Annual Report
The Indenture Trustee will be required to mail each year to all Noteholders
a brief report relating to its eligibility and qualification to continue as the
Indenture Trustee under the Indenture, any amounts advanced by it under the
Indenture which remain unpaid on the date of the report, the amount, interest
rate and maturity date of certain indebtedness owing by the Issuer (or any other
obligor on such Series) to the Indenture Trustee in its individual capacity, the
property and funds physically held by the Indenture Trustee as such, any release
or releases and substitution of property subject to the lien of the Indenture
which has not been previously reported, any additional issuance of Notes not
previously reported and any action taken by it which materially affects the
Notes and which has not been previously reported.
The Indenture Trustee
The Indenture Trustee will be a bank or trust company qualified under the
TIA and named in the Prospectus Supplement related to a Series. The Issuer may
maintain other banking relationships in the ordinary course of business with the
Indenture Trustee. The Indenture Trustee's "Corporate Trust Office" will be
specified in the Prospectus Supplement, or at such other addresses as the
Indenture Trustee may designate from time to time by notice to the Noteholders
and the Issuer. With respect to the presentment and surrender of Notes for final
payment of principal in retirement thereof on any Distribution Date (or any
redemption date, special distribution date or special redemption date) and, with
respect to any other presentment and surrender of such Notes and for all other
41
purposes such Notes may be presented at the Corporate Trust Office of the
Indenture Trustee or at the office of the Issuer's paying agent, which will be
specified in the Prospectus Supplement.
DESCRIPTION OF THE TRUST AGREEMENT
General
The following summary of certain provisions of the Trust Agreement and the
Certificates does not purport to be complete and such 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 Trust Agreement are referred to, such defined terms are
incorporated herein by reference as part of the statement made, and the
statement is qualified in its entirety by such reference.
Assignment of Deposited Assets
At the time of issuance of any Series of Certificates, the Company will
cause the Term Assets 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 Company on or with respect to such 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, other than Retained Interest, if specified in the
Prospectus Supplement. The Trustee will, concurrently with such assignment,
deliver the Certificates to the Company 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 Series Supplement to the Trust Agreement. Such
schedule will include certain statistical information with respect to each of
the Term Assets and each other Deposited Asset as of the Cut-off Date, and in
the event any Term Assets represents ten percent or more of the total Term
Assets with respect to any Series of Certificates, such schedule will include,
to the extent applicable, information regarding the payment terms thereof, the
Retained Interest, if any, with respect thereto, the maturity or term thereof,
the rating, if any, thereof and certain other information with respect thereto.
In addition, the Company 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 a custodian or the Administrator (defined
below)) will review (or cause to be reviewed) such documents upon receipt
thereof or within such period as is permitted in the Prospectus Supplement, and
the Trustee (or such custodian) will hold such documents in trust for the
benefit of the Certificateholders.
With respect to certain types of Deposited Assets specified in the
applicable Prospectus Supplement only if and to the extent provided therein, if
any such document is found to be missing or defective in any material respect,
the Trustee (or such custodian or the Administrator) shall immediately notify
the Administrative Agent, if any, and the Company, and the Administrative Agent,
if any, and otherwise the Trustee shall immediately notify the relevant person
who sold the applicable Deposited Asset to the Company (a "Deposited Asset
Provider"). To the extent specified in the applicable Prospectus Supplement, if
the Deposited Asset Provider cannot cure such omission or defect within 60 days
after receipt of such notice, the Deposited Asset Provider will be obligated,
within 90 days of receipt of such notice, to repurchase the related Deposited
Asset from the Trust at the Purchase Price (as defined below) or provide a
substitute for such Deposited Asset. There can be no assurance that a Deposited
Asset Provider will fulfill this repurchase or substitution obligation. Although
the Administrative Agent, if any, or otherwise an Administrator, on behalf of
the Trustee is obligated to use its best efforts to enforce such obligation,
neither such Administrative Agent nor the Company will be obligated to
repurchase or substitute for such Deposited Asset if the Deposited Asset
Provider defaults on its obligation. Unless otherwise specified in the related
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 Company and the Administrative Agent, if any, will make certain
representations and warranties regarding its authority to enter into, and its
ability to perform its obligations under, the Trust Agreement.
42
Upon a breach of any such representation of the Company or any such
Administrative Agent, as the case may be, which materially and adversely affects
the interests of the Certificateholders, the Company or any such Administrative
Agent, respectively, will be obligated to cure the breach in all material
respects.
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 an
Administrator, will make reasonable efforts to collect all schedule payments
under the Deposited Assets and will follow or cause to be followed such
collection procedures, if any, 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, the "Credit Support Instruments") and provided
that, except as otherwise expressly set forth 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 third parties they deem
qualified to perform such obligations (each, an "Administrator"), but the
Trustee or Administrative Agent will remain obligated with respect to such
obligations under the Trust Agreement. Each Administrator will be required to
perform the customary functions of an administrator of comparable financial
assets, including, if applicable, collecting payments from obligors and
remitting such 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 Administration Agreement (as defined below).
