TRUST AGREEMENT
TRUST AGREEMENT, between MSDW Structured Asset Corp. (the "Depositor")
and LaSalle Bank National Association (the "Trustee"), made as of the date set
forth in Schedule I attached hereto, which Schedule together with Schedules II
and III attached hereto, are made a part hereof and are hereinafter referred to
collectively as the "Terms Schedule". The terms of the Standard Terms for Trust
Agreements, dated July 7, 1999 (the "Standard Terms") are, except to the extent
otherwise expressly stated, hereby incorporated by reference herein in their
entirety with the same force and effect as though set forth herein. Capitalized
terms used herein and not defined shall have the meanings defined in the
Standard Terms. References to "herein", "hereunder", "this Trust Agreement" and
the like shall include the Terms Schedule attached hereto and the Standard Terms
so incorporated by reference.
WHEREAS, the Depositor and the Trustee desire to establish the Trust
identified in Schedule I attached hereto (the "Trust") for the primary purposes
of (i) holding the Securities, (ii) entering into any Swap Agreement with the
Swap Counterparty and (iii) issuing the Units;
WHEREAS, the Depositor desires that the respective beneficial
interests in the Trust be divided into transferable fractional shares, such
shares to be represented by the Units; and
WHEREAS, the Depositor desires to appoint the Trustee as trustee of
the Trust and the Trustee desires to accept such appointment;
WHEREAS, the Depositor shall transfer, convey and assign to the Trust
without recourse, and the Trust shall acquire, all of the Depositor's right,
title and interest in and under the Securities and other property identified in
Schedule II to the Trust Agreement (the "Trust Property"); and
WHEREAS, the Trust agrees to acquire the Trust Property specified
herein in consideration for Units having an initial Unit Principal Balance
identified in Schedule I attached hereto, subject to the terms and conditions
specified in the Trust Agreement;
NOW THEREFORE, the Depositor hereby appoints the Trustee as trustee
hereunder and hereby requests the Trustee to
receive the Securities from the Depositor and to issue in accordance with the
instructions of the Depositor Units having an initial Unit Principal Balance
identified in Schedule I attached hereto, and the Trustee accepts such
appointment and, for itself and its successors and assigns, hereby declares that
it shall hold all the estate, right, title and interest in any property
contributed to the trust account established hereunder (except property to be
applied to the payment or reimbursement of or by the Trustee for any fees or
expenses which under the terms hereof is to be so applied) in trust for the
benefit of all present and future Holders of the fractional shares of beneficial
interest issued hereunder, namely, the Unitholders, and subject to the terms and
provisions hereof and of the Standard Terms.
IN WITNESS WHEREOF, each of the undersigned has executed this
instrument as of the date set forth in the Terms Schedule attached hereto.
LASALLE BANK NATIONAL ASSOCIATION
as Trustee on behalf of the Trust
identified in Schedule I hereto,
and not in its individual capacity
By: /s/ Brian D. Ames
-----------------
Name: Brian D. Ames
Title: Vice President
MSDW STRUCTURED ASSET CORP.
By: /s/ Sue Portelli
----------------
Name: Sue Portelli
Title: Attorney in fact
Attachments: Terms Schedule (consisting of Schedules I, II and III)
Schedule I
(Terms of Trust and Units)
Trust: SATURNS Trust No. 2001-3
Date of Trust Agreement: May 22, 2001
Trustee: LaSalle Bank National
Association. References to
Chase Bank of Texas, National
Association in the Standard
Terms shall be inapplicable.
Initial Unit Principal Balance: $58,402,000
Issue Price: 100%
Number of Units: 2,336,080 (Unit Principal
Balance of $25 each)
Minimum Denomination: $25 and $25 increments in
excess thereof. The minimum
denomination specified in
Section 5.01(a) of the
Standard Terms shall not
apply. Each $25 of Unit
Principal Balance is a Unit.
Cut-off Date: May 22, 2001
Closing Date: May 22, 2001
Specified Currency: United States dollars
Business Day: New York, New York and
Chicago, Illinois
Interest Rate: 7.125%
Interest Reset Period: Not Applicable
Rating: Aa3 by Moody's
AA- by S&P
Rating Agencies: Moody's and S&P
Scheduled Final Distribution Date: July 15, 2097. The Units will
have the same final maturity
as the Securities. The
Scheduled Final Distribution
Date of the Units will shorten
to match any shortening of the
maturity of the Securities.
Prepayment/Redemption: The Trust Property is subject
to redemption at any time and
is subject to call in
accordance with Schedule III.
