Registration No. 33-
As filed with the Securities and Exchange Commission on _________, 1998
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
Form S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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STRUCTURED ASSET TRUST UNIT REPACKAGINGS
MSDW STRUCTURED ASSET CORP.
(Exact name of registrant as specified in governing instruments)
Delaware *
(State or other jurisdiction (I.R.S. employer identification number)
of incorporation or organization)
1585 Broadway
New York, NY 10036
(212) 761-1715
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
---------
Michael Harpe
MSDW Structured Asset Corp.
1585 Broadway
New York, NY 10036
(212) 761-2520
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
---------
Copies to:
Mitchell S. Dupler, Esq.
Cleary, Gottlieb, Steen & Hamilton
2000 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
Approximate date of commencement of proposed sale to the public:
From time to time after this Registration Statement becomes
effective in light of 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 pursuant to 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, check
the following box and list the Securities Act registration
statement number of the earlier effective registration for the
same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box. [ ]
*Applied for and to be filed by amendment
------------------
CALCULATION OF REGISTRATION FEE
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Proposed Proposed
Title of maximum maximum
securities Amount offering aggregate Amount of
being being price offering registration
registered registered per unit(1) price(1) fee
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Trust Units $500,000,000 100% $500,000,000 $147,500.00
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(1) Estimated solely for purposes of calculating the registration
fee on the basis of the proposed maximum aggregate offering price.
-------------------------
The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
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+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR +
+ AMENDMENT. A REGISTRATION STATEMENT RELATING TO THE +
+ SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE +
+ COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS +
+ TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION +
+ STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SUPPLEMENT AND +
+ THE PROSPECTUS TO WHICH IT RELATES SHALL NOT CONSTITUTE AN +
+ OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR +
+ SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN +
+ WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL +
+ PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES +
+ LAWS OF ANY SUCH STATE. +
+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS SUPPLEMENT
(To Prospectus dated ___________, 1998)
Structured Asset Trust Unit Repackagings (SATURNS SM)
Series 1998-__
[$] [Principal or Notional Amount] [(Approximate)],
Class __ Units
[ %] [Variable] Pass Through Rate
[$] [Principal or Notional Amount] [(Approximate)],
Class __ Units
[ %] [Variable] Pass Through Rate
MSDW Structured Asset Corp.
Depositor
The Structured Asset Trust Unit Repackagings (the "Units")
offered hereby will consist of __ classes of Units (each a
"Class"), denominated in [dollars] [____ the "Specified
Currency"]. The Units will represent in the aggregate the entire
beneficial ownership interest in the debt securities or loans
described in this Supplement (the "Debt Securities") to be
deposited in a trust (the "Trust") formed pursuant to a trust
agreement (the "Trust Agreement") to be entered into between MSDW
Structured Asset Corp., as depositor (the "Depositor"), and
[Chase Bank of Texas, National Association] (the "Trustee"). The
Debt Securities will be acquired by the Depositor and, pursuant
to the Trust Agreement, deposited into the Trust for the benefit
of Unitholders. [The Debt Securities were issued and sold as part
of an underwritten public offering in [ ].] The Debt Securities
are obligations of [describe] (the "Debt Security Issuer") and
[explain whether senior or subordinate, whether secured or
unsecured and whether subject to any redemption or put rights].
[Describe any required principal payments of Debt Securities.]
Terms used but not otherwise defined in this Prospectus
Supplement are defined in the attached Prospectus.
Distributions on the Units will be made [monthly] [quarterly]
[semi-annually] on [[ ] of each year]-[to be conformed to
interest payment dates for Debt Securities], or, if any such date
is not a business day, then on the immediately following business
day (each, a "Distribution Date") commencing [ ]. The last day on
which distributions are scheduled to be made on the Units is [ ]
(the "Scheduled Final Distribution Date"), by which date the
holders of the Units will receive a distribution of all amounts
allocable to principal on such Units or, to the extent specified
herein, a pro rata share of any remaining Debt Securities.
[The Trust will enter into one or more derivative transactions
(each a "Transaction") under a swap agreement ("Swap Agreement")
with [ ] (the "Swap Counterparty"). Subject to the Swap
Counterparty's performance of its obligations, the Swap Agreement
will effectively alter the interest rate or currency applicable
to the Debt Securities during the term of the related
Transaction, give the Trust rights or liabilities under an option
agreement relating to a designated portion of the Trust Property,
or create other rights or liabilities of the Trust in respect of
derivative agreements. See "Description of Swap Agreements"
herein and in the Prospectus.]
[Application will be made to list the Units on the
New York Stock Exchange.]
There will be no market for any Series of Units 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
Unitholders with liquidity of investment or will continue for the
life of the Units.
The Units represent interests in the Trust only and do not
represent obligations of or interests in the Depositor, Morgan
Stanley & Co. Incorporated ("Morgan Stanley") or any of their
respective affiliates. The Units do not represent a direct
obligation of the Debt Security Issuer or any of its affiliates.
At the time of issue, the [Class __] Units will be
rated [ ] by [ ] (each a "Rating Agency").
--------------
SEE "RISK FACTORS" HEREIN ON PAGES [__] TO [__] AND IN THE
PROSPECTUS ON PAGES __ to __.
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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 Underwriter has agreed to purchase the Units from the
Depositor at [ ]% of the Unit Principal Balance thereof ($[ ]
aggregate proceeds to the Depositor, before deducting expenses
estimated at $[ ]) plus accrued interest, if any, at the
Pass-Through Rate calculated from [ ], 1998 (the "Closing Date"),
subject to the terms and conditions set forth in the Underwriting
Agreement referred to herein under "Plan of Distribution."
The Underwriter proposes to offer the Units 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 "Plan of Distribution." The Units 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] Units will be made in book-entry
form through [specify depositary] on or about the Closing Date.]
As and to the extent described herein, collections received by
the Trustee with respect to the Trust Property will be
distributed to Unitholders [of each Class] in the manner and
priority described herein. [The rights of the holders of the
Class Units [and specify other Classes] to receive distributions
of such collections are subordinated to the rights of the holders
of the Class Units [and specify other Classes].] As and to the
extent described herein, losses realized on the Trust Property
will be borne by the holders of the Class Units [and specify
other Classes] before such losses will be borne by the holders of
the other Classes of the Units [and the Class Units [and specify
other Classes]]. To the extent described herein, the relative
priorities of each Class of Units with respect to collections
from and losses on the Trust Property may each change over time,
either permanently or temporarily, upon the occurrence of certain
circumstances specified herein. See "Description of
the Units-Allocation of Losses; Subordination."
The Debt Security Issuer is not participating in, and will not
receive any proceeds in connection with, this offering.
SM SATURNS is being registered as a service mark of Morgan
Stanley Dean Witter & Co
[The [specify applicable Classes] Units initially will be
represented by certificates registered in the name of CEDE & Co.,
as nominee of The Depository Trust Company ("DTC"). The interests
of beneficial owners of such Units will be represented by book
entries on the records of participating members of DTC.]
[The [specify applicable Classes] Units initially will be
represented by a Temporary Global Security, issued outside the
United States and exchangeable for a Permanent Global Bearer Unit
or definitive Bearer Units after 40 days upon certification of
non-U.S. beneficial ownership, in accordance with the provisions
set forth in the Prospectus under "Limitations on Issuance of
Bearer Units". Bearer Units are subject to U.S. tax law
requirements and may not be offered, sold or delivered within the
United States or its possessions or to U.S. persons, except in
certain transactions permitted by U.S. tax regulations].
THE UNITS OFFERED BY THIS PROSPECTUS SUPPLEMENT WILL CONSTITUTE A
SEPARATE SERIES OF UNITS BEING OFFERED BY THE DEPOSITOR PURSUANT
TO ITS PROSPECTUS DATED [__________], 1998, 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 CAREFULLY THE FACTORS SET FORTH UNDER
"RISK FACTORS" IN THE PROSPECTUS AND IN THIS PROSPECTUS
SUPPLEMENT.
UNTIL ,1998, ALL DEALERS EFFECTING TRANSACTIONS IN THE UNITS,
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 BE ADDITION TO
THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS SUPPLEMENT AND
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND BE
WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
--------------
MORGAN STANLEY DEAN WITTER
September __, 1998
S-2
TABLE OF CONTENTS
Page
SUMMARY OF PRINCIPAL TERMS.....................................3
RISK FACTORS...................................................7
FORMATION OF THE TRUST.........................................7
YIELD ON THE UNITS.............................................7
DESCRIPTION OF TRUST PROPERTY..................................8
[DESCRIPTION OF SWAP AGREEMENT]...............................17
DESCRIPTION OF UNITS..........................................18
DESCRIPTION OF TRUST AGREEMENT................................20
CERTAIN FEDERAL INCOME TAX CONSEQUENCES.......................21
ERISA CONSIDERATIONS..........................................21
[BEARER UNITS]................................................23
PLAN OF DISTRIBUTION..........................................23
RATINGS.......................................................24
LEGAL OPINIONS................................................25
S-2
SUMMARY OF PRINCIPAL TERMS
The Terms Schedule to the Trust Agreement sets forth the
following principal terms with respect to the Trust, the Units,
the Debt Securities[, and the Swap Agreement:]
1. Terms of Trust and Units:
Trust: Structured Asset Trust Unit
Repackagings Series 199_-_
Date of Trust Agreement:
Trustee:
Initial Unit Principal
Balance:
Issue Price:
Cut-off Date:
Closing Date:
Specified Currency:
Business Day:
Pass Through Rate: [Swap Rate]
Interest Reset Period: [Each Swap Rate Accrual
Period]
Rating:
Rating Agencies:
Scheduled Final
Distribution Date:
[Swap Agreement:] [The ISDA Agreement referred
to in Schedule III]
[Swap Counterparty:] [Party A to the Swap Agreement
referred to in Schedule III]
[Guarantee:]
S-3
[Swap Notional Amount:] [The Notional Amount specified
in Schedule III]
[Swap Payment Date:] [Each Payment Date specified
in Schedule III for Party A]
[Swap Rate:] [The [Fixed][Floating]
Rate specified in Schedule
III for the applicable
Calculation Period under the
Swap Agreement, plus or minus
the Spread specified in
Schedule III].
Distribution Date:
Record Date:
Form: [Global/Definitive]
[Registered/Bearer]
Depositary:
Alternative ERISA
Restrictions [Apply][Do Not Apply]
Deemed Representations: [Apply][Do Not Apply]
Additional Trust
Wind-Up Event:
Exchangeable Series
Terms:
Terms of Retained
Interest:
Call Option Terms:
Other Terms:
2. Terms of Trust Property
Concentrated Debt Securities:
[repeat for each]
Debt Securities:
Debt Security Issuer:
S-4
Principal Amount:
Debt Security Rate:
Credit Ratings:
Listing:
Debt Security Agreement:
Events of Default:
Form:
Currency of
Denomination:
Acquisition Price Units having an initial Unit
by Trust: Principal Balance of [$______].
Debt Security Payment
Date:
Original Issue Date:
Maturity Date:
Sinking Fund Terms:
Redemption Terms:
CUSIP No.:/ISIN No.
Debt Security Trustee:
Cut-Off Date:
Credit Support:
Other Trust Property:
[3. Terms of Swap Transaction[s] [repeat separately for each]
Trade Date: [ ], 1998
Effective Date: [ ], 1998
Termination Date:
Fixed Amounts:
Fixed Rate Payer
Notional/Currency Amount:
Fixed Rate Payer:
Fixed Rate Payer
Payment Date:
Fixed Rate:
Floating Amounts:
Floating Rate Payer
Notional/Currency Amount:
Floating Rate Payer:
Floating Rate:
Floating Rate Payer
Payment Dates:
Floating Rate Option:
Designated Maturity:
Floating Rate Day Count
Fraction:
Reset Dates:
No Adjustment of Period
End Dates:
Rate Cut-off Dates:
Method of Averaging:
Compounding:
Calculation Agent: Party A
Business Days:]
S-6
RISK FACTORS
[Describe risk factors applicable to the specific Debt
Securities[, Swap Agreement] or other Trust Property and the
particular structure of the Units being offered, including
factors relating to the yield on the Units and risks associated
with the Trust Property and the terms thereof, as described
elsewhere herein.] See "Risk Factors" and "Maturity and Yield
Considerations" in the Prospectus.
FORMATION OF THE TRUST
The Trust will be formed pursuant to the Trust Agreement
between the Depositor and the Trustee, which incorporates the
provisions of the Standard Terms of Trust Agreements between the
Depositor and the Trustee dated __________, 1998. Concurrently
with the execution and delivery of the Trust Agreement, the
Depositor will deposit the Debt Securities in the Trust. The
Trustee, on behalf of the Trust, will accept such Debt
Securities[, enter into the Swap Agreement] and deliver the Units
to or upon the order of the Depositor.
The Debt Securities [will be] [have been] purchased by
the Depositor in the secondary market (either directly or through
an affiliate of the Depositor). The Debt Securities will not be
acquired from the Debt Securities Issuer as part of any
distribution by or pursuant to any agreement with the Debt
Security Issuer. The Debt Security Issuer is not participating in
this offering and will not receive any of the proceeds of the
sale of the Debt Securities to the Depositor or the issuance of
the Units. [Neither the Depositor nor any of its affiliates
participated in the initial public offering of the Debt
Securities] [Morgan Stanley, an affiliate of the Depositor,
participated in the initial public offering of the Debt
Securities as a [co-underwriter] [underwriter]].
YIELD ON THE UNITS
[Describe factors relating to the Trust Property, the terms
thereof and the manner and priority in which collections thereon
are allocated to the Unitholders of each Class of the Units, as
described elsewhere herein.] See "Maturity and Yield
Considerations" in the Prospectus.
S-7
DESCRIPTION OF TRUST PROPERTY
This Prospectus Supplement sets forth certain relevant
terms with respect to the Debt Securities, but does not provide
detailed information with respect to the Debt Securities. This
Prospectus Supplement relates only to the Units offered hereby
and does not relate to the Trust Property.
All information set forth in this Prospectus Supplement
with respect to each of the Debt Securities is derived solely
from the related Debt Security Prospectus, or other publicly
available information. [Describe publicly available documents.]
[Prospective purchasers of Units are urged to read this
Prospectus Supplement in conjunction with each Debt Security
Prospectus and each Debt Security Registration Statement. None of
the Depositor, Morgan Stanley or the Trustee nor any of their
respective affiliates has participated in the preparation of any
Debt Security Prospectus or Debt Security Registration Statement
or other public information relating to the Debt Securities, and
takes no responsibility for the accuracy or completeness of the
information provided therein.]
This Prospectus Supplement does not provide information
with respect to the Debt Security Issuer(s), and no investigation
of the financial condition or creditworthiness of any of the Debt
Security Issuer(s) or any of its subsidiaries or other
affiliates, [or of the ratings on the Debt Securities], has been
made by the Depositor, Morgan Stanley or the Trustee in
connection with the issuance of the related Units. Prospective
purchasers of Units should consider carefully each Debt Security
Issuer's financial condition and its ability to make payments in
respect of the related Debt Securities. All information contained
in this Prospectus Supplement regarding each Debt Security Issuer
has been derived from the related Debt Security Prospectus,
reports filed by the Debt Security Issuer pursuant to the
Exchange Act, or other publicly available information. There can
be no assurance that events affecting the Debt Securities or the
Debt Security 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.
Concentrated Debt Securities
[Use the following where Units are backed principally by
Treasury/FNMA/FHLMC securities]:
[The Debt Securities include] [Each Debt Security will
represent] [(i) an obligation issued or guaranteed by the United
States of America or any agency thereof or the payment of which
is guaranteed by the full faith and credit of the United States
of America ("Treasury Securities"), (ii) obligations of the
Federal National Mortgage Association ("Fannie Mae") or (iii)
obligations of the Federal Home Loan Mortgage Association
("Freddie Mac")] .
S-8
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 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.
S-9
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.]
[Add the following where the Concentrated Debt Security is issued
by a foreign sovereign agency or instrumentality]
[The Trust Property includes Concentrated Debt Securities which
consist of obligations of, or guaranteed by, foreign governments,
foreign political subdivisions, or agencies and instrumentalities
thereof (each such issuer and guarantor, if any, sometimes
referred to herein as a "Foreign Government Issuer" and a
"Foreign Government Guarantor," respectively; and collectively
referred to as "Foreign Governments"). In the absence of a waiver
of immunity by a Foreign Government, it would not be possible to
obtain a United States judgment against such Foreign Government
unless a court were to determine that such issuer is not entitled
under the Foreign Sovereign Immunities Act of 1976 (the
"Immunities Act") to sovereign immunity with respect to such
action. Even if such an issuer is amenable to suit in the United
States, the enforceability of any judgment obtained may be
limited by a lack of substantial assets which can be levied upon
in the United States or the inability to obtain recognition and
enforcement of the judgment in the issuer's country. Because the
Debt Securities represent direct or indirect obligations of
foreign governments, Unitholders should consider the political,
economic and other risks attendant on holding the obligations of
a foreign government which are not typically associated with an
investment in securities of a domestic issuer. Such risks include
future political and economic developments, governmental
repudiation, moratorium on payment or rescheduling of external
debts, confiscatory taxation, imposition of any withholding tax,
exchange rate fluctuations, political or social instability or
diplomatic developments and the imposition of additional
governmental laws or restrictions. While a Foreign Government
Issuer may make certain information available by filing periodic
reports and other information with the Commission, such
information (including financial information) may differ in
timing, form and substance from that normally available with
respect to domestic issuers.]
[The Debt Securities of ___________ have been issued
pursuant to a fiscal agency agreement with provision for a Fiscal
Agent, rather than a Trustee. A Fiscal Agent does not have the
same responsibilities or duties to act on behalf of the holders
of a Foreign Government's debt securities as would a trustee. The
due and punctual payment of each Debt Security and the due and
timely performance of all obligations with respect thereto [are
backed
S-10
by the full faith and credit of the sovereign entity] [or]
[unconditionally guaranteed by the sovereign entity].]
[Use the following with respect to each obligor of a Concentrated
Debt Security --only a single obligor is referred to for purposes
of this section of the form of Prospectus Supplement.]
[A significant portion of] [Virtually all of] [All of] the
Trust Property of the Trust will consist of the [___%] [floating
rate] [specify publicly issued debt security] due of [specify
issuer][, exclusive of the interest therein retained by [the
Depositor] as described below (the "Retained Interest")], having
an aggregate principal amount outstanding as of the Cut-off Date
of approximately [$][specify currency] (the "Debt Securities").
The Debt 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 Debt
Securities will not be acquired either from [name such obligor]
or pursuant to any distribution by or agreement with [name such
obligor]. [Describe any put, call or other conversion or
redemption options applicable to the Debt Securities, as well as
the nature of the obligation represented by such Debt Securities
(i.e., senior, subordinate, secured)]. As of the Cut-off Date,
the foregoing debt security comprising [ %] of the Debt
Securities was rated [specify investment grade rating]
[investment grade] by [specify nationally recognized rating
agency or agencies], and the obligor thereon was not in default
in the payment of any installments of principal, interest or
premium (if any) with respect thereto. Any such rating of such
Debt Securities is not a recommendation to purchase, hold or sell
such Debt Securities or the Units, 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 regarding certain considerations applicable
to the ratings of the Units.
According to [name such obligor]'s publicly available
documents, [name such obligor] is a [identify form of entity,
banking organization, insurance company, or describe foreign
sovereign or agency or instrumentality] whose principal executive
offices are located at [specify address]. The Depositor is not an
affiliate of [name such obligor]. [Name such obligor] is subject
to the informational requirements of the Exchange Act and in
accordance therewith files reports and other information
(including financial information) with the Commission [and makes
available to the public upon request certain annual reports
containing financial and other information]. Copies of such
reports and other information [may be inspected and copied at the
Commission locations listed under "Available Information" in the
accompanying Prospectus and may be obtained from the Public
Reference Section of the Commission at Washington, D.C. 20549, at
prescribed rates. In addition, such reports and other information
[can be inspected at the offices of the [New York Stock Exchange
at 20 Broad Street, New York, New York 10005] [may be obtained
from [name such obligor], according to its most recent annual
report, upon written or oral request to [name such obligor]].
[Describe material covenants and events of default under Debt
Security Agreement relating to each Concentrated Debt Security]
S-11
[Use the following where the Debt Securities consist of a pool of
obligations of multiple obligors.]
[Debt Securities Pool
[The Debt Securities consist of debt securities of [specify
all types of issuers --domestic, foreign, corporate, government].
The Debt Securities [will be] [have been] 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 Debt Securities will not be acquired either from the
respective obligors on the Debt Securities or pursuant to any
distribution by or agreement with such obligors.
The composition of the Debt Securities pool and the
distribution by ratings, remaining term to maturity and interest
rate of the Debt Securities as of the Cut-off Date are as set
forth below:
Composition Of The Debt Securities Pool
As Of The Cut-Off Date
Number of Debt 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 Debt Securities Pool As Of The Cut-Off Date
Aggregate Percent of
Industry Principal Aggregate
Classification Number Balance Principal Balance
- -------------- ------ ------- -----------------
S-12
Total
Distribution By Ratings Of The
Debt Securities Pool As Of The Cut-Off Date
Aggregate Percent of
Principal Aggregate
Rating Number Balance Principal Balance
- ------ ------ ------- -----------------
Total:
[As of the Cut-off Date, [all of] [approximately % of] such
Debt Securities were rated [investment grade] [specify particular
rating] by at least one nationally recognized rating agency, and
no obligor of any Debt 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 Debt Securities is
not a recommendation to purchase, hold or sell such Debt Security
or the Units, 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 regarding certain considerations applicable to the ratings
of the Units.]
Distribution By Remaining Term To Maturity
Of The Debt Securities Pool As Of The Cut-Off Date
Aggregate Percent of
Remaining Term Principal Aggregate
to Maturity Number Balance Principal Balance
- ----------- ------ ------- -----------------
Total
Distribution By Interest Rate
Of The Debt Securities Pool As Of The Cut-Off Date
Aggregate Percent of
Interest Principal Aggregate
Rate Range Number Balance Principal Balance
- ---------- ------ ------- -----------------
S-13
[Add the following where pool includes Foreign Government
Issuers].
[The Debt Securities will include obligations of, or
guaranteed by, foreign governments, foreign political
subdivisions, or agencies and instrumentalities thereof (each
such issuer and guarantor, if any, sometimes referred to herein
as a "Foreign Government Issuer" and a "Foreign Government
Guarantor," respectively; and collectively referred to as
"Foreign Governments"). In the absence of a waiver of immunity by
a Foreign Government, it would not be possible to obtain a United
States judgment against such Foreign Government unless a court
were to determine that such issuer is not entitled under the
Sovereign Immunities Act of 1976 (the "Immunities Act") to
sovereign immunity with respect to such action. Even if such an
issuer is amenable to suit in the United States, the
enforceability of any judgment obtained may be limited by a lack
of substantial assets which can be levied upon in the United
States or the inability to obtain recognition and enforcement of
the judgment in the issuer's country. Because the Debt Securities
represent direct or indirect obligations of foreign governments,
Unitholders should consider the political, economic and other
risks attendant on holding the obligations of a foreign
government which are not typically associated with an investment
in securities of a domestic issuer. Such risks include future
political and economic developments, governmental repudiation,
moratorium on payment or rescheduling of external debts,
confiscatory taxation, imposition of any withholding tax,
exchange rate fluctuations, political or social instability or
diplomatic developments and the imposition of additional
governmental laws or restrictions. While a Foreign Government
Issuer may make certain information available by filing periodic
reports and other information with the Commission, such
information (including financial information) may differ in
timing, form and substance from that normally available with
respect to domestic issuers.]
[The Debt Securities generally have been issued pursuant to
a fiscal agency agreement with provision for a Fiscal Agent,
rather than a Trustee. A Fiscal Agent does not have the same
responsibilities or duties to act on behalf of the holders of a
Foreign Government's debt securities as would a trustee. The due
and punctual payment of each Debt Security and the due and timely
performance of all obligations with respect thereto [are backed
by the full faith and credit of the sovereign entity] [or]
[unconditionally guaranteed by the sovereign entity].
[There are few contractual restrictions on the Foreign
Government Issuers or Foreign Government Guarantors in respect of
the Debt Securities. The Debt Securities by their terms and
provisions may, however, restrict certain actions of the related
Foreign Governments and may also require, among other things, the
creation or maintenance of reserves or a sinking fund or contain
an undertaking or pledge of the Foreign Government not to
encumber its assets to secure any other external indebtedness
without providing like security for the related Debt Securities.
Certain actions in respect of the debt securities of Foreign
Governments may also be subject to proper executive, legislative
or administrative approval.]
Debt Security Agreements
S-14
Each of the Debt Security Agreement[s] limits the
[respective] Debt Security Issuer's ability to engage in certain
activities and transactions and requires that the Debt Security
Issuer perform certain obligations with respect to the Debt
Securities. [Describe common restrictive, financial and other
covenants on the Debt Security Issuer contained in the Debt
Security Agreement.]
[The following is a summary of the typical Debt Security
Events of Default for each series of Outstanding Debt Securities:
(a) failure to make payments of principal (and premium, if
any) and interest to holders of the Outstanding Debt Securities
in the time periods given in the Debt Security Agreement;
(b) material breaches of certain representations,
warranties or covenants or failure to observe or perform in any
material respect any covenant or agreement under a Debt Security
Agreement continuing for a specified period of time after notice
thereof is given to the Debt Security Issuer by the Debt Security
Trustee or the holders of not less than a specified percentage of
the Outstanding Debt Securities;
(c) failure by the Debt Security 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 Debt Security Issuer or the acceleration by or on behalf
of the holders thereof of such securities; [and]
(d) certain events of bankruptcy or insolvency relating to
the Debt Security Issuer; and
[(e) describe any additional common events of default with
respect to the pool of Debt Securities].]
As of the Cut-off Date, [all of] [approximately __% of] the
Debt Securities were [subject to [describe any put, call or other
conversion or redemption options applicable to the Debt
Securities as well as the nature of the obligation represented by
such Debt Securities (i.e., senior, subordinate, secured) and
describe commonalities with respect to any subordination or
security provisions or collateral].]
[Credit Support
For the benefit [solely] of the [Offered] [Class [ ] Units
[and the Class [ ] Units]], 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 Trust Property,
in the form and amount described below.
[The Letter of Credit
S-15
Simultaneously with the Depositor's assignment of the Trust
Property to the Trust, the Depositor will obtain the Letter of
Credit from [ ] (the "Letter of Credit Bank") in favor of the
Trustee on behalf of the Unitholders. The Letter of Credit will
be irrevocable and will [support] the [timely][ultimate]
remittance of amounts due with respect to the Trust Property].
[The maximum amount that the Trustee may draw under the Letter of
Credit will initially be equal to . The initial amount of the
Letter of Credit will be [$] . Thereafter, the amount of the
Letter of Credit with respect to any Distribution Date will equal
[the lesser of (i) % of the aggregate Unit 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 Trust Property]
[describe other methods]. The Letter of Credit expires on , 19 .
The Trustee will be obligated, in the event of a drawing on the
Letter of Credit, to pursue appropriate remedies against the
Trust Property 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 description of the Letter of Credit Bank with respect
to its debt ratings, activities it engages in, regulatory
authorities having jurisdiction over it and the nature of such
regulation, a narrative description of its assets, liabilities
(including deposits) and equity, and include an address for
further information concerning the Letter of Credit Bank. In
addition, to the extent that the Letter of Credit will cover
payment of 20% or more of the aggregate principal amount of the
Units covered thereby, provide information of financial and other
matters with respect to the Letter of Credit Bank.]]
[The Insurance Policy
Simultaneously with the Depositor's assignment of the Trust
Property to the Trust, the Depositor will obtain the financial
guaranty insurance policy (the "Policy") from [ ] (the "Insurer")
in favor of the Trustee on behalf of the Unitholders. The Policy
will guaranty scheduled payments of principal, premium (if any)
and interest with respect to the [Class[ ]] Units. The Policy
expires on , 19 . The Trustee will be obligated, in the event of
a drawing on the Policy, to pursue appropriate remedies against
the Trust Property and other collateral, and any realization
thereon shall be paid to the Insurer to the extent of any amounts
owing, in the manner and priority specified herein.
[Add language regarding the issuer of the Policy with
respect to its insurance strength 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 Insurer. In
addition, to the extent that the Policy will cover payment of 20%
or more of the aggregate principal amount of the Units covered
thereby, provide information of financial and other matters with
respect to the issuer of the Policy.]]
S-16
[Reserve Account
The Depositor will establish for the benefit of the Trustee
on the Closing Date a Reserve Account containing cash, letters of
credit and short-term investments acceptable to the Rating Agency
initially rating the Units in the amount of [$] . [Collections
with respect to the Trust Property not distributed with respect
to the Units shall be deposited in the Reserve Account.] Amounts
so deposited in such Reserve Account will be used by the Trustee
to make payments of principal of and premium (if any) and
interest on the Units 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 Depositor].]
[Allocation of Losses; Subordination
The subordination described herein provided by the Class [
] Units [and the Class [ ] Units] is designed to protect holders
of the remaining Classes of Units from certain losses and other
shortfalls with respect to the Trust Property. As a result,
losses and other shortfalls with respect to the Trust Property
will be borne by the remaining Classes of Units, 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 will be allocated on any Distribution Date
as follows: [describe allocation among the various Classes].]
[DESCRIPTION OF SWAP AGREEMENT]
As set forth in the Prospectus, the Trust will enter into a
Swap Agreement with [Morgan Stanley Capital Services, Inc.]
[other Swap Counterparty] in the form of a 1992 Master Agreement
(as governed by the ISDA Definitions), subject to a Schedule to
the Master Agreement in the form attached as an exhibit to the
Registration Statement.