The agreement between any Administrative Agent or Trustee and an
Administrator (an "Administration Agreement") will be consistent with the terms
of the Trust Agreement and such assignment to the 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. With respect to any
Administration Agreement between an Administrative Agent and an Administrator,
although such Administration Agreement will be a contract solely between such
Administrative Agent and the Administrator, the Trust Agreement pursuant to
which a Series of Certificates is issued will provide that, if for any reason
such Administrative Agent for such Series of Certificates is no longer acting in
such capacity, the Trustee or any successor Administrative Agent must recognize
the Administrator's rights and obligations under each Administration Agreement.
Except to the extent otherwise set forth in the Prospectus Supplement, the
Administrative Agent or Trustee, as applicable, will be solely liable for all
fees owed by it to any Administrator, 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 such fees. To the extent set forth in the Prospectus Supplement and the
related Administration Agreement, each Administrator 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 such Series. See "-- Retained Interest, Administrative
Agent Compensation and Payment of Expenses."
The Administrative Agent or Trustee, as applicable, may require any
Administrator to agree to indemnify the Administrative Agent or Trustee, as
applicable, for any liability or obligation sustained by the Administrative
Agent or Trustee, as applicable, in connection with any act or failure to act by
the Administrator.
Realization upon Defaulted Deposited Assets. Unless otherwise specified in
the applicable Prospectus Supplement, as administrator with respect to the
Deposited Assets, the Trustee (or an Administrator on its behalf) on behalf of
the Certificateholders of a given Series (or any Class or Classes within such
Series), will present claims under each applicable Credit Support Instrument,
and will take such reasonable steps as are necessary to receive payment or to
permit recovery thereunder with respect to defaulted Deposited Assets. Except as
otherwise specified in the applicable Prospectus Supplement, all collections by
or on behalf of the Trustee or Administrative Agent
43
under any Credit Support Instrument are to be deposited in the Security Account
for the related Trust, subject to withdrawal as described above.
Unless otherwise provided in the applicable Prospectus Supplement, if
recovery on a defaulted Deposited Asset under any related Credit Support
Instrument is not available, the Trustee (or an Administrator on its behalf)
will be obligated to follow or cause to be followed such normal practices and
procedures as it deems necessary or advisable to realize upon the defaulted
Deposited Asset, provided that, except as otherwise expressly provided in the
applicable Prospectus Supplement, it shall not be required to expend or risk its
own funds or 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 thereon at the applicable interest rate and (iii) the aggregate
amount of expenses incurred by the Administrative Agent and the Trustee, as
applicable, 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 provided 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
Security Account out of the net proceeds recovered on any defaulted Deposited
Asset, prior to the distribution of such 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 Asset, and, if so, the
owner thereof. If so provided, the 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 Security
Account or become a part of the related Trust. Unless otherwise provided 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 thereof, 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 Administrator, the Administrative Agent, if
any, 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 related Prospectus Supplement.
Advances in Respect of Delinquencies
Unless otherwise specified in the applicable Prospectus Supplement, the
Administrative Agent, if any, specified therein 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 provided in the applicable Prospectus Supplement, any such Administrative
Agent will advance on or before each Distribution Date its own funds or funds
held in the Security Account for such Series that are not part of the funds
available for distribution for such Distribution Date, in an amount equal to 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 and were
delinquent on the related Determination Date, subject to (i) any such
Administrative Agent's good faith determination that such advances will be
reimbursable from Related Proceeds (as defined below) and (ii) such other
conditions as may be specified in the Prospectus Supplement.
44
Advances, if any, 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 thereto, rather than to guarantee or insure
against losses. Unless otherwise provided in the related Prospectus Supplement,
advances of an Administrative Agent's funds, if any, will be reimbursable only
out of related recoveries on the Deposited Assets (and amounts received under
any form of Credit Support) for such Series with respect to which such advances
were made (as to any Deposited Assets, "Related Proceeds"); provided, however,
that any such Advance will be reimbursable from any amounts in the Security
Account for such Series to the extent that such Administrative Agent shall
determine, in its sole judgment, that such advance (a "Nonrecoverable Advance")
is not ultimately recoverable from Related Proceeds. If advances have been made
by such Administrative Agent from excess funds in the Security Account for any
Series, such Administrative Agent will replace such funds in such Security
Account on any future Distribution Date to the extent that funds in such
Security Account on such Distribution are less than payments required to be made
to Certificateholders on such date. If so specified in the related Prospectus
Supplement, the obligations, if any, of an Administrative Agent 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 set forth in the related Prospectus
Supplement.
Certain Matters Regarding the Administrative Agent and the Company
An Administrative Agent, if any, for each Series of Certificates under the
Trust Agreement will be named in the related Prospectus Supplement. The entity
serving as Administrative Agent for any such Series may be the Trustee, the
Company, an affiliate of either thereof, the Deposited Asset Provider or any
third party and may have other normal business relationships with the Trustee,
the Company, their affiliates or the Deposited Asset Provider.
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 such resignation, and the appointment of a
successor, will not result in a withdrawal or downgrading of the rating of any
Class of Certificates of such Series or upon a determination that its duties
under the Trust Agreement with respect to such Series are no longer permissible
under applicable law. No such resignation will become effective until a
successor has assumed the Administrative Agent's obligations under the Trust
Agreement with respect to such Series.