If the rights under the Swap
Agreement is partially
exercised or if there is a
partial redemption of the
Securities, the Trustee will
randomly select Units to be
redeemed in full from the
proceeds of such partial
exercise of the Swap Agreement
or partial redemption of the
Securities.
Additional Distribution: If any of the Securities are
redeemed by the Security
Issuer prior to July 15, 2006,
each of the Units which are
redeemed in connection with
such redemption of Securities
will receive a pro rata
distribution from the proceeds
of the redemption of the
Securities remaining after
payment of principal and
interest on such Units up to a
maximum of $2.50 per Unit.
Corporate Trust Office: The definition of "Corporate
Trust Office" in the Standard
Terms shall not apply.
The Corporate Trust Office
shall be the Trustee's
Asset-Backed Securities Trust
Services Group having an
office at 135 S. LaSalle
Street, Suite 1625, Chicago,
Illinois 60603 or such other
addresses as the Trustee may
designate from time to time by
notice to the Unitholders, the
Depositor, the Swap
Counterparty and the
Guarantor.
Swap Agreement: The ISDA Agreement referred to
in Schedule III. In addition,
in connection with an
additional issuance of Units,
any additional Swap Agreement
entered into in connection
therewith.
Swap Counterparty: Party A to the Swap Agreement
referred to in Schedule III or
any assignee thereof. In
addition, in connection with
an additional issuance of
Units, Party A to any
additional Swap Agreement or
any assignee thereof.
In the event that there is
more than one Swap
Counterparty at any time when
a partial termination or a
deemed exercise is to occur
under only part of the options
outstanding under all Swap
Agreements, the Trustee shall
randomly select which options
under the Swap Agreements
shall be selected for such
partial termination or deemed
exercise.
Guaranty: Morgan Stanley Dean Witter &
Co. (the "Guarantor") shall
guarantee the obligations of
Morgan Stanley & Co.
International Limited ("MSIL")
for so long as MSIL is Party A
to any Swap Agreement with the
Trust.
Swap Notional Amount: The Notional Amount specified
in Schedule III.
Swap Payment Date: Any date upon which the rights
under the Swap Agreement may
be exercised.
Swap Rate: Not Applicable
Additional Swap Agreements: In connection with an
additional issuance of Units,
the Depositor may arrange for
the Trust to enter into an
additional Swap Agreement with
identical terms as the Swap
Agreement entered into as of
the Closing Date with an
additional Swap Counterparty,
except that such Swap
Agreement may have a different
Swap Counterparty and premium
amount than the Swap Agreement
entered into on the Closing
Date. The Rating Agency
Condition must be satisfied in
connection with respect to the
Swap Counterparty.
Distribution Date: Each January 15 and July 15,
commencing July 15, 2001.
If any payment with respect to
the Securities held by the
Trust is not received by the
Trustee by 12 noon (New York
City time) on a Distribution
Date, the corresponding
distribution on the Units will
not occur until the next
Business Day that the Trust is
in receipt of proceeds of such
payment prior to 12 noon, with
no adjustment to the amount
distributed.
Record Date: Each January 1 and July 1,
regardless of whether such
day is a Business Day.
Form: Global
Depositary: DTC
Trustee Fees and Expenses: As compensation for and in
payment of trust expenses
related to its services
hereunder other than
Extraordinary Trust Expenses,
the Trustee will receive
Trustee Fees on each
Distribution Date in the
amount equal to $3,750. The
Trustee Fee shall cease to
accrue after termination of
the Trust. The "Trigger
Amount" with respect to
Extraordinary Trust Expenses
for the Trust is $25,000 and
the Maximum Reimbursable
Amount is $100,000. The
Trustee Fee will be paid by
the Expense Administrator.
Expenses will be reimbursed by
the Expense Administrator in
accordance with the Expense
Administration Agreement.
Expense Administrator: The Depositor
will act as Expense
Administrator on behalf of the
Trust pursuant to an Expense
Administration Agreement,
dated as of May 22, 2001 (the
"Expense Administration
Agreement"), between the
Depositor as Expense
Administrator (the "Expense
Administrator") and the Trust.
The Expense Administrator will
receive a fee equal to 0.025%
per annum of the principal
amount of the Securities held
by the Trust as its fee,
payable on the basis of a 360
day year consisting of twelve
30 day months. The Expense
Administrator's fee is payable
only from available interest
receipts received with respect
to the Securities after
application of such receipts
to payment of accrued interest
on the Units and any Swap
Termination Payments currently
owing.