[The Swap Agreement will document an interest rate swap
Transaction between the Trust and the Swap Counterparty under
which the Trust will pay to the Swap Counterparty the [fixed
rate/floating rate] coupon payments received in respect of
[specified] Debt Securities and receive from the Swap
Counterparty [floating rate/fixed rate] payments. The Transaction
will have the effect, subject to performance by the Swap
Counterparty of its obligations under the Swap Agreement, of
converting the coupon otherwise applicable to the [specified]
Debt Securities to the effective coupon received by the Trust
under the Swap Agreement.]
[The Swap Agreement will document a cross-currency swap
Transaction between the Trust and the Swap Counterparty under
which the Trust will pay to the Swap Counterparty the [fixed
rate/floating rate] [foreign currency/dollar] coupon and
principal payments received in respect of [specified] Debt
Securities, and will receive from the Swap Counterparty [floating
rate/fixed rate] [dollar/foreign currency] payments. The
Transaction will have the effect, subject to performance by the
Swap Counterparty of its obligations under the Swap Agreement,
S-17
of converting the interest rate and currency otherwise applicable
to payment of interest and principal under the [specified] Debt
Securities to the interest rate and currency received by the
Trust under the Swap Agreement.]
[The Swap Agreement will document an option transaction
between the Trust and the Swap Counterparty under which the Trust
will grant a call option to the Swap Counterparty with respect to
the [specified] Debt Securities or other Trust Property, and the
Swap Counterparty will make a payment to the Trust of ________.]
[The call option will effectively reserve to the Swap
Counterparty the right to realize all or a portion of the gain
from an increase in the market value of the specified Trust
Property at or prior to the maturity of the Units or to effect a
conversion of the Debt Securities into the right to receive
another security.] [The put option will entitle the Trust to put
to the Swap Counterparty [specified] [Debt Securities] at par,
thereby protecting the Trust from a decline in the market value
of the related Debt Securities in circumstances where the Debt
Securities may be outstanding on the Scheduled Final Distribution
Date with respect to the Units. The Trust Agreement will provide
that the Trust will automatically exercise the put option, unless
otherwise instructed by the Unitholders, if the market value of
the Debt Securities on the exercise date for the put option is
less than the par value of such Debt Securities.]
[Describe any other derivative agreements to be documented
under the Swap Agreement].
[As set forth in the Prospectus, early termination of the
Swap Agreement upon the occurrence of a Debt Security Default,
Trust Wind-Up Event or other early termination event may result
in the Trust becoming liable for a Swap Termination Payment, and
the Trust may be required to sell Debt Securities in order to pay
such Swap Termination Payment. Investors should consider
carefully the Risk Factors applicable to Swap Agreements as set
forth in the Prospectus.]
[Guarantee of MSDW
MSDW will unconditionally and irrevocably guarantee the due
and punctual payment of all amounts payable by the Swap
Counterparty under such Swap Agreement. Pursuant to such
Guarantee, MSDW will agree to pay or cause to be paid all such
amounts upon the failure of the Swap Counterparty punctually to
pay any such amount and written demand by the Trustee to MSDW to
pay such amount.]
DESCRIPTION OF UNITS
General
The Units will consist of [ ] Classes of Units,
designated as Class [ ][,] [and] Class [ ] [and Class___] Units.
The Units will be denominated and distributions with respect
thereto will be payable in the Specified Currency. The Units
represent in the aggregate the entire beneficial
S-18
ownership interest in the related Trust. The Class [ ] Units have
in the aggregate an initial [Unit Principal Balance] [Notional
Amount] of [$]________ (approximate) and a [___%] [Variable]
Pass-Through Rate. The Class [ ] Units have in the aggregate an
initial [Unit Principal Balance] [Notional Amount] of [$]________
(approximate) and a [___%] [Variable] Pass-Through Rate. [The
Class [ ] Units have in the aggregate an initial [Unit Principal
Balance] [Notional Amount] of [$]________ (approximate) and a
[___%] [Variable] Pass-Through Rate.] [The Class [ ] Units, which
are not being offered hereby, will be transferred by the
Depositor to an affiliate on the Closing Date, and may be sold at
any time by the Depositor in accordance with the terms of the
Trust Agreement.]
[Use the following except for issuance of Bearer Units]:
The Units [(other than the Class [ ] Units [and specify
others] (the "Definitive Classes"))] will be issued, maintained
and transferred on the book-entry records of DTC and its
Participants in minimum denominations of [$ ] and [integral
multiples thereof] [multiples of [$ ] in excess thereof]. [The
Class [ ] Units [and specify any others] will be offered in
registered, certificated form, in minimum percentage interests
corresponding to the initial Notional Amounts or Unit Principal
Balances, as applicable, of [$ ] and integral multiples thereof,
except that one Unit of each such Class may be issued with an
initial Notional Amount or Unit Principal Balance, as applicable,
equal to an integral multiple of [$ ] plus the excess of the
initial aggregate Notional Amount or Unit Principal Balance, as
applicable, of such Class over the greatest integral multiple of
[$ ] that is not more than such initial aggregate Notional Amount
or Unit Principal Balance, as applicable.]
The Units [(other than the Definitive Classes of Units)]
will each initially be represented by one or more global
certificates registered in the name of the nominee of DTC, except
as provided below. The Depositor has been informed by DTC that
DTC's nominee will be CEDE & Co. ("CEDE"). No holder of any such
Unit will be entitled to receive a certificate representing such
person's interest, except as set forth below under "--Definitive
Units." Unless and until Definitive Units are issued under the
limited circumstances described herein, all references to actions
by Unitholders with respect to any such Units shall refer to
actions taken by DTC upon instructions from its Participants. See
"Description of Units--Form" 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 Unitholder under the Trust Agreement only at the
direction of one or more Participants to whose DTC account such
Units 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 Units evidence such
specified Voting Rights. DTC may take conflicting actions with
respect to Voting Rights, to the extent that Participants whose
holdings of Units evidence such Voting Rights, authorize
divergent action.
S-19
Principal of Units
[Describe any scheduled amortization or indexation features
of the Units]
Interest on Units
[Describe any floating rate or interest indexation
features]
[Call Rights
The Units are a Callable Series; has the right to purchase
all or a portion of the Units (the "Call") at a price of ___%,
provided that the Call must be exercised with respect to a
minimum Unit Principal Balance of or integral multiples thereof;
[specify any time restriction] Each Unitholder will be entitled
to receive a distribution of a pro rata share of the Call Price
paid in connection with exercise of the Call.]
[Optional Exchange
The Units are an "Exchangeable Series." A holder may
exchange Units of any for a pro rata portion of the Trust
Property; provided that: (i) the exchanging holder tenders to the
Trustee Units of each Class; (ii) the exchange is made with
respect to a minimum Unit Principal Balance or Notional Amount of
______ or an integral multiple thereof; (iii) exchange may only
be affected on the following Optional Exchange Dates; [(iv) an
exchanging holder is required to obtain the consent of the Swap
Counterparty to such exchange and tender to the Swap Counterparty
a termination payment in respect of termination of any portion of
the Swap Agreement corresponding to the portion of the Debt
Securities to be distributed to such holder by the Trustee;]
[other limitations or provisions].]
DESCRIPTION OF TRUST AGREEMENT
The following summaries do not purport to be complete and,
with respect to a particular Series of Units to be offered
pursuant to this Prospectus and a Prospectus Supplement, are
subject to the detailed provisions of the form of Trust Agreement
included as an exhibit to the Registration Statement, to which
reference is hereby made for a full description of such
provisions, including the definitions of certain terms used.
General
The Units will be issued pursuant to a Trust Agreement
incorporating the provisions of the Standard Terms of Trust
Agreements, a form of which is filed as an exhibit to the
Registration Statement. A Current Report on Form 8-K relating to
the Units containing a copy of the Trust Agreement as executed
will be filed by the Depositor with the Commission following the
issuance and sale of the Units. The Trust created under the Trust
Agreement will
S-20
consist of (i) the Trust Property (exclusive of any Retained
Interest, which is not part of the Trust), (ii) all payments on
or collections in respect of the Trust Property due after the
Cut-off Date, together with any proceeds thereof[,] [and] [(iii)
any Credit Support in respect of any class or classes of Units]
[and (iv) the rights of the Depositor under the Purchase
Agreement between the Depositor and the Seller]. [In addition,
the Unitholders of the Units may also have the benefit of certain
Credit Support discussed above. See "Description of Trust
Property --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 Units.
Trustee Compensation
As compensation for and in payment of trust expenses
related to its services under the Trust Agreement other than
Extraordinary Trust Expenses, the Trustee will receive Trustee
Fees in the amount of _______, payable [from Trust Property/by
the Depositor/other]. The "Trigger Amount" with respect to
Extraordinary Trust Expenses for the Trust is _________ and the
Maximum Reimburseable Amount is ________________.
Retained Interest
[Description of any Retained Interest of Depositor]
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
[Discuss any special tax features not discussed in Base
Prospectus, including, if applicable, FASIT election, partnership
classification of Trust,
ERISA CONSIDERATIONS
[The Units are Book-Entry Units and interests in the Units
may not be transferred to any person unless that person is not a
Plan subject to the fiduciary responsibility provisions of the
Employee Retirement Income Security Act of 1974 ("ERISA") or
Section 4975 of the Code and is not acquiring the Units with the
assets of any such Plan or any government or other plan subject
to substantially similar requirements. The Trust Agreement
provides that any purported transfer in violation of this
restriction shall be void. Each person who acquires any
Book-Entry Unit, and each fiduciary which causes any such person
to so acquire a Book-Entry Unit, in its individual as well as its
fiduciary capacity, will be deemed to have represented upon the
acquisition of such Book-Entry Unit that such purchaser or
transferee is not a Plan subject to the fiduciary responsibility
provisions of ERISA or Section 4975 of the Code or any government
or other plan subject to substantially similar requirements and
is not using the assets of any such Plan to purchase the
Book-Entry Units. THE TRUST AGREEMENT PROVIDES THAT EACH HOLDER
OF A BOOK-ENTRY UNIT SHALL INDEMNIFY THE TRUSTEE, THE
S-21
DEPOSITOR, MORGAN STANLEY AND THEIR AFFILIATES AGAINST ANY COSTS,
EXPENSES, DAMAGES OR LOSSES INCURRED BY THEM AS A RESULT OF THE
FAILURE OF THE FOREGOING REPRESENTATION TO BE TRUE.]
The "Alternative ERISA Restrictions" are applicable to the
Units, and Units will be issued only as Definitive Units in
registered form and only upon execution and delivery of a
definitive Purchase Agreement, which will contain additional
representations regarding whether such purchaser or proposed
transferee is a benefit plan investor (within the meaning of the
Plan Asset Regulations) or is acquiring the Units with assets of
a benefit plan investor. A definitive Purchase Agreement will
similarly be required to be obtained from any proposed transferee
of a Unit to which the "Alternative ERISA Restrictions" apply. As
set forth in the Prospectus, no such purchase or proposed
transfer shall be permitted to the extent that it would cause the
ownership by benefit plan investors to be "significant" within
the meaning of the Plan Asset Regulations immediately after such
purchase or proposed transfer. In addition, the Depositor and the
Trustee will agree that, after the initial distribution of a
particular Series of Units subject to the Alternative ERISA
Restrictions, neither they nor their affiliates will acquire any
Units of such Series, unless such acquisition would not cause the
ownership by benefit plan investors immediately following such
acquisition to be "significant."]
[The "Alternative ERISA Restrictions" are applicable to the
Units. Units will be issued in reliance on certain exemptions
from the prohibited transaction provisions of Section 406 of
ERISA and Section 4975 of the Code which may be applicable,
depending in part on the type of Plan fiduciary making the
decision to acquire a Unit and the circumstances under which such
decision is made. Included among these exemptions are Prohibited
Transaction Class Exemption ("PTCE") 91-38 (relating to
investments by bank collective investment funds), PTCE 84-14
(relating to transactions effected by a "qualified professional
asset manager"), PTCE 90-1 (relating to investments by insurance
company pooled separate accounts) and PTCE 96-23 (relating to
transactions determined by in-house asset managers). There can be
no assurance that any of these class exemptions or any other
exemption will be available with respect to any particular
transaction involving the Units. BY ITS PURCHASE OF ANY UNIT, THE
PURCHASER THEREOF WILL BE DEEMED TO HAVE REPRESENTED AND
WARRANTED EITHER THAT (A) IT IS NOT AN ERISA PLAN OR OTHER PLAN,
AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE THE ASSETS OF ANY SUCH
ERISA PLAN OR OTHER PLAN, OR A GOVERNMENTAL PLAN WHICH IS SUBJECT
TO ANY FEDERAL, STATE OR LOCAL LAW THAT IS SUBSTANTIALLY SIMILAR
TO THE PROVISIONS OF SECTION 406 OF ERISA OR SECTION 4975 OF THE
CODE OR (B) ITS PURCHASE, HOLDING AND DISPOSITION OF A UNIT WILL
NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA
OR SECTION 4975 OF THE CODE (OR, IN THE CASE OF A GOVERNMENTAL
PLAN, ANY SUBSTANTIALLY SIMILAR FEDERAL, STATE OR LOCAL LAW) FOR
WHICH AN EXEMPTION IS NOT AVAILABLE. THE TRUST AGREEMENT PROVIDES
THAT EACH HOLDER OF A BOOK-ENTRY UNIT SHALL INDEMNIFY THE
TRUSTEE, THE DEPOSITOR, MORGAN STANLEY AND THEIR AFFILIATES
AGAINST ANY COSTS, EXPENSES, DAMAGES OR LOSSES INCURRED BY THEM
AS A RESULT OF THE FAILURE OF THE FOREGOING REPRESENTATION TO BE
TRUE.]
S-22
[BEARER UNITS
The [Class __] Units will be issued as Bearer Units. In
compliance with United States Federal income tax laws and
regulations, the Depositor and any underwriter, agent or dealer
participating in the offering of the Bearer Units will agree
that, in connection with the original issuance of such Bearer
Unit and during the period ending 40 days after the issue of such
Bearer Unit, they will not offer, sell or deliver such Bearer
Unit, 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. The [Class __] Units 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 165(j) and 1287(a) of the Internal Revenue Code."
Pending the availability of a permanent Global Security or
definitive Bearer Units, as the case may be, the [Class __] Units
will initially be represented by a single temporary Global
Security, without interest coupons, to be deposited with a common
depositary in London for Euroclear and CEDEL for credit to the
accounts designated by or on behalf of the purchasers thereof.
Following the availability of a permanent Global Security in
bearer form, without coupons attached, or definitive Bearer Units
and subject to any further limitations described in the
applicable Prospectus Supplement, the temporary Global Security
will be exchangeable for interests in such permanent Global
Security or for such definitive Bearer Units, respectively, only
upon receipt of a Certificate of Non-U.S. Beneficial Ownership"
as described in the Prospectus. 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.]
PLAN OF DISTRIBUTION
Subject to the terms and conditions set forth in the
Underwriting Agreement, dated as of [ ], 199[ ] (the
"Underwriting Agreement"), the Depositor has agreed to sell and
[Morgan Stanley (an affiliate of the Depositor)] [each of the
Underwriters named below, including Morgan Stanley (an affiliate
of the Depositor)] (the "Underwriter[s]")[,] has [severally]
agreed to purchase, the [Units] [the principal amount of each
class of Units set forth below opposite its name].
[Morgan Stanley has] [The several Underwriters have]
agreed, subject to the terms and conditions set forth in the
Underwriting Agreement, to purchase all Units offered hereby if
any of such Units 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.]
S-23
The Depositor has been advised by the Underwriter[s] that
[it][they] propose[s] to offer the Units 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 Units 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 Units for whom they may act as agents. The
Underwriter[s] and any dealers that participate with the
Underwriter[s] in the distribution of Units may be deemed to be
underwriters, and any profit on the resale of Units by them may
be deemed to be underwriting discounts, or commissions under the
Securities Act.
The Underwriting Agreement provides that the Depositor 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.
Morgan Stanley is an affiliate of the Depositor, and the
participation by Morgan Stanley in the offering of the Units
complies with Section 2720 of the Conduct Rules of the National
Association of Securities Dealers, Inc. regarding underwriting
securities of an affiliate.
RATINGS
It is a condition to the issuance of the Units that the
Units be rated not lower than [specify ratings applicable to each
class] by [Standard & Poor's Ratings Group ("Standard &
Poor's")][Moody's Investors Service, Inc. ("Moody's")][Fitch
Investors Service, L.P. ("Fitch")] [and] [Duff & Phelps Credit
Rating Company ("Duff & Phelps")](the "Rating[Agency]
[Agencies]"). The ratings address the likelihood of the receipt
by the Unitholders of payments required under the Trust
Agreement, and are based primarily on the credit quality of the
Trust Property and any providers of Credit Support, as well as on
the relative priorities of the Unitholders of each class of the
Units with respect to collections and losses with respect to the
Trust Property. The rating on the Units does not, however,
constitute a statement regarding the occurrence or frequency of
redemptions or prepayments on, or extensions of the maturity of,
the Trust Property, the corresponding effect on yield to
investors, or whether investors in the Class [ ] Units [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 Depositor has not requested a rating on the Units 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 Units, or, if it does, what rating would be
assigned by any such other rating agency. A rating on the Units
by another rating agency, if assigned at all, may be lower than
the ratings assigned to the Units by the Rating [Agency]
[Agencies].
S-24
LEGAL OPINIONS
Certain legal matters relating to the Units will be passed
upon for the Depositor and the Underwriter[s] by [Cleary,
Gottlieb, Steen & Hamilton, Washington, D.C.].
S-25
+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR +
+ AMENDMENT. A REGISTRATION STATEMENT RELATING TO THE +
+ SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE +
+ COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS +
+ TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION +
+ STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT +
+ CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER +
+ TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY +
+ STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+ UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE +
+ SECURITIES LAWS OF ANY SUCH STATE. +
+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion, Dated _________, 199_
PROSPECTUS
Structured Asset Trust Unit Repackagings (SATURNS SM)
Issuable in Series
MSDW Structured Asset Corp.
Depositor
The Structured Asset Trust Unit Repackagings (the "Units")
offered hereby and by Prospectus 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"), denominated in
dollars or in one or more foreign currencies. Units 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. Units may be sold for United States dollars or for
one or more foreign currencies, and the principal of, premium on,
if any, and any interest to be distributed in respect of Units
may be payable in United States dollars or in one or more foreign
currencies. Each Series and Class of Units may be issued in fully
registered form without interest coupons ("Registered Units") or
in bearer form with or without coupons attached ("Bearer Units"),
as one or more global securities in registered or bearer form
(each a "Global Security") or as individual securities in
definitive form with or without coupons ("Definitive Units").
Each Series of Units will represent in the aggregate the entire
beneficial ownership interest in one or more debt securities or
loans (the "Debt Securities"), together with, if specified in the
Prospectus Supplement, rights under certain swap or other
derivative agreements or certain other assets described herein
and in the related Prospectus Supplement (such assets, together
with the Debt Securities and any Credit Support as defined below,
the "Trust Property"), to be deposited in a trust (the "Trust")
formed pursuant to a trust agreement (the "Trust Agreement") to
be entered into between MSDW Structured Asset Corp., as depositor
(the "Depositor"), and Chase Bank of Texas, National Association
(the "Trustee") or another Trustee specified in the Prospectus
Supplement. Unless otherwise specified in the Prospectus
Supplement, the Debt Securities will be purchased by the
Depositor in the secondary market (either directly or through an
affiliate of the Depositor), and will not be acquired from the
issuer thereof (each a "Debt Security Issuer") as part of any
distribution by or pursuant to any agreement with such Debt
Security Issuer. Each Debt Security which represents on the date
of formation of the Trust 10% or more by principal amount of the
Debt Securities held by such Trust (a "Concentrated Debt
Security") will represent (i) obligations of or guaranteed by the
United States government, obligations of the Federal National
Mortgage Association or Federal Home Loan Mortgage Corporation,
or (ii) obligations of one or more corporations, limited
partnerships, trusts, limited liability companies or other
organizations, banking organizations, insurance companies or
foreign sovereigns or political subdivisions or instrumentalities
thereof (each a "Foreign Sovereign"), in each case which are
subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and which,
in accordance therewith, file reports and other information with
the Securities and Exchange Commission (or another applicable
agency pursuant to Section 12(i) of the Exchange Act) (and in the
case of a Foreign Sovereign, are current in their filings in
accordance with such requirements). If so specified in the
related Prospectus Supplement, the Trust Property for a Series of
Units may also include, or the Unitholders of such Units 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 Trust Property (collectively,
"Credit Support"). See "Description of Units" and "Description of
Trust Property."
Each Class of Units 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 Trust
Property in the manner described herein and in the related
Prospectus Supplement. A Series may include two or more Classes
differing as to entitlement to 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.
If specified in the Prospectus Supplement, application will be
made to list the related Series of Units on the New York Stock
Exchange.
There will be no market for any Series of Units 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
Unitholders with liquidity of investment or will continue for the
life of the Units.
Bearer Units are subject to U.S. tax law requirements and may not
be offered, sold or delivered within the United States or its
possessions or to U.S. persons, except in certain transactions
permitted by U.S. tax regulations.
The Units represent interests in the Trust only and do not
represent obligations of or interests in the Depositor, Morgan
Stanley & Co. Incorporated ("Morgan Stanley") or any of their
respective affiliates. The Units do not represent a direct
obligation of the Debt Security Issuer or any of its affiliates.
At the time of issue, the Units 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 (each a "Rating Agency").
------------------
PURCHASERS OF UNITS SHOULD CAREFULLY CONSIDER ALL INFORMATION
CONTAINED IN THIS PROSPECTUS AND THE APPLICABLE PROSPECTUS
SUPPLEMENT, PARTICULARLY THE INFORMATION SET FORTH UNDER "RISK
FACTORS" IN THIS PROSPECTUS AND ANY ANALOGOUS DISCUSSION IN SUCH
PROSPECTUS SUPPLEMENT. THE PURCHASE OF UNITS IS SUITABLE ONLY FOR
AND SHOULD BE MADE ONLY BY INVESTORS WHO CAN BEAR THE RISKS OF
LIMITED LIQUIDITY AND UNDERSTAND AND CAN BEAR THE FINANCIAL AND
OTHER RISKS OF AN INVESTMENT IN UNITS.
------------------
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 Units may be offered and sold to or through Morgan Stanley as
underwriter, dealer or agent, or through one or more other
underwriters, 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 Units offered hereby unless accompanied by a
Prospectus Supplement.
------------------
MORGAN STANLEY DEAN WITTER
September __, 1998
SM SATURNS is being registered as a service mark of Morgan
Stanley Dean Witter & Co.
TABLE OF CONTENTS
Page
PROSPECTUS SUPPLEMENTS.........................................3
AVAILABLE INFORMATION..........................................4
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE................4
IMPORTANT CURRENCY INFORMATION.................................5
RISK FACTORS...................................................5
THE DEPOSITOR.................................................12
USE OF PROCEEDS...............................................13
FORMATION OF TRUSTS...........................................13
DESCRIPTION OF TRUST PROPERTY.................................15
DESCRIPTION OF SWAP AGREEMENTS................................23
MSDW..........................................................28
DESCRIPTION OF UNITS..........................................29
DESCRIPTION OF TRUST AGREEMENTS...............................52
CERTAIN FEDERAL INCOME TAX CONSEQUENCES.......................62
ERISA CONSIDERATIONS..........................................75
CURRENCY RISKS................................................78
LIMITATIONS ON ISSUANCE OF BEARER UNITS.......................79
PLAN OF DISTRIBUTION..........................................80
LEGAL MATTERS.................................................82
2
PROSPECTUS SUPPLEMENTS
A Prospectus Supplement which describes the specific
matters described below will be provided with this Prospectus.
The Prospectus must be read in conjunction with the related
Prospectus Supplement. TO THE EXTENT THERE IS ANY CONFLICT
BETWEEN THE INFORMATION PROVIDED HEREIN AND THE INFORMATION
PROVIDED IN THE RELATED PROSPECTUS SUPPLEMENT, THE RELATED
PROSPECTUS SUPPLEMENT SHALL CONTROL.
Each Prospectus Supplement will set forth, among other
things, the following with respect to the related Series of
Units: (i) the title, aggregate principal amount and authorized
denominations (or, if applicable, notional amount); (ii) 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 on such Units (the Specified Principal
Currency, the Specified Premium Currency and the Specified
Interest Currency being collectively referred to as the
"Specified Currency"), if other than U.S. dollars; (iii) the
interest rate on such Units or the method of calculation thereof
(the "Pass Through Rate"); (iv) the terms of one or more swap or
other derivative transactions (each a "Transaction") under a
master agreement in the form described herein (the master
agreement together with each specific Transaction thereunder, the
"Swap Agreement") to be entered into by the Trust; (v) the number
of Classes of such Series and, with respect to each Class of such
Series, its designation, aggregate principal amount and
authorized denominations, the stated principal amount (or, if
applicable, notional amount), if fixed or whether the principal
amount or notional amount will be variable based upon one or more
Transactions under a Swap Agreement; (vi) the time and place of
distribution (each such date, a "Distribution Date") of any
interest, premium and/or principal; (vii) the original date of
issue and the scheduled final Distribution Date for such Units;
(viii) if the Units are offered at a fixed price, such price;
(ix) certain information concerning the type, characteristics and
specifications of the Trust Property for such Series or Class;
(x) the relative rights and priorities of each such Class
(including the method for allocating collections from the Trust
Property to the Unitholders of each Class and the relative
ranking of the claims of the Unitholders of each Class to such
Trust Property); (xi) the identity of any entity or entities
identified in the related Prospectus Supplement as entering into
one or more Transactions with the Trust under any Swap Agreement
(each a "Swap Counterparty"); (xii) a description of the specific
provisions of any related Swap Agreement to the extent not
described under "Description of Swap Agreements" or inconsistent
with such description; (xiii) if the Swap Counterparty is not
Morgan Stanley Capital Services Inc. ("MSCS"), a description of
any guarantee (the "Guarantee") or other type of support, if any,
of such Swap Counterparty's obligations under the Swap Agreement;
(xiv) any Call Rights (as defined herein) exercisable by the
Depositor or any third party, or any other any mandatory or
optional exchange or redemption terms; and (xv) any other
specific terms of such Units not described in this Prospectus.
See "Description of Units - General" for a listing of other items
that may be specified in the applicable Prospectus Supplement.
3
AVAILABLE INFORMATION
Each Trust is subject to the informational requirements of
the Exchange Act and in accordance therewith the Depositor files
on behalf of each Trust reports and other information with the
Securities and Exchange Commission (the "Commission"). Reports
with respect to each Trust and other information concerning each
Trust 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 located at Seven World Trade Center, Suite 1300,
New York, New York 10048, and Citicorp Center, Suite 1400, 500
West Madison Street, 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 also
maintains a site on the World Wide Web (the "Web") at
"http://www.sec.gov" at which users can view and download copies
of reports, proxy, information statements and other information
filed electronically through the Electronic Data Gathering,
Analysis and Retrieval ("EDGAR") system. The Depositor does not
intend to send any financial reports to Unitholders.
If the Prospectus Supplement for the Units of a given
series specifies that the Units are to be listed on the New York
Stock Exchange, reports and other information concerning the
related Trust can also be inspected at the offices of the New
York Stock Exchange, 20 Broad Street, New York, New York 10005.
The Depositor 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 Units. 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 Depositor pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act prior to and
subsequent to the date of this Prospectus and prior to the
termination of the offering of the Units 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 Depositor 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
4
(unless such exhibits are specifically incorporated by reference
in such documents). Written requests for such copies should be
directed to MSDW Structured Asset Corp. 1585 Broadway, New York,
New York 10036, Attention: Assistant Secretary, Tel. 212-761-
1715.
REPORTS TO UNITHOLDERS
Except as otherwise specified in the applicable Prospectus
Supplement, on each Distribution Date unaudited reports
containing information concerning the related Trust will be
prepared by the Trustee and sent on behalf of each Trust to
registered holders of the Units. Where the Units are represented
by a Global Security in registered form, unless and until
Definitive Units are issued, reports will be sent only to the
Depositary (as defined herein) or its nominee, as registered
holder of the Units. See "Description of Units--Form" and
"Description of the Trust Agreement--Reports to Unitholders;
Notices." Such reports will not constitute financial statements
prepared in accordance with generally accepted accounting
principles. The Depositor, on behalf of each Trust, will cause to
be filed with the Commission such periodic reports as are
required under the Exchange Act.
IMPORTANT CURRENCY INFORMATION
Unless otherwise specified in the applicable Prospectus
Supplement, purchasers will be required to pay for each Unit in
the Specified Principal Currency for such Unit. 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 Unit having a Specified Principal
Currency other than U.S. dollars, Morgan Stanley or an affiliate
or its agent, as exchange rate agent (the "Exchange Rate Agent"),
in its sole discretion, may arrange for the exchange of U.S.
dollars into such Specified Principal Currency to enable the
purchaser to pay for such Unit. Each such exchange will be made
by the Exchange Rate Agent on such terms and subject to such
conditions, limitations and charges as it 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 in this Prospectus and in Prospectus Supplements
to "U.S. dollars", "U.S.$", "USD", "dollar" or "$" are to the
lawful currency of the United States.
RISK FACTORS
No Obligation of or Interest in Depositor or Morgan
Stanley. The Units do not represent a direct obligation of or
interest in the Depositor, Morgan Stanley or any affiliate of
either of them.
Limited Liquidity. There will be no market for any Series
of Units 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 Unitholders with liquidity of
investment or that it will continue for
5
the life of such Units. Morgan Stanley is not obligated to make a
market for the Units, and may or may not do so.
Maturity and Prepayment Considerations. The timing of
distributions of interest, premium (if any) and principal of
Units will be affected by any early redemption, prepayment or
extension of maturity with respect to the related Debt
Securities. The applicable Prospectus Supplement will describe
any puts, calls or other mandatory or optional redemption
features, any extension of maturity provisions and certain other
terms applicable to such Debt Securities. In addition, the timing
of distributions on Units will be affected by any exchange of the
related Debt Securities pursuant to a tender offer or otherwise.