The Trust Agreement will further provide that neither such an
Administrative Agent, the Company nor any director, officer, employee, or agent
of the Administrative Agent or the Company 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
Company nor any such person will be protected against any liability that would
otherwise be imposed by reason of willful misfeasance, bad faith or negligence
in the performance of duties thereunder or by reason of reckless disregard of
obligations and duties thereunder. The Trust Agreement may further provide that,
unless otherwise provided in the applicable series supplement thereto, such an
Administrative Agent, the Company and any director, officer, employee or agent
of the Administrative Agent or the Company will be entitled to the
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 negligence in
the performance of duties thereunder or by reason of reckless disregard of
obligations and duties thereunder. In addition, the Trust Agreement will provide
that neither such an Administrative Agent nor the Company 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 involve it in any expense or liability. Each of such
Administrative Agent or the Company any, however, in its discretion undertake
any such action which it may deem necessary or desirable with respect to the
Trust Agreement and the rights and duties of the parties thereto and the
interests of the Certificateholders thereunder. The applicable Prospectus
Supplement will describe how such legal expenses and costs of such action and
any liability resulting therefrom 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.
45
Administrative Agent Termination Events; Rights Upon Administrative Agent
Termination Event
Unless otherwise provided in the related Prospectus Supplement,
"Administrative Agent Termination Events" under the Trust Agreement with respect
to any given Series of Certificates will consist of the following: (i) 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 such failure to the Administrative Agent by the
Trustee or the Company, or to the Administrative Agent, the Company and the
Trustee by the holders of such Certificates evidencing not less than 25% of the
Voting Rights (as defined below); (ii) 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 such Series which
continues unremedied for thirty days after the giving of written notice of such
failure to the Administrative Agent by the Trustee or the Company, or the
Administrative Agent, the Company and the Trustee by the holders of such
Certificates evidencing not less than 25% of the Voting Rights; and (iii)
certain 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 set forth 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 (as defined below) applicable to each such 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 Security Principal Balance or Notional Amount, as
applicable) of Certificates of a designated Class or group of Classes within
such 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 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 Company or the
Trustee may, and at the direction of holders of such Certificates evidencing not
less than the "Required Percentage -- Administrative Agent Termination" of the
Voting Rights, the Trustee will, terminate all the rights and obligations of
such 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 such Administrative Agent), whereupon the Trustee, or the
Administrator on its behalf, will succeed to all the responsibilities, duties
and liabilities of such Administrative Agent under the Trust Agreement with
respect to such 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
so to act, it may or, at the written request of the holders of such 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 with a
net worth at the time of such appointment of at least $15,000,000 to act as
successor to such Administrative Agent under the Trust Agreement with respect to
such Series. Pending such appointment, the Trustee is obligated to act in such
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 to be paid to such successor, which in no event may be greater than
the compensation payable to such Administrative Agent under the Trust Agreement
with respect to such Series.
No Certificateholder will have the right under the Trust Agreement to
institute any proceeding with respect thereto unless such holder previously has
given to the Trustee written notice of breach and unless the holders of
Certificates evidencing not less that the "Required Percentage -- Remedies" 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 trusts or powers vested in it by the Trust Agreement or
to make any investigation of matters arising thereunder or to institute, conduct
or defend any litigation thereunder or in relation thereto at the request, order
or direction of any of the holders of Certificates
46
covered by the Trust Agreement, unless such Certificateholders have offered to
the Trustee reasonable security or indemnity against the costs, expenses, and
liabilities which may be incurred therein or thereby.
Modification and Waiver
Unless otherwise specified in the applicable Prospectus Supplement, the
Trust Agreement for each Series of Certificates may be amended by the Company
and the Trustee with respect to such Series, without notice to or consent of the
Certificateholders, for certain purposes including (i) to cure any ambiguity,
(ii) to correct or supplement any provision therein which may be inconsistent
with any other provision therein or in the Prospectus Supplement, (iii) to add
or supplement any Credit Support for the benefit of any Certificateholders
(provided that if any such 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), (iv) to add to the covenants, restrictions or
obligations of the Company, the Administrative Agent, if any, or the Trustee for
the benefit of the Certificateholders, (v) to add, change or eliminate any other
provisions with respect to matters or questions arising under such Trust
Agreement so long as (x) any such 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 such
Certificates that such amendment will not cause such Rating Agency to reduce or
withdraw the then current rating thereof, or (vi) 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
Company, and the Trustee, with the consent of the holders of Certificates
evidencing not less than the "Required Percentage -- Amendment" 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 such Certificateholders; provided,
however, that in the event such modification or amendment would materially
adversely affect the rating of any Series or Class by the 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 such Series or Class.
Except as otherwise set forth in the applicable Prospectus Supplement, no
such 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 such 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" 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
Company, the Trustee or the Administrative Agent, if any, with certain
restrictive provisions, if any, of the Trust Agreement before the time for such
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 such 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 thereby.