In addition the Expense
Administrator shall own that
portion of the Securities
which represent the interest
of a fractional Unitholder
that would remain after a
partial exercise or deemed
exercise of the Swap Agreement
had the Swap Counterparty not
been obligated to pay the
Fractional Unit Make Whole
Amount (pursuant to and as
defined in the Swap
Agreement). The Expense
Administrator shall receive
all interest and principal
with respect to such portion
of the Securities.
The Expense Administrator will
be responsible for paying the
Trustee Fee and reimbursing
certain other expenses of the
Trust in accordance with the
Expense Administration
Agreement.
Listing: The Depositor has applied to
list the Units on the New York
Stock Exchange
ERISA Restrictions: None of the
restrictions in the Standard
Terms relating to the Employee
Retirement Income Security Act
of 1974, as amended, and
related matters shall apply.
Deemed Representations: Not Applicable
QIB Restriction Not Applicable
Trust Wind-Up Event: The Trust Wind-Up Events
specified in Sections 9.01(a),
9.01(c), 9.01(d), 9.01(f) and
9.01(h) shall not apply. The
Trust Wind Events specified in
Sections 9.01(b) (Security
Default), 9.01(c) (Early
Termination Date designated
due to "illegality" or "tax
event" under the Swap
Agreement), 9.01(g)
(Disqualified Securities),
9.01(i) (Excess Expense Event)
shall apply. Pursuant to
Section 9.01(j), the following
events also shall constitute
Trust Wind-Up Events: (i)
redemption (or completion of a
self-tender) by the Security
Issuer of all Securities held
by the Trust and (ii) exercise
of the right to purchase
Securities under the Swap
Agreement as to all Securities
held by the Trust.
Termination: If a Trust Wind-Up Event
occurs (other than due to
exercise of the right to
purchase Securities under the
Swap Agreement as to all
Securities held by the Trust),
any Securities held by the
Trust will be liquidated (in
the case of a Trust Wind-Up
Event resulting from a
self-tender offer, by tender
to the Security Issuer) and
the proceeds will be applied
first to redeem the Units at
100% of their principal
balance plus accrued interest
and then to apply any
remaining amounts to the
payment of any amounts owed to
the Swap Counterparty as a
Swap Termination Payment under
the Swap Agreement.
In the event the Security
Issuer makes a self-tender
offer for the Securities, 100%
of the Unitholders may direct
the Trustee to tender all of
the Securities held by the
Trust. The Trustee will only
accept an instruction to
tender the Securities if all
of the Securities held by the
Trust are to be tendered. The
Units will receive the
proceeds after payment of a
Swap Termination Payment
determined on the basis of
"Market Quotation" under the
Swap Agreement (with the Trust
as sole Affected Party) as
advised by the Swap
Counterparty.
Terms of Retained Interest: The Depositor retains the
right to receive any and all
interest that accrues on the
Securities prior to the
Closing Date. The Depositor
will receive such accrued
interest on the first
Distribution Date for the
Units and such amount shall be
paid from the interest payment
made with respect to the
Securities on July 15, 2001.
The amount of the Retained
Interest is $1,467,958.
If a Security Default occurs
on or prior to July 15, 2001
and the Depositor does not
receive such Retained Interest
amount in connection with such
Distribution Date, the
Depositor will have a claim
for such Retained Interest,
and will share pro rata with
holders of the Units to the
extent of such claim in the
proceeds from the recovery on
the Securities.
Call Option Terms: Not applicable.
Security Default: The definition of Security
Default in the Standard Terms
shall not apply. A "Security
Default" shall mean one of the
following events: (i) the
acceleration of the
outstanding Securities under
the terms of the Securities
and/or the applicable Security
Agreement, (ii) the failure of
the Security Issuer to pay an
installment of principal of,
or any amount of interest due
on, the Securities after the
due date thereof and after the
expiration of any applicable
grace period; or (iii) the
occurrence of certain events
of default under such
Securities and/or Security
Agreement relating to the
insolvency or bankruptcy of
the Security Issuer.
Sale of Securities If the Trust must sell the
Securities it holds, the Trust
will sell the Securities
through the Selling Agent in
accordance with Section
9.03(b) and the following
terms. The Selling Agent will
solicit bids for all of the
Securities held by the Trust
from at least three registered
broker-dealers of national
reputation, one of which shall
be the Selling Agent. The
Selling Agent will, on behalf
of the Trust, sell the
Securities at the highest bid
price received. If the Selling
Agent did not put forward such
highest bid, it may purchase
the Securities at such highest
bid rather than selling the
Securities to the highest
bidder.
Votingand other Actions: In the event that the Security
Issuer solicits any vote,
consent, waiver, modification
or other action under the
Security Agreement or the
terms of the Securities, the
Trustee will act with respect
to all of the Securities in
conformity with the direction
of a majority (by outstanding
Unit Principal Balance) of the
Units.