To the extent that the aggregate principal amount of the related
Debt Securities is reduced through any such redemption, payment
or exchange, the corresponding notional amount for any swap or
amount of any option or other reference amount for any derivative
obligation (collectively "Swap Amount") subject to the Swap
Agreement, may be ratably reduced. See "Description of Swap
Agreements - Payments Under Swap Agreements". To the extent that
the amount of any distribution of interest or principal on Units
is calculated according to a formula that references such Swap
Amount under the terms of the related Swap Agreement, any
reduction in such Swap Amount may affect such distributions.
Yield Characteristics of Units. The yield to maturity of
any Unit will be a function of the purchase price of, and the
interest rate from time to time applicable to, and amount
returned at maturity of, such Unit. If the interest rate from
time to time applicable to such Unit is variable based on an
index different from that applicable to the Debt Securities, such
rate as of any determination date will generally be determined by
the terms of any related Swap Agreement. In such circumstance,
the holders of such Unit will effectively be exchanging the right
to receive interest payments on the related Debt Securities for
the right to receive payments on such Unit according to the terms
of such Swap Agreement for so long as it is in effect. The yield
to maturity of such Unit will therefore also be affected by any
early termination of a Swap Agreement under the circumstances
described under "Description of Swap Agreements" and in any
related discussion in the applicable Prospectus Supplement. The
applicable Prospectus Supplement will set forth additional
information concerning yield characteristics on the related Unit
resulting from the specific terms of any related Swap Agreement
as well as the specific attributes of the related Debt
Securities.
Distributions on Index-Linked Units. If specified in the
applicable Prospectus Supplement, the amounts of any distribution
of principal or interest on the related Unit, including the
amount of any final distribution of principal upon the final
scheduled Distribution Date of such Unit, may be determined by
reference to an index of one or more securities, currencies,
commodities or other goods and may therefore be variable (such
Units, "Index-Linked Units"). Holders of such Units will likely
receive different amounts of principal or interest on such Units,
which may be lesser amounts, than they would otherwise have
received had they held the related Debt Securities.
6
An investment in Index-Linked Units may entail significant
risks that are not associated with a similar investment in an
instrument that has a fixed principal amount, is denominated in
U.S. dollars and entitles the holder to distributions of interest
at either a fixed rate or a floating rate determined by reference
to nationally published interest rate references. The risks of a
particular Index-Linked Unit will depend on the terms of such
Index-Linked Unit, but may include, without limitation, the
possibility of significant changes in the prices of securities,
commodities, currencies, intangibles, goods or articles or of
other objective price, economic or other measures making up the
relevant index (the "Underlying Assets"). Such risks generally
depend on factors over which the Depositor, any Swap Counterparty
or the Trustee or any of their respective affiliates have no
control and which cannot readily be foreseen, such as economic
and political events and the supply of and demand for the
Underlying Assets.
In considering whether to purchase Index-Linked Units,
investors should be aware that the calculation of amounts payable
in respect of Index-Linked Units may involve reference to an
index determined by an affiliate of the Depositor or the Swap
Counterparty or to prices which are published solely by third
parties or entities which are not subject to regulation under the
laws of the United States.
THIS PROSPECTUS DOES NOT, AND ANY PROSPECTUS SUPPLEMENT
WILL NOT, DESCRIBE ALL THE RISKS OF AN INVESTMENT IN INDEX-LINKED
UNITS, AND THE DEPOSITOR, THE SWAP COUNTERPARTY, THE TRUSTEE AND
THEIR RESPECTIVE AFFILIATES DISCLAIM 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.
THIS RISK OF LOSS AS A RESULT OF THE LINKAGE OF PRINCIPAL OR
INTEREST PAYMENTS ON INDEX-LINKED UNITS TO AN INDEX AND TO THE
UNDERLYING ASSETS CAN BE SUBSTANTIAL. PROSPECTIVE PURCHASERS
SHOULD CONSULT THEIR OWN FINANCIAL AND LEGAL ADVISORS AS TO THE
RISKS ENTAILED BY AN INVESTMENT IN INDEX-LINKED UNITS. AN
INDEX-LINKED UNIT IS NOT AN APPROPRIATE INVESTMENT FOR PERSONS
WHO ARE UNSOPHISTICATED WITH RESPECT TO TRANSACTIONS IN THE
UNDERLYING ASSETS OF ANY INDEX RELEVANT TO THAT INDEX-LINKED
UNIT.
Certain Considerations relating to Swap Agreements. In
general, a Swap Agreement will alter the amounts and timing and,
if applicable, currency, of distributions of principal and/or
interest on the related Units to which a holder thereof would be
entitled from what such holder would otherwise have been entitled
to receive had such holder held the related Debt Securities
directly. Unless otherwise provided in the related Prospectus
Supplement, it is not intended that any Swap Agreement will
provide coverage against losses as a result of failure to receive
payments on the related Debt Securities, and no assurance can be
given that the Trustee will receive either the payments due to be
received on such Debt Securities or any payment due to be
received under such Swap Agreement, in each case when due, or
that the Trustee will recover moneys under a related Guarantee,
if any, upon a payment default by the Swap Counterparty under
such Swap Agreement.
Upon an early termination of a Swap Agreement or one or
more Transactions thereunder, as described more fully in
"Description of Swap Agreements - Early Termination of Swap
Agreements" and in any analogous discussion in the applicable
Prospectus
7
Supplement, a payment (the "Swap Termination Payment") may be
payable by the applicable Trust to the Swap Counterparty or by
the Swap Counterparty to such Trust, unless the Prospectus
Supplement provides that Swap Termination Payments will not be
payable in connection with early termination of the related Swap
Agreement or Transaction. The amount of any Swap Termination
Payment will generally be based on the market value of each
replacement transaction for the Swap Counterparty (or, if such
market value cannot be determined or does not produce a
commercially reasonable result, the losses suffered as a result
of the termination of the Swap Agreement or specific
Transaction(s)).
The amount incurred by the Trust as a Swap Termination
Payment and the resulting loss to Unitholders could be quite
substantial in relation to the total value of the Debt Securities
if interest rates, currency rates and/or swap spreads have
changed significantly since the Closing Date. Any Swap
Termination Payment payable by the Trust will be limited (i) in
the case of an early termination other than as a result of a Debt
Security Default, to a claim against the Trust Property pro rata
with that of the Unitholders based on the aggregate Unit
Principal Balance and (ii) in the case of an early termination as
a result of a Debt Security Default, to the Trust Property. See
"Description of Units -- Early Distribution of Debt Securities"
and "Description of Trust Agreements -- Trust Wind-Up Events".
Unitholders will not be liable to the Swap Counterparty for Swap
Termination Payments to the extent, if any, that the amount of
any such termination payments exceeds the assets of the Trust.
Upon an early termination of a Transaction under the Swap
Agreement, the applicable Trust will terminate (unless one or
more Transactions under the Swap Agreement are not affected by
the related Termination Event (as defined herein)), any
applicable Swap Termination Payment will be paid by or to the
Trust and Debt Securities may be sold by the Trustee through the
Selling Agent, unless and until the Selling Agent receives notice
from the Trustee of an exercise by the Unitholders of their right
to tender the amount of any related Swap Termination Payment as
set forth below. Unless otherwise provided in the Prospectus
Supplement, the Selling Agent will be Morgan Stanley or an
affiliate of Morgan Stanley (including the Swap Counterparty)
designated by it. The timing, price and other terms of any sale
conducted by the Selling Agent shall be determined by the Selling
Agent in its sole discretion, but all such sales shall be
completed within 30 days or such longer period of time as may be
reasonable with respect to particular Debt Securities. The
Selling Agent shall be permitted to sell Debt Securities to
affiliates of the Selling Agent. In connection with any Swap
Termination Payment payable by the Trust, the Unitholders may,
acting unanimously, deliver to the Trustee the amount of such
outstanding Swap Termination Payment (and any fees payable to the
Trustee from Trust Property) and a written instruction to
discontinue sale of the Debt Securities. It is possible that Debt
Securities may be sold by the Selling Agent in the time necessary
for the Unitholders to be notified of and act upon their rights
under the foregoing provision. After giving effect to any sales,
the remaining Debt Securities will be distributed to the
Unitholders. With respect to each such Unitholder, such
distribution will constitute full satisfaction of such holder's
fractional undivided interest in such Trust. Unitholders could be
materially adversely affected if the Trust is required to sell
Debt Securities in order to pay Swap Termination Payments at a
time when prices for the Debt Securities in the secondary
8
market are depressed as a result of a default on the Debt
Securities or for any other reason. See "Description of Swap
Agreements -- Early Termination of Swap Agreements" and "-- Swap
Termination Payments" and "Description of Trust Agreements --
Sale of Debt Securities; Secured Party Rights".
After such distribution of the related Debt Securities, the
holders thereof will only be entitled to distributions of
principal and interest in accordance with the terms of such Debt
Securities, and not in accordance with the terms of the
terminated Transaction(s) under the Swap Agreement, which may
result in such holders receiving less than they would have if the
related Transaction(s) had not terminated.
The obligations of each Trust to any related Swap
Counterparty will be secured by a security interest in the Trust
Property granted by the Trust in favor of the Swap Counterparty.
Early Termination of Trusts. Unless otherwise specified in
a Prospectus Supplement, the related Trust will terminate prior
to the final scheduled distribution on the Units issued thereby
upon the occurrence of a Trust Wind-Up Event, as described under
"Description of Trust Agreements - Trust Wind-Up Events". Unless
otherwise specified in the applicable Prospectus Supplement, a
Trust Wind-Up Event will be deemed to have occurred where (i)
certain standard events of default or termination events have
occurred under any related Swap Agreement, including a Debt
Security Default (as defined herein) resulting in termination of
all affected Transactions under the Swap Agreement; (ii) the
Trustee incurs certain losses, liabilities or expenses in excess
of a specified "Trigger Amount" set forth in the Prospectus
Supplement (the "Trigger Amount"), which are to be indemnified by
the Depositor in an aggregate amount up to a Maximum Reimbursable
Amount set forth in the Prospectus Supplement (the "Maximum
Reimbursable Amount"), unless the Unitholders unanimously
undertake (or any Swap Counterparty undertakes) to indemnify the
Trustee as described under "Description of Trust Agreements -
Trust Wind-Up Events"; (iii) in certain circumstances if the
Trust holds Disqualified Securities as defined below (see
"--Termination Risk With Respect To Reporting Requirements"
below); and certain other events.
Upon an early termination of a Trust, any related Swap
Agreement, including each Transaction thereunder, will terminate
and any applicable Swap Termination Payment will be incurred or
received by the Trust.
Non-recourse Obligations. The Units will be obligations of
the applicable Trust and distributions of interest, premium (if
any) and principal thereon will only be made out of the
applicable Trust Property. Such Units will not represent
obligations of or interests in the Depositor, Morgan Stanley,
Morgan Stanley Dean Witter & Co. ("MSDW"), any Swap Counterparty,
the Trustee or any of their affiliates, except to the limited
extent described herein and in the applicable Prospectus
Supplement. None of the Depositor, Morgan Stanley, MSDW, any Swap
Counterparty, the Trustee or any of their affiliates or any other
person or entity, will be obligated to make payments on such
Units in the event that the applicable Trust Property is
insufficient to provide for such distributions and purchasers of
such Units will have
9
no recourse against any of them or their respective assets in
respect of payments not made on such Units.
Priority of Payment. No final distribution will be made to
Unitholders of a Trust until (i) all amounts due to the Swap
Counterparty under any related Swap Agreement, including any Swap
Termination Payment (as limited to a claim pro rata with that of
the Unitholders for the aggregate Unit Principal Balance other
than in connection with a Debt Security Default), and (ii) all
amounts due to the Trustee with respect to Extraordinary Trust
Expenses (as hereinafter defined) have been paid. Debt Securities
may be sold by the Trustee to fund such payments. It is possible
that all or a substantial part of such Trust Property may be
required to be paid to the Swap Counterparty and/or the Trustee
prior to the final distribution to Unitholders.
Potential Conflicts of Interest. The Swap Counterparty (or
an affiliate thereof) may act as calculation agent (the "Swap
Calculation Agent") under any Swap Agreement, and potential
conflicts of interest may exist between the Swap Calculation
Agent and the Trustee on behalf of the Unitholders, with respect
to the Swap Calculation Agent's determination of currency
exchange rates applicable to the Swap Agreement, certain
calculations with respect to interest on the Units or other
calculations or determinations with respect to the Swap
Agreement. See "Description of Swap Agreements - Interest on
Units" and "Description of Units - Interest of Units." The Swap
Calculation Agent is obligated to carry out its duties and
functions as Swap Calculation Agent in good faith.
The Swap Counterparty, Morgan Stanley or another affiliate
of Morgan Stanley may act as Selling Agent and will have the
right to sell Debt Securities upon such terms as it may determine
it its sole discretion (unless and until instructed to the
contrary by the Unitholders as provided under "Description of
Trust Agreement -- Sale of Debt Securities; Secured Party
Rights") where such sale is required to enable the Trust to make
payment of a Swap Termination Payment under any Swap Agreement.
The Selling Agent will be permitted to sell Debt Securities to
affiliates of the Selling Agent. Moreover, where a Swap
Termination Payment is owed to the Swap Counterparty, the
interests of the Swap Counterparty and the Unitholders with
respect to the liquidation of the Debt Securities may conflict.
The Selling Agent is an agent of the Trustee only and will have
no fiduciary or other duties to the Unitholders, nor will the
Selling Agent have any liability to the Trust in the absence of
the Selling Agent's bad faith or wilful default.
Currency Risks. To the extent specified in the
applicable Prospectus Supplement, the Units may be denominated in
a currency other than U.S. dollars. An investment in a Unit
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. In
particular, depreciation of the Specified Currency for such a
Unit against the U.S. dollar would result in a decrease in the
effective yield of such Unit below its Pass Through Rate and, in
certain circumstances, could result in a loss to the investor of
principal or interest or both on a U.S. dollar basis. Prospective
purchasers of such Units should consult their own financial and
legal
10
advisors as to the risks entailed by an investment in such Units
denominated in a currency other than U.S. dollars. Such Units are
not an appropriate investment for persons who are unsophisticated
with respect to foreign currency transactions. See "Currency
Risks".
Passive Nature of the Trust. The Trustee with respect to
any Series of Units will hold the Trust Property for the benefit
of the Unitholders. Each Trust will generally hold the related
Trust Property to maturity and not dispose of it, regardless of
adverse events, financial or otherwise, which may affect any Debt
Security Issuer or the value of the Trust Property. Under certain
circumstances the holders of the Units may direct the Trustee to
dispose of the Debt Securities or take certain other actions in
respect of the Trust Property.
Investing in the High Yield Debt Securities Market. If
specified in the applicable Prospectus Supplement, the Trust may
acquire high yield corporate debt obligations of U.S. or other
issuers rated below investment grade. High yield debt obligations
are generally unsecured, may be subordinated to other obligations
of the issuer and generally have greater credit and liquidity
risk than is typically associated with investment grade corporate
obligations. High yield obligations are often issued in
connection with leveraged acquisitions or recapitalizations in
which the issuers incur a substantially higher amount of
indebtedness than the level at which they had previously
operated.
High yield debt obligations have historically experienced
greater default rates than has been the case for investment grade
securities. Although studies have been made of historical default
rates in the high yield market, such studies do not necessarily
provide a basis for drawing definitive conclusions with respect
to default rates and, in any event, do not necessarily provide a
basis for predicting future default rates.
Investing in Emerging Markets. If specified in the
applicable Prospectus Supplement, the Trust may acquire emerging
market Debt Securities. Investing in the debt of emerging markets
involves special risks not associated with investing in more
established capital markets such as the United States and Western
Europe, including risks attributable to fluctuations in foreign
exchange rates, political, economic and diplomatic instability,
hyperinflation, expropriation, different legal systems, exchange
controls, confiscatory taxation, nationalization of private
businesses, or other governmental restrictions. Individual
economies may differ substantially with respect to growth of
gross national product, rates of inflation, capital reinvestment,
resources, self-sufficiency and balance of payments position. In
addition, certain foreign investments may be subject to foreign
withholding taxes or other taxes or changes in the rates or
methods of taxation applicable to the Trust or to the Debt
Security Issuer.
Smaller capital markets with substantially less volume than
capital markets of non-emerging markets are common in emerging
markets and the securities traded therein are generally less
liquid and securities prices are generally more volatile than
securities of comparable companies in non-emerging markets. A
limited number of issuers often represent a disproportionately
large percentage of market capitalization and trading value in
emerging markets. Should there be a Swap Default (as defined
below) and a Trust Wind-Up Event
11
resulting in the Unitholders receiving a distribution of their
pro rata share of the Debt Securities, the limited liquidity of
the securities markets of emerging markets may also affect the
Unitholders' ability to dispose of such Debt Securities at the
price and time they wish to do so. In addition, emerging markets
securities markets are susceptible to influence by large
investors trading significant blocks of securities or by large
dispositions of securities resulting from failure to meet margin
calls when due.
Disclosure and regulatory standards in emerging markets are
in many respects less stringent than those in other international
securities markets, with a low level of monitoring and regulation
of the market and market participants, and limited and uneven
enforcement of existing regulations. There may be less publicly
available information about an issuer in an emerging market
country than would be available in a non-emerging market, and the
issuer may not be subject to accounting, auditing and financial
reporting standards comparable to those of companies in
non-emerging markets. As a result, traditional investment
measurements, such as price/earnings ratios, may not be useful in
emerging markets.
Termination Risk With Respect to Reporting Requirements. If
an issuer of a Concentrated Debt Security ceases to file periodic
reports under the Exchange Act, the Depositor, on behalf of the
Trust, will not be able to meet applicable reporting requirements
of the Exchange Act. Accordingly, unless otherwise provided in
the Prospectus Supplement, if the issuer of any Concentrated Debt
Security ceases to be a reporting company under the Exchange Act
(such Debt Security a "Disqualified Security"), (i) a Termination
Event shall occur with respect to any Transaction related to such
Disqualified Security under any related Swap Agreement and the
Trust shall be required to sell Debt Securities to the extent
necessary to pay any related Swap Termination Payment; (ii) the
remaining Disqualified Securities shall be distributed pro rata
to the Unitholders; and (iii) a Trust Wind Up Event shall occur
if (A) the Trust holds only Disqualified Securities and no other
Trust Property or (B) if so provided in the Prospectus
Supplement.
The Prospectus Supplement for the Units may set forth
additional information regarding special considerations
applicable to such Units.
THE DEPOSITOR
The Depositor was incorporated in the State of Delaware on
September 21, 1998, as an indirect, wholly-owned, limited-purpose
subsidiary of MSDW. The address of the Depositor is at 1585
Broadway, New York, New York 10036, Attention: Secretary. Its
telephone number is (212) 761-1715. The Certificate of
Incorporation of the Depositor provides generally that the
business to be conducted by the Depositor is limited to
acquiring, holding and disposing of Debt Securities, arranging
for Credit Support, acting as Depositor of Trusts in connection
with Series of Units, registering the Units with the Commission
and complying on behalf of each Trust with the related reporting
and filing requirements under the Exchange Act, holding and
transferring interests in the Units and Retained Interests in the
Trust Property, and engaging in
12
other related activities and transactions. The Depositor is
required at all times to have at least one director which is not
affiliated with MSDW.
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 Units (whether or not offered hereby) will be
used by the Depositor to purchase the related Trust Property,
including, if specified in the related Prospectus Supplement,
arranging Credit Support, (including by making required deposits
into any Reserve Account (as defined below) or another account of
the Trustee for the benefit of the Unitholders of such Series or
Class). Any remaining net proceeds will be used by the Depositor
for general corporate purposes.
FORMATION OF TRUSTS
The Units of any Series will be issued by a Trust. Each
Trust will be established under the laws of New York pursuant to
a Trust Agreement to be entered into between the Depositor and
the Trustee, as more fully described in such Prospectus
Supplement. Concurrently with the execution and delivery of such
Trust Agreement, (i) the Depositor will transfer the related Debt
Securities and other Trust Property to the Trustee, in its
capacity as Trustee, for the benefit of the Unitholders and
deposit such Debt Securities in the related Trust, (ii) the
Trustee will enter into any Swap Agreement with the applicable
Swap Counterparty and accept the related Guarantee, if any.
The Trustee, on behalf of such Trust, will accept such Debt
Securities and other Trust Property and deliver Units to or upon
the order of the Depositor. The Depositor's transfer of such Debt
Securities to the Trustee will be without recourse.
The Trust Property with respect to a Trust will consist of:
(i) the related Debt Securities and all payments on or
collections in respect of such Debt Securities due after a
specified cut-off date (the "Cut-off Date") set forth in the
applicable Prospectus Supplement; (ii) all the Trustee's right,
title and interest under any Swap Agreement and any related
Guarantee; (iii) all the Trustee's right, title and interest in
any related Credit Support; (iv) all funds from time to time
deposited in certain segregated accounts held by the Trustee in
trust and for the benefit of the holders of the Units
representing interests in such Trust; and (v) any other asset
described in the applicable Prospectus Supplement as constituting
a portion of such Trust Property, in each case as more fully
described in this Prospectus or in such Prospectus Supplement,
and in each case exclusive of any interest retained by the
Depositor or a third party ("Retained Interest") in any of the
Debt Securities, the Swap Agreement or other assets constituting
Trust Property. The Units to be issued by a Trust will represent
fractional undivided interests in the related Trust Property and
claims of the holders of such Units on such Trust Property will
be subject to (i) if applicable, the security interest of the
Swap Counterparty with respect to amounts due to it under the
Swap Agreement, including, without
13
limitation, any Swap Termination Payments (as limited in the case
of a termination other than for a Debt Security Default to a
claim pro rata with that of the Unitholders), and (ii) the prior
claims of the Trustee with respect to any Extraordinary Trust
Expense. See "Risk Factors-Priority of Payment."
The Trustee will administer the Trust Property pursuant to
the related Trust Agreement and will perform such tasks with
respect to the related Units as are specified in such Trust
Agreement. As compensation and in payment of all its regular and
ordinary expenses, the Trustee will receive customary fees (the
"Trustee Fees"), which will, unless otherwise provided in the
applicable Prospectus Supplement, be paid by the Depositor or
another entity (other than any Trust). The Trustee will not have
any claim to or lien upon the related Trust or any of its
property in order to secure payment of the Trustee Fees. See
"Description of Trust Agreements - Trustee Compensation".
MATURITY AND YIELD CONSIDERATIONS
Each Prospectus Supplement will, to the extent applicable,
contain information with respect to the type and maturities of
the related Debt Securities and the terms, if any, upon which
such Debt Securities may be subject to early redemption (either
by the applicable obligor or pursuant to a third-party call
option), repayment (at the option of the holders thereof) or
extension of maturity. The provisions of the Debt Securities with
respect to the foregoing will, unless otherwise specified in the
applicable Prospectus Supplement, affect the weighted average
life of the related Series of Units.
The effective yield to holders of the Units of any Series
(and Class within such Series) may be affected by certain aspects
of the Trust Property or the manner and priorities of allocations
of collections with respect to such Trust Property between the
Classes of a given Series. With respect to any Series of Units
where the related Trust holds Debt Securities that consist of one
or more redeemable securities, extendable securities or
securities subject to a third-party call option, the yield to
maturity of such Series (or Class within such Series) may be
affected by any optional or mandatory redemption or repayment or
extension of the related Debt Securities prior to the stated
maturity thereof. A variety of tax, accounting, economic, and
other factors will influence whether a corporate issuer exercises
any right of redemption in respect of its securities. All else
remaining equal, if prevailing interest rates fall significantly
below the interest rates on the related Debt Securities, the
likelihood of redemption would be expected to increase. There can
be no certainty as to whether any Debt Security redeemable at the
option of the related Debt Security Issuer will be repaid prior
to its stated maturity.
Unless otherwise specified in the related Prospectus
Supplement, each of the Debt Securities will be subject to
acceleration upon the occurrence of certain Covenant Defaults (as
defined below). The maturity and yield on the Units will be
affected by any early repayment of the Debt Securities as a
result of the acceleration of the Outstanding Debt Securities (as
hereinafter defined) by the holders thereof. See "Description of
Trust Property -- Debt Security Agreement." If a Debt Security
Issuer becomes subject to a bankruptcy proceeding,
14
the timing and amount of payments with respect to both interest
and principal may be materially and adversely affected. A variety
of factors influence the performance of private debt issuers and
correspondingly may affect a Debt Security Issuer's ability to
satisfy its obligations under the Debt Securities, including the
company's operating and financial condition, leverage, and
social, geographic, legal and economic factors.
The extent to which the yield to maturity of such Units may
vary from the anticipated yield due to the rate and timing of
payments on the Trust Property 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 Trust Property.
The yield to maturity of any Series (or Class) of Units
will also be affected by variations in the interest rates
applicable to, and the corresponding payments in respect of, such
Units, to the extent that the Pass Through Rate (as defined
below) for such Series (or Class) is based on variable or
adjustable interest rates. With respect to any Series of Units
representing an interest in two or more Debt Securities,
disproportionate principal payments (whether resulting from
differences in amortization schedules, payments due on scheduled
maturity or upon early redemption) on the related Debt Securities
having interest rates higher or lower than the then applicable
Pass Through Rates applicable to such Units may affect the yield
thereon.
The Prospectus Supplement for each Series of Units will set
forth additional information regarding yield and maturity
considerations applicable to such Series (and each Class within
such Series) and the related Trust Property, including the
applicable Debt Securities.
DESCRIPTION OF TRUST PROPERTY
Unless otherwise set forth in the Prospectus Supplement,
the Debt Securities will have been purchased by the Depositor (or
an affiliate thereof) in the secondary market. Each Debt Security
which represents on the date of formation of the Trust 10% or
more by principal amount of the Debt Securities held by such
Trust (a "Concentrated Debt Security") will represent (i)
obligations of or guaranteed by the United States government,
obligations of the Federal National Mortgage Association or
Federal Home Loan Mortgage Corporation, or (ii) obligations of
one or more corporations, limited partnerships, trusts, limited
liability companies or other organizations, banking
organizations, insurance companies or foreign sovereigns or
political subdivisions or instrumentalities thereof (each a
"Foreign Sovereign"), in each case which are subject to the
informational requirements of the Exchange Act, and which, in
accordance therewith, file reports and other information with the
Commission (or another applicable agency pursuant to Section
12(i) of the Exchange Act) (and in the case of a Foreign
Sovereign, are current in their filings in accordance with such
requirements). If so specified in the related Prospectus
Supplement, the Trust for a Series of Units may also include, or
the Unitholders of such Units may have the benefit of, any
combination of insurance policies, letters of credit, reserve
accounts and other types of rights or assets
15
designed to support or ensure the servicing and distribution of
amounts due in respect of the Trust Property (collectively,
"Credit Support").
All information set forth in a Prospectus Supplement with
respect to a Concentrated Debt Security or any other Debt
Security will be derived solely from the description of such Debt
Security contained in a publicly available prospectus or offering
document relating to such Debt Security, if any ("Debt Security
Prospectus"), or other publicly available information. Unless
otherwise specified in the Prospectus Supplement, the Debt
Security Prospectus with respect to any Concentrated Debt
Security will have been filed with the Commission in connection
with the issuance of the related Debt Security or otherwise in
public filings by the related Debt Security Issuer. Prospective
purchasers of Units are urged to read this Prospectus and the
applicable Prospectus Supplement in conjunction with (i) each
related Debt Security Prospectus and (ii) each registration
statement of which any Debt Security Prospectus is a part (a
"Debt Security Registration Statement"). No representation is
made by the Trust, the Trustee or the Depositor or any of their
respective affiliates as to the accuracy or completeness of the
information contained in any Debt Security Prospectus or Debt
Security Registration Statement.
Unless otherwise indicated in a Prospectus Supplement, such
Prospectus Supplement will not provide information with respect
to any Debt Security Issuer (other than, in the case of the
issuer of a Concentrated Debt Security, the identity thereof),
and no investigation of the financial condition or
creditworthiness of any Debt Security Issuer or any of its
subsidiaries or other affiliates, or of the ratings, if any, on
the related Debt Securities, will have been made by the
Depositor, Morgan Stanley or the Trustee in connection with the
issuance of the related Units. Prospective purchasers of Units
should consider carefully each Debt Security Issuer's financial
condition and its ability to make payments in respect of the
related Debt Securities. All information contained in a
Prospectus Supplement regarding a Debt Security Issuer will be
derived from the related Debt Security Prospectus, reports filed
by the Debt Security Issuer pursuant to the Exchange Act, or
other publicly available information. Unless otherwise provided
in the Prospectus Supplement, none of the Depositor, Morgan
Stanley or the Trustee nor any of their respective affiliates has
participated in the preparation of any Debt Security Prospectus
or Debt Security Registration Statement or other public
information relating to the Debt Securities, and takes no
responsibility for the accuracy or completeness of the
information provided therein.
Reference is made to the applicable Prospectus Supplement
with respect to each Series of Units for a description of the
following terms, as applicable, of any Concentrated Debt
Security: (i) the title and series of such Concentrated Debt
Securities, the aggregate principal amount, denomination and form
thereof; (ii) whether such securities are senior or subordinated
to any other obligations of the related Debt Security 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 Concentrated Debt Securities will bear interest, if
any; the date or dates from which such
16
interest will accrue; and the dates on which such interest will
be payable; (vii) the obligation, if any, of the Debt Security
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 Debt
Security Issuer; (ix) whether the Debt Securities were issued at
a price lower than the principal amount thereof; (x) if other
than United States dollars, the foreign 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 Debt
Securities will be made, 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 Debt Securities; (xii) the rating thereof, if any; (xiii)
the Retained Interest, if any, with respect thereto; and (xiv)
any other material terms of such Debt Securities.