Reports to Certificateholders; Notices
Reports to Certificateholders. Unless otherwise provided 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
provided in the related Prospectus Supplement, will forward or cause to be
forwarded to each such Certificateholder, to the Company and to such other
parties as may be specified in the Trust Agreement, a statement setting forth:
47
(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 Pass-Through Rate,
the Pass-Through Rate applicable to such Distribution Date, as calculated
in accordance with the method specified herein and in the related
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 such 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 the Prospectus Supplement provides for advances, the aggregate
amount of advances included in such 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
thereon at the close of business on such Distribution Date;
(vi) the aggregate Security Principal Balance or aggregate Notional
Amount, if applicable, of each Class of Certificates (including any Class
of Certificates not offered hereby) at the close of business on such
Distribution Date, separately identifying any reduction in such aggregate
Security Principal Balance or aggregate Notional Amount due to the
allocation of any Realized Losses or otherwise;
(vii) as to any Series (or Class within such 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 such Distribution
Date.
In the case of information furnished pursuant to subclasses (i) and (iii)
above, the amounts shall be expressed as a U.S. dollar amount (or equivalent
thereof in any other Specified Currency) per minimum denomination of
Certificates or for such other specified portion thereof. Within a reasonable
period of time after the end of each calendar year, the Administrative Agent or
the Trustee, shall furnish to each person who at any time during the calendar
year was a Certificateholder a statement containing the information set forth in
subclauses (i) and (iii) above, aggregated for such calendar year or the
applicable portion thereof during which such person was a Certificateholder.
Such obligation of the Administrative Agent or the Trustee, as applicable, shall
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 provided in the applicable Prospectus Supplement,
any notice required to be given to a holder of a Registered Security will be
mailed to the last address of such holder set forth in the applicable Security
Register. Any notice required to be given to a holder of a Bearer Security will
be published in a newspaper of general circulation in the city or cities
specified in the Prospectus Supplement relating to such Bearer Security.
Evidence as to Compliance
Unless otherwise specified in the applicable Prospectus Supplement, the
Trust Agreement will provide that on or before a specified date in each year, a
firm of independent public accountants will furnish a statement to the Trustee
to the effect that such firm has examined certain documents and records relating
to the administration of the Deposited Assets during the related 12-month period
(or, in the case of the first such 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), which report should enable the
recipients to determine whether such administration was conducted in compliance
with the terms of the Trust Agreement. Such report shall identify any exceptions
found during the examination.
48
The Trust Agreement will also provide for delivery to the Company, 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 set forth in the related Prospectus Supplement.
Replacement Certificates
Unless otherwise provided in the applicable Prospectus Supplement, if a
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 (in the case of Registered Securities) or at the principal London
office of the applicable Trustee (in the case of Bearer Securities), or such
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 in connection therewith and the furnishing of such evidence and
indemnity as such Trustee may require. Mutilated Certificates must be
surrendered before new Certificates will be issued.
Termination
Unless otherwise provided in the Prospectus Supplement, 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 Security 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
any Deposited Asset and (ii) the purchase of all the assets of the Trust by the
party entitled to effect such termination, under the circumstances and in the
manner set forth in the related Prospectus Supplement. In no event, however,
will any trust created by the Trust Agreement continue beyond the respective
date specified in the related 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 such purchase of Deposited Assets and property acquired in respect of
Deposited Assets evidenced by a Series of Certificates shall 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 such
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 therein (such price, a "Purchase Price"). The exercise of
such right will effect early retirement of the Certificates of that Series, but
the right of the person entitled to effect such termination is subject to the
aggregate principal balance of the outstanding Deposited Assets for such 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 related 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 and is not accountable for the use or application by or on
behalf of any Administrative Agent of any funds paid to such Administrative
Agent or its designee in respect of such Certificates or the Deposited Assets,
or deposited into or withdrawn from the related Security Account or any other
account by or on behalf of such Administrative Agent. The Trustee is required to
perform only those duties specifically required under the Trust Agreement with
respect to such Series. However, upon receipt of the various certificates,
reports or other instruments required to be furnished to it, the Trustee is
49
required to examine such documents and to determine whether they conform to the
applicable requirements of the Trust Agreement.
The Trustee
The Trustee for any given Series of Certificates under the Trust Agreement
will be named in the Prospectus Supplement. The commercial bank, national
banking association or trust company serving as Trustee, will be unaffiliated
with, but may have normal banking relationships with the Company, any
Administrative Agent and their respective affiliates.
LIMITATIONS ON ISSUANCE OF BEARER SECURITIES
In compliance with United States Federal income tax laws and regulations,
the Company and any underwriter, agent or dealer participating in the offering
of any Bearer Security will agree that, in connection with the original issuance
of such Bearer Security and during the period ending 40 days after the issue
date of such Bearer Security, they will not offer, sell or deliver such Bearer
Security, directly or indirectly, to a U.S. Person or to any person within the
United States, except to the extent permitted under U.S. Treasury regulations.
Bearer Securities will bear a legend to the following effect: any United
States Person who holds this obligation will be subject to limitations under the
United States income tax laws, including the limitations provided in Sections
1650(j) and 1287(a) of the Internal Revenue Code". The sections referred to in
the legend provide that, with certain exceptions, a United States taxpayer who
holds Bearer Securities will not be allowed to deduct any loss with respect to,
and will not be eligible for capital gain treatment with respect to any gain
realized on a sale, exchange, redemption or other disposition of, such Bearer
Securities.