Additional Issuance of Units: Upon no less than 5 days'
notice to the Trustee, the
Depositor may deposit
additional Securities at any
time in exchange for
additional Units in a minimum
aggregate amount of $250,000
and, if in excess of such
amount, in a $25 integral
multiple in excess thereof.
The principal amount of
Securities deposited must be
in the same ratio to the Unit
Principal Balance of the Units
received as the ratio of the
aggregate Unit Principal
Balance on the Closing Date to
the aggregate principal
balance of the Securities on
the Closing Date. The
Depositor must either arrange
for the Swap Counterparty and
the Trust to increase
proportionally the notional
amount under the Swap
Agreement or arrange for an
additional Swap Agreement to
be entered into between the
Trust and an additional Swap
Counterparty. The Rating
Agency Condition must be
satisfied in connection with
any such additional issuance.
Selling Agent: Morgan Stanley & Co.
Incorporated. Notwithstanding
any provision of the Standard
Terms to the contrary, any
sale of the Securities shall
be conducted by and through
the Selling Agent and not the
Trustee.
Rating Agency Condition: The definition of Rating
Agencies Condition in the
Standard Terms shall not
apply.
"Rating Agency Condition": With respect to any specified
action or determination, means
receipt of (i) oral or written
confirmation by Moody's (for
so long as the Units are
outstanding and rated by
Moody's) and (ii) written
confirmation by S&P (for so
long as the Units are
outstanding and rated by S&P),
that such specified action or
determination will not result
in the reduction or withdrawal
of their then-current ratings
on the Units; provided,
however, that if the Rating
Agency Condition specified
herein is to be satisfied only
with respect to Moody's or
S&P, only clause (i) or clause
(ii) shall be applicable. Such
satisfaction may relate either
to a specified transaction or
may be a confirmation with
respect to any future
transactions which comply with
generally applicable
conditions published by the
applicable rating agency.
Eligible Account: The definition of "Eligible
Account" in the Standard Terms
shall not apply.
"Eligible Account": A
non-interest bearing account,
held in the United States, in
the name of the Trustee for
the benefit of the Trust that
is either (i) a segregated
account or segregated accounts
maintained with a Federal or
State chartered depository
institution or trust company
the short-term and long-term
unsecured debt obligations of
which (or, in the case of a
depository institution or
trust company that is the
principal subsidiary of a
holding company, the
short-term and long-term
unsecured debt obligations of
such holding company) are
rated P-1 and Aa2 by Moody's,
A-1+ and AA by S&P, and, if
rated by Fitch, F1 and AA by
Fitch at the time any amounts
are held on deposit therein
including when such amounts
are initially deposited and
all times subsequent or (ii) a
segregated trust account or
segregated accounts maintained
as a segregated account or as
segregated accounts and held
by the Trustee in its
Corporate Trust Office in
trust for the benefit of the
Unitholders.
Permitted Investments: The following shall be a
Permitted Investment in
addition to the investments
specified in the Standard
Terms:
Units of the Dreyfus Cash
Management Fund Investor
Shares or any other money
market funds which are rated
in the highest applicable
rating category by each Rating
Agency (or such lower rating
if the Rating Agency Condition
is satisfied).
Non-U.S.Persons Notwithstanding anything to
the contrary herein or in the
Standard Terms, any beneficial
owner of any Units which is a
non-U.S. person shall not be
entitled to exercise any
rights of the Unitholders to
instruct or direct Trustee.
Other Terms: The Trust shall not merge or
consolidate with any other
trust, entity or person and
the Trust shall not acquire
the assets of, or an interest
in, any other trust, entity or
person except as specifically
contemplated herein.
The Trustee shall provide to
the Unitholders copies of any
notices it receives with
respect to a redemption of the
Securities or a call of the
Securities under the Swap
Agreement and any other
notices with respect to the
Securities.
The reference to "B2" in the
definition of Certificate in
the Standard Terms shall be
replaced with "Exhibit B2".
The reference to "Section
10.02(ix)" in the definition
of Available Funds in the
Standard Terms shall be
replaced with "Section
10.02(a)(ix)".
The reference to "Section
3.04" in the definition of
Unit Account in the Standard
Terms shall be replaced with
"Section 3.05".
The transfer by the Depositor
to the Trustee specified in
Section 2.01(a) of the
Standard Terms shall be in
trust.
Section 2.06 of the Standard
Terms shall be incorporated
herein by inserting "cash in
an amount equal to the premium
under the Swap Agreement and"
after the phrase "constituting
the Trust Property," therein.