With respect to any portion of the Trust Property comprised
of Debt Securities other than Concentrated Debt Securities, the
related Prospectus Supplement will describe the composition of
such portion as of the Cut-off Date, certain material events of
default or restrictive covenants common to the Debt Securities,
and, on an aggregate, percentage or weighted average basis, as
applicable, the characteristics of such portion with respect to
the terms set forth in (ii), (iii), (v), (vi), (vii), (viii),
(ix) and (x) of the preceding paragraph and any other material
terms regarding such portion of the Trust Property.
In addition to the foregoing, with respect to each
Concentrated Debt Security the applicable Prospectus Supplement
will disclose the identity of the applicable obligor and any
trustee under the applicable Debt Security Agreement, and will
describe the existence and type of certain information that is
made publicly available by each obligor regarding such
Concentrated Debt Security or Concentrated Debt Securities and
will disclose where and how prospective purchasers of the Units
may obtain such publicly available information with respect to
each such obligor. Such publicly available information will
typically consist of the quarterly and annual reports filed under
the Exchange Act by such issuer with, and which are available
from, the Commission.
Debt Security Agreement
General. Unless otherwise specified in the related
Prospectus Supplement, each Debt Security will have been issued
pursuant to an indenture or other agreement (each, a "Debt
Security Agreement") between the Debt Security Issuer and, in
certain cases a trustee, or in other cases the initial purchasers
of such Debt Security. Except as specifically described in any
Prospectus Supplement, all information set forth therein with
respect to the provisions of any Debt Security Agreement
pertaining to a Concentrated Debt Security will be based solely
on the version of the Debt Security Agreement filed with the
Commission in connection with the registration of such
Concentrated Debt Security.
17
Certain Covenants. A Debt Security Agreement will generally
contain covenants intended to protect security holders against
the occurrence or effects of certain specified events, including
restrictions limiting the issuer's, and in some cases any of its
subsidiaries' 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 distributions on or in respect of, or
purchase, redeem, exchange or otherwise acquire or retire for
value any capital stock or subordinated indebtedness of the
issuer or its subsidiaries, if any. A Debt Security Agreement 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, a Debt Security Agreement typically may be amended or
supplemented and past defaults may be waived with the consent of
the indenture trustee (if any), the consent of the holders of not
less than a specified percentage of the outstanding securities or
both.
The Debt Security Agreement related to one or more Debt
Securities 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 Debt
Securities are investment grade debt they are unlikely to contain
significant restrictive covenants although certain non-investment
grade debt may not be subject to restrictive covenants either.
There can be no assurance that any such provision will protect
the Trust as a holder of the Debt Securities against losses. The
Prospectus Supplement used to offer any Series of Units will
describe material covenants in relation to any Concentrated Debt
Security (as defined below) and, as applicable, will describe
material covenants which are common to other Debt Securities
included in the Trust Property.
Events of Default. A Debt Security Agreement may 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 Debt Security Agreement which failure is
materially adverse to security holders and continues for a
specified period after notice thereof is given to the issuer;
(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 Debt Security Issuer.
Remedies. A Debt Security Agreement will generally
provide that upon the occurrence of an event of default, the
indenture trustee may, and upon the written request of the
holders of
18
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. In
certain cases, the indenture trustee or a specified percentage of
the holders of the outstanding securities will 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 Debt Security Agreement may or may not be in the form
of an indenture and 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 Units will describe the material terms
of the events of default under the Debt Security Agreement with
respect to any Concentrated Debt Security (each a "Covenant
Default") and applicable remedies with respect thereto. With
respect to any portion of the Trust Property comprised of Debt
Securities other than Concentrated Debt Securities, the
applicable Prospectus Supplement will describe certain common
Covenant Defaults with respect to such portion. There can be no
assurance that any such provision will protect the Trust, as a
holder of the Debt Securities, against losses. If a Covenant
Default occurs and the Trust as a holder of the Debt Securities
is entitled to vote or take such other action to declare the
principal amount of a Debt Security and any accrued and unpaid
interest thereon to be due and payable, the Unitholders'
objectives may differ from those of holders of other securities
of the same series and class as any Debt Security ("Outstanding
Debt Securities") in determining whether to declare the
acceleration of the Debt Securities.
Subordination. As set forth in the applicable Prospectus
Supplement, certain of the Debt Securities with respect to any
Trust may be either senior ("Senior Debt Securities") or
subordinated ("Subordinated Debt Securities") in right to payment
to other existing or future indebtedness of the Debt Security
Issuer. With respect to Subordinated Debt Securities, to the
extent of the subordination provisions of such securities, and
after the occurrence of certain events, security holders and
direct creditors whose claims are senior to Subordinated Debt
Securities, 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 Debt Security Issuer. There can be no assurance,
however, that in the event of a bankruptcy or similar proceeding
the Trust as a holder of Senior Debt Securities would receive
19
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 Units for a description of any
subordination provisions with respect to any Concentrated Debt
Securities and the percentage of Senior Debt Securities and
Subordinated Debt Securities, if any, in the portion of a Trust
comprised of other than Concentrated Debt Securities.
Secured Obligations. Certain of the Debt Securities with
respect to any Trust may represent secured obligations of the
Debt Security Issuer ("Secured Debt Securities"). Generally,
unless an event of default shall have occurred and is continuing,
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 Debt Security Agreement with respect to any Secured
Debt Security may include, some, all or none of the foregoing
provisions or variations thereof. The Prospectus Supplement used
to offer any Series of Units which includes Concentrated Debt
Securities which are Secured Debt Securities, will describe the
security provisions of such Debt Securities and the related
collateral. With respect to any portion of the Trust Property
comprised of Secured Debt Securities other than Concentrated Debt
Securities, the applicable Prospectus Supplement will disclose
certain general information with respect to such security
provisions and the collateral.
Other Trust Property
The Trust Property for a given Series of Units and the
related Trust will not constitute Trust Property for any other
Series of Units and the related Trust and the Units of each Class
of a given Series possess an equal and ratable undivided
ownership interest in such Trust Property. The applicable
Prospectus Supplement may, however, specify that certain assets
constituting a part of the Trust Property relating to any given
Series may be beneficially owned
20
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
Trust Property.
Credit Support
As specified in the applicable Prospectus Supplement for a
given Series of Units, the Trust for any Series of Units may
include, or the Unitholders 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 Units contains, or the Unitholders of such
Units 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 unless such obligor is subject to the
informational requirements of the Exchange Act.
Subordination. As discussed below under "--Collections,"
the rights of the Unitholders of any given Class within a Series
of Units to receive collections from the Trust for such Series
and any Credit Support obtained for the benefit of the
Unitholders of such Series (or Classes within such Series) may be
subordinated to the rights of the Unitholders 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 Unitholders of
those other Classes. If losses are realized during a given period
on the Trust Property relating to a Series of Units such that the
collections received thereon are insufficient to make all
distributions on the Units of such Series, those realized losses
would be allocated to the Unitholders of any Class of any 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 Unitholders 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 Units 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 Unitholders 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
21
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 Units of such Series.
Letter of Credit; Guaranty. The Unitholders of any Series
(or Class or group of Classes of Units 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 financial
guaranty or surety bond (a "Guaranty") issued by a financial
guarantor or surety company (a "Guarantor"). 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 Guaranty, 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 or claims under the Letter of
Credit or the Guaranty, as the case may be, under the
circumstances and to cover the amounts specified in the
applicable Prospectus Supplement. The applicable Prospectus
Supplement will provide 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
Guarantor, 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 Guaranty, 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 Guarantor, as applicable, will continue to satisfy such
requirements or that any such substitute Letter of Credit,
Guaranty 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 Guaranty (or similar credit enhancement)
may be reduced to the level otherwise available for the same cost
as the original Letter of Credit or Guaranty.
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 Trust
Property for a given Series of Units, in the manner and priority
specified in the applicable Prospectus Supplement.
22
The Trust Property will be identified in a schedule
appearing as an exhibit to the Trust Agreement.
DESCRIPTION OF SWAP AGREEMENTS
Concurrently with the formation of a Trust, the Trust may
enter into a related Swap Agreement. The following summaries
describe certain general provisions of the form of Swap Agreement
to be entered into in connection with issuances of Units. The
following summaries of provisions of the Swap Agreements do not
purport to be complete and are subject to the detailed provisions
of the form of Swap Agreement, filed as an exhibit to the
Registration Statement and in the manner set forth in the
applicable Prospectus Supplement. In addition, the specific terms
of each Transaction under the Swap Agreement, particularly the
method of calculation of payments by the Swap Counterparty
thereunder and the timing of such payments, will be set forth in
the applicable Prospectus Supplement.
General
As particularly described in the applicable Prospectus
Supplement, for any Trust, the Transaction or Transactions under
a related Swap Agreement may be one or more of the following: (i)
a rate swap transaction, basis swap, forward rate transaction,
commodity swap, commodity option, index swap, index option, bond
option, total rate of return swap, credit default swap, credit
spread put, credit spread call, interest rate option, foreign
exchange transaction, cap transaction, floor transaction, collar
transaction, currency swap transaction, cross currency rate swap
transaction, currency option or any other similar transaction
(including any option with respect to any of these transactions);
(ii) any combination of these transactions; or (iii) any other
transaction identified in such Swap Agreement or the relevant
confirmation and described in such Prospectus Supplement.
Unless otherwise indicated in the applicable Prospectus
Supplement, a Swap Agreement will be in the form of the 1992 ISDA
Master Agreement (Multicurrency - Cross Border) (the "1992 Master
Agreement") published by the International Swaps and Derivatives
Association, Inc. ("ISDA") and will incorporate the 1991 ISDA
Definitions (as published by ISDA, the "ISDA Definitions"), as
modified and supplemented by a schedule thereto (the "Schedule")
except as modified to reflect the terms of the related Units and
Trust Agreement and any specific terms of the Transaction or
Transactions under such Swap Agreement. Except as expressly set
forth in the Schedule or in any Prospectus Supplement, a Swap
Agreement will be governed in all relevant respects by the
provisions set forth in the 1992 Master Agreement and the ISDA
Definitions, without regard to any amendments or modifications to
the 1992 Master Agreement or the ISDA Definitions published by
ISDA subsequent to the date of such Swap Agreement.
Payments under Swap Agreements
In general, under a Swap Agreement, the related Trust and
the Swap Counterparty will each agree to exchange certain
payments on each payment date (each, a "Swap Payment Date")
23
under such Swap Agreement. The amounts to be exchanged by the
parties on a Swap Payment Date may both be floating amounts,
calculated with reference to one or more interest rate bases
(which may be one or more of the interest rate Base Rates
described under "Description of Units - Interest on Units") or
other types of bases, in each case as set forth in the applicable
Prospectus Supplement, or one such amount may be floating and the
other fixed. In addition, such amounts will also be calculated
with reference to the notional principal amount of the
Transaction or Transactions under such Swap Agreement, which,
unless otherwise specified in the applicable Prospectus
Supplement, as of any date of determination will be equal to the
then aggregate principal amount of the related Debt Securities
(as such amount may have been reduced through any redemption,
prepayment or exchange). The obligations of the Trust to the Swap
Counterparty will be secured by a security interest in the Trust
Property granted by the Trust in favor of the Swap Counterparty.
A Swap Agreement may provide for either periodic exchanges
of payment amounts or, in the case of Index-Linked Units, a
single exchange or series of exchanges upon one or more interest
payment dates or the maturity or prospective maturities of the
related Debt Securities, or both.
If specified in the applicable Prospectus Supplement, a
Swap Agreement may also document a call option granted by the
Trust, or a put option in favor of the Trust with respect to all
or a portion of the Debt Securities or other Trust Property. A
call option written by the Trust will effectively reserve to the
Swap Counterparty the right to realize all or a portion of the
gain from an increase in the market value of the specified Trust
Property at or prior to the maturity of the Units or to effect a
conversion of the Debt Securities into the right to receive
another security, rights which the Trust ordinarily will not be
entitled to exercise. Conversely, a put option in favor of the
Trust will generally be intended to protect the Trust in whole or
in part from a decline in the market value of the related Debt
Securities in circumstances where the Debt Securities may be
outstanding on the Scheduled Final Distribution Date with respect
to the Units. A put option written in favor of the Trust will,
unless otherwise specified in the Prospectus Supplement, be
automatically exercised by the Trustee upon the occurrence of
specified events.
Unless otherwise specified in the applicable Prospectus
Supplement, on any given Swap Payment Date (including a Swap
Payment Date occurring upon the maturity of the related Debt
Securities or a portion thereof), each exchange of payments in
the same currency will be settled on a "net payments" basis,
which means that only a single net payment will be due from one
of the parties under the Swap Agreement to the other. On each
Distribution Date with respect to Units in connection with which
the Trust has entered into a Swap Agreement, the Trustee will
have available for distribution to Unitholders funds equal to (i)
the amount of any payments received on the Swap Agreement and
other related Trust Property less (ii) all payments made by such
Trustee to the Swap Counterparty, in each case since the
immediately preceding Distribution Date. The effect of such Swap
Agreement, therefore, will be that holders of such Units will be
entitled to distributions of interest (and, in the case of
Index-Linked Units, of principal) thereon in accordance with the
terms of the Swap Agreement rather than the terms of the related
Debt Securities. Unless otherwise specifically provided in the
Prospectus
24
Supplement, the Swap Agreement will not provide coverage against
losses as a result of failure to receive payments on the related
Debt Securities, and no assurance can be given that the Trustee
will receive either any payment due to be received on such Debt
Securities or any net payment, if any, due to be received under
such Swap Agreement, in each case when due, or that the Trustee
will recover moneys under a related Guarantee, if any, upon a
payment default by the Swap Counterparty under such Swap
Agreement.
Modification and Amendment of Swap Agreements
Unless otherwise specified in the applicable Prospectus
Supplement, the related Trust Agreement will contain provisions
permitting the Trustee to enter into any amendment of a related
Swap Agreement requested by the Swap Counterparty to cure any
ambiguity in, or to correct or supplement any provision of, such
Swap Agreement, so long as (i) the Trustee determines that such
amendment will not materially and adversely affect the interests
of the holders of the Units and (ii) the Trustee has received an
opinion of counsel to the effect that such amendment will not
alter the classification of the related Trust for United States
Federal income tax purposes.
Defaults Under Swap Agreements
Unless otherwise noted in the applicable Prospectus
Supplement, "Events of Default" under the related Swap Agreement
(each, a "Swap Default") are limited to: (i) the failure of the
applicable Trust to pay any amount when due under the Swap
Agreement after giving effect to the applicable grace period, if
any; (ii) the failure of the applicable Swap Counterparty or the
Guarantor, if any, to pay any amount when due under such Swap
Agreement after giving effect to the applicable grace period, if
any; and (iii) certain other standard events of default under the
1992 Master Agreement including "Credit Support Default",
"Bankruptcy" and "Merger without Assumption", as described in
Sections 5(a)(iii), 5(a)(vii) and 5(a)(viii) of the 1992 Master
Agreement. Several of the standard events of default of the 1992
Master Agreement are not Events of Default under the Swap
Agreement. The standard events of default excluded are "Breach of
Agreement", "Misrepresentation", "Default Under Specified
Transaction" and "Cross Default" as described in Sections
5(a)(ii), 5(a)(iv), 5(a)(v) and 5(a)(vi), respectively, of the
1992 Master Agreement.
Termination Events
Unless otherwise specified in the applicable Prospectus
Supplement, "Termination Events" under the related Swap Agreement
consist of the following: (i) the occurrence of a Debt Security
Default with respect to a related Debt Security or Reporting
Event (each as defined below) with respect to a related
Concentrated Debt Security (which Termination Event shall apply
only to the specific Transaction under the Swap Agreement
relating to such Debt Security or Concentrated Debt Security, as
applicable); (ii) the occurrence of an Excess Expense Event (as
defined under "Description of Trust Agreements - Trust Wind-Up
Events"); (iii) other Trust Wind-Up Events; (iv) the occurrence
of an "Illegality" or "Tax Event" as described in Sections
5(b)(i) and 5(b)(ii) of the 1992 Master Agreement. With respect
to each
25
of (i), (ii) and (iii), both the Trust and the Swap Counterparty
will be deemed to be "Affected Parties" entitled to terminate the
Swap Agreement or the particular affected Transaction; however,
for purposes of the calculation of any Swap Termination Payment,
the Trust will be deemed the sole Affected Party. The "Tax Event
Upon Merger" and "Credit Event Upon Merger" Termination Event
contained in Section 5(b)(iii) and 5(b)(iv) of the 1992 Master
Agreement will not apply.
Early Termination of Swap Agreements
Unless otherwise specified in the applicable Prospectus
Supplement, upon the occurrence of a Termination Event of the
types referred to in clauses (i), (ii) and (iii) above under "-
Termination Events" or upon the occurrence of any Swap Default
arising from any action taken, or failure to act, by the Swap
Counterparty, the Trustee will by notice to the Swap Counterparty
terminate the Swap Agreement or the particular affected
Transaction thereunder (the date of such termination being an
"Early Termination Date"). With respect to other Termination
Events, the date on which the Swap Agreement will terminate
(also, an "Early Termination Date") must be designated by one of
the parties, as specified in each case in the Swap Agreement, and
will occur only upon notice and, in certain cases, after any
Affected Party (other than a Trust) has (or Affected Parties
have, if applicable) used reasonable efforts to transfer their
rights and obligations under such Swap Agreement to a related
entity within a limited time period after notice has been given
of the Termination Event, all as set forth in such Swap
Agreement. In the event that the Trustee becomes aware that a
Termination Event occurs with respect to which the Swap
Counterparty is the sole Affected Party, the Trustee will under
the terms of the Trust Agreement, designate a Termination Event;
provided, however, that if the Trust would thereby owe the Swap
Counterparty a Swap Termination Payment, it will not designate a
Termination Event. If a Termination Event occurs and, when
applicable, an Early Termination Date is designated, such Swap
Agreement (or the particular affected Transaction) will terminate
and Swap Termination Payments may be payable by the applicable
Trust to the applicable Swap Counterparty or by the applicable
Swap Counterparty to such Trust. The Selling Agent will be
authorized, in the absence of a unanimous decision by the
Unitholders to pay the Swap Termination Payment to sell Debt
Securities in order to fund such payments. See "Description of
Trust Agreements -- Trust Wind Up Events".
In addition to the termination events described above,
unless otherwise provided in the Prospectus Supplement, to the
extent that the aggregate principal amount of the Debt Securities
held by the Trust is reduced through redemption, prepayment or
exchange, the corresponding Swap Amount subject to the Swap
Agreement will be ratably reduced automatically without the Trust
or the Swap Counterparty incurring liability for a termination
payment.
In general, not all events of default under the applicable
Debt Security Agreement will trigger a Debt Security Default for
purposes of the Swap Agreement. Rather, unless otherwise
specified in the applicable Prospectus Supplement, a "Debt
Security Default" shall mean one of the following events: (i) the
acceleration of the outstanding Debt Securities under the terms
26
of the Debt Securities and/or the applicable Debt Security
Agreement; (ii) the failure of the applicable Debt Security
Issuer to pay an installment of principal of, or any amount of
interest due on, the related Debt Securities after the due date
thereof specified in such Prospectus Supplement and after the
expiration of any applicable grace period, or (iii) the
occurrence of certain events of default under such Debt
Securities and/or Debt Security Agreement relating to the
insolvency or bankruptcy of the applicable Debt Security Issuer.
Notwithstanding the existence of a grace period with respect to a
Debt Security, the failure of a Debt Security Issuer to make
timely payment of an amount required in order for the Trust to
make a related payment under the Swap Agreement may result in a
default by the Trust under the Swap Agreement prior to the
occurrence of a Debt Security Default.
A "Reporting Event" will occur where a Concentrated Debt
Security relating to a Transaction under the Swap Agreement has
become a Disqualified Security. See "Description of Trust
Agreements -- Trust Wind Up Events".
Swap Termination Payments
If the Swap Agreement is terminated prior to maturity
thereof, the market value of each Transaction under the Swap
Agreement will be established by one or both parties as specified
in the Swap Agreement either (a) on the basis of the market
quotations of the cost of entering into a replacement transaction
or (b) if such market quotations are unavailable or do not
produce a commercially reasonable result, based on losses
suffered by either party as a result of the termination of the
affected Transaction(s), in each case in accordance with the
procedures set forth in detail in the Swap Agreement. The market
value may be positive for the Trust or the termination may result
in a loss to the Trust, in which case a Swap Termination Payment
will be due from the Swap Counterparty to the Trust, or it may be
positive for or result in a loss to the Swap Counterparty, in
which case a Swap Termination Payment will be due to the Swap
Counterparty.
The resulting loss to Unitholders could, if interest rates,
currency rates and/or swap spreads have changed significantly
since the Closing Date, be quite substantial in relation to the
total value of the Debt Securities. The Trust may be required to
sell Debt Securities through the Selling Agent in order to pay
any Swap Termination Payments owed to the Swap Counterparty. In
connection with any Swap Termination Payment payable by the
Trust, the Unitholders may, acting unanimously, deliver to the
Trustee the amount of such outstanding Swap Termination Payment
(and any fees payable to the Trustee from Trust Property) and a
written instruction to discontinue sale of the Debt Securities.
It is possible that Debt Securities may be sold by the Selling
Agent in the time necessary for the Unitholders to be notified of
and act upon their rights under the foregoing provision, in which
case the Trustee will not be obligated to sell the Debt
Securities. The Swap Termination Payments payable by the Trust
will be limited to the assets of the Trust, and Unitholders will
not be liable to the Swap Counterparty for Swap Termination
Payments to the extent, if any, that the amount of such
termination payments exceeds the assets of the Trust. If the Swap
Agreement is terminated, any further distributions in respect of
the Debt Securities would be made pursuant to the Debt Securities
without the benefit of the Swap Agreement.
27
Unitholders could also be materially adversely affected if
the Trust is required to sell Debt Securities in order to pay
Swap Termination Payments at a time when prices for the Debt
Securities in the secondary market are depressed as a result of a
default on the Debt Securities or for any other reason. See "Risk
Factors."
If a Swap Agreement is terminated for reasons other than a
Debt Security Default, any Swap Termination Payment payable to
the Swap Counterparty will be limited to a claim against the
Trust Property pro rata with that of the Unitholders.
Guarantees of MSDW; Other Guarantees or Support
In general, unless otherwise specified in the applicable
Prospectus Supplement, the payment obligations of the Swap
Counterparty under the related Swap Agreement will be general,
unsecured obligations of such Swap Counterparty. With respect to
any Swap Agreement in which the Swap Counterparty is MSCS or if
set forth in the Prospectus Supplement, pursuant to the related
Guarantee to be delivered with respect to any such Swap
Agreement, MSDW will unconditionally and irrevocably guarantee
the due and punctual payment of all amounts payable by the Swap
Counterparty under such Swap Agreement. Pursuant to such
Guarantee, MSDW will agree to pay or cause to be paid all such
amounts upon the failure of the Swap Counterparty punctually to
pay any such amount and written demand by the Trustee to MSDW to
pay such amount. With respect to any Swap Agreement in which the
obligations of the Swap Counterparty are not guaranteed by MSDW,
the applicable Prospectus Supplement will describe the material
provisions of any Guarantee or other type of support, if any, of
the obligations of such Swap Counterparty.
MSDW
MSDW is a global financial services corporation organized
under the laws of the State of Delaware. MSDW's principal
executive offices are at 1585 Broadway, New York, New York 10036,
United States of America and its telephone number is (212)
761-4000. The long term debt of MSDW is currently rated "A1" by
Moody's and "A+" by S&P.
At prescribed rates, Unitholders may obtain copies of all
reports, proxy statements and other publicly available
information filed by MSDW with the Commission from the Public
Reference Section of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549, United States of America. Unitholders may
inspect and copy such materials at the Commission's Regional
Offices located at Suite 1400, Citicorp Center, 500 West Madison
Street, Chicago, Illinois 60661 and at Seven World Trade Center,
13th Floor, New York, New York 10048. In addition, the Commission
maintains a website that contains reports, proxy and other
information regarding registrants that file electronically, such
as MSDW. The address of the Commission's website is
http://www.sec.gov.
DESCRIPTION OF UNITS
28
The Units of any Series to be offered pursuant to this
Prospectus and the applicable Prospectus Supplement will be
issued pursuant to a Trust Agreement to be entered into between
the Depositor and the Trustee, which agreement will be in the
form filed as an exhibit to the Registration Statement. The terms
of a specific Series of Units will be set forth in the applicable
Prospectus Supplement to the extent they materially differ from
or are in addition to the general description of Units set forth
below. In addition to a general description of such Units, the
description set forth below also summarizes certain general
provisions of the form of Trust Agreement. Certain other general
provisions are summarized in this Prospectus under the caption
"Description of Trust Agreements". The provisions of Trust
Agreements may vary depending upon the terms of the Units to be
issued thereunder and the related Debt Securities and any Swap
Agreement and any Credit Support.
The following summaries do not purport to be complete and,
with respect to an issuance of Units to be offered pursuant to
this Prospectus and a Prospectus Supplement, are subject to the
detailed provisions of the related Trust Agreement and such
Units, to which reference is hereby made for a full description
of such provisions.
General
The Units of a particular Series to be issued under a Trust
Agreement will represent the entire beneficial ownership interest
in the Trust created pursuant to such Trust Agreement. The Units
issued under a Trust Agreement may be limited to a single class,
or, if so specified in the applicable Prospectus Supplement, a
Series of Units may include two or more Classes differing as to
entitlement to distributions of principal, interest or premium,
and one or more Classes may be subordinated in certain respects
to other Classes of such Series.
Reference is made to the applicable Prospectus Supplement
for a description of the following terms of the Series (and, if
applicable, Classes within such Series) of Units in respect of
which this Prospectus and such Prospectus Supplement are being
delivered: (i) the title of such Units; (ii) the Series of such
Units and, if applicable, the number and designation of Classes
of such Series; (iii) certain information concerning the type,
characteristics and specifications of the Trust Property being
deposited into the related Trust by the Depositor (and, with
respect to any Concentrated Debt Security, the identity of the
issuer thereof and where publicly available information regarding
such issuer 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,
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 Trust Property to the Unitholders of
each such Class); (vii) whether the Units of such Series or each
Class within such Series are Fixed Rate Units or Floating Rate
Units (each as defined below) and the applicable Pass Through
Rate for each such Class including the applicable rate, if fixed,
or the terms relating to the particular method of calculation
thereof applicable to such Series or each Class within such
Series, if variable, the date or dates from which such interest
29
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 (as
defined in the related Prospectus Supplement), if any; (viii) the
option, if any, of any Unitholder of such Series or Class to
withdraw a portion of the assets of the Trust in exchange for
surrendering such Unitholder's Unit or of the Depositor, or
another third party to purchase or repurchase any Trust Property
(in each case to the extent not inconsistent with the Depositor'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 ("Rule 3a-7"), as relevant) 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 (see
"--Optional Exchange"); (ix) the rating of each 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 Units 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
Units") and the applicable terms thereof; (xii) whether the Units
of such Series or of any Class within such Series are to be
issued as Registered Units or Bearer Units or both and, if Bearer
Units are to be issued, whether coupons will be attached thereto;
whether Bearer Units of such Series or Class may be exchanged for
Registered Units 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 Units 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 ("DTC"), for such Global Security or Securities;
(xiv) if a temporary Unit 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 Unit 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 Units 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 Units of such Series or
Class; (xvi) if other than U.S. dollars, the Specified Currency
applicable to the Units 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 Depositor or a Unitholder, 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) all applicable Required Percentages and Voting Rights
(each as defined below) relating to the manner and percentage of
votes of Unitholders of such Series and each Class within such
Series required with respect to certain actions by the Depositor,
if any, or Trustee under the Trust Agreement or with respect to
the applicable Trust; and
30
(xviii) any other terms of such Series or Class within such
Series of Units not inconsistent with the provisions of the Trust
Agreement relating to such Series.
Unless otherwise indicated in the applicable Prospectus
Supplement, Units of each Series (including any Class of Units
not offered hereby) will be issued only as Registered Units in
denominations of $1,000 and any integral multiple thereof and
will be payable only in U.S. dollars. The authorized
denominations of Registered Units 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. Unless otherwise specified in the applicable
Prospectus Supplement and if the purchaser of such Units has
elected to pay in U.S. dollars, the U.S. dollar equivalent of the
purchase price of Units having a Specified Principal Currency
other than U.S. dollars may be determined by the Exchange Rate
Agent in its sole discretion.
Unless otherwise provided in the applicable Prospectus
Supplement, Units may be transferred or exchanged for a like face
amount of Units at the corporate trust office or agency of the
Trustee in the City and State of New York, subject to the
limitations provided in the applicable Trust Agreement, without
the payment of any service charge, other than any tax or
governmental charge payable in connection therewith.
Bearer Units will be transferable by delivery. Provisions
with respect to the exchange of Bearer Units will be described in
the applicable Prospectus Supplement. Unless otherwise specified
in the applicable Prospectus Supplement, Registered Units may not
be exchanged for Bearer Units.
Morgan Stanley or an affiliate may at any time purchase
Units at any price in the open market or otherwise. Any Units so
purchased by Morgan Stanley or such affiliate may, at the
discretion of Morgan Stanley, be held or resold.
Distributions
In general, distributions allocable to principal, premium
(if any) and interest on any Units will be made in the Specified
Currency for such Units by or on behalf of the Trustee on each
Distribution Date as specified in the related Prospectus
Supplement. If the Specified Currency for Units is other than
U.S. dollars, the Exchange Rate Agent may, at its discretion and
upon request by the Unitholder in the manner set forth in the
Prospectus Supplement, arrange to convert all payments in respect
of any such Unit into U.S. dollars as described in the following
paragraph.