As used herein, "United States" means the United States of America and its
possessions, and "U.S. Person" means a citizen or resident of the United States,
a corporation, partnership or other entity created or organized in or under the
laws of the United States, or an estate or trust the income of which is subject
to United States Federal income taxation regardless of its source.
Pending the availability of a definitive Global Security or individual
Bearer Securities, as the case may be, Securities that are issuable as Bearer
Securities may initially be represented by a single temporary Global Security,
without interest coupons, to be deposited with a common depositary in London for
Morgan Guaranty Trust Company of New York, Brussels Office, as operator of the
Euroclear System ("Euroclear"), and Centrale de Livraison de Valeurs Mobilieres
S.A. ("CEDEL") for credit to the accounts designated by or on behalf of the
purchases thereof. Following the availability of a definitive Global Security in
bearer form, without coupons attached, or individual Bearer Securities and
subject to any further limitations described in the applicable Prospectus
Supplement, the temporary Global Security will be exchangeable for interests in
such definitive Global Security or for such individual Bearer Securities,
respectively, only upon receipt of a "Certificate of Non-U.S. Beneficial
Ownership." A "Certificate of Non-U.S. Beneficial Ownership" is a certificate to
the effect that a beneficial interest in a temporary Global Security is owned by
a person that is not a U.S. Person or is owned by or through a financial
institution in compliance with applicable U.S. Treasury regulations. No Bearer
Security will be delivered in or to the United States. If so specified in the
applicable Prospectus Supplement, interest on a temporary Global Security will
be distributed to each of Euroclear and CEDEL with respect to that portion of
such temporary Global Security held for its account, but only upon receipt as of
the relevant Distribution Date of a Certificate of Non-U.S. Beneficial
Ownership.
CURRENCY RISKS
Exchange Rates and Exchange Controls
An investment in a Security 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. Such risks include,
without limitation, the possibility of significant changes in rates of exchange
between the U.S. dollar and such
50
Specified Currency and the possibility of the imposition or modification of
foreign exchange controls with respect to such Specified Currency. Such risks
generally depend on factors over which the Company 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 Security. Depreciation of the
Specified Currency for a Security against the U.S. dollar would result in a
decrease in the effective yield of such Security below its Note Interest Rate or
Pass-Through 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 as well as the availability
of a Specified Currency for making distributions in respect of Securities
denominated in such currency. At present, the Company has identified the
following currencies in which distributions of principal, premium and interest
on Securities may be made: Australian dollars, Canadian dollars, Danish kroner,
Italian lire, Japanese yen, New Zealand dollars, U.S. dollars and ECU. However,
Securities 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. Even if there are no actual exchange controls, it is
possible that, on a Distribution Date with respect to any particular Security,
the currency in which amounts then due to be distributed in respect of such
Security are distributable would not be available. In that event, such payments
will be made in the manner set forth above under "Description of Securities --
General" or as otherwise specified in the applicable Prospectus Supplement.
THIS PROSPECTUS DOES NOT DESCRIBE ALL THE RISKS OF AN INVESTMENT IN
SECURITIES DENOMINATED IN A CURRENCY OTHER THAN U.S. DOLLARS, AND THE COMPANY
DISCLAIMS ANY RESPONSIBILITY TO ADVISE PROSPECTIVE PURCHASERS OF SUCH RISKS AS
THEY EXIST AT THE DATE OF THIS PROSPECTUS OR AS SUCH RISKS MAY CHANGE FROM TIME
TO TIME. PROSPECTIVE PURCHASERS SHOULD CONSULT THEIR OWN FINANCIAL AND LEGAL
ADVISORS AS TO THE RISKS ENTAILED BY AN INVESTMENT IN SECURITIES DENOMINATED IN
A CURRENCY OTHER THAN U.S. DOLLARS. SUCH SECURITIES 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 Securities who are United States residents. The applicable
Prospectus Supplement for certain issuances of Securities may set forth 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, such Securities.
Any Prospectus Supplement relating to Securities having a Specified
Currency other than U.S. dollars will contain information concerning historical
exchange rates for such currency against the U.S. dollar, a description of such
currency, any exchange controls affecting such currency and any other required
information concerning such currency.
Payment Currency
Except as set forth below or unless otherwise provided in the applicable
Prospectus Supplement, if distributions in respect of a Security are required to
be made in a Specified Currency other than U.S. dollars and such currency is
unavailable due to the imposition of exchange controls or other circumstances
beyond the Company's control or is no longer used by the government of the
country issuing such currency or for the settlement of transactions by public
institutions of or within the international banking community, then all
distributions in respect of such Security shall be made in U.S. dollars until
such 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 Market Exchange Rate for such currency or as otherwise
indicated in the applicable Prospectus Supplement.
51
If distribution in respect of a Security is required to be made in ECU and
ECU is no longer used in the European Monetary System, then all distributions in
respect of such Security 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 such
determination 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 Securities 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 such
Trustee on the basis of the most recently available Market Exchange Rates for
such 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 such single currency
equal to the sum of the amounts of the consolidated component currencies
expressed in such 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 of such two or more 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 Securityholders of such
Series.