The reference to "calendar
day" in the last sentence of
Section 3.06 of the Standard
Terms shall be replaced with
"Business Day".
Section 4.02(d) of the
Standard Terms shall be
incorporated herein by
striking "and the Trustee on
behalf of the Unitholders"
from the first sentence of the
second paragraph thereof.
Section 5.03(c) of the
Standard Terms shall be
incorporated herein by
striking "(if so required by
the Trustee or the Unit
Registrar)" from the first
sentence thereof.
Section 7.01(c)(i) of the
Standard Terms shall be
incorporated herein by
replacing the first word
thereof ("after") with
"alter".
Section 7.02 of the Standard
Terms shall be incorporated
herein by striking "(i) the
Trustee determines that such
amendment will not adversely
affect the interests of the
Unitholders and (ii)" from the
first sentence thereof,
inserting "on which it may
conclusively rely" after
"Opinion of Counsel" in such
sentence, and striking "clause
(ii)" from the second sentence
of such Section.
Section 9.03(a) of the
Standard Terms shall be
incorporated herein by
striking "or oral" after the
"at any time by" in the third
sentence thereof.
Clause (ix) of Section
10.02(a) shall not apply.
Section 10.02(a)(x) of the
Standard Terms shall be
replaced with the following:
(x) the Trustee shall have the
power to sell the Securities
and other Trust Property, in
accordance with Article IX and
XI, through the Selling Agent
or, if the Selling Agent shall
have resigned or declined to
sell some or all of the
Securities, any broker
selected by the Trustee (at
the direction of the
Depositor) with reasonable
care, in an amount sufficient
to pay any amount due to the
Swap Counterparty under the
Swap Agreement (including
Termination Payments) or
reimbursable to itself in
respect of unpaid
Extraordinary Trust Expenses
and to use the proceeds
thereof to make such payments
after the distribution of
funds or Trust Property to
Unitholders. Any such broker
shall be instructed by the
Trustee to sell such Trust
Property in a reasonable
manner designed to maximize
the sale proceeds.
Section 10.05(b) of the
Standard Terms shall be
incorporated herein by
replacing ", pursuant to the
first sentence of this
paragraph" with "the Trustee
shall be indemnified by the
Trust, however," in the last
sentence thereof.
Section 10.06(a) of the
Standard Terms shall be
incorporated herein by
inserting "or association"
after the word "corporation"
in the second sentence
thereof.
Section 10.07(a) of the
Standard Terms shall be
incorporated herein by
replacing "notice or
resignation" with "notice of
resignation" in the second
sentence thereof and striking
the last two sentences
thereof.
Section 10.10(b) of the
Standard Terms shall be
incorporated herein by
inserting "The Trustee shall
not be liable for the acts or
omissions of any co-trustee."
after the last sentence
thereof.
Section 10.14 of the Standard
Terms shall be replaced with
the following:
SECTION 10.14. Non-Petition .
Prior to the date that is one
year and one day after all
distributions in respect of
the Units have been made, none
of the Trustee, the Trust or
the Depositor shall take any
action or institute any
proceeding against any of the
others under the United States
Bankruptcy Code or any other
liquidation, insolvency,
bankruptcy, moratorium,
reorganization or similar law
("Insolvency Law") applicable
to any of them, now or
hereafter in effect, or which
would be reasonably likely to
cause any of the others to be
subject to, or seek the
protection of, any such
Insolvency Law.
Section 12.01(a) of the
Standard Terms shall be
incorporated herein by
replacing "(v)" with "(vi)" in
the last proviso thereof.
Section 12.01(c) of the
Standard Terms shall be
incorporated herein by
inserting ",provided at the
expense of the party
requesting such amendment,"
after "Opinion of Counsel".
Section 12.05 of the Standard
Terms shall be incorporated
herein by striking "the
Trustee and" in the last
sentence of the second
paragraph thereof.
The reference to "its
President, its Treasurer, or
one of its Vice Presidents,
Assistant Vice Presidents or
Trust Officers" in the first
sentence of Section 5.02(a) of
the Standard Terms shall be
replaced with "a Responsible
Officer".
The reference to "the proper
officers" in the second
sentence of Section 5.02(a) of
the Standard Terms shall be
replaced with "a Responsible
Officer".
The reference to "one of its
authorized signatories" in the
first sentence of Section
5.02(d) of the Standard Terms
shall be replaced with "a
Responsible Officer".
The reference to the "Trust"
in the first sentence of
Section 5.08(b) of the
Standard Terms shall be
replaced with the "Trustee".
References to D&P in the
Standard Terms shall be
incorporated as references to
Fitch Inc. ("Fitch").