Unless otherwise specified in the applicable Prospectus
Supplement, in the case of a Unit having a Specified Currency
other than U.S. dollars, the amount of any U.S. dollar
distribution in respect of such Unit will be determined by the
Exchange Rate Agent in its sole discretion; provided, that the
Exchange Rate Agent is not required to provide any such exchange
rate. All currency exchange costs will be borne by the holders of
such Units by deductions from such distributions. If no such bid
quotations are available or if the Exchange Rate Agent elects not
to provide any such quotations at any time in its sole
discretion, such
31
distributions will be made in such Specified Currency, except in
the circumstances described under "Currency Risks".
Unless otherwise provided in the applicable Prospectus
Supplement and except as provided in the succeeding paragraph,
distributions with respect to Registered Units of any Series will
be made at the corporate trust office or agency of the Trustee in
The City of New York. U.S. dollar distributions on Registered
Units will be made by wire transfer of immediately available
funds to the holder of record on the relevant Record Date (as
specified in the applicable Prospectus Supplement) for such
distribution, but only if appropriate wire transfer instructions
have been received in writing by the Trustee for such Units not
later than 15 calendar days prior to the applicable Distribution
Date. However, in the case of Registered Units issued between a
Record Date and the related Distribution Date, interest for the
period beginning on the issue date for such Units and ending on
the last day of the interest accrual period immediately prior to
such Distribution Date will, unless otherwise specified in the
Prospectus Supplement, be distributed on the next succeeding
Distribution Date to the holders of the Registered Units on the
related Record Date. Simultaneously with the election by any
Unitholder to receive payments in a Specified Currency other than
U.S. dollars (as provided above), such Unitholder shall provide
appropriate wire transfer instructions to the Trustee for such
Registered Units, 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.
Unless otherwise indicated in the Pricing Supplement,
subject to the provisions described under "Limitations on
Issuance of Bearer Units," and to applicable laws and
regulations, payments in respect of interest or principal or
premium on Bearer Units will be payable only upon surrender of
applicable coupons, if any, or Units, respectively, and at such
offices or agencies outside the United States as the Trustee may
from time to time designate.
Unless otherwise specified in the applicable Prospectus
Supplement, "Business Day" with respect to any Unit 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 and in the
city where the corporate trust office of the Trustee is located
or (b) if the Specified Currency for such Unit is other than U.S.
Dollars, the financial center of the country issuing such
currency and (ii) if the Pass Through Rate for such Unit is based
on LIBOR, a London Banking Day. "London Banking Day" with respect
to any Unit means any day on which dealings in deposits in the
Specified Currency of such Unit are transacted in the London
interbank market.
Interest on Units
General. Each Class of Units (other than certain Classes of
Strip Units) of a given Series may have a different Pass Through
Rate as described below. In the case of Strip Units with no or,
in certain cases, a nominal Unit Principal Balance, distributions
of interest will be in an amount described in the related
Prospectus Supplement. For purposes hereof, "Notional
32
Amount" means the notional principal amount specified in the
applicable Prospectus Supplement on which interest on Strip Units
with no or, in certain cases, a nominal Unit Principal Balance
will be made on each Distribution Date. Reference to the Notional
Amount of a Class of Strip Units herein or in a Prospectus
Supplement does not indicate that such Units 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 Units. Each Unit having a fixed Pass Through
Rate (a "Fixed Rate Unit") will bear interest, on the outstanding
Unit Principal Balance (or Notional Amount, if applicable) (as
described below under "Principal of Units - General") thereof,
from its original issue date, or from the last Distribution 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 Units
with no or a nominal principal amount, until the Notional Amount
thereof is reduced to zero), except that, if so provided under
the terms of a related Swap Agreement or the terms of the Debt
Securities, 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
Units by one or more rating agencies, in accordance with a
schedule or otherwise, all as described in such Prospectus
Supplement. Unless otherwise specified in the applicable
Prospectus Supplement, interest will be distributable in arrears
on each Distribution Date with respect to such Fixed Rate Units.
Floating Rate Units. As specified in the applicable
Prospectus Supplement, each Unit having a variable Pass Through
Rate (a "Floating Rate Unit") will bear interest, on the
outstanding Unit Principal Balance (or Notional Amount, if
applicable) thereof from its original issue date to the first
Interest Reset Date (as defined below) at the initial Pass
Through Rate set forth 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 provided under the terms of a related
Swap Agreement or the terms of the Debt Securities, the Spread or
Spread Multiplier on such Series or any such Class or Classes of
Floating Rate Units may be subject to adjustment from time to
time in response to designated changes in the rating assigned to
such Units by one or more rating agencies, in accordance with a
schedule or otherwise, all as described in such Prospectus
Supplement. The applicable Prospectus Supplement may designate
one or more of the following Base Rates as a reference for the
calculation of payments under the related Swap Agreement, which
will determine the interest rate to be payable on the Floating
Rate Units: (i) LIBOR (a "LIBOR Unit"); (ii) the Commercial Paper
Rate (a "Commercial Paper Rate Unit");
33
(iii) the Treasury Rate (a "Treasury Rate Unit"); (iv) the
Federal Funds Rate (a "Federal Funds Rate Unit"); (v) the CD Rate
(a "CD Rate Unit"); 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)
made with respect to a designated asset or pool of assets) as is
set forth in such Prospectus Supplement and in such Floating Rate
Unit. The "Index Maturity" for any Floating Rate Unit 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.
If specified in the applicable Prospectus Supplement, a
Series of Floating Rate Units 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 (a
"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 (a "Minimum Pass Through Rate"). In
addition to any Maximum Pass Through Rate that may be applicable
to any Floating Rate Units, the Pass Through Rate applicable to
any Floating Rate Units 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.
Unless otherwise specified in the Prospectus Supplement,
the Pass Through Rate applicable to the Units will be the
equivalent floating rate applicable to payments received by the
Trust under any related Swap Agreement (as determined by the Swap
Calculation Agent) or under the Debt Securities. If the
Prospectus Supplement specifies a Calculation Agent, the
Calculation Agent shall calculate the Pass Through Rate
applicable to the Units from time to time as specified in the
Prospectus Supplement. 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 Units.
Unless otherwise specified in the applicable Prospectus
Supplement, the Pass Through Rate on each Series of Floating Rate
Units will be reset daily, weekly, monthly, quarterly,
semiannually or annually (such period being the "Interest Reset
Period" for such issuance, and the first day of each Interest
Reset Period being an "Interest Reset Date"), as specified in the
applicable Prospectus Supplement. The Interest Reset Dates with
respect to a given Series of Floating Rate Units will be
specified in the applicable Prospectus Supplement. However,
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 Floating Rate Units 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.
34
Unless otherwise specified in the applicable Prospectus
Supplement, interest payable in respect of Floating Rate Units
shall be the accrued interest from and including the original
issue date thereof 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 Interest Reset Date.
With respect to a Floating Rate Unit, accrued interest
shall be calculated by multiplying its Unit Principal Balance (or
Notional Amount, if applicable) by the accrued interest factor of
such Floating Rate Unit. 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 Units, Commercial Paper
Rate Units, Federal Funds Rate Units and CD Rate Units or by the
actual number of days in the year, in the case of Treasury Rate
Units. For purposes of making the foregoing calculation, the 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 Unit 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 Units will be rounded to the nearest one-hundredth
of a unit (with .005 of a unit being rounded upward).
Interest on any Series of Floating Rate Units 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.
LIBOR Units. Each LIBOR Unit will bear interest for each
Interest Reset Period at a Pass Through Rate calculated with
reference to LIBOR, as specified in such Unit and in the
applicable Prospectus Supplement.
With respect to LIBOR indexed to the offered rates for U.S.
dollar deposits, "LIBOR" for each Interest Reset Period will be
determined by the Calculation Agent for any LIBOR Unit 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 Unit will determine (a) if "Reuters" is specified in
the applicable Prospectus Supplement, the arithmetic mean
of the offered rates for deposits in U.S. dollars for the
period of the Index Maturity which appear on the Reuters
Screen LIBO Page at approximately 11:00 a.m., London time,
on such LIBOR Determination Date if at least two such
offered rates appear on the Reuters Screen LIBO Page
("LIBOR Reuters"), or
35
(b) if "Telerate" is specified in the applicable Prospectus
Supplement, the rate for deposits in U.S. dollars for the
period of the Index Maturity that appears on the Telerate
Page 3750 at approximately 11:00 a.m., London time, on such
LIBOR Determination Date ("LIBOR Telerate"). "Reuters
Screen LIBO Page" means the display designated as Page
"LIBO" on the Reuters Monitor Money Rates Service (or such
other page as may replace the LIBO page on that service for
the purpose of displaying London interbank offered rates of
major banks). "Telerate Page 3750" means the display
designated as page "3750" on the Telerate Service (or such
other page as may replace the 3750 page on that service or
such other service or services as may be nominated by the
British Bankers' Association for the purpose of displaying
London interbank offered rates for U.S. dollar deposits).
If neither LIBOR Reuters nor LIBOR Telerate is specified in
the applicable Prospectus Supplement, LIBOR will be
determined as if LIBOR Telerate had been specified. If
fewer than two offered rates appear on the Reuters Screen
LIBO Page, or if no rate appears on the Telerate Page 3750,
as applicable, LIBOR in respect of that LIBOR Determination
Date will be determined as described in (ii) below.
(ii) If fewer than two offered rates appear on the
Reuters Screen LIBO Page on such LIBOR Determination Date
or no rate appears on Telerate Page 3750, the Calculation
Agent for such LIBOR Unit 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 less than $1
million 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 Unit 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 million 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 Unit 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.
36
Commercial Paper Rate Units. Each Commercial Paper Rate
Unit will bear interest for each Interest Reset Period at a Pass
Through Rate calculated with reference to the Commercial Paper
Rate (subject to any Maximum or Minimum Pass Through Rate, if
any), as specified in such Unit 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 Unit 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 9:00 a.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 Unit 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 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 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
37
(b) the second Business Day preceding the date any distribution
of interest is required to be made following the applicable
interest Reset Date.
Treasury Rate Units. Each Treasury Rate Unit will bear
interest for each Interest Reset Period at a Pass Through Rate
calculated with reference to the Treasury Rate (subject to any
Maximum or Minimum Pass Through Rate, if any), as specified in
such Unit 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 Units-Treasury
bills-auction average (investment)" or, in the event that such
rate is not published prior to 9:00 a.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 Unit
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 Series Prospectus
Supplement, if an auction date shall fall on any day that would
otherwise be an
38
Interest Reset Date for a Treasury Rate Unit, 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.
Federal Funds Rate Units. Each Federal Funds Rate Unit will
bear interest for each Interest Reset Period at a Pass Through
Rate calculated with reference to the Federal Funds Rate (subject
to any Maximum or Minimum Pass Through Rate, if any), as
specified in such Unit 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 9:00 a.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 Unit that resets
daily, the Pass Through Rate on such Unit for the period from and
including a Monday to but excluding the succeeding Monday will be
reset by the Calculation Agent for such Unit 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.
CD Rate Units. Each CD Rate Unit will bear interest for
each Interest Reset Period at a Pass Through Rate calculated with
reference to the CD Rate (subject to any Maximum or
39
Minimum Pass Through Rate, if any), as specified in such Unit 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 9:00 a.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 Unit 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 Unit 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 specified in the related
Prospectus Supplement which shall in no event be less than
$100,000; 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.
Principal of Units
General. Unless the applicable Prospectus Supplement
provides otherwise, each Unit will have a "Unit Principal
Balance" which, at any time, will equal the maximum amount that
the holder thereof will be entitled to receive in respect of
principal from the related Debt Securities, subject to any
requirement that distributions of principal on Index-Linked Units
be determined in accordance with the terms of the related Swap
Agreement.
40
The outstanding Unit Principal Balance of a Unit 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 the Trust Property allocated
thereto. Unless the related Prospectus Supplement provides
otherwise, the initial aggregate Unit Principal Balance of all
Classes of Units of a Series will equal the outstanding aggregate
principal balance of the related Trust Property as of the
applicable Cut-off Date. The initial aggregate Unit Principal
Balance of a Series and each Class thereof will be specified in
the related Prospectus Supplement. Distributions of principal of
any Class of Units will be made on a pro rata basis among all the
Units of such Class. Strip Units with no Unit Principal Balance
will not receive distributions of principal.
Index-Linked Units. From time to time, the Trust may offer
a Series of Units ("Index-Linked Units"), the principal amount
payable at the stated maturity date of which (the "Indexed
Principal Amount") and/or interest amounts with respect to which
are determined by reference to (i) the rate of exchange between
the specified currency for such Unit and the other currency (the
"Indexed Currency") specified therein; (ii) the difference in the
price of a specified commodity (the "Indexed Commodity") on
specified dates; (iii) the difference in the level of a specified
stock index (the "Stock Index"), which may be based on U.S. or
foreign stocks, on specified dates; or (iv) such other objective
price or economic measure as are described in the related
Prospectus Supplement. The manner of determining the Indexed
Principal Amount of a Index-Linked Unit, and historical and other
information concerning the Indexed Currency, Indexed Commodity,
Stock Index or other price or economic measure used in such
determination, will generally be set forth under a related Swap
Agreement and will be specified in the related Prospectus
Supplement. Index-Linked Units will be issued only to the extent
consistent with qualification of the Trust under Rule 3a-7, as
applicable.
Except as otherwise specified in the related Prospectus
Supplement, interest on a Index-Linked Unit will be payable based
on the amount designated in the related Prospectus
Supplement as the "Face Amount" of such Index-Linked Unit. The
related Prospectus Supplement will describe whether the principal
amount of the related Index-Linked Unit that would be payable
upon redemption or repayment prior to the stated maturity date
will be the Face Amount of such Index-Linked Unit, the Indexed
Principal Amount of such Index-Linked Unit at the time of
redemption or repayment, or another amount described in such
Prospectus Supplement.
Foreign Currency Units
If the specified currency of any Unit is not U.S. dollars
(a "Foreign Currency Unit"), certain provisions with respect
thereto will be set forth in the related Prospectus Supplement
which will specify the denominations, the currency or currencies
in which the principal and interest with respect to such Unit are
to be paid and any other terms and conditions relating to the
non-U.S. dollar denominations or otherwise applicable to the
Units.
41
Dual Currency Units
Units may be issued as dual currency units ("Dual Currency
Units"), in which case payments of principal and/or interest in
respect of Dual Currency Units will be made in such currencies.
The exchange rates will be calculated upon such bases, as
indicated in the Units and described in the related Prospectus
Supplement. Other material terms and conditions relating to Dual
Currency Units will be set forth in the Units and the related
Prospectus Supplement.
Call Rights
If one or more specified persons has the right to purchase
all or a portion of the Units of any given Series, the applicable
Prospectus Supplement will designate such Series as a "Callable
Series". The terms upon which any such specified person or entity
may exercise its right to purchase all or a portion of the Units
of a Series will be specified in the related Prospectus
Supplement. Such terms may relate to, but are not limited to, the
following:
(a) a minimum Unit Principal Balance with respect to
each Unit being purchased;
(b) a requirement that the Unit Principal Balance of
each Unit being purchased be an integral multiple of an
amount specified in the Prospectus Supplement;
(c) specified dates during which such a purchase may
be effected (each, a "Call Date"); and
(d) the price at which such a purchase may be effected
(the "Call Price").
After receiving notice of the exercise of such a call
right, the Trustee will provide notice thereof as specified in
the applicable Prospectus Supplement. Upon the satisfaction of
any applicable conditions to the exercise of such right to
purchase of the Units described in such Prospectus Supplement,
each Unitholder of a Unit that has been called will be entitled
to receive a distribution of a pro rata share of the Call Price
paid in connection with such exercise, in the manner and to the
extent described in such Prospectus Supplement.
Optional Exchange
If a holder may exchange Units of any given Series for a
pro rata portion of the Trust Property, an "Exchangeable Series,"
the terms upon which a holder may exchange Units of any
Exchangeable Series for a pro rata portion of the Trust Property
of the related Trust will be specified in the related Prospectus
Supplement and/or the related Trust Agreement; provided that any
right of exchange shall be exercisable only to the extent that
such exchange would not be inconsistent with the Depositor's and
such Trust's continued satisfaction of the applicable
requirements for exemption under Rule 3a-7, as applicable. Such
terms may relate to, but are not limited to, the following:
42
(i) a requirement that the exchanging holder tender to
the Trustee Units of each Class within such Exchangeable
Series;
(ii) a minimum Unit Principal Balance or Notional
Amount, as applicable, with respect to each Unit being
tendered for exchange;
(iii) a requirement that the Unit Principal Balance or
Notional Amount, as applicable, of each Unit tendered for
exchange be an integral multiple of an amount specified in
the Prospectus Supplement;
(iv) specified dates during which a holder may effect
such an exchange (each, an "Optional Exchange Date");
(v) limitations on the right of an exchanging holder
to receive any benefit upon exchange from any Credit
Support or other non-Debt Securities deposited in the
applicable Trust;
(vi) 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 as set forth
in the applicable Prospectus Supplement; and
(vii) a requirement that the exchanging holder obtain
the consent of any Swap Counterparty to such exchange and
tender to the Swap Counterparty a termination payment in
respect of termination of any portion of the Swap Agreement
corresponding to the portion of the Debt Securities to be
distributed by the Trustee.
Unless otherwise specified in the related Prospectus
Supplement, in order for a Unit of a given Exchangeable Series
(or Class within such Exchangeable Series) to be exchanged by the
applicable Unitholder, the Trustee for such Unit 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
Unit with the form entitled "Option to Elect Exchange" on the
reverse thereof duly completed or (ii) in the case of Registered
Units, 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 Unit, the Unit Principal Balance or
Notional Amount of such Registered Unit to be exchanged, the
certificate number or a description of the tenor and terms of
such Registration Unit, a statement that the option to elect
exchange is being exercised thereby and a guarantee that the
Registered Unit to be exchanged with the form entitled "Option to
Elect Exchange" on the reverse of the Registered Unit 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 Unit
and form duly completed must be received by such
43
Trustee by such fifth Business Day. Any tender of a Unit by the
holder for exchange shall be irrevocable. The exchange option may
be exercised by the holder of a Unit for less than the entire
Unit Principal Balance of such Unit provided that the Unit
Principal Balance or Notional Amount, as applicable, of such Unit
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 Unit shall be canceled and a new Unit or Units for
the remaining Unit Principal Balance thereof shall be issued
(which, in the case of any Registered Unit, shall be in the name
of the holder of such exchanged Unit).
Unless otherwise provided in the applicable Prospectus
Supplement, upon the satisfaction of the foregoing conditions and
any applicable conditions with respect to the related Trust
Property, as described in such Prospectus Supplement, the
applicable Unitholder will be entitled to receive a distribution
of a pro rata share of the Trust Property related to the
Exchangeable Series (and Class within such Exchangeable Series)
of the Unit 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 Unitholder, upon satisfaction of such conditions, may
direct the related Trustee to sell, on behalf of such Unitholder,
such pro rata share of the Trust Property, in which event the
Unitholder 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.
Ratings of Units
At the time of issue, the Units 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 Units is based
primarily on the related Trust Property and the relative
priorities of the Unitholders of such Series or Class to receive
collections from, and to assert claims against, the Trust with
respect to such Trust Property. 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 Units may not be
offered pursuant to this Prospectus, in which case such Class or
Classes will not necessarily be rated in an investment grade
category by a Rating Agency.
In general, a credit 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. The rating
also does not comment as to market price or suitability for a
particular investor. In addition, any credit rating will be
limited in scope to its terms. Prospective purchasers of Units
are urged to review in its entirety any disclosure relating to
any rating of such Units that is contained in the applicable
Prospectus Supplement, including the text of any such rating
letter or letters, if provided.
44
Form
Subject to the "Limitations on Issuance of Bearer Units"
set forth herein, each Series and Class of Units may be issued in
fully registered form without interest coupons ("Registered
Units") or, in bearer form with or without coupons attached
("Bearer Units"), as one or more global securities in registered
or bearer form (each a "Global Security") or as individual
securities in definitive form with or without coupons
("Definitive Units"). Registered Units will be transferable on
the records of the Unit Register (as defined below) maintained by
the Trustee. Unless otherwise specified in the applicable
Prospectus Supplement, all Units 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, DTC (only for
Registered Units denominated and payable in U.S. dollars), Morgan
Guaranty Trust Company of New York, Brussels office, as operator
of the Euroclear System ("Euroclear"), Cedel Bank, S.A.
("CEDEL"), or another entity specified in the Prospectus
Supplement (any of the foregoing a "Depositary"). Global
Securities may be issued in either registered or bearer form and
in either temporary or permanent form. Global Securities
representing Registered Units will be registered in the name of a
nominee of the Depositary, and will clear and settle in
book-entry form ("Book-Entry Units") only through the facilities
of one or more Depositaries. Unless and until it is exchanged in
whole or in part for the individual Units represented thereby, 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.
With respect to each Series of Registered Units, the
Trustee will maintain a register (the "Unit Register") in which,
subject to such reasonable regulations as it may prescribe, the
Trustee will provide for the registration of Units of each Series
and the registration of transfers of such Units. No service
charge will be payable with respect to any transfer of Units, but
the Trustee may require payment of a sum sufficient to cover any
tax or government charge that may be imposed in connection with
any such transfer.
Unless otherwise specified in the applicable Prospectus
Supplement, because initially and until Definitive Units are
issued, each Unit will be represented by a Global Security, the
Depositary's nominee will be the Unitholder of such Unit 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
Unit, the beneficial owner of such Unit must instruct the broker
or other direct or indirect participant through which it holds an
interest in such Unit 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 Unit 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.
45
DTC is a limited-purpose trust company organized under the
New York Banking Law, a "banking organization" within the meaning
of the New York Banking Law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Exchange Act.
DTC holds securities that its participants ("Participants")
deposit with DTC. DTC also facilitates the settlement among
Participants of securities transactions, such as transfers and
pledges, in deposited securities through electronic computerized
book-entry changes in Participants' accounts, thereby eliminating
the need for physical movement of securities certificates.
Participants in DTC include securities brokers and dealers,
banks, trust companies, clearing corporations and certain other
organizations ("Direct Participants"). DTC is owned by a number
of its Direct Participants and by the New York Stock Exchange
Inc., the American Stock Exchange, Inc., and the National
Association of Securities Dealers, Inc. Access to the DTC system
is also available to others, such as securities brokers and
dealers, banks and trust companies that clear transactions
through or maintain a direct or indirect custodial relationship
with a Direct Participant, either directly or indirectly
("Indirect Participants"). The rules applicable to DTC and its
Participants are on file with the Commission.
Conveyance of notices and other communications by DTC to
Direct Participants, by Direct Participants to Indirect
Participants, and by Direct Participants and Indirect
Participants to beneficial owners of the Units will be governed
by arrangements among them, subject to any statutory or
regulatory requirements as may be in effect from time to time.
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 or notional
amounts, if applicable, of the individual Units represented by
such Global Security to the accounts of its participants. The
accounts to be accredited shall be designated by the underwriters
of such Units, or, if such Units are offered and sold directly
through one or more agents, by the Depositor 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
Unitholder of the individual Units represented by such Global
Security for all purposes under the Trust Agreement governing
such Units. Except as set forth below, owners of beneficial
interests in a Global Security will not be entitled to have any
of the individual Units represented by such Global Security
registered in their names, will not receive or be entitled to
receive physical delivery of any such Units and will not be
considered the Unitholder thereof under the Trust Agreement
governing such Units. Because the Depositary can only act on
46
behalf of its participants, the ability of a holder of any Unit
to pledge that Unit to persons or entities that do not
participate in the Depositary's system, or to otherwise act with
respect to such Unit, may be limited due to the lack of a
physical certificate for such Unit.
Subject to the restrictions discussed under "Limitations on
Issuance of Bearer Units" below, distributions of principal of
(and premium, if any) and any interest on individual Units
represented by a Global Security will be made to the Depositary
or its nominee, as the case may be, as the Unitholder of such
Global Security. None of the Depositor, the Trustee for such
Units, any paying agent or the Unit registrar for such Units will
have 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
Depositor expects that the Depositary for Units 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 Units, 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 Depositor 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 Units".
If the Depositary for Units of a given Class of any Series
is at any time unwilling or unable to continue as depositary and
a successor depositary is not appointed by the Depositor within
thirty days, the Depositor will issue individual Definitive Units
in exchange for the Global Security or Securities representing
such Units. In addition, the Depositor may at any time and in its
sole discretion determine not to have any Units of a given Class
represented by one or more Global Securities and, in such event,
will issue individual Definitive Units of such Class in exchange
for the Global Security or Securities representing such Units.
Further, if the Prospectus Supplement so specifies with respect
to the Units of a given Class, an owner of a beneficial interest
in a Global Security representing Units of such Class may, on
terms acceptable to the Depositor and the Depositary of such
Global Security, receive individual Definitive Units 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 Units of the Class
represented by such Global Security equal in principal amount or
notional amount, if applicable, to such beneficial interest and
to have such Definitive Units registered in its name (if the
Units of such Class are issuable as Registered Units). Individual
Definitive Units of such Class so issued will be issued (a) as
Registered Units in denominations, unless otherwise specified by
the Depositor or in the related Prospectus Supplement, of $1,000
and integral multiples thereof if the Units of such Class are
issuable as Registered Units, (b) as Bearer Units in the
denomination or denominations specified by the Depositor or as
specified in the related Prospectus Supplement if the Units of
such Class are issuable as Bearer Units or (c) as either
Registered or Bearer Units, if the Units of such Class
47
are issuable in either form. See "Limitations on Issuance of
Bearer Units" below for a description of certain restrictions on
the issuance of individual Bearer Units 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 Units being offered thereby to the extent not
set forth or different from the description set forth above.
European Monetary Union
Unless otherwise provided in an applicable Prospectus
Supplement, the Depositor may, without the consent of the
Unitholders, on giving at least 30 days' prior notice to
Unitholders, the relevant clearing systems and the Trustee,
designate a date (a "Redenomination Date"), being a date for
payment of interest under Units which are denominated in any of
the currencies of the countries which are member states of the
European Community that are participating in the third stage of
economic and monetary union pursuant to the Treaty establishing
the European Community (the "Treaty") falling on or after the
start of such third stage or, if the country of the specified
currency is not one of the countries then participating in such
third stage, the Redenomination Date in respect of such Units
shall be such date designated by the Depositor, falling on or
after such later date as it does so participate.
"Euro" means the currency to be introduced at the start of
the third stage of economic and monetary union pursuant to the
Treaty.
With effect from the Redenomination Date notwithstanding
the other provisions of the Units:
(i) Such Units shall (unless already so provided by
mandatory provisions of applicable law) be deemed to be
redenominated into Euro in the denomination of Euro 0.01
with an aggregate principal amount equal to their aggregate
principal amount in the Specified Currency, converted into
Euro at the rate for the conversion of the specified
currency into Euro established by the Council of the
European Union pursuant to the Treaty (including compliance
with rules relating to roundings in accordance with
European Community regulations).
(ii) If definitive Units are required to be issued
they shall be in the denominations of Euro 0.01, Euro
1,000, Euro 10,000, Euro 100,000 and such other
denominations as the Trustee shall determine after
consultation with the relevant clearing systems and notify
Unitholders.
(iii) All unmatured coupons denominated in the
specified currency (whether or not attached to such Units)
will become void and no payments will be made in respect of
them. New Units in respect of Euro-denominated Units and
coupons will be issued in exchange for the specified
currency Units and coupons in such manner as the Trustee
may specify and notify to Unitholders.
48
(iv) All payments in respect of the Units (other than
payments of interest in respect of periods commencing
before the Redenomination Date) will be made solely in
Euro. Such payments will be made in Euro by credit or
transfer to a Euro account (or any other account to which
Euro may be credited or transferred) specified by the payee
or by check.
(v) A redenominated Unit or coupon may only be
presented for payment on a day which is a day on which the
relevant clearance system is operating.
(vi) The amount of interest due in respect of such
Units will be calculated by reference to the aggregate
principal amount of Units presented (or, as the case may
be, in respect of which coupons are presented) for payment
by the relevant holder and the amount of such payment shall
be rounded down to the nearest Euro 0.01.
Following any redenomination of Units pursuant to the
foregoing provisions, the amount of interest due in respect of
such Units represented by any Global Security will be calculated
by reference to the aggregate principal amount of such Units and
the amount of such payment shall be rounded down to the nearest
Euro 0.01.
If a Unit redenominated in accordance with this section is
a Floating Rate Unit, the Pass Through Rate that shall apply to
such Unit from, and including, the Distribution Date falling on
or immediately prior to the Redenomination Date shall be (i) the
interest rate which applied to such Unit prior to the
redenomination, with "Euros" substituted for the Specified
Currency specified for such Unit, unless such interest rate is
inconsistent with legally applicable standards adopted for
Euro-denominated debt obligations issued in the Euromarkets with
floating rate interest payments of frequencies identical or
substantially similar to the frequency of interest payments
hereunder and held in international clearing systems, as
determined by the Calculation Agent, or (ii) if such interest
rate is so inconsistent, the interest rate which the Calculation
Agent determines is consistent with applicable market practices
adopted for Euro-denominated debt obligations issued in the
Euromarkets and held in international clearing systems, in each
case with such interest rate equal to the interest rate
applicable hereto (adjusted as aforesaid) plus or minus any
Spread or multiplied by any Spread Multiplier, as indicated in
the Prospectus Supplement for such Units, as determined by the
Calculation Agent.