Foreign Currency Judgments
Unless otherwise specified in the applicable Prospectus Supplement, the
Securities 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 or 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.
PLAN OF DISTRIBUTION
Securities 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 set forth the terms of the offering of any
Series of Securities, which may include the names of any underwriters, or
initial purchasers, the purchase price of such Securities and the proceeds to
the Company from such sale, 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 such Securities may be listed, any restrictions on the sale
and delivery of Securities in bearer form and the place and time of delivery of
the Securities to be offered thereby.
If underwriters are used in the sale, Securities 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. Such Securities may
be offered to the public either through underwriting syndicates represented by
managing underwriters or by underwriters without a syndicate. Such managing
underwriters or underwriters in the United States will include Salomon Brothers
Inc, an affiliate of the Company. Unless otherwise set forth in the applicable
Prospectus Supplement, the obligations of the
52
underwriters to purchase such Securities will be subject to certain conditions
precedent, and the underwriters will be obligated to purchase all such
Securities if any of such Securities 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.
Securities may also be sold through agents designated by the Company from
time to time. Any agent involved in the offer or sale of Securities will be
named, and any commissions payable by the Company to such agent will be set
forth, in the applicable Prospectus Supplement. Unless otherwise indicated in
the applicable Prospectus Supplement, any such agent will act on a best efforts
basis for the period of its appointment.
If so indicated in the applicable Prospectus Supplement, the Company will
authorize agents, underwriters or dealers to solicit offers by certain specified
institutions to purchase Securities at the public offering price described in
such Prospectus Supplement pursuant to delayed delivery contracts providing for
payment and delivery on a future date specified in such Prospectus Supplement.
Such contracts will be subject only to those conditions set forth in the
applicable Prospectus Supplement and such Prospectus Supplement will set forth
the commissions payable for solicitation of such contracts.
Any underwriters, dealers or agents participating in the distribution of
Securities may be deemed to be underwriters and any discounts or commissions
received by them on the sale or resale of Securities 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 Company to
indemnification by the Company against certain civil liabilities, including
liabilities under the Securities Act, or to contribution with respect to
payments that the agents or underwriters may be required to make in respect
thereof. Agents and underwriters may be customers of, engage in transactions
with, or perform services for, the Company or its affiliates in the ordinary
course of business.
Salomon Brothers Inc. is an affiliate of the Company and is an indirect
wholly owned subsidiary of Salomon Smith Barney Holdings Inc., the indirect
parent corporation of the Company. Salomon Brothers Inc.'s participation in the
offer and sale of Securities complies with the requirements of Rule 2720 of the
National Association of Securities Dealers, Inc. regarding underwriting
securities of an affiliate.
As to each Series of Securities, only those Classes rated in one of the
investment grade rating categories by a Rating Agency will be offered hereby.
Any unrated Classes or Classes rated below investment grade may be retained by
the Company or sold at any time to one or more purchasers.
Affiliates of the Underwriters may act as agents or underwriters in
connection with the sale of the Securities. Any affiliate of the Underwriters so
acting will be named, and its affiliation with the Underwriters described, in
the related Prospectus Supplement. Also, affiliates of the Underwriters may act
as principals or agents in connection with market-making transactions relating
to the Securities. A Prospectus Supplement will be prepared with respect to the
Securities for use by such affiliates in connection with offers and sales
related to market-making transactions in the Securities.
LEGAL OPINIONS
Certain legal matters with respect to the Securities will be passed upon
for the Company and the Orrick, Herrington & Sutcliffe LLP, New York, New York
or other counsel identified in the applicable Prospectus Supplement.
53
INDEX OF TERMS
Accounts.......................................................................1
Additional Accounts............................................................7
Administration Agreement......................................................43
Administration Fee.............................................................9
Administrative Agent...........................................................1
Administrator.................................................................43
Agreement......................................................................5
Base Rate......................................................................7
Bearer Securities..............................................................1
Business Day..................................................................14
Calculation Agent.............................................................15
Calculation Date..............................................................17
CD Rate.......................................................................16
CD Rate Determination Date....................................................16
CD Rate Security..............................................................15
Cede...........................................................................3
CEDEL.........................................................................50
Certificate of Non-U.S. Beneficial Ownership..................................50
Certificates...................................................................1
Class..........................................................................1
Collection Account............................................................33
Commercial Paper Rate.........................................................17
Commercial Paper Rate Determination Date......................................17
Commercial Paper Rate Security................................................15
Commission.....................................................................2
Company........................................................................1
Components....................................................................52
Composite Quotations..........................................................15
Concentrated Term Asset.......................................................26
Corporate Trust Office........................................................41
Coupons.......................................................................12
Credit Card Receivables.......................................................25
Credit Card Securities.........................................................1
Credit Support.................................................................1
Credit Support Instruments....................................................43
Cut-off Date..................................................................25
Day of Valuation..............................................................52
Definitive Security...........................................................21
Depositary....................................................................21
Deposited Asset Provider......................................................42
Deposited Assets...............................................................1
Determination Date............................................................13
Distribution Date..............................................................2
Early Amortization Event.......................................................4
Early Amortization Period......................................................4
ECU............................................................................1
Eligible Servicer.............................................................35
Euroclear.....................................................................50
Event of Default..............................................................37
Exchange Act...................................................................2
Exchange Rate Agent...........................................................12
Exchangeable Series...........................................................20
Fannie Mae....................................................................24
54
Federal Funds Rate........................................................17, 18
Federal Funds Rate Determination Date.........................................17
Federal Funds Rate Security...................................................15
FFCB..........................................................................24
FHLB..........................................................................24
Finance Charge Receivables....................................................25
FIRREA.........................................................................5
Fixed Rate....................................................................11
Fixed Rate Securities.........................................................14