Schedule II
(Terms of Trust Property)
Securities: BellSouth Capital Funding
Corporation 7.12% Debentures
due July 15, 2097
Security Issuer: BellSouth Corporation
(successor by merger to
BellSouth Capital Funding
Corporation ("BellSouth
Capital"))
Principal Amount: $58,602,000
Security Rate: 7.12%
Credit Ratings: Aa3 by Moody's
AA- by S&P
Listing: Not applicable
Security Agreement: An indenture dated as of
August 1, 1992, among
BellSouth Capital, the
Security Issuer and The Bank
of New York (as successor
under the Security Agreement
to Wachovia Bank of Georgia,
N.A.), as trustee, as
supplemented from time to time
by supplemental indentures.
Form: Global
Currency of United States dollars
Denomination:
Acquisition Price 99.654%
by Trust:
Security Payment Date: Each January 15 and July 15,
commencing January 15, 1998.
Original Issue Date: The Securities were issued
July 24, 1997.
Maturity Date: July 15, 2097. The Security
Issuer may shorten the
maturity of the Securities
upon a "tax event" as
described in the Security
Prospectus.
Sinking Fund Terms: Not Applicable
Redemption Terms: The Securities are redeemable
at any time and from time to
time subject to payment of a
make-whole amount, if
applicable.
CUSIP No.:/ISIN No. 079587 AF 5
Security Trustee: The Bank of New York
Available Information The Security Issuer is subject
Regarding the Security Issuer to the informational
(if other than U.S. requirements of the Securities
Treasury obligations): Exchange Act of 1934, as
amended, and in accordance
therewith files reports and
other information with the
Securities and Exchange
Commission (the "Commission").
Such reports and other
information 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 following Regional Offices
of the Commission: 7 World
Trade Center, 13th Floor, New
York, New York 10048 and
Northwest Atrium Center, 500
West Madison Street, Chicago,
Illinois 60661. Copies of such
materials can be obtained from
the Public Reference Section
of the Commission at 450 Fifth
Street, N.W., Washington, D.C.
20549 at prescribed rates.
Schedule III
(Call Option Confirm)
MORGAN STANLEY
- --------------------------------------------------------------------------------
Date: May 22, 2001
To: SATURNS Trust No. 2001-3 From: Morgan Stanley & Co.
International Limited
Attn: Asset-Backed Securities Group Contact: Madhu Philips
SATURNS Trust No. 2001-3
Fax: 312-904-2084 Fax: 212-761-0406
Tel: 312-904-7807 Tel: 212-761-2583
- --------------------------------------------------------------------------------
Re: Bond Option Transaction. MS Reference Number S6832
The purpose of this letter agreement is to confirm the terms and
conditions of the Transaction entered into between you and Morgan Stanley & Co.
International Limited ("MSIL"), with Morgan Stanley & Co. Incorporated
("MS&Co."), as agent, on the Trade Date specified below (the "Transaction").
This letter agreement constitutes a "Confirmation" as referred to in the
Agreement below.
The definitions and provisions contained in (i) the 1991 ISDA
Definitions and the 1997 ISDA Government Bond Option Definitions (the "Bond
Option Definitions") (each as published by the International Swaps and
Derivatives Association, Inc. ("ISDA")) and (ii) to the extent of terms not
defined herein or in the Bond Option Definitions the 1996 ISDA Equity
Derivatives Definitions (as published by ISDA) (the "Equity Definitions"), are
incorporated into this Confirmation. In the event of any inconsistency between
those definitions and this Confirmation, this Confirmation will govern.
1. This Confirmation supplements, forms a part of, and is subject
to, the ISDA Master Agreement dated as of May 22, 2001, as amended and
supplemented from time to time (the "Agreement"), between you and us. All
provisions contained in the Agreement govern this Confirmation except as
expressly modified below.
2. The terms of the particular Transaction to which this Confirmation
relates are as follows:
I. General Terms
- ----------------
Trade Date: May 15, 2001
Commencement Date: May 22, 2001
Option Style: American
Option Type: Call
Buyer: MSIL ("Party A")
Seller: SATURNS Trust No. 2001-3
("Party B")
Bonds: The obligation identified
as follows:
Bond Issuer: BellSouth
Corporation
Issue: 7.12% Debentures
due 2097
CUSIP: 079857 AF 5
Coupon: 7.12%
Maturity
Date: July 15, 2097
Face Amount
Purchased: USD 58,605,000
Premium: USD 146,512
Number of Options: 58,605
Option Entitlement: USD 1,000 of face amount of
the Bonds per Option.