The interest accrual basis and the provisions of the Units
of such Series relating to the source and determination of such
interest accrual basis that shall apply to such Units from, and
including, the Distribution Date falling on or immediately prior
to the Redenomination Date shall be (i) the interest accrual
basis and such provisions which applied to such Units prior to
such redenomination, unless such interest accrual basis is and/or
such provisions are inconsistent with market practices adopted
for Euro-denominated debt obligations issued in the Euromarkets
with fixed rate or floating rate interest payments (as the case
may be) of frequencies identical or substantially similar to the
frequency of interest payments under such Units, based, in the
case of floating interest rate payments, on the reference rate
applicable to such Units prior to the Redenomination Date and
held in international clearing systems as
49
determined by the Calculation Agent or (ii) if the interest
accrual basis which applied to such Units prior to Redenomination
Date is and/or such provisions are so inconsistent, the interest
accrual basis and/or the provisions of the Units of such Series
relating to the source and determination of such interest accrual
basis, as the case may be, which the Calculation Agent determines
is consistent with applicable market practices adopted for
Euro-denominated debt obligations issued in the Euromarkets with
fixed rate or floating rate interest payments (as the case may
be) of frequencies identical or substantially similar to the
frequency of interest payments under such Units, based, in the
case of floating interest rate payments, on the reference rate
applicable to such Units (adjusted as aforesaid) and held in
international clearing systems as determined by the Calculation
Agent.
The Depositor may, with the consent of the Trustee, and
without the need to obtain the consent of the Holder of any Unit,
make any changes or additions to the terms of the Units of a
Series which (i) the Depositor and the Trustee believe are
necessary or appropriate to facilitate the implementation of the
provisions of this section as they relate to such Units in the
context of the introduction of the Euro or (ii) correct any
manifest error or any ambiguity or correct or supplement any
defective provisions described herein and which changes or
additions the Depositor and the Trustee believe are not
materially prejudicial to the interests of the Holders of the
Units of such Series. Any such change or addition shall be
binding on the Depositor, the Holders of the Units of such
Series, the Trustee, and any agent of the Trustee. The Trustee
shall promptly give notice of any such change or addition to the
Unitholders affected thereby.
Voting of Debt Securities; Modification of Debt Security Agreements
Within five Business Days after receipt of notice of any
meeting of, or other occasion for the exercise of voting rights
or the giving of consents by, owners of any of the Debt
Securities, the Trustee will give notice to the Unitholders,
setting forth (i) such information as is contained in such notice
to owners of Debt Securities, (ii) a statement that the
Unitholders will be entitled, subject to any applicable provision
of law and any applicable provisions of such Debt Securities, to
instruct the Trustee as to the exercise of voting rights, if any,
pertaining to such Debt Securities and (iii) a statement as to
the manner in which instructions may be given to the Trustee to
give a discretionary proxy to a person designated in the notice
received by the Trustee. The Trustee will give such notice to the
Unitholders of record on the relevant record date.
Unless otherwise specified in the applicable Prospectus
Supplement, the voting rights allocable to the owners of the Debt
Securities pursuant to the terms thereof will be allocated among
the Unitholders pro rata, in the proportion that the denomination
of each Unit bears to the aggregate denomination of all Units;
and upon the written request of the applicable Unitholder,
received on or before the date established by the Trustee for
such purpose, the Trustee will endeavor, insofar as practicable
and permitted under any applicable provision of law and any
applicable provision of or governing the Debt Securities, to vote
in accordance with any nondiscretionary instruction set forth in
such written request, provided that the Trustee will not vote
except as specifically authorized and directed in written
instructions from
50
the applicable Unitholder entitled to give such instructions.
Notwithstanding the foregoing, the Trustee must reject any vote
to (i) alter the currency, amount or timing of payment of, or the
method or rate of accruing, principal or interest on the Debt
Securities underlying the Units held by such Unitholder or (ii)
consent to any redemption or prepayment of the Debt Securities
underlying the Units held by such Unitholder or (iii) consent to
the issuance of new obligations in exchange or substitution for
any Debt Securities pursuant to a plan or refunding of the Debt
Securities or any other offer for the Debt Securities; in each
case unless the Trustee is directed by the affirmative vote of
all Unitholders to accept such amendment or offer as the case may
be; and provided, further, that the Trustee receives advice of
nationally recognized independent tax counsel, designated by the
Depositor, that such exercise of voting rights with respect to
any Debt Securities would not result in a "sale or other
disposition" of such Debt Securities within the meaning of
Section 1001(a) of the Internal Revenue Code of 1986, as amended
(the "Code"). The Trustee will not grant any consent (other than
a unanimous consent) solicited from the owners of the Debt
Securities underlying the Units with respect to the foregoing
matters in (i), (ii) and (iii) above nor will it accept or take
any action in respect of any consent, proxy or instructions
received from any Unitholder in contravention of such provisions.
Early Distribution of Debt Securities
Unless otherwise specified in the applicable Prospectus
Supplement, upon the occurrence of a Trust Wind-Up Event (as
defined under "Description of Trust Agreements-Trust Wind-Up
Events"), the applicable Trust Agreement and any related Swap
Agreement will terminate, subject to payment of Swap Termination
Payments, if any, and the Trustee shall deliver notice to each of
the Unitholders of the occurrence of a Trust Wind-Up Event, the
termination of such Swap Agreement (and payment of Swap
Termination Payments, if any) and the termination of such Trust
Agreement and related Trust, and such notice shall state that
holders should surrender their Units to the Trustee or give, to
the Trustee's reasonable satisfaction, appropriate indemnity or
security in exchange for a portion of the Debt Securities or cash
if the Trust is liquidated, as specified in the applicable Trust
Agreement. Such notice to the Unitholders shall also specify: (i)
the cause of the Trust Wind-Up Event; (ii) the location and hours
of the office or agency of the Trustee at which Units should be
presented and surrendered; (iii) that each holder must supply
transfer instructions in writing with respect to the related Debt
Securities; and (iv) any other information required to be set
forth by such Trust Agreement, as set forth in the applicable
Prospectus Supplement.
Upon receipt by the Trustee of (i) appropriate transfer
instructions in writing from a holder with respect to such Debt
Securities and (ii) such holder's Units, or appropriate and
satisfactory indemnity or security, the Trustee shall promptly
deliver to such holder its pro rata share of such Debt Securities
or cash in accordance with such transfer instructions by physical
delivery or, if applicable, by causing the book-entry depositary
for such Debt Securities to credit such Debt Securities to an
account of such holder with such depositary or an account of a
designated participant in such depositary.
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Unless otherwise specified in the applicable Prospectus
Supplement, upon the occurrence of a Trust Wind-Up Event, any
related Swap Agreement will terminate and the only distributions
(other than the early distribution of the related Debt Securities
themselves) from the related Trust to which the holders of Units
issued thereby will be entitled will be any payments on the Debt
Securities, if any, or any amounts recovered under the Swap
Agreement or the related Guarantee, if any, that are in each case
received by the Trustee after the occurrence of the Trust Wind-Up
Event, which the Trustee shall distribute to the Unitholders upon
satisfaction of the conditions for transfer of Debt Securities
referred to above. No interest will accrue on, and no investments
will be made with, any such funds awaiting distribution to
Unitholders.
Except for certain duties and reporting requirements set
forth in the applicable Trust Agreement, the obligations of the
Trustee thereunder will terminate upon the distribution to
Unitholders of all amounts required to be so distributed pursuant
to such Trust Agreement and the disposition of all related Debt
Securities held by such Trustee.
DESCRIPTION OF TRUST AGREEMENTS
General
Set forth below are summaries of certain provisions of the
Trust Agreement to be entered into in connection with any Series
of Units. Each Trust Agreement will be entered into by the
Depositor and the Trustee. The provisions of the Trust Agreements
may vary from one another depending upon the terms of the Units
to be issued thereunder, the related Debt Securities and any Swap
Agreement. The specific provisions of each Trust Agreement, to
the extent they materially differ from or are in addition to the
summaries below, will be set forth in the applicable Prospectus
Supplement.
The following summaries do not purport to be complete and,
with respect to a particular Series of Units to be offered
pursuant to this Prospectus and a Prospectus Supplement, are
subject to the detailed provisions of the form of Trust Agreement
included as an exhibit to the Registration Statement, to which
reference is hereby made for a full description of such
provisions, including the definitions of certain terms used.
Collections on Debt Securities
With respect to any Series of Units, the Trustee shall make
reasonable efforts to collect all scheduled payments on the
related Debt Securities and other Trust Property provided that
such procedures are consistent with the applicable Trust
Agreement and that, except as otherwise expressly set forth in
such Trust Agreement and in the applicable Prospectus Supplement,
it shall not be required to expend or risk its own funds or
otherwise incur personal financial liability.
52
Trustee Compensation
As compensation for and in payment of trust expenses
related to its services under the Trust Agreement other than
Extraordinary Trust Expenses, the Trustee will receive the
Trustee Fees. The Prospectus Supplement will set forth, the
amount, source, manner and priority of payment with respect to
such Trustee Fees.
Certain Matters Regarding Trustees and the Depositor
Unless otherwise provided in the applicable Prospectus
Supplement, the related Trust Agreement will provide that neither
the Depositor nor any of its directors, officers, employees or
agents will incur any liability to the related Trust or
Unitholders for any action taken, or for refraining from taking
any action, in good faith pursuant to such Trust Agreement or for
errors in judgment; however, neither the Depositor nor any such
person will be protected against any liability that would
otherwise be imposed by reason of willful misfeasance, bad faith
or negligence in the performance of their duties under such Trust
Agreement or by reason of reckless disregard of obligations and
duties thereunder. In addition, such Trust Agreement will provide
that the Depositor will not be under any obligation to appear in,
prosecute or defend any legal action related to its
responsibilities under such Trust Agreement which in its opinion
may involve it in any expense or liability. The Depositor may,
however, in its discretion undertake any such action which it
deems necessary or desirable with respect to such Trust Agreement
and the rights and duties of the parties thereto and the
interests of the Unitholders thereunder.
The Trustee will undertake to perform only such duties as
are specifically set forth in the related Trust Agreement. Unless
otherwise provided in the applicable Prospectus Supplement, the
Depositor or one or more third parties will be responsible for
payment of the Trustee Fees related to each Trust. The Depositor
will also indemnify any other loss, liability or expense
("Extraordinary Trust Expenses") relating to the applicable Trust
Agreement, Swap Agreement or Debt Securities (other than any such
loss, liability or expense incurred by reason of willful
misfeasance, bad faith or negligence in the performance of the
Trustee's duties under such Trust Agreement) up to the Maximum
Reimbursable Amount in the aggregate. Extraordinary Trust
Expenses not paid by the Depositor will be payable to the Trustee
from Trust Property.
The Trust Agreement provides that the Trustee may elect to
perform some or all of its duties through a custodian or other
administrative agent. Any particular provisions with respect to
entities acting as a custodian or administrative agent of the
Trustee will be described in a Prospectus Supplement.
Unless otherwise provided in the Prospectus Supplement,
prior to the date that is one year and one day after all
distributions in respect of the Units have been made, neither the
Trustee nor the Depositor shall take any action or institute any
proceeding against the other under the United States Bankruptcy
Code or any other liquidation, insolvency, bankruptcy,
moratorium, reorganization or similar law ("Insolvency Law")
applicable to either of them,
53
now or hereafter in effect, or which would be reasonably likely
to cause the other to be subject to, or seek the protection of,
any such Insolvency Law.
Retained Interest
The Prospectus Supplement for a Series of Units will
specify whether there will be any Retained Interest in the Trust
Property, 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 Trust
Agreement. A Retained Interest in the Trust Property represents a
specified interest therein. Payments in respect of the Retained
Interest will be deducted from payments on the Trust Property as
received and, in general, will not become a part of the related
Trust. Unless otherwise provided in the applicable Prospectus
Supplement, any partial recovery of interest on the Trust
Property, after deduction of all applicable administration fees,
will be allocated between the Retained Interest (if any) and
interest distributions to Unitholders on a pari passu basis.
Modification and Waiver
Unless otherwise specified in the applicable Prospectus
Supplement, the Trust Agreement for each Series of Units may be
amended by the Depositor and the Trustee with respect to such
Series, without notice to or consent of the Unitholders, 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 Unitholders (provided that if any
such addition affects any Series or Class of Unitholders
differently than any other Series or class of Unitholders, 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 Unitholders); (iv) to add to the covenants,
restrictions or obligations of the Depositor, or the Trustee for
the benefit of the Unitholders; (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 Unit for tax purposes and (y) the Trustee has
received written confirmation from each Rating Agency rating such
Units that such amendment will not cause such Rating Agency to
qualify, 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 Depositor, and the Trustee, with the consent of the holders
of Units evidencing not less than the "Required
Percentage--Amendment" (as defined in the Prospectus Supplement)
of the Voting Rights of those Units 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 Unitholders; 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--
54
Amendment" specified in the related series supplement to the
Trust Agreement shall include an additional specified percentage
of the Units of such Series or Class.
Except as otherwise set forth under "Description of the
Units -- European Monetary Union" or in the applicable Prospectus
Supplement, no such modification or amendment may, however, (i)
reduce in any manner the amount of or alter the timing, currency
or amounts of distributions or payments which are required to be
made on any Unit without the consent of the holder of such Unit
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 Units covered by the Trust
Agreement then outstanding.
Unless otherwise specified in the applicable Prospectus
Supplement, holders of Units evidencing not less than the
"Required Percentage--Waiver" (as defined in the Prospectus
Supplement) of the Voting Rights of a given Series may, on behalf
of all Unitholders of that Series, (i) waive, insofar as that
Series is concerned, compliance by the Depositor or the Trustee,
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 Units 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 Unit 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 Unit
affected thereby.
Reports to Unitholders
Reports to Unitholders. Unless otherwise provided in the
applicable Prospectus Supplement, on each Distribution Date the
Trustee will forward or cause to be forwarded to each such
Unitholder, to the Depositor and to such other parties as may be
specified in the Trust Agreement, a statement setting forth:
(i) the amount of such distribution to Unitholders
allocable to principal of or interest or premium, if any,
on the Units;
(ii) 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 aggregate stated principal amount of the
related Debt Securities as of the Distribution Date and the
interest rate applicable to such Debt Securities for the
accrual period therefor next beginning;
(iv) the amount received by the Trustee on the related
Debt Securities for the accrual period therefor last ended;
55
(v) the amounts of and recipients of any payments
under any Swap Agreement for the accrual period for the
Swap Agreement last ended;
(vi) if feasible, the new Swap Rate applicable to the
accrual period for any Swap Agreement next beginning;
(vii) the aggregate Unit Principal Balance (or
Notional Amount, if applicable) at the close of business on
such Distribution Date;
(viii) with respect to any Trust having Trust Property
which includes Credit Support, the available amount of each
element of Credit Support; and
(ix) any additional information relevant to the
Unitholders as specified in the applicable Prospectus
Supplement or in the applicable Trust Agreement.
In the case of information furnished pursuant to clause (i)
above, the amounts shall be expressed as a U.S. dollar amount (or
equivalent thereof in any other Specified Currency) per minimum
denomination of Units or for such other specified portion
thereof. Within a reasonable period of time after the end of each
calendar year, the Trustee, as provided in the related Prospectus
Supplement, will furnish to each person who at any time during
the calendar year was a Unitholder, a statement containing the
information set forth in clause (i) above, aggregated for such
calendar year or the applicable portion thereof during which such
person was a Unitholder and containing such information as is
sufficient to enable Unitholders to calculate their United States
federal income tax liability with respect to Units. Such
obligation of the Trustee shall be deemed to have been satisfied
to the extent that substantially comparable information shall be
provided by the Trustee pursuant to any requirements of the Code
as are from time to time in effect.
Evidence as to Compliance
If so specified in the applicable Prospectus Supplement,
the Trust Agreement will provide that commencing on a certain
date and on or before a specified date in each year thereafter, 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 Trust
Property 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 with
respect to such Units) and that, on the basis of certain agreed
upon procedures considered appropriate under the circumstances,
such firm is of the opinion that such administration was
conducted in compliance with the terms of the Trust Agreement,
except for such exceptions as such firm shall believe to be
immaterial and such other exceptions and qualifications as shall
be set forth in such report.
The Trust Agreement may also provide for delivery to the
Depositor and the Trustee on behalf of the Unitholders, on or
before a specified date in each year, of an annual statement
56
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
Units.
Copies of the annual accountants' statement, if any, and
the statement of officers of the Trustee may be obtained by
Unitholders without charge upon written request to the Trustee at
the address set forth in the related Prospectus Supplement.
Notices
The Trustee will notify the Unitholders of all notices and
communications it receives from the Debt Security Issuer,
including notice of any call of the Debt Securities by the Debt
Security Issuer. The Trustee will also notify the Unitholders of
any call of the Debt Securities by a Swap Counterparty under the
terms of a Swap Agreement. Unless otherwise provided in the
applicable Prospectus Supplement, any notice required to be given
to a holder of a Registered Unit will be given by facsimile to
such number as may be provided to the Trustee or be mailed to the
last address of such holder set forth in the applicable Unit
Register. Any notice so mailed within the time prescribed in the
Trust Agreement shall be conclusively presumed to have been given
when mailed, whether or not the Unitholder receives such notice.
Notices given by facsimile will be effective upon confirmation
(including electronic confirmation) of effective transmission. In
the case of Registered Units in global form, the Depositary will
be the sole direct recipient of notices. See "Description of the
Units -- Form".
Notice shall be sufficiently given to holders of Bearer
Units if (i) published in an Authorized Newspaper (defined in the
Trust Agreement to mean a leading daily newspaper of general
circulation) in such city or cities as may be specified in such
Units on a Business Day and (ii) in the case of a Global
Security, if also delivered to Euroclear or CEDEL, as applicable
for communication by them to the persons shown in their
respective records as having interests therein. In case by reason
of suspension of publication of any Authorized Newspaper or
Authorized Newspapers or by reason of any other cause it shall be
impracticable to publish any notice to Holders of Bearer Units as
provided above, then such notification to Holders of Bearer Units
shall be published as provided above in an Authorized Newspaper
of general circulation in Europe or, if such publication shall
also be impracticable, such notification shall be given in such
manner as shall be approved by the Trustee and the Depositor.
Replacement Units
Unless otherwise provided in the applicable Prospectus
Supplement, if a Unit is mutilated, destroyed, lost or stolen, it
may be replaced at the corporate trust office or agency of the
Trustee in the City and State of New York upon payment by the
holder of such expenses as may be incurred by the Trustee in
connection therewith and the furnishing of such evidence and
indemnity as the Trustee may require. Mutilated Units must be
surrendered before new Units will be issued unless the Depositor
and the Trustee receive, to their satisfaction, such security or
indemnity as they may require to save each of them harmless.
57
Trust Wind-Up Events
Unless otherwise provided in the applicable Prospectus
Supplement, a Trust Wind-Up Event under the related Trust
Agreement is defined as the occurrence of (i) any Swap Default
arising from any action taken or failure to act, by the Swap
Counterparty, if applicable; (ii) one or more Debt Security
Defaults where either (a) a Debt Security Default has occurred
with respect to all Debt Securities held by the Trust or (b) a
Termination Event results under the Swap Agreement with respect
to which all Transactions are "Affected Transactions" (as defined
in the Swap Agreement); (iii) any Termination Event under the
Swap Agreement with respect to which the Swap Counterparty shall
be the sole "Affected Party" (as defined in the Swap Agreement);
provided that at the time of such occurrence no Swap Termination
Payment would be payable by the Trust to the Swap Counterparty
upon designation of an Early Termination Date by the Trust; (iv)
the designation of an Early Termination Date by the Swap
Counterparty under a related Swap Agreement (other than with
respect to the termination of fewer than all Transactions entered
into under the Swap Agreement); (v) the designation by the
Depositor, if the Depositor owns 100% of the Unit Principal
Balance, of a "Special Depositor Wind-Up Event"; and (vi) the
Debt Security Issuer with respect to any Concentrated Debt
Security ceases to be a reporting company under the Exchange Act,
provided that the Trust holds no other Debt Securities for which
the Debt Security Issuer continues to be a reporting company or
which is not a Concentrated Debt Security; (vii) any Excess
Expense Event (as defined below); or (viii) any other Trust
Wind-Up Event set forth in the Prospectus Supplement. See
"Description of Swap Agreements - Defaults Under Swap Agreements"
and "- Termination Events". Unless otherwise provided in the
applicable Prospectus Supplement, upon the occurrence of a Trust
Wind-Up Event, such Trust Agreement and the related Swap
Agreement will terminate, the Trustee will sell some or all of
the Debt Securities to fund the payment of applicable Swap
Termination Payments, if any, and hold all related Debt
Securities and any proceeds thereof until the satisfaction of
certain conditions, at which time the Trustee will distribute
such Debt Securities to the Unitholders. See "Description of
Units - Early Distribution of Debt Securities".
Unless otherwise provided in the Prospectus Supplement, if
the issuer of any Concentrated Debt Security ceases to be a
reporting company under the Exchange Act (such Debt Security a
"Disqualified Security"), (i) a Termination Event shall occur
with respect to any Transaction related to such Disqualified
Security under any related Swap Agreement and the Trust shall be
required to sell Debt Securities to the extent necessary to pay
any related Swap Termination Payment; (ii) the remaining
Disqualified Securities shall be distributed pro rata to the
Unitholders; and (iii) a Trust Wind Up Event shall occur if (A)
the Trust holds only Disqualified Securities and no other Trust
Property or (B) if so provided in the Prospectus Supplement.
The Trustee will not be responsible for giving notice of a
Trust Wind-Up Event unless and until (i) the Trustee fails to
receive amounts due on the Debt Securities or under a Swap
Agreement when due and such payment is not received within any
applicable grace period, (ii) receipt by the Trustee of notice
from a Swap Counterparty of the occurrence of a Swap Default or
Termination Event or upon actual knowledge of a Swap Default or
Termination
58
Event by an officer of the Trustee assigned to its Corporate
Trust Department or (iii) receipt of notice of an event
constituting a Debt Security Default.
Under each Trust Agreement, unless otherwise specified in
the applicable Prospectus Supplement, an "Excess Expense Event"
will occur if the Trustee has incurred Extraordinary Trust
Expenses in an aggregate amount exceeding the Trigger Amount
specified in the applicable Prospectus Supplement, and either any
Swap Counterparty has not agreed, or the holders of Units issued
under such Trust Agreement have not unanimously agreed, to
provide adequate assurance of indemnity to the Trustee within
seven calendar days after notice, as described in the next
sentence. Under the terms of such Trust Agreement, the Trustee
will be required to provide notice to any Swap Counterparty and
each Unitholder promptly upon the incurrence by the Trustee of
Extraordinary Trust Expenses in an aggregate amount in excess of
the Trigger Amount, stating that an Excess Expense Event will
occur on the seventh calendar day following the provision of such
notice unless prior to such day the Unitholders unanimously agree
(or any Swap Counterparty agrees) to indemnify the Trustee for
future Extraordinary Trust Expense (and Extraordinary Trust
Expense that has already been incurred at the time of the
agreement to indemnify) that exceeds the Maximum Reimbursable
Amount specified in the applicable Prospectus Supplement, to the
reasonable satisfaction of the Trustee. Following such an
agreement to indemnify, upon the incurrence by the Trustee of
aggregate Extraordinary Trust Expense greater than the Maximum
Reimbursable Amount, an Excess Expense Event will occur unless
either (i) any Swap Counterparty agrees or (ii) the holders of
the Units unanimously agree, to provide further adequate
assurance of indemnity to the Trustee within seven calendar days
after notice, as described in the preceding sentence.
Unless otherwise provided in the Prospectus Supplement, in
connection with early termination of a Swap Agreement or one or
more Transactions thereunder, other than as a result of Debt
Security Default, the claim of the Swap Counterparty against the
Debt Securities (or proceeds thereof arising from sale thereof)
and any other Trust Property will be limited to a claim pro rata
with that of the Unitholders according to the amount of the
Termination Payment otherwise payable to the Swap Counterparty
and the Unitholders' aggregate Unit Principal Balance plus
accrued interest.
Termination
Unless a Trust is terminated early upon the occurrence of a
Trust Wind-Up Event, the obligations created by the related Trust
Agreement (other than the obligations of the Trustee to provide
reports and certain other information under such Trust Agreement)
will terminate (after payment of Extraordinary Trust Expenses, if
any, and any amount due under the Swap Agreement and upon
distribution of Debt Securities) and the payment to the holders
of Units issued thereunder of all amounts required to be paid
under the terms of such Trust Agreement and such Units following
the final scheduled Distribution Date. Written notice of such
termination will be provided as set forth above under "Reports to
Unitholders; Notices", and the final distribution on such Units
will be made only upon surrender and cancellation of such Units
at an office or agency of the Trustee.
59
Sale of Debt Securities; Secured Party Rights
Immediately upon receipt of notice from the Swap
Counterparty that the Trust will be obligated to pay a Swap
Termination Payment or upon other notice from the Trustee that
the Trust is required to sell Debt Securities, the Selling Agent
will undertake to sell Debt Securities on behalf of the Trust,
unless and until the Selling Agent receives notice from the
Trustee of an exercise by the Unitholders of their rights to
tender the amount of any related Swap Termination Payment as set
forth below. The timing, price and other terms of any sale
conducted by the Selling Agent shall be determined by the Selling
Agent in its sole discretion, but all such sales shall be
completed within 30 days or such longer period of time as may be
reasonable with respect to particular Debt Securities. In the
case of a Debt Security Default or Reporting Event which does not
result in termination of the Trust, sales shall be limited to the
Debt Securities affected by such event, except where the proceeds
from the affected Debt Securities are insufficient to make
payment of the Swap Termination Payment.
In connection with any Termination Payment payable by the
Trust, the Unitholders may, acting unanimously, deliver to the
Trustee the amount of such outstanding Termination Payment
(together with, in the case of a Trust Wind-Up Event, any
Extraordinary Trust Expenses in excess of the Maximum
Reimbursable Amount payable to the Trustee) and a written
instruction to discontinue sale of the Debt Securities. If the
Selling Agent receives notice from the Trustee of the exercise by
the Unitholders of their rights under the foregoing provision,
the Selling Agent shall promptly discontinue sales of the related
Debt Securities (but the Selling Agent and the Trustee shall
complete the settlement of any sale already agreed).
The Selling Agent is an agent of the Trustee only and shall
have no fiduciary or other duties to the Unitholders, nor shall
the Selling Agent have any liability to the Trust in the absence
of the Selling Agent's bad faith or wilful default. The Selling
Agent shall be permitted to sell Debt Securities to Affiliates of
the Selling Agent. The Selling Agent may elect not to act as
Selling Agent with respect to some or all of the Debt Securities
by written notice to that effect to the Trustee, and may resign
at any time.
In addition to the provisions of the Trust Agreement with
respect to the Selling Agent, upon any failure of the Trust to
make any payment when due under the Swap Agreement, the Swap
Counterparty shall have the right to take all action and to
pursue all remedies with respect to such property that a secured
party is permitted to take with respect to collateral under the
UCC, including the right to require the Trustee promptly to sell
all or any portion of the Debt Securities in the open market or,
if the Swap Counterparty elects, to sell the Debt Securities to
the Swap Counterparty for its fair value as determined in good
faith by the Swap Counterparty. In either case, the proceeds of
sale shall be applied to any amounts owed to the Swap
Counterparty.
Trustee
The Trustee shall at all times be a corporation which is
not an affiliate of the Depositor (but may have normal banking
relationships with the Depositor or any obligor with respect to
60
the Debt Securities with respect to any Series of Units and their
respective affiliates) organized and doing business under the
laws of any State or the United States, authorized under such
laws to exercise corporate trust powers, having a combined
capital and surplus of at least $50,000,000 and subject to
supervision or examination by Federal or State authority, the
long-term debt obligations of which are rated in one of the four
highest categories assigned to long-term debt obligations by each
of the Rating Agencies, and shall at all times satisfy the
requirements of Section 310(a) of the Trust Indenture Act of
1939, as amended (the "TIA") and Section (a)(4)(i) of Rule 3a-7
(any such Trustee, an "Eligible Trustee"). Unless otherwise
specified in the applicable Prospectus Supplement and for so long
as it is an Eligible Trustee, the Trustee for each Trust will be
Chase Bank of Texas, National Association. The Trustee may at any
time resign and be discharged from the Trust by giving written
notice thereof to the Depositor, the Swap Counterparty, and the
Unitholders, in which event the Depositor will appoint a
successor trustee, which must be an Eligible Trustee. If no
successor trustee shall have been so appointed and have accepted
appointment within 30 days after the giving of such notice of
resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor trustee
for the Units.
The Trust Agreement and the provisions of the TIA
incorporated by reference therein, contain limitations on the
rights of the Trustee thereunder, should it become a creditor of
the Trust, to obtain payment of claims in certain cases or to
realize on certain property received by it in respect of any such
claims, as security or otherwise. The Trustee is permitted to
engage in other transactions; provided, however, that if it
acquires any conflicting interest (as defined) it must eliminate
such conflict or resign.
Governing Law
The Units, the Trust Agreement and any Swap Agreement will
be governed by the laws of the State of New York. The Trust
Agreement will be subject to the provisions of the TIA that are
required to be part of the Trust Agreement and will, to the
extent applicable, be governed by such provisions.
The federal and state courts in the Borough of Manhattan in
the City of New York shall have non-exclusive jurisdiction in
respect of any action arising out of or relating to the Units,
the Trust Agreement or any Swap Agreement.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of certain
anticipated federal income tax consequences of the ownership of
Units by a Unitholder who acquires its Units on the date on which
the net proceeds of this offering are received by the Depositor
(the "Closing Date"). The discussion is based on interpretations
of law, regulations, rulings and decisions currently in effect,
all of which are subject to change. Any such change may be
applied retroactively, and may adversely affect the federal
income tax consequences described herein. Except where otherwise
noted, the discussion below is addressed to Unitholders that are
domestic
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corporations or are otherwise subject to federal income taxation
on a net income basis, and that hold Units as capital assets. It
does not discuss state, local, or foreign tax consequences, nor
does it discuss the tax consequences that may be relevant to a
Unitholder subject to special rules, including dealers in stocks,
securities or notional principal contracts, traders in securities
electing to mark to market, banks, savings and loan associations
and similar financial institutions, taxpayers that hold Units as
part of a "straddle" or "conversion transaction" for federal
income tax purposes, or taxpayers whose functional currency is
other than the U.S. dollar. It also does not discuss tax
consequences for individuals or entities taxed like individuals.