Floating Rate Securities......................................................14
Freddie Mae...................................................................24
Global Security................................................................1
GSE Issuer....................................................................24
H.15(519).....................................................................15
Indenture......................................................................1
Indenture Trustee..............................................................8
Index Maturity................................................................15
Interchange...................................................................25
Interest Reset Date...........................................................15
Interest Reset Period.........................................................15
Issuer........................................................................36
Letter of Credit..............................................................31
Letter of Credit Bank.........................................................31
LIBOR.........................................................................18
LIBOR Determination Date......................................................18
LIBOR Security................................................................15
Liquidation Proceeds..........................................................33
London Banking Day............................................................14
Market Exchange Rate..........................................................12
Maximum Rate..................................................................15
Minimum Rate..................................................................15
Money Market Yield............................................................17
Net Portfolio Yield............................................................7
Nonrecoverable Advance........................................................45
Note Interest Rate............................................................11
Notes..........................................................................1
Notional Amount...............................................................14
Offering Agent.................................................................3
Optional Exchange Date........................................................20
Original Issue Date...........................................................11
Originator.....................................................................5
Outstanding...................................................................37
Outstanding Debt Securities...................................................29
Participants..................................................................25
Pass-Through Rate.............................................................11
Principal Receivables.........................................................25
Prospectus Supplement..........................................................1
Purchase Price................................................................49
Rating Agency..................................................................7
Realized Losses...............................................................20
Receivables....................................................................1
REFCORP.......................................................................24
Registered Securities..........................................................1
Registration Statement.........................................................2
Related Proceeds..............................................................45
55
Removed Accounts..............................................................25
Required Percentage...........................................................46
Reserve Account...............................................................32
Retained Interest..............................................................9
Reuters Screen LIBO Page......................................................18
Sallie Mae....................................................................24
Schedule B....................................................................24
Secured Term Assets...........................................................29
Securities.....................................................................1
Securities Act.................................................................2
Security......................................................................11
Security Principal Balance....................................................19
Securityholders................................................................1
Seller.........................................................................5
Senior Term Assets............................................................29
Series.........................................................................1
Servicer.......................................................................1
Servicer's Fee................................................................33
Servicing Agreement...........................................................33
Specified Currency.............................................................2
Specified Interest Currency....................................................2
Specified Premium Currency.....................................................2
Specified Principal Currency...................................................2
Spread........................................................................15
Spread Multiplier.............................................................15
SPV............................................................................1
Strip Securities..............................................................12
Stripped Interest.............................................................14
Subordinated Term Assets......................................................29
Surety........................................................................31
Surety Bond...................................................................31
Term Asset Events of Default..................................................29
Term Asset Prospectus.........................................................23
Term Assets....................................................................1
Term Assets Currency..........................................................30
Term Assets Early Amortization Event...........................................4
Term Assets Early Amortization Period..........................................5
Term Assets Enhancement.......................................................27
Term Assets Indenture.........................................................28
Term Assets Interest Accrual Periods..........................................30
Term Assets Issuers...........................................................23
Term Assets Payment Dates.....................................................30
Term Assets Rate..............................................................30
Term Assets Trustee...........................................................27
TIA...........................................................................37
Treasury bills................................................................19
Treasury Rate.................................................................19
Treasury Rate Determination Date..............................................19
Treasury Rate Security........................................................15
Treasury Securities...........................................................24
Trust..........................................................................1
Trust Agreement................................................................1
Trustee........................................................................1
Trustee's Fee..................................................................9
TVA...........................................................................24
56
U.S. Person...................................................................50
United States.................................................................50
Variable Rate.................................................................11
Voting Rights.................................................................36
57
PART II
Item 14. Other Expenses of Issuance and Distribution
The following is an itemized list of the estimated expenses to be incurred
in connection with the offering of the securities being offered hereunder other
than underwriting discounts and commissions.
Registration Fee......................................... $295.00
Printing and Engraving Expenses.......................... $100,000.00
Trustee's Fees........................................... $600,000.00
Legal Fees and Expenses.................................. $800,000.00
Blue Sky Fees and Expenses............................... $20,000.00
Accountants' Fees and Expenses........................... $150,000.00
Rating Agency Fees....................................... $400,000.00
Miscellaneous............................................ $50,000.00
Total............................................... $2,120,295.00
Item 15. Indemnification of Directors and Officers
The Company's By-laws provide for indemnification of directors and officers
of the Company to the fullest 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.
Salomon Smith Barney Holdings Inc. carries directors' and officers'
liability insurance that covers certain liabilities and expenses of the
Company's directors and officers.