Strike Price:
(i) For any Exercise Date on
or prior to July 15, 2006, the
greater of (A) 100% or (B) the
redemption price of the Bonds
including any make-whole
amount (expressed as a
percentage) subject to a
maximum of 110%, or (ii) for
any Exercise Date after July
15, 2006, 99.654%, of the face
amount of the Bonds.
Calculation Agent: Party A
II. Exercise Terms
- ------------------
Automatic Exercise: Inapplicable
Exercise Period: Any Business Day from, and
including, 9:00 a.m. (New York
time) on July 15, 2006 to, and
including, the Expiration Time
on the Expiration Date;
provided, however, the
Exercise Period shall also
include any Business Day prior
to July 15, 2006 (i) if a
Security Default has occurred
and is continuing or (ii) with
respect to any such Bonds as
to which notice of redemption
has been delivered by the
Issuer (including if
necessary, additional Bonds to
allow for the exercise of
whole Options).
Exercise Date: For each Option exercised or
deemed exercised, the day
during the Exercise Period on
which that Option is or is
deemed to be exercised,
subject to the Deemed Exercise
and Alternative Settlement
provision set forth below.
Multiple Exercise: Applicable
Minimum Number of Options: 1
Maximum Number of Options: 58,605
Integral Multiple: 1
Written Confirmation of Exercise: Applicable. Buyer shall give
irrevocable exercise notice
which may be given orally
(including by telephone)
during the Exercise Period but
no later than the Notification
Date. Buyer will execute and
deliver a written exercise
notice confirming the
substance of such oral notice,
however, failure to provide
such written notice will not
affect the validity of the
oral notice.
Notification Date: Any date at least 35 calendar
days but not more than 60
calendar days prior to the
Exercise Date, provided that
any date (i) which is 30
calendar days after the Bond
Issuer provides notice of
redemption or (ii) when a
Security Default has occurred
and is continuing is also a
Notification Date.
Limited Right to Confirm Exercise: Inapplicable
Expiration Date: July 15, 2094
Expiration Time: 4:00 p.m. New York time
Business Days: New York and Chicago
III. Settlements:
- -----------------
Settlement: Physical Settlement (subject
to the Deemed Exercise and
Alternative Settlement
provision below). Party A will
notify Party B separately
regarding the clearance system
details.
Bond Payment: An amount equal to the sum of:
(i) The product of the Strike
Price and the Exercised Call
Notional Amount,
(ii) The accrued interest, if
applicable, and
(iii) Any Fractional Unit Make
Whole Amount.
In addition, in connection
with any partial exercise,
Party A shall pay to the
Expense Administrator an
amount equal to the present
value of the Trustee Fee
that will accrue from the
date of such exercise until
the Scheduled Final
Distribution Date (as
defined in the Trust
Agreement), assuming for
this purpose that the Trust
(as defined in the Trust
Agreement) is not
terminated prior to the
Scheduled Final
Distribution Date,
multiplied by the Exercised
Call Notional Amount and
divided by $58,605,000.
Exercised Call Notional Amount: The product of the Option
Entitlement and the number of
Options exercised on the
relevant Exercise Date.
Settlement Date: Exercise Date
Deposit of Bond Payment: Except in
the event of a deemed
exercise, Party A must
deposit the Bond Payment
with the Trustee on the
Business Day prior to the
Exercise Date. The Bonds
are to be delivered "free"
to Party A.
Deemed Exercise and Alternative Settlement: In the event that any of the
Bonds held by Party B are
redeemed by the Bond Issuer
and paid in full in accordance
with their terms, an
equivalent number of Options
with respect to any remaining
Bonds held by Party B shall be
deemed to have been exercised
(and the requirements of
notice of exercise and written
confirmation of exercise
deemed satisfied), in the same
proportion as the portion of
the Bonds held by Party B that
are redeemed. The effective
date of deemed exercise shall
be 35 calendar days prior to
the date on which Party B
receives the cash proceeds
delivered in connection with
the redemption. As a result of
such deemed exercise, (i)
Party B shall pay to Party A,
against the payment by Party A
set forth in clause (ii), the
cash proceeds delivered in
connection with such
redemption (including any cash
paid or delivered in respect
of accrued interest on the
Bonds) and (ii) Party A shall
pay to Party B, against the
payment and/or delivery set
forth in clause (i), the Bond
Payment.
3. Additional Definitions:
----------------------
"Expense Administration Agreement" means the expense administration agreement
dated as of May 22, 2001 between Party B and the Expense Administrator.
"Expense Administrator" means MSDW Structured Asset Corp. acting pursuant to the
Expense Administration Agreement.