Units of a particular Series may have special features that
produce tax consequences different from those described below. In
cases where the related Prospectus Supplement contains additional
tax information, prospective Unitholders should review such
information together with this tax discussion.
PROSPECTIVE UNITHOLDERS SHOULD CONSULT THEIR TAX ADVISORS
AS TO THE FEDERAL TAX CONSEQUENCES TO THEM OF ACQUIRING, HOLDING
AND DISPOSING OF UNITS, INCLUDING, IN PARTICULAR, THE APPLICATION
IN THEIR PARTICULAR CIRCUMSTANCES OF THE TAX CONSIDERATIONS
DISCUSSED BELOW, AS WELL AS THE APPLICATION OF STATE, LOCAL,
FOREIGN OR OTHER TAX LAWS.
Classification of the Trust
Cleary, Gottlieb, Steen & Hamilton, counsel to the
Depositor, will provide to the Depositor its opinion that, under
current law, the Trust will not be classified as a corporation or
as an association taxable as a corporation for U.S. federal
income tax purposes. As a consequence, the Trust will not be
subject to federal income taxation.
Unless another characterization is applicable, as described
below and indicated in the applicable Prospectus Supplement, the
Trust will be classified as a grantor trust for federal income
tax purposes, and the Trustee intends to report income, gain,
loss and deductions to the Internal Revenue Service ("IRS")
accordingly. Under the federal income tax rules applicable to
grantor trusts, a Unitholder will be treated as the owner of an
undivided interest in the assets and income of the Trust and as
having entered into any Swap Agreement, both to the extent of
such Unitholder's proportionate interest in the Trust. The sale
of a Unit will be considered a sale of a Unitholder's interest in
the assets and income of the Trust and a termination of any Swap
Agreement with respect to that Unitholder. In the case of an
Exchangeable Series, a Unitholder's withdrawal of Debt Securities
representing the Unitholder's proportionate share of such assets
of the Trust will not constitute a taxable event, but any
termination of a Swap Agreement will be taxable. A Unitholder may
deduct its pro rata share of the fees and other deductible
expenses paid by the Trust, at the same time and to the same
extent as such items could be deducted by the Unitholder if the
Unitholder paid directly a pro rata portion of the amounts paid
by the Trust.
If so indicated in the applicable Prospectus Supplement, a
Trust in a particular Series may be characterized as a
partnership rather than a grantor trust. Although a partnership
is not subject to federal income taxation at the entity level,
partnership classification may result in
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differences in the timing and character of income reported by
Unitholders, as well as different requirements for reporting tax
information, making tax elections, and conducting contests with
the IRS.
An election may be made to treat a Trust in a particular
Series as a financial asset securitization investment trust
("FASIT"), as defined in section 860L of the Code. If a Trust
makes a FASIT election, the Prospectus Supplement relating to any
Class or Series of Units representing interests in such FASIT
will state that the Trust is a FASIT for federal income tax
purposes and will describe the federal income tax consequences of
the ownership of such Units.
Treatment of the Debt Securities and Swap Agreement as Integrated
or Separate Transactions
The tax treatment of the Debt Securities and any Swap
Agreement will depend on whether they are integrated into a
single synthetic debt instrument or treated as separate financial
instruments. If the Debt Securities and Swap Agreement qualify
for integration under Treasury regulations section 1.1275-6 (the
"Integration Regulations") or section 1.988-5 (the "Foreign
Currency Integration Regulations"), the Unitholder may elect, or
the IRS may require, integrated treatment. If the transaction is
integrated, the Unitholder will be required to take into account
its pro rata share of the income from the synthetic debt
instrument resulting from such integration. See "Tax Consequences
of Integration," below.
If integrated treatment is not available, a Unitholder will
be required to take into account its pro rata share of the income
from the Debt Securities and any Swap Agreement as determined
under the separate federal income tax rules applicable to those
items. See "Tax Consequences of Separate Treatment," below.
Integrated treatment will not be available for a Swap Agreement
and related Debt Securities underlying Dual Currency Units.
The discussion in the two preceding paragraphs assumes that
the Debt Securities are considered to be owned by the Trust for
federal income tax purposes. In some circumstances, the Debt
Securities and Swap Agreement may be treated together as a loan
to the Swap Counterparty. See "Tax Consequences of Separate
Treatment--Taxation of the Swap Agreement--Other
Characterizations."
Tax Consequences of Integration
Integration of Debt Securities and Swap Agreements that Do Not
Hedge Currency Risk
In general, under the Integration Regulations, a Debt
Security and a Swap Agreement that does not hedge currency risk
may be integrated and treated as a single synthetic debt
instrument if the combined cash flows are substantially
equivalent to the cash flows on a fixed rate debt instrument or
on a variable rate debt instrument that pays interest at a
qualified rate or rates (as such terms are defined in applicable
sections of the Code and Treasury regulations) and certain other
requirements are satisfied, including the identification of the
integrated economic transaction in the Unitholder's books and
records on the date of purchase of the
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Units. The synthetic debt instrument may be denominated in U.S.
dollars or another single currency. Certain Debt Securities, such
as pay-through bonds that are subject to prepayment out of
principal received on other debt instruments or tax-exempt
obligations, will not qualify for integration. The IRS generally
may require integration where a Unitholder could have but did not
make the appropriate identification and in certain other cases.
The synthetic debt instrument created through integration
generally will be subject to the tax rules that apply to
conventional debt instruments, except that all stated interest on
the instrument will be treated as original issue discount
("OID"), which a Unitholder must include in income as it accrues.
See the discussion of OID and other income from a debt instrument
under "Tax Consequences of Separate Treatment -- Taxation of Debt
Securities," below. The issue date of the synthetic debt
instrument will be the date of purchase, and the term of the
instrument will be the period from the issue date to the maturity
date of the Debt Securities. The issue price will be the adjusted
issue price of the Debt Securities as of the issue date of the
synthetic debt instrument, decreased or increased by any payments
of Swap Premium (as defined below under "Tax Consequences of
Separate Treatment - Allocation of Basis and Sales Proceeds") by
or to the Unitholder. The source and character of interest income
from the synthetic debt instrument will be determined by
reference to the source and character of income on the Debt
Securities. Income from the Debt Securities and Swap Agreement
underlying a synthetic debt instrument will be treated separately
for purposes of the withholding tax rules. See "Foreign
Unitholders," below.
Integration of Debt Securities and Swap Agreements that Hedge
Currency Risk
If a Swap Agreement hedges currency risk, then integration
of the Swap Agreement and Debt Security may be available under
the Foreign Currency Integration Regulations. The rules for such
integration and for the treatment of the resulting synthetic debt
instrument generally are similar to the rules described above for
integration of Debt Securities and Swap Agreements not hedging
currency risk. One difference is that to qualify for integration,
the combined cash flows on the Debt Security and Swap Agreement
must be substantially equivalent to the cash flows on a
fixed-rate debt instrument. In addition, different types of debt
instruments may qualify for integration under the Foreign
Currency Integration Regulations. Other differences between the
two sets of rules may be relevant for particular Debt Securities
and Swap Agreements.
The issue price of the synthetic debt instrument is
determined by translating the adjusted issue price of the Debt
Securities into the currency in which the synthetic debt
instrument is denominated at the spot rate on the issue date. If
the synthetic debt instrument is payable in U.S. dollars,
Unitholders will not recognize any foreign exchange gain or loss
(as defined below under "Foreign Currency Rules") with respect to
the instrument.
Tax Consequences of Separate Treatment
The discussion under this heading assumes that the
integration rules described above do not apply, so that a
Unitholder must take into account its pro rata share of the
income from the
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Debt Securities and the Swap Agreement, as determined under the
separate tax rules applicable to those items.
Allocation of Basis and Sales Proceeds
A Unitholder should be considered to have purchased its
interest in the Debt Securities for an amount equal to the cost
of its Unit multiplied by a fraction, the numerator of which is
the fair market value of the Debt Securities and the denominator
of which is the sum of the fair market value of the Debt
Securities and the fair market value of any Swap Agreement (which
may be negative, zero or positive), in each case at the time of
purchase. The Unitholder's initial tax basis in the Debt
Securities will equal such allocated purchase price. The
Unitholder's tax basis in the Debt Securities generally will be
increased by any amounts included in income with respect thereto,
and reduced by any payments thereon and any amortized premium
with respect thereto.
If the fair market value to the Trust of the Swap Agreement
is not zero at the time of purchase of a Unit by a Unitholder,
the Unitholder should be treated as having received or paid a
premium with respect to the Swap Agreement ("Swap Premium"). If
such fair market value is negative, a Swap Premium will be
treated as paid to such Unitholder in an amount equal to the
excess of the amount allocated to the Debt Securities (determined
as described above) over the cost of the Unit. If such fair
market value is positive, a Swap Premium will be treated as paid
by such Unitholder equal to the excess of the cost of the Unit
over the amount allocated to the Debt Securities.
Upon a sale of a Unit, the same method would apply in
allocating the amount realized by the selling Unitholder between
the Debt Securities and the Swap Agreement using fair market
values at the time of sale. The amount allocated to the Swap
Agreement would be considered a termination payment made to or by
the Unitholder, depending on whether the amount is positive or
negative as to the Trust.
If the Trust holds, at the time of purchase of a Unit, cash
or cash equivalents, then the cost of the Unit would first be
reduced by the amount of such cash or cash equivalents allocated
to the Unit before making the above allocation.
Taxation of Debt Securities
It is assumed for purposes of the following discussion that
the Debt Securities underlying the Units of each Series will
constitute debt instruments in their entirety and that such Debt
Securities are not acquired by the Trust at their original
issuance. If the Debt Securities are denominated in a foreign
currency, the rules for calculation of foreign exchange gains and
losses discussed below under "Foreign Currency Rules" will also
apply.
Interest, Discount and Premium
Stated Interest. A Unitholder will be required to include
stated interest on Debt Securities in gross income as ordinary
interest income, in accordance with such Unitholder's
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method of accounting, to the extent such stated interest is
qualified stated interest. Stated interest on a Debt Security
will be qualified stated interest, in very general terms, if such
stated interest is unconditionally payable in cash or property
(other than debt instruments of the issuer) at least annually
during the entire term of the Debt Security at a single fixed
rate of interest or, subject to certain conditions, under a
single formula based on one or more interest indices. If stated
interest is not qualified stated interest, it will be included in
OID and a Unitholder will be required to take such discount into
account in accordance with the rules described below.
General OID Rules. OID is the amount by which a debt
instrument's stated redemption price at maturity (as defined
below) exceeds its issue price. Holders of debt instruments
generally are required to include OID in ordinary gross income
using a constant yield method, whether the holder uses the cash
or accrual method of accounting. The amount of OID allocable to
each accrual period is determined by multiplying the adjusted
issue price (as defined below) of the debt instrument at the
beginning of the accrual period by the yield to maturity of such
debt instrument (appropriately adjusted to reflect the length of
the accrual period). The yield to maturity of a debt instrument
is the discount rate that causes the present value of all
payments on the debt instrument as of its issue date to equal the
issue price of such debt instrument. The adjusted issue price of
a debt instrument equals its issue price plus prior accruals of
OID, adjusted for prior payments of amounts included in the
stated redemption price at maturity. The stated redemption price
at maturity of a debt instrument equals the sum of all payments
to be made thereunder other than payments of qualified stated
interest. An accrual period is a period not longer than one year
that generally ends on dates that are or correspond to payment
dates.
Debt Securities Issued With OID. If a Debt Security was
initially issued with OID, a Unitholder will be required to treat
as interest income its share of such discount, adjusted to
reflect the Unitholder's actual purchase price allocated to such
Debt Security, as such discount accrues, without regard to the
timing of receipt of the cash attributable to such income. In
very general terms, if the purchase price allocated to such a
Debt Security exceeds its adjusted issue price but is less than
the stated redemption price at maturity of such Debt Security, a
Unitholder will have acquired such Debt Security with acquisition
premium and such premium will offset and reduce a Unitholder's
share of OID. If the purchase price allocated to such Debt
Security exceeds its stated redemption price at maturity, a
Unitholder will not be required to include OID in income. The
excess of the purchase price over the amount payable on maturity
of the Debt Security (exclusive of any portion of such excess
attributable to a conversion feature) generally will be
amortizable bond premium which, at the election of a Unitholder,
may be offset against stated interest payments on such Debt
Security or in some cases deducted. If the purchase price
allocated to such a Debt Security is less than its adjusted issue
price by more than a de minimis amount, a Unitholder will have
acquired such Debt Security with market discount (as defined in
the Code), which the Unitholder will be required to accrue and
include in income in accordance with special market discount
rules, in addition to OID amounts. Those market discount rules
generally require accrued market discount to be treated as
interest income (1) as principal payments on a debt instrument
are received (up to the amount of such payments), or (2) when a
debt instrument is sold, up to the amount of gain
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recognized in the sale. Any de minimis discount generally is
taken into income ratably as principal payments are received or
the debt instrument is sold.
Debt Securities Issued Without OID. If a Debt Security was
initially issued without OID, a Unitholder will be required to
take into account only stated interest payments on such Debt
Security, unless the purchase price allocated to such Debt
Security differs from the stated redemption price at maturity of
such Debt Security. If the purchase price allocated to a Debt
Security exceeds its amount payable on maturity, that excess
amount (exclusive of any portion thereof attributable to a
conversion feature) generally will be amortizable bond premium,
which at the Unitholder's election, may be offset against stated
interest payments on such Debt Security or in some cases
deducted. In general, if the purchase price allocated to a Debt
Security is less than its stated redemption price at maturity by
more than a de minimis amount, a Unitholder will have acquired
such Debt Security with market discount. The tax treatment of
market discount and de minimis discount are described in the
immediately preceding paragraph.
Special Election to Apply OID Rules. In lieu of the rules
described above with respect to discount and premium, a
Unitholder may elect to report all income on a Debt Security
under the principles of the OID rules, as if such Debt Security
were newly issued on the date of purchase of the Units by the
Unitholder, the issue price of such Debt Security equaled the
purchase price allocated thereto, and none of the interest
thereon was qualified stated interest. An election made by a
taxpayer with respect to one obligation can affect other
obligations it holds. Unitholders should consult with their tax
advisors regarding the merits of making this election.
Sale, Exchange and Retirement of Debt Securities
Upon the sale, exchange or retirement of Debt Securities
(including a sale resulting from a sale of Units), a Unitholder
generally will recognize gain or loss equal to the difference
between the amount realized on the sale, exchange or retirement
and the Unitholder's tax basis in the Debt Securities.
Except as discussed above with respect to market discount
and below under "--Debt Securities Providing for Contingent
Payments," "Straddle Rules," and "Foreign Currency Rules," gain
or loss recognized by a Unitholder on the sale, exchange or
retirement of Debt Securities generally will be capital gain or
loss, and will be long-term capital gain or loss if the
Unitholder is considered to have held the Debt Securities for
more than one year at the time of the disposition.
Debt Securities Providing for Contingent Payments
Debt Securities in a Trust may provide for contingent
payments ("contingent debt obligations"). Regulations issued in
1996 (the "Contingent Payment Regulations") govern the treatment
of contingent debt obligations issued on or after August 13,
1996.
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Under the Contingent Payment Regulations, contingent
debt obligations generally will be subject to the noncontingent
bond method. In general, under this method the issuer of a
contingent debt obligation creates a schedule of projected fixed
payments on the instrument (the "Tax Projected Payment
Schedule"). The Tax Projected Payment Schedule is calculated by
replacing each contingent payment with a projected payment and
then setting the level of those projected payments so that the
obligation has a yield equal to the issuer's comparable yield.
The comparable yield is the rate of interest the issuer would pay
on a comparable debt instrument that did not provide for
contingent payments. The Tax Projected Payment Schedule is
calculated based on the rules in the Contingent Payment
Regulations and does not necessarily represent the issuer's
prediction of how a contingent debt obligation will perform. The
Tax Projected Payment Schedule in respect of contingent debt will
be binding on the Unitholders as long as it is reasonable.
A Unitholder of a Trust holding a contingent debt
obligation generally must include in income interest on such
contingent debt obligation as it accrues, calculated as if the
contingent debt obligation provided only for fixed payments
according to the Tax Projected Payment Schedule. The Tax
Projected Payment Schedule generally is not revised to account
for changes in circumstances that occur while the contingent debt
obligation is outstanding. Any difference between a projected
payment and an actual payment is taken into account as an
adjustment to the Unitholder's interest income when the payment
is made. (This treatment assumes that any contingency affecting a
payment is resolved, so that the payment becomes fixed, no
earlier than six months prior to the date of payment.) Upward and
downward adjustments are netted for each taxable year with
respect to each contingent debt obligation. Any net upward
adjustment for the taxable year is treated as additional interest
income. Any net downward adjustment reduces the interest income
on the obligation for the taxable year that would otherwise
accrue. If any downward adjustment exceeds the interest income
otherwise reported in respect of a contingent debt obligation for
the taxable year, the adjustment would be allowed as an ordinary
deduction, to the extent it does not exceed the net amount of
interest income of the Unitholder from the contingent debt
obligation in prior years.
If a Unitholder is treated as purchasing a contingent
debt obligation for an amount different from its adjusted issue
price, the Unitholder will be required to accrue interest income
on the obligation in accordance with the original Tax Projected
Payment Schedule. Any difference between the purchase price and
the obligation's adjusted issue price on the date of purchase
will be allocated among the remaining payments in the Tax
Projected Payment Schedule. If the Unitholder's basis is greater
than the adjusted issue price of the obligation, the excess is a
downward adjustment; and if the Unitholder's basis is less than
the adjusted issue price, the difference is an upward adjustment.
These adjustments are taken into account at the time the
corresponding interest payment is accrued or made. Any downward
or upward adjustment in respect of a difference between the
Unitholder's purchase price and a contingent debt obligation's
adjusted issue price at the date of purchase will decrease or
increase the Unitholder's basis in the obligation.
Gain or loss recognized on a sale or exchange of a
contingent debt obligation generally would be treated as interest
income or ordinary loss. However, any loss in excess of
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the net amount of interest income on the contingent debt
obligation previously included in income by the Unitholder will
be a capital loss. Furthermore, any gain or loss will be
long-term capital gain or loss if the Unitholder has held the
contingent debt obligation for the long-term holding period and
there are no remaining contingent payments on the obligation at
the time of the disposition.
Taxation of the Swap Agreement
It is assumed for purposes of the following discussion that
a Swap Agreement is a "notional principal contract" in its
entirety. Alternative characterizations of a Swap Agreement are
discussed below under "--Other Characterizations." If payments
under a Swap Agreement are denominated in, or determined by
reference to, a foreign currency, the rules relating to foreign
exchange gains and losses discussed below under "Foreign Currency
Rules" will also apply.
Periodic Payments and Nonperiodic Payments (Including Swap Premium)
Income or deductions with respect to a Swap Agreement may
be attributable to periodic payments, nonperiodic payments
(including Swap Premium) or Swap Termination Payments.
Periodic payments under a Swap Agreement are payments made
or received by the Trust that are payable at intervals of one
year or less during the entire term of the contract (including
any extension periods), that are based on a specified index and
are based on a single notional principal amount or a notional
principal amount that varies over the term of the contract in the
same proportion as the notional principal amount that measures
the other party's payments. However, payments to buy or sell an
interest rate cap or floor are never periodic payments.
All taxpayers must account for periodic payments under an
accrual method of accounting. In a case where periodic payments
to be made under a Swap Agreement are set in arrears, and the
payment relating to a period during a taxable year of a
Unitholder cannot be determined by the end of the year, then
accruals for that year will be based on a reasonable estimate of
the payment, and the difference between the estimated amount and
actual amount will be taken into account in the year in which the
payment is fixed.
Payments under a Swap Agreement that are not periodic
payments or Swap Termination Payments are "nonperiodic payments".
(Accordingly, any Swap Premium paid or received generally would
be a nonperiodic payment.) Nonperiodic payments generally must be
recognized over the term of the Swap Agreement in a manner that
reflects the economic substance of the contract. The amount of
any nonperiodic payment that is amortized in any taxable year
will be treated in the same manner as a periodic payment that
accrues in that year.
Under an alternative rule, nonperiodic payments under a
notional principal contract may be amortized under a level
payment method. Under that method, nonperiodic payments are
allocated as if they represented principal payments on a level
payment loan that extends over the life of the contract and bears
interest at a rate equal to the rate (or rates) used by the
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parties to determine the nonperiodic payments (or if such rate is
not readily ascertainable, a rate that is reasonable under the
circumstances). The level payment method cannot be used by a
taxpayer with respect to a notional principal contract if the
taxpayer reduces risk with respect to the contract by purchasing,
selling or otherwise entering into other financial contracts
(other than debt instruments).
Periodic and nonperiodic payments attributed to any taxable
year would be netted. The net amount received or paid should
generally be ordinary income or an ordinary deduction,
respectively, for that year. Although not certain, income or loss
attributable to changes in the value of property may be treated
as gain or loss from the termination of a right or obligation
with respect to such property, and accordingly may be treated as
capital gains or losses under section 1234A of the Code (except
as discussed below under "Straddle Rules" and "Foreign Currency
Rules").
As an exception to the treatment of nonperiodic payments
outlined above, a notional principal contract that provides for a
"significant" nonperiodic payment is divided into two parts for
federal income tax purposes: a notional principal contract with
periodic payments and a loan.
Where relevant, for purposes of tax information reporting,
the Trustee intends (i) to assume that all of the Units were
purchased on the Closing Date, and (ii) to amortize any
nonperiodic payments that are fixed in amount (including any
initial Swap Premium) under the level payment method described
above. Unitholders that purchase a Unit and are deemed either to
receive or to pay Swap Premium should consult with their tax
advisors regarding the appropriate methods for amortizing such
Swap Premium.
Swap Termination Payments
As described above under "Allocations of Basis and Sales
Proceeds," a Unitholder may be considered to pay or receive a
Swap Termination Payment under a Swap Agreement in connection
with the sale of a Unit. In such a case, a Unitholder would have
gain or loss from termination of a Swap Agreement equal to (i)
the sum of the unamortized portion of any nonperiodic payments
received by the Unitholder and any Swap Termination Payment it
receives or is deemed to have received, less (ii) the sum of the
unamortized portion of any nonperiodic payments paid by the
Unitholder and any Swap Termination Payment it pays or is deemed
to have paid.
A termination of a Swap Agreement generally will be
considered to involve a "sale or exchange" of the Swap Agreement,
with the result that any gain or loss generally will be treated
as capital gain or loss (subject to the discussion below under
"Straddle Rules" and "Foreign Currency Rules"). A Unitholder that
recognizes capital loss upon termination of the Swap Agreement
generally will be able to offset that loss against any gain
recognized with respect to the Debt Securities to the extent such
gain is capital gain.
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Straddle Rules
The Debt Securities and the Swap Agreement may be
considered offsetting positions in a "straddle" subject to the
straddle rules of section 1092 of the Code. Under section
1092(d), a selling Unitholder's capital gain or loss (if any)
with respect to Debt Securities that are positions in a straddle
will be short-term unless such Debt Securities have been held for
the long term capital gain holding period after termination of
the Swap Agreement. Similarly, if the Swap Agreement is a
position in a straddle, capital gain or loss realized in
connection with its termination (or the termination of a right or
obligation thereunder) will be short-term. In addition, under
section 1092, all or a portion of any loss realized upon such
termination may be deferred until disposition of the Debt
Securities. Further, if the Debt Securities and the Swap
Agreement are positions in a straddle and as a result are
considered to be held as part of a "conversion transaction"
within the meaning of section 1258 of the Code, all or a portion
of any gain that would otherwise be capital gain may be
recharacterized as ordinary income. Finally, if the Debt
Securities and the Swap Agreement are positions in a straddle,
any interest or carrying charges incurred by a Unitholder with
respect to its Units may have to be capitalized to the extent
they exceed the Unitholder's interest income from the Debt
Securities, under section 263(g) of the Code.
Other Characterizations of the Debt Securities and Swap Agreement
Depending on its terms, a Swap Agreement may be in economic
substance an option or forward contract (among other
possibilities), instead of or in addition to a notional principal
contract. In general, a Swap Agreement will be treated for
federal income tax purposes in accordance with its economic
substance. Consequently, if a Swap Agreement is an option, a
Unitholder will be treated as writing or purchasing an option.
Any premium paid or received in respect of the option (calculated
in the same manner as Swap Premiums in respect of a Swap
Agreement, as described under "Tax Consequences of Separate
Treatment--Allocation of Basis and Sales Proceeds") generally
will be taken into account in determining gain or loss only upon
termination of the option or, if the option is physically settled
and involves the purchase of property by the Trust, upon the
disposition of such property. Any such gain or loss will be
capital gain or loss (subject to the discussion below under
"Straddle Rules" and "Foreign Currency Rules"). An option
generally will not be subject to the mark-to-market rules under
section 1256 of the Code, but the inapplicability of those rules
is not entirely free from doubt in the case of a purchased option
underlying a Unit that is itself listed on a national securities
exchange. An option and the Debt Securities may be considered
offsetting positions in personal property for purposes of the
straddle rules discussed in the preceding paragraph.
In some cases, Debt Securities and a related Swap Agreement
may represent economically a loan to the Swap Counterparty
secured by the Debt Securities. In that case, the Trust may be
considered to have made a loan providing for cash flows equal to
the cash flows of the Debt Securities and the Swap Agreement
combined. Such a loan would be subject to the rules governing
debt instruments described above under "Tax Consequences of
Separate Treatment--Taxation of Debt Securities."
71
Other characterizations may be possible, depending on
the particular terms of the Swap Agreement. Unitholders should
consult their own tax advisors with respect to the federal income
tax treatment of the Swap Agreement.
Stripped Bond Rules
A Unitholder that holds a Strip Unit will be taxed under
the "stripped bond" rules of the Code. The Unitholder will be
treated as having purchased a newly issued, single debt
instrument providing for payments equal to the payments on the
Debt Securities allocable to the Unit and having OID equal to the
excess of the sum of such payments over the issue price. The
issue price is the price at which the Unitholder is considered to
have purchased its right to payments on the Debt Securities. In
the case of a Trust that holds only Debt Securities and cash or
cash equivalents, the issue price would be the cost of the Unit
less the Unitholder's allocable share of such cash or cash
equivalents. The Unitholder will include OID in income as it
accrues in accordance with the constant yield method described
above under "Taxation of Debt Securities--Interest, Discount and
Premium--General OID Rules."
Holders of certain Strip Units may not be entitled to
receive current distributions on such Units. In that case, OID
will be includible in income prior to the receipt of cash
attributable to such income and the amount of OID includible in
income will increase each year.
Unless otherwise specified in the Prospectus Supplement, it
is anticipated that a Trust will, for information reporting
purposes, account for OID reportable by holders of Strip Units by
reference to the first price at which a substantial amount of the
Units is sold to purchasers (other than the underwriters), even
though the amount of OID will differ for subsequent purchasers.
Unitholders should consult their tax advisors regarding the
proper calculation of OID.
Foreign Currency Rules
If the Debt Securities provide for payments denominated in,
or determined by reference to, a foreign currency, and the
integration rules do not apply, then (under the rules of section
988 of the Code and the regulations promulgated thereunder)
foreign exchange gain or loss will be computed separately from
interest income and gain or loss from the Debt Securities.
Foreign exchange gain or loss is treated as ordinary income or
loss that is generally not interest income (or a direct offset to
interest income) and is sourced based on the residence of the
taxpayer.
In general terms, interest income (including OID, and
adjusted for any premium amortization) from the Debt Securities
will be calculated first in foreign currency units as if the
instrument were denominated in U.S. dollars. Interest in foreign
currency units will then be translated into U.S. dollars based on
an average exchange rate for the period when the interest accrues
or, in some cases, based on the exchange rate at the time
interest is paid. Foreign exchange gain or loss will be
recognized when interest income is actually paid in an amount
equal to the difference, if any, between the U.S. dollar value of
the interest payment based on
72
the exchange rate or rates used in calculating the interest
income attributable to the payment and the rate when it is
actually paid. Similarly, foreign exchange gain or loss will be
recognized upon the receipt of a principal payment (exclusive of
any portion thereof representing original issue discount) in an
amount equal to the difference between the U.S. dollar value of
the payment based on the exchange rate when the Debt Securities
were acquired and the rate when the payment is made. Upon a sale
of the Debt Securities, gain or loss will be treated as foreign
exchange gain or loss to the extent it does not exceed the gain
or loss, respectively, attributable to changes in exchange rates
over the period that the Unitholder is considered to have held
the Debt Securities.
The principles described above would also apply to any
synthetic debt instrument created by integrating the Debt
Securities and Swap Agreement if that instrument provides for
payments in, or determined by reference to, a foreign currency.
The rules governing a Swap Agreement whose payments are
denominated in, or determined by reference to, foreign currencies
and that is not integrated with the Debt Securities will depend
on its specific terms. In general, the timing of income and
deductions would be determined under the principles described in
"Tax Consequences of Separate Treatment--Taxation of the Swap
Agreement" and any income, loss or deduction (including any gain
or loss from a termination of a Swap Agreement) would be
characterized as foreign exchange gain or loss. In the case of a
Swap Agreement that exchanges both interest and principal
payments, however, the amount and timing of income or loss
generally would be determined as though the Trust had made a
hypothetical loan denominated in the currency in which payments
are received and had incurred a hypothetical debt denominated in
the currency in which payments are made. The resulting net income
or loss would be characterized as foreign exchange gain or loss.