Item 16. Exhibits
1.1 Form of proposed Underwriting Agreement for Trust Certificates/Trust
Shares/Trust Notes to be distributed in the United States.*
3.1 Certificate of Incorporation of Structured Products Corp.*
3.2 By-laws of Structured Products Corp.*
4.1 Form of Trust Agreement, with forms of Trust Certificates/Trust
Shares/Trust Notes attached thereto.*
4.2 Form of qualified Trust Agreement.*
4.3 Form of Indenture.*
4.4 Alternate form of qualified Trust Agreement.*
5.1 Opinion of Orrick, Herrington & Sutcliffe LLP with respect to
legality.
8.1 Opinion of Orrick, Herrington & Sutcliffe LLP with respect to tax
matters.
23.1 Consents of Orrick, Herrington & Sutcliffe LLP (included in its
opinions filed as Exhibits 5.1 and 8.1).
24.1 Powers of Attorney.
25.1 Statement of eligibility of Trustee (U.S. Bank Trust National
Association).
* Incorporated by reference from the Registration Statement on Form S-3
(File No. 33-55860)
Item 17. Undertakings
The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being made of
the securities registered hereby, 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 (the "Act"), as amended; (ii) to reflect
in the prospectus any facts or events arising after the effective date of this
registration statement (or the most recent post-effective amendment hereof)
which, individually or in the aggregate, represent a fundamental change in the
information set forth in this registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the estimated maximum
offering range may be reflected in the form of Prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in the
effective registration statement; and (iii) to include any material information
with respect to the plan of distribution not previously disclosed in this
registration statement or any material change to such information in this
registration statement; provided, however, that the undertakings set forth in
clauses (i) and (ii) above do not apply if the information required to be
included in a post-effective amendment by those clauses is contained in periodic
reports filed by the registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934, as amended, that are incorporated by reference
in this registration statement.
(b) That, for the purpose of determining any liability under the Act, 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.
(c) 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.
(d) That, for purposes of determining any liability under the Act, each
filing
of the registrant's annual report pursuant to Section 13(a) or Section 15(d) of
the Securities Exchange Act of 1934, as amended, that is incorporated by
reference in this registration statement shall be deemed to be a new
registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(e) That insofar as indemnification for liabilities arising under the Act
may be permitted to directors, officers and controlling person of the registrant
pursuant to the provisions above, 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 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.
(f) That, for purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in the form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Act shall be deemed to be part of the registration statement as of the
time it was declared effective.
(g) That, for the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus 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.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-3, reasonably believes that the security
rating requirement contained in Transaction Requirement B.5. of Form S-3 will be
met by the time of the sale of the securities registered hereunder and has duly
caused this 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 this 18th day of June, 1998.
STRUCTURED PRODUCTS CORP.,
By: /s/ Matthew R. Mayers
------------------------------
Name: Matthew R. Mayers
Title: Assistant Vice President
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
June 10, 1998 By: /s/ Thomas W. Jasper*
Date --------------------------------------------------
Name: Thomas W. Jasper
Title: Director and Treasurer and Finance Officer
(Principal Financial and Accounting Officer)
June 17, 1998 By: /s/ Martin J. Gruber*
Date --------------------------------------------------
Name: Martin J. Gruber
Title: Director
June 17, 1998 By: /s/ Nathanial H. Leff
Date ---------------------------------------------------
Name: Nathanial H. Leff
Title: Director
June 10, 1998 By: /s/ Marcey Engel*
Date ---------------------------------------------------
Name: Marcey Engel
Title: Director
June 9, 1998 By: /s/ Timothy Beaulac*
Date --------------------------------------------------
Name: Timothy Beaulac
Title: President (Principal Executive Officer)
June 9, 1998 By: /s/ Matthew Mayers*
Date --------------------------------------------------
Name: Matthew R. Mayers
Title: Attorney-in-Fact
* A Power of Attorney appointing Nazareth A. Festekjian, Marwan A. Marshi,
Philip U. Tremmel, Thomas W. Jasper, Timothy Beaulac and Matthew Mayers , in
whole or individually, as attorney-in-fact has been filed on Exhibit 24.1.
EXHIBIT INDEX
Description of Exhibit
Exhibit
No.
1.1 Form of proposed Underwriting Agreement for Trust
Certificates/Trust Shares/Trust Notes to be distributed in
the United States.*
3.1 Certificate of Incorporation of Structured Products Corp.*
3.2 By-laws of Structured Products Corp.*
4.1 Form of Trust Agreement, with forms of Trust
Certificates/Trust Shares/Trust Notes attached thereto.*
4.2 Form of qualified Trust Agreement*
4.3 Form of Indenture.*
4.4 Alternate form of qualified Trust Agreement.*
5.1 Opinion of Orrick, Herrington & Sutcliffe LLP with respect to
legality.
8.1 Opinion of Orrick, Herrington & Sutcliffe LLP with respect to
tax matters.
23.1 Consents of Orrick, Herrington & Sutcliffe LLP (included in
its opinion filed as Exhibits 5.1 and 8.1).
24.1 Powers of Attorney.
25.1 Statement of eligibility of Trustee (U.S. Bank Trust National
Association).
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* Incorporated by reference from the Registration Statement on Form S-3 (File
No. 33-55860).