"Fractional Unit Make Whole Amount" means the amount specified in paragraph 9.
"Security Default" has the meaning set forth in the Trust Agreement.
"Security Agreement" means the indenture dated as of August 1, 1992, among
BellSouth Capital Funding Corporation, the Bond Issuer and The Bank of New York,
as successor trustee, as supplemented from time to time by supplemental
indentures, all as relating to the Bonds.
"Trust Agreement" means the trust agreement dated as of May 22, 2001, between
the MSDW Structured Asset Corp. and LaSalle Bank
National Association.
4. Representations:
---------------
Morgan Stanley & Co. Incorporated is acting as agent for both parties
but does not guarantee the performance of Party A.
5. Additional Termination Event:
----------------------------
As set forth in the Agreement, a Trust Wind-Up Event will result in
an Additional Termination Event under the Agreement with respect to which Party
B shall be the Affected Party and this Transaction shall be an Affected
Transaction.
6. Swap Termination Payments. In the event an Early Termination Date
is designated with respect to which this Transaction is an Affected Transaction
(other than as a result of a self-tender), there shall be payable to Party A as
a termination payment in lieu of the termination payment determined in
accordance with Section 6(e) of the Agreement an amount equal to the excess (if
any) of the sale proceeds in excess of the principal of and interest on the
Units. If an early termination occurs due to a tender of the Bonds to the Bond
Issuer, the Swap Termination Payment shall be determined under Section 6(e)
determined on the basis of "Market Quotation" under the Swap Agreement (with
Party B as sole Affected Party). If an early termination occurs due to a tender
of the Bonds to the Bond Issuer, the Swap Termination Payment shall be paid
prior to any payment on the Units.
7. Assignment. The rights under this Confirmation and the Agreement
may be assigned at any time and from time to time in whole or in part; provided
that any such assignment shall be an assignment of whole Options and provided
further that Rating Agency Condition is satisfied (as provided in the Trust
Agreement).
8. Account Details:
---------------
Payments to Party A: Citibank, New York
ABA No. 021 000 089
For: Morgan Stanley & Co.
International Limited
Account No. 4072 4601
Operations Contact: Barbara Kent
Tel: 212-761-4662
Fax: 212-761-0581
Payments to Party B: LaSalle Bank, Chicago,
Illinois
ABA No. 071 000 505
Reference: SATURNS 2001-3
Unit Account / AC-2090067/
Account No.: 67-8785-70-0
Operations Contact: Brian Ames
Tel: 312-904-7807
Fax: 312-904-2084
9. Fractional Unit Make-Whole Amount: In the event any exercise or
deemed exercise hereunder would result in a fractional Unit (as defined in the
Trust Agreement) remaining after such exercise, Party A shall, in addition to
amounts payable hereunder, pay to Party B the remaining fractional Unit
Principal Balance (as defined in the Trust Agreement) together with accrued
interest on such Unit and, if applicable, any Additional Distribution (as
defined in the Trust Agreement). Party A shall be entitled to reimbursement from
the Expense Administrator to the extent provided in the Expense Administration
Agreement.
10. Representations: Morgan Stanley & Co. Incorporated is acting as
agent for both parties but does not guarantee the performance of Party A. Party
B represents and warrants to Party A, which representation and warranty will be
deemed to be repeated by Party B on each date on which a Transaction is entered
into, that it owns or controls (or, in the case of an investment advisor
(whether or not registered under the United States Investment Advisors Act of
1940), has under management) in excess of USD 58 million in Aggregate Financial
Assets (as defined below).
For purposes hereof, Aggregate Financial Assets of an entity means the total, on
a gross basis, without deduction for liabilities of the entity, of all cash,
money-market instruments, securities of unaffiliated issuers, futures and
options.
Please confirm that the foregoing correctly sets forth the terms of our
agreement MS Reference Number S6832 by executing this Confirmation and returning
it to us.
Best Regards,
MORGAN STANLEY & CO. INTERNATIONAL LIMITED
BY: /s/ Sue Portelli
----------------
Name: Sue Portelli
Title: Attorney in fact
Acknowledged and agreed as of the date first written above:
SATURNS TRUST NO. 2001-3
BY: LaSalle Bank National Association,
solely as Trustee and not in its individual capacity.
BY: /s/ Brian D. Ames
-----------------
Name: Brian D. Ames
Title: Vice-President
MORGAN STANLEY & CO. INCORPORATED hereby agrees to and
acknowledges its role as agent for both parties in accordance with
the Schedule to the Agreement.
BY: /s/ Sue Portelli
----------------
Name: Sue Portelli
Title: Attorney in fact