Tax-Exempt Organizations
A qualified pension plan or other entity that generally is
exempt from federal income taxation pursuant to section 501 of
the Code (such an entity, a "Tax-Exempt Investor") nonetheless
will be subject to federal income taxation to the extent that its
income is unrelated business taxable income within the meaning of
section 512 of the Code. Interest on the Debt Securities (or
synthetic debt instrument, if the Debt Securities and Swap
Agreement are integrated), income from a Swap Agreement that is a
notional principal contract and gains from the sale, exchange or
other disposition of Units held by a Tax-Exempt Investor
generally will not be unrelated business taxable income, unless
such Units are "debt-financed property" within the meaning of
section 514 of the Code. A portion of any income or gain from the
Debt Securities would be unrelated business taxable income if,
because of the existence of a significant Swap Premium or other
nonperiodic payment under the Swap Agreement, the Swap
Counterparty were deemed to have made a loan to a Tax-Exempt
Investor that is a Unitholder. See "Tax Consequences of Separate
Treatment--Taxation of Swap Agreement."
73
Foreign Unitholders
The following discussion applies to Unitholders that hold
Registered Units. The applicable Prospectus Supplement will
discuss the rules applicable to non-U.S. holders of Bearer Units.
A Unitholder that is not a U.S. person (as defined below)
and that is not subject to U.S. federal income tax as a result of
any direct or indirect connection to the United States in
addition to its ownership of a Unit will not be subject to United
States income or withholding tax, except as described below and
under "Information Reporting and Backup Withholding," in respect
of interest income or gain on the Debt Securities or income from
the Swap Agreement if (i) the Debt Securities were issued after
July 18, 1984, (ii) the Unitholder is not a "10-percent
shareholder" or "related controlled foreign corporation" with
respect to the issuer of the Debt Securities (or the Swap
Counterparty, if the Swap Agreement is considered to involve a
significant nonperiodic payment to the Swap Counterparty that is
treated as a loan or is otherwise considered part of a loan to
the Swap Counterparty), (iii) interest on the Debt Securities
(or, to the extent the Swap Agreement is considered to involve a
loan to the Swap Counterparty, interest on such loan) is not
contingent on the cash flows of, value of property of, or
dividends or other equity payments by, the issuer of the Debt
Securities (or, in the case of a loan to the Swap Counterparty,
the Swap Counterparty), except that this clause will not apply to
Debt Securities that are debt instruments with a fixed term
issued on or before April 7, 1993, (iv) the Unitholder provides
an appropriate statement (generally on IRS Form W-8), signed
under penalties of perjury, identifying the Unitholder and
stating, among other things, that the Unitholder is not a U.S.
person (or, with respect to payments made after December 31,
1999, satisfies certain documentary evidence requirements for
establishing that it is not a U.S. person) and (v) the Unitholder
is not considered to be a bank extending credit under a loan
entered into in the ordinary course of its trade or business.
If the Debt Securities or Swap Agreement provide for
payments relating to a "United States real property interest"
within the meaning of section 897 of the Code, then gain from the
Debt Securities or Swap Agreement, as the case may be, may be
treated as income effectively connected with a United States
trade or business, and a related withholding tax may apply.
A Unitholder that is not a U.S. person may also be subject
to U.S. federal income taxation with respect to a Unit if it is a
personal holding company, corporation that accumulates earnings
to avoid U.S. taxes on shareholders or private foundation under
the Code.
The term "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 any
political subdivision thereof, an estate the income of which is
subject to United States federal income taxation regardless of
its source or a trust if (i) a U.S. court is able to exercise
primary supervision over the trust's administration and (ii) one
or more U.S. persons have the authority to control all of the
trust's substantial decisions.
74
Information Reporting and Backup Withholding
The Trustee will furnish or make available, within 90 days
after the end of each calendar year, to each party registered
during such calendar year as a Unitholder, such information as is
required under the Code or regulations under the Code to enable
each Unitholder to file its federal income tax returns with
respect to its ownership of Registered Units. Such information
may also be reported to the IRS.
Distributions made on a Unit and proceeds from the sale of
a Unit to or through certain brokers may be subject to a "backup"
withholding tax of 31% unless, in general, the Unitholder
complies with certain procedures or establishes that it is a
corporation or otherwise exempt from such withholding. A
Unitholder may be required to provide a statement under penalties
of perjury (generally on IRS Form W-9 for U.S. persons or W-8 for
non-U.S. persons) to establish an exemption. Any amounts so
withheld from distributions on the Unit would be allowed as a
credit against the Unitholder's federal income tax liability, or
upon application by the Unitholder to the IRS, would be refunded
by the IRS to the extent it exceeds such liability.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and the Code impose requirements on employee
benefit plans (and on certain other retirement plans and
arrangements, including individual retirement accounts and
annuities, Keogh plans and collective investment funds and
insurance company separate accounts in which such plans, accounts
or arrangements are invested) subject to ERISA or the Code
(collectively, "Plans") and on persons who are fiduciaries with
respect to such Plans. Among other things, ERISA requires that
the assets of a Plan subject to ERISA be held in trust and
imposes general standards of investment prudence and
diversification on fiduciaries of Plans. In addition, ERISA and
Section 4975 of the Code prohibit a broad range of transactions
involving Plan assets and persons ("Parties in Interest") having
certain specified relationships to a Plan and impose additional
prohibitions where Parties in Interest are fiduciaries with
respect to a Plan. Each of Morgan Stanley, any Swap Counterparty,
the issuers of the Debt Securities and the Trustee and their
affiliates may be Parties in Interest with respect to Plans.
The United States Department of Labor (the "DOL") has
issued regulations (DOL Reg. ss.2510.3-101) concerning what
constitutes the assets of a Plan when a Plan invests in another
entity (the "Plan Asset Regulations"). The Units would constitute
equity interests in the Trust for purposes of the Plan Asset
Regulations. Under the Plan Asset Regulations, the underlying
assets and properties of corporations, partnerships and certain
other entities in which a Plan makes an "equity" investment could
be deemed for purposes of ERISA and Section 4975 of the Code to
be assets of the investing Plan in certain circumstances, unless
the ownership by "benefit plan investors" of equity interests in
the entity is not "significant." In general, ownership by benefit
plan investors of equity interests in an entity is "significant"
on any date if, immediately after the most recent acquisition of
any equity interest in the entity, twenty-five percent or more
75
of the value of any class of equity interests in the entity is
held by benefit plan investors. For purposes of the Plan Asset
Regulations, the term "benefit plan investor" includes (a) any
employee benefit plan (as defined in Section 3(3) of ERISA),
whether or not it is subject to the provisions of Title I of
ERISA, including governmental and foreign employee benefit plans,
(b) any plan described in Section 4975(e)(1) of the Code and (c)
any entity whose underlying assets include plan assets by reason
of a plan's investment in the entity.
Unless the "Alternative ERISA Restrictions" or "Deemed
Representations" apply, Units may not be transferred to any
person unless that person is not a Plan subject to the fiduciary
responsibility provisions of ERISA or Section 4975 of the Code
and is not acquiring the Units with the assets of any such Plan
or any government or other plan subject to substantially similar
requirements. The Trust Agreement provides that any purported
transfer in violation of this restriction shall be void ab
initio. Each person who acquires any Book-Entry Unit, and each
fiduciary which causes any such person to so acquire a Book-Entry
Unit, in its individual as well as its fiduciary capacity, will
be deemed to have represented upon the acquisition of such
Book-Entry Unit that such purchaser or transferee is not a Plan
subject to the fiduciary responsibility provisions of ERISA or
Section 4975 of the Code or any government or other plan subject
to substantially similar requirements and is not using the assets
of any such Plan to purchase the Book-Entry Units. THE TRUST
AGREEMENT PROVIDES THAT EACH HOLDER OF A BOOK-ENTRY UNIT SHALL
INDEMNIFY THE TRUSTEE, THE DEPOSITOR, MORGAN STANLEY AND THEIR
AFFILIATES AGAINST ANY COSTS, EXPENSES, DAMAGES OR LOSSES
INCURRED BY THEM AS A RESULT OF THE FAILURE OF THE FOREGOING
REPRESENTATION TO BE TRUE.
Alternatively, if the Prospectus Supplement with respect to
a Series of Units elects the "Alternative ERISA Restrictions",
the restrictions described in the preceding paragraph will not
apply. Unless otherwise specified in the applicable Prospectus
Supplement, Units subject to the "Alternative ERISA Restrictions"
will be issued only as Definitive Units in registered form and
only upon execution and delivery of a definitive Purchase
Agreement, which will contain additional representations
regarding whether such purchaser or proposed transferee is a
benefit plan investor (within the meaning of the Plan Asset
Regulations) or is acquiring the Units with assets of a benefit
plan investor. A definitive Purchase Agreement will similarly be
required to be obtained from any proposed transferee of a Unit to
which the "Alternative ERISA Restrictions" apply. No such
purchase or proposed transfer shall be permitted to the extent
that it would cause the ownership by benefit plan investors to be
"significant" within the meaning of the Plan Asset Regulations
immediately after such purchase or proposed transfer. In
addition, the Depositor and the Trustee will agree that, after
the initial distribution of a particular Series of Units subject
to the Alternative ERISA Restrictions, neither they nor their
affiliates will acquire any Units of such Series, unless such
acquisition would not cause the ownership by benefit plan
investors immediately following such acquisition to be
"significant."
Alternatively, if the Prospectus Supplement with respect to
a Series of Units elects the "Deemed Representations", the
restrictions described in the two preceding paragraphs will not
apply. Units will be issued in reliance on certain exemptions
from the prohibited transaction provisions of Section 406 of
ERISA and Section 4975 of the Code which may be applicable,
76
depending in part on the type of Plan fiduciary making the
decision to acquire a Unit and the circumstances under which such
decision is made. Included among these exemptions are Prohibited
Transaction Class Exemption ("PTCE") 91-38 (relating to
investments by bank collective investment funds), PTCE 84-14
(relating to transactions effected by a "qualified professional
asset manager"), PTCE 90-1 (relating to investments by insurance
company pooled separate accounts) and PTCE 96-23 (relating to
transactions determined by in-house asset managers). There can be
no assurance that any of these class exemptions or any other
exemption will be available with respect to any particular
transaction involving the Units. BY ITS PURCHASE OF ANY UNIT, THE
PURCHASER THEREOF WILL BE DEEMED TO HAVE REPRESENTED AND
WARRANTED EITHER THAT (A) IT IS NOT AN ERISA PLAN OR OTHER PLAN,
AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE THE ASSETS OF ANY SUCH
ERISA PLAN OR OTHER PLAN, OR A GOVERNMENTAL PLAN WHICH IS SUBJECT
TO ANY FEDERAL, STATE OR LOCAL LAW THAT IS SUBSTANTIALLY SIMILAR
TO THE PROVISIONS OF SECTION 406 OF ERISA OR SECTION 4975 OF THE
CODE OR (B) ITS PURCHASE, HOLDING AND DISPOSITION OF A UNIT WILL
NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA
OR SECTION 4975 OF THE CODE (OR, IN THE CASE OF A GOVERNMENTAL
PLAN, ANY SUBSTANTIALLY SIMILAR FEDERAL, STATE OR LOCAL LAW) FOR
WHICH AN EXEMPTION IS NOT AVAILABLE. THE TRUST AGREEMENT PROVIDES
THAT EACH HOLDER OF A BOOK-ENTRY UNIT SHALL INDEMNIFY THE
TRUSTEE, THE DEPOSITOR, MORGAN STANLEY AND THEIR AFFILIATES
AGAINST ANY COSTS, EXPENSES, DAMAGES OR LOSSES INCURRED BY THEM
AS A RESULT OF THE FAILURE OF THE FOREGOING REPRESENTATION TO BE
TRUE.
The Prospectus Supplement may also specify restrictions
with respect to ERISA investors different from any of the
foregoing.
Each Plan fiduciary who is responsible for making the
investment decisions whether to purchase or commit to purchase
and to hold Units should determine whether, under the general
fiduciary standards of investment prudence and diversification
and under the documents and instruments governing the Plan, an
investment in the Units is appropriate for the Plan, taking into
account the overall investment policy of the Plan and the
composition of the Plan's investment portfolio. Any Plan
proposing to invest in Units should consult with its counsel to
confirm that such investment will not result in a prohibited
transaction and will satisfy the other requirements of ERISA and
the Code. The sale of any Units to a Plan or a governmental or
other plan is in no respect a representation by the Trust or
Morgan Stanley that such an investment meets all relevant legal
requirements with respect to investments by Plans generally, any
particular Plan or any such other plan, or that such an
investment is appropriate for Plans generally, any particular
Plan or any such other plan.
CURRENCY RISKS
PROSPECTIVE PURCHASERS SHOULD CONSULT THEIR OWN FINANCIAL
AND LEGAL ADVISORS AS TO THE RISKS ENTAILED BY AN INVESTMENT IN
UNITS DENOMINATED IN A CURRENCY OTHER THAN U.S.
77
DOLLARS. SUCH UNITS ARE NOT AN APPROPRIATE INVESTMENT FOR PERSONS WHO ARE
UNSOPHISTICATED WITH RESPECT TO FOREIGN CURRENCY TRANSACTIONS.
Exchange Rates and Exchange Controls
An investment in a Unit 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 Depositor, Morgan Stanley and
the Trustee have 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 Unit. Depreciation of the Specified
Currency for a Unit against the U.S. dollar would result in a
decrease in the effective yield of such Unit below its Pass
Through Rate and, in certain circumstances, could result in a
loss to the investor of principal or interest or both 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 Units denominated in such currency.
Even if there are no actual exchange controls, it is possible
that, on a Distribution Date with respect to any particular Unit,
the currency in which amounts then due to be distributed in
respect of such Unit are distributable would not be available.
Except as set forth below or unless otherwise provided in the
applicable Prospectus Supplement, if distributions in respect of
a Unit 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
control of the Depositor or the Trust or their respective
affiliates, 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 (other than under the circumstances described under
"Description of Units -- European Monetary Union"), then all
distributions in respect of such Unit shall be made at a time and
in a manner determined by the Exchange Rate Agent in its sole
discretion, which may be in the Specified Currency at such time
as such currency is again available or so used or in such other
currency and at such rates as the Exchange Rate Agent shall
determine.
Foreign Currency Judgments
Unless otherwise specified in the applicable Prospectus
Supplement, the Units 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
78
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.
The information set forth in this Prospectus is directed to
prospective purchasers of Units who are United States residents.
The applicable Prospectus Supplement for certain issuances of
Units 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 Units.
LIMITATIONS ON ISSUANCE OF BEARER UNITS
In compliance with United States Federal income tax laws
and regulations, the Depositor and any underwriter, agent or
dealer participating in the offering of any Bearer Unit will
agree that, in connection with the original issuance of such
Bearer Unit and during the period ending 40 days after the issue
of such Bearer Unit, they will not offer, sell or deliver such
Bearer Unit, 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 Units 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 165(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 Units 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 Units.
Pending the availability of a permanent Global Security or
definitive Bearer Units, as the case may be, Units that are
issuable as Bearer Units may initially be represented by a single
temporary Global Security, without interest coupons, to be
deposited with a common depositary in London for Euroclear and
CEDEL for credit to the accounts designated by or on behalf of
the purchasers thereof. Following the availability of a permanent
Global Security in bearer form, without coupons attached, or
definitive Bearer Units and subject to any further limitations
described in the applicable Prospectus Supplement, the temporary
Global Security will be exchangeable for interests in such
permanent Global Security or for such definitive Bearer Units,
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 Unit 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
79
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.
PLAN OF DISTRIBUTION
The Units may be offered and sold to or through Morgan
Stanley as underwriter, dealer or agent, or through one or more
other underwriters, dealers or agents, or directly to purchasers.
The applicable Prospectus Supplement will set forth the terms of
the offering of any Series of Units, which may include the names
of any underwriters, or initial purchasers, the purchase price of
such Units and the proceeds to the Depositor 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 Units may be listed, any
restrictions on the sale and delivery of Units in bearer form and
the place and time of delivery of the Units to be offered
thereby.
If underwriters are used in the sale, Units 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 Units 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 Morgan Stanley, an affiliate of the
Depositor. Unless otherwise set forth in the applicable
Prospectus Supplement, the obligations of the underwriters to
purchase such Units will be subject to certain conditions
precedent, and the underwriters will be obligated to purchase all
such Units, if any, of such Units 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.
In connection with an underwritten offering of Units,
certain underwriters and selling group members and their
respective affiliates may engage in transactions that stabilize,
maintain or otherwise affect the market price of the Units. Such
transactions may include stabilization transactions effected in
accordance with Rule 104 of Regulation M under the Exchange Act,
pursuant to which such persons may bid for or purchase Units for
the purposes of stabilizing their market price.
Units may also be sold through agents designated by the
Depositor from time to time. Any agent involved in the offer or
sale of Units will be named, and any commissions payable by the
Depositor 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 Depositor will authorize agents, underwriters or dealers to
solicit offers by certain specified institutions to purchase
Units 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
80
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 Units may be deemed to be underwriters and any
discounts or commissions received by them on the sale or resale
of Units may be deemed to be underwriting discounts and
commissions under the Securities Act. Agents and underwriters may
be entitled under agreements entered into with the Depositor to
indemnification by the Depositor against certain civil
liabilities, including liabilities under the Securities Act, or
to contribution with respect to payments that the agents or
underwriters may be required to make in respect thereof. Agents
and underwriters may be customers of, engage in transactions
with, or perform services for, the Depositor or its affiliates in
the ordinary course of business.
If specified in the Prospectus Supplement, the Debt
Securities may be deposited into the Trust in connection with a
distribution of the Debt Securities by one or more affiliates of
the Depositor pursuant to a registration statement under the
Securities Act, in which the Trust will effectively act as an
underwriter of the Debt Securities pursuant to Rule 140 under the
Securities Act.
Morgan Stanley is an affiliate of the Depositor. Morgan
Stanley's participation in the offer and sale of Units complies
with the requirements of Section 2720 of the Conduct Rules of the
National Association of Securities Dealers, Inc. regarding
underwriting securities of an affiliate.
As to each Series of Units, 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 Depositor or sold at any
time to one or more purchasers.
The Depositor and Morgan Stanley may be indemnified by the
Trust for certain expenses or liabilities incurred in connection
with the offer and sale of the Units.
From time to time, Morgan Stanley and its affiliates may be
engaged by Debt Security Issuers as an underwriter or placement
agent, in an advisory capacity or in other business arrangements.
In addition, Morgan Stanley and its affiliates may make a market
in other outstanding securities of any Debt Security Issuer. Each
Unitholder will be deemed to have acknowledged and agreed that
Morgan Stanley or its affiliates may engage in any kind of
business with, or have an investment in, any Debt Security Issuer
or related persons, and in connection therewith, may obtain or be
in possession of non-public information regarding the Debt
Securities or related persons which may not be made available to
Unitholders.
Affiliates of other underwriters may also act as agents or
underwriters in connection with the sale of the Units. 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 Units.
81
LEGAL MATTERS
Certain legal matters with respect to the issuance of Units
will be passed upon for the Depositor by Cleary, Gottlieb, Steen
& Hamilton.
82
=================================================================
No dealer, salesperson or any other person has been
authorized to give any information or to make any representations
other than those contained in the Prospectus (including the
accompanying Prospectus Supplement) in connection with the offer
contained herein and, if given or made, such information or
representations must not be relied upon as having been authorized
by the company or an agent. Neither the delivery of this
Prospectus (including the accompanying Prospectus Supplement) nor
any sale made hereunder shall, under any circumstances, create an
implication that there has been no change in the affairs of the
company since the dates as of which information is given in this
Prospectus (including the accompanying Prospectus Supplement).
This Prospectus (including the accompanying Prospectus
Supplement) do not constitute an offer or solicitation by anyone
in any jurisdiction in which such offer or solicitation is not
authorized or in which the person making such offer or
solicitation is not qualified to do so or to any person to whom
it is unlawful to make such offer or solicitation.
TABLE OF CONTENTS
Page
----
PROSPECTUS SUPPLEMENTS........................................3
AVAILABLE INFORMATION.........................................4
INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE...................................4
IMPORTANT CURRENCY INFORMATION................................5
RISK FACTORS..................................................5
THE DEPOSITOR................................................12
USE OF PROCEEDS..............................................13
FORMATION OF TRUSTS..........................................13
DESCRIPTION OF TRUST PROPERTY................................15
DESCRIPTION OF SWAP AGREEMENTS...............................23
MSDW.........................................................28
DESCRIPTION OF UNITS.........................................29
DESCRIPTION OF TRUST AGREEMENTS..............................52
CERTAIN FEDERAL INCOME
TAX CONSEQUENCES........................................62
ERISA CONSIDERATIONS.........................................75
CURRENCY RISKS...............................................78
LIMITATIONS ON ISSUANCE OF
BEARER UNITS............................................79
PLAN OF DISTRIBUTION.........................................80
LEGAL MATTERS................................................82
=================================================================
=================================================================
$
MSDW STRUCTURED ASSET CORP.
STRUCTURED ASSET TRUST UNIT REPACKAGINGS
PROSPECTUS
Dated , 199__
=================================================================
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Other Expenses of Issuance and Distribution (Item 14 of Form S-3)
The expenses expected to be incurred in connection with the
issuance and distribution of the Certificates being registered,
other than underwriting compensation, are as set forth below.
Filing Fee for Registration Statement............... $147,500
Legal Fees and Expenses............................. *
Accounting Fees and Expenses........................ *
Trustee's Fees and Expenses
(including counsel fees)...................... *
Blue Sky Fees and Expenses.......................... *
Printing and Engraving Fees......................... *
Rating Agency Fees.................................. *
Miscellaneous....................................... *
------
Total............................................... ======
---------------
* To be provided by amendment.
Indemnification of Directors and Officers (Item 15 of Form S-3).
The Company's By-laws provide that the Corporation shall
indemnify, to the fullest extent permitted by applicable law, any
person who was or is a party or is threatened to be made a party
to, or is involved in any manner in, any threatened, pending or
completed action, suit or proceeding (whether civil, criminal,
administrative or investigative) by reason of the fact that such
person (1) is or was a director or officer of the Corporation or
a Subsidiary or (2) is or was serving at the request of the
Corporation or a Subsidiary as a director, officer, partner,
member, employee or agent of another corporation, partnership,
joint venture, trust, committee or other enterprise.
Section 145 of the Delaware General Corporation Law (the
"GCL") provides as follows:
"(a) A corporation shall have power to indemnify any person
who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other
than an action by or in the right of the corporation) by reason
of the fact that the person is or was a director, officer,
employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust
or
other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and
reasonably incurred by the person in connection with such action,
suit or proceeding if the person acted in good faith and in a
manner the person reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe
the person's conduct was unlawful. The termination of any action,
suit or proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good
faith and in a manner which the person reasonably believed to be
in or not opposed to the best interests of the corporation, and,
with respect to any criminal action or proceeding, had reasonable
cause to believe that the person's conduct was unlawful.
(b) A corporation shall have power to indemnify any person
who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the
right of the corporation to procure a judgment in its favor by
reason of the fact that the person is or was a director, officer,
employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust
or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by the person in connection with
the defense or settlement of such action or suit if the person
acted in good faith and in a manner the person reasonably
believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person
shall have been adjudged to be liable to the corporation unless
and only to the extent that the Court of Chancery or the court in
which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly
and reasonably entitled to indemnity for such expenses which the
Court of Chancery of such other court shall deem proper.
(c) To the extent that a present or former director or
officer of a corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred
to in subsections (a) and (b) of this section, or in defense of
any claim, issue or matter therein, such person shall be
indemnified against expenses (including attorneys' fees) actually
and reasonably incurred by such person in connection therewith.
(d) Any indemnification under subsections (a) and (b) of
this section (unless ordered by a court) shall be made by the
corporation only as authorized in the specific case upon a
determination that indemnification of the present or former
director, officer, employee or agent is proper in the
circumstances because the person has met the applicable standard
of conduct set forth in subsections (a) and (b) of this section.
Such determination shall be made, with respect to a person who is
a director or officer at the time of such determination, (1) by a
majority vote of the directors who are not parties to such
action, suit or proceeding, even though less than a quorum, or
(2) by a committee of such directors designated by majority vote
of such directors, even though less than a quorum, or (3) if
there are no such directors, or if such directors so direct, by
independent legal counsel in a written opinion, or (4) by the
stockholders.
2
(e) Expenses (including attorneys' fees) incurred by an
officer or director in defending any civil, criminal,
administrative or investigative action, suit or proceeding may be
paid by the corporation in advance of the final disposition of
such action, suit or proceeding upon receipt of an undertaking by
or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that such person is not
entitled to be indemnified by the corporation as authorized in
this section. Such expenses (including attorneys' fees) incurred
by former directors and officers or other employees and agents
may be so paid upon such terms and conditions, if any, as the
corporation deems appropriate.
(f) The indemnification and advancement of expenses
provided by, or granted pursuant to, the other subsections of
this section shall not be deemed exclusive of any other rights to
which those seeking indemnification or advancement of expenses
may be entitled under any bylaw, agreement, vote of stockholders
or disinterested directors or otherwise, both as to action in
such person's official capacity and as to action in another
capacity while holding such office.
(g) A corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director,
officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted
against such person and incurred by such person in any such
capacity, or arising out of such person's status as such, whether
or not the corporation would have the power to indemnify such
person against such liability under this section.
(h) For purposes of this section, references to "the
corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have
had power and authority to indemnify its directors, officers, and
employees or agents, so that any person who is or was a director,
officer, employee or agent of such constituent corporation, or is
or was serving at the request of such constituent corporation as
a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall
stand in the same position under this section with respect to the
resulting or surviving corporation as such person would have with
respect to such constituent corporation if its separate existence
had continued.
(i) For purposes of this section, references to "other
enterprises" shall include employee benefit plans; references to
"fines" shall include any excise taxes assessed on a person with
respect to any employee benefit plan; and references to "serving
at the request of the corporation" shall include any service as a
director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director,
officer, employee or agent with respect to any employee benefit
plan, its participants or beneficiaries; and a person who acted
in good faith and in a manner such person reasonably believed to
be in the interest of the participants and beneficiaries of an
employee benefit plan shall be deemed to have acted in a manner
"not opposed to the best interests of the corporation" as
referred to in this section.
3
(j) The indemnification and advancement of expenses
provided by, or granted pursuant to, this section shall, unless
otherwise provided when authorized or ratified, continue as to a
person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
(k) The Court of Chancery is hereby vested with exclusive
jurisdiction to hear and determine all actions for advancement of
expenses of indemnification brought under this section or under
any bylaw, agreement, vote of stockholders or disinterested
directors, or otherwise. The Court of Chancery may summarily
determine a corporation's obligation to advance expenses
(including attorneys' fees)."
The Certificate of Incorporation also limits the personal
liability of directors to the Corporation or its stockholders for
monetary damages for any breach of fiduciary duty. The
Certificate of Incorporation provides as follows:
"A director of the Corporation shall not be personally
liable to the Corporation or its stockholders for
monetary damages for any breach of fiduciary duty as a
director, except for liability (i) for any breach by
the director of his duty of loyalty to the Corporation
or its stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or
a knowing violation of law, (iii) under Section 174 of
the General Corporation Law of the State of Delaware
or (iv) for any transaction from which the director
derived an improper personal benefit."
Undertakings (Item 17 of form S-3).
A. Undertakings Pursuant to Rule 415.
The undersigned Registrant hereby undertakes:
(a) (1) To file, during any period in which offers or
sales are being made, a post-effective amendment to this
Registration Statement (i) to include any prospectus required by
Section 10(a)(3) of the Securities Act of 1933, (ii) to reflect
in the prospectus any facts or events arising after the effective
date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement, and (iii) to include any
material information with respect to the plan of distribution not
previously disclosed in this Registration Statement or any
material change to such information in this Registration
Statement; provided however, that paragraphs (a)(1)(i) and
(a)(1)(ii) do not apply if the information required to be
included in a post-effective amendment by those paragraphs is
contained in periodic reports filed with or furnished to the
Commission by the Registrant pursuant to Section 13 or Section
15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in this Registration Statement.
4
(2) That, for the purpose of determining any
liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities being registered
which remain unsold at the termination of the offering.
(b) That, for purposes of determining any liability
under the Securities Act of 1933, each filing of the Registrant's
annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each
filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the Registration Statement shall be
deemed to be a new Registration Statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(c) To provide to the underwriter at the closing
specified in the underwriting agreements certificates in such
denominations and registered in such names as required by the
underwriter to permit prompt delivery to each purchaser.
B. Undertaking in Respect of Indemnification.
Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to directors,
officers and controlling persons of the Registrant pursuant to
the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
Registrant 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.
5
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 of 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 by this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in
New York, New York on the 30th day of September, 1998.
MSDW STRUCTURED ASSET CORP.
By: /s/ Laya Khadjavi
------------------
Laya Khadjavi
Director
Pursuant to the requirements of the Securities Act of
1933, this Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
/s/ Laya Khadjavi Director, President September 30, 1998
- ---------------------- and Chief Executive
Officer
/s/ Michael Harpe Director, Treasurer September 30, 1998
- ---------------------- and Chief Financial
Officer
/s/ Donald J. Puglisi Assistant Secretary September 30, 1998
- ----------------------
6
Registration No. 33-______
=================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
EXHIBITS
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------
MSDW Structured Asset Corp.
(Exact name of registrant as specified in charter)
=================================================================
Index to Exhibits
Exhibit Number Exhibit Page
-------------- ------- ----
1.1 Form of Underwriting --
Agreement
3.1 Certificate of Incorporation --
3.2 By-Laws --
4.1 Standard Terms of Trust --
Agreements
5.1 Opinion of Cleary, Gottlieb, --
Steen & Hamilton with respect
to legality
8.1 Opinion of Cleary, Gottlieb, --
Steen & Hamilton with respect
to certain tax matters
10.1 Form of Schedule to ISDA --
Master Agreement
23.1 Consent of Cleary, Gottlieb, --
Steen & Hamilton (included in
Exhibit 8.1)
25.1 Statement of Eligibility of --
Trustee