As filed with the Securities
and Exchange Commission on April 28, 1999 Registration No. 333-64879
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
Amendment No. 2 to Form S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------
STRUCTURED ASSET TRUST UNIT REPACKAGINGS
MSDW STRUCTURED ASSET CORP.
(Exact name of registrant as specified in governing instruments)
Delaware 13-4026700
(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification number)
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. [ ]
------------------
CALCULATION OF REGISTRATION FEE
Amount Proposed Proposed maximum
Title of securities being maximum offering aggregate offering Amount of
being registered registered price per unit price(2) registration fee
---------------- ---------- -------------- -------- ----------------
(1) (2)
Trust Units $500,000,000 100% $500,000,000 $147,500.00
(1) This registration statement also relates to offers and sales of
securities in connection with market-making transactions by and through
affiliates of the Registrant (subject, with respect to any securities
listed on a stock exchange or quoted on an automatic quotation system,
to any required approval of such stock exchange or quotation system in
connection with market-making transactions by and through Morgan
Stanley & Co. Incorporated).
(2) 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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XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX X
Information contained herein is subject to completion X X or amendment. A
registration statement relating to these X X securities has been filed with the
Securities and Exchange X X Commission. These securities may not be sold nor may
offers to X X buy be accepted prior to the time the registration statement X X
becomes effective. This prospectus shall not constitute an offer X X to sell or
the solicitation of an offer to buy nor shall there be X X any sale of these
securities in any State in which such offer, X X solicitation or sale would be
unlawful prior to registration or X X qualification under the securities laws of
any such State. X
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
PROSPECTUS SUPPLEMENT
(To Prospectus dated ___________, 1999)
Structured Asset Trust Unit Repackagings (SATURNS)SM
Series 1999-__
[Amount], Class * [Callable] Units, [ * %] [Variable] Rate
[Amount], Class * [Callable] Units, [ * %] [Variable] Rate
MSDW Structured Asset Corp.
Depositor
Consider carefully the risk factors beginning on page i in this Prospectus
Supplement and on page 3 in the Prospectus.
The Units represent obligations of the Trust only and do not represent an
interest in or obligation of any other entity.
This Prospectus Supplement may be used to offer and sell the Units only if
accompanied by the Prospectus.
The Structured Asset Trust Unit Repackagings (SATURNS) Trust Series 1999- * will
issue [a single class][ * classes] of Units. These Units are being offered by
this Prospectus Supplement and the accompanying Prospectus.
o The Units will represent a beneficial interest in the securities described
on pages * of this Supplement. The securities will be held by the Trust. *
The securities have a different [interest rate][currency][maturity][credit
risk] than do the Units.
o [Interest will accrue on the Units at rate equal to * ][The Class * Units
will receive all scheduled interest payments received by the Trust on or
before * on the securities held by the Trust. The Class * Units will
receive a distribution of the securities in kind on * .]
o [The Trust will enter into a derivative transaction with * as its
counterparty. The Trust will pay to the counterparty the [interest]
[principal] [other] amounts the Trust receives on the securities. In
exchange, the counterparty will pay to the Trust the scheduled
distributions on the Units.] [Describe for each derivative]
o [If the securities default, or if the Trust is terminated or fails to
perform its obligations, the derivative transaction will terminate early.
Early termination of the derivative transaction may result in losses to the
purchaser of the Units, which may be as much as the entire investment. *
See "Risk Factors."]
o [Payments of [interest] [principal] will vary based on performance of an
index.][A [decline][increase] in the value of the index will result in
losses to the purchaser of the Units, which may be as much as the entire
investment.] See "Risk Factors."]
o [The Class * Units are not entitled to distributions of principal. If the
Securities are prepaid or redeemed early, returns on the Class * Units will
be adversely affected and holders of the Class * Units may not recover the
initial investment. See "Risk Factors".]
Neither the Securities and Exchange Commission nor any state securities
commission has approved these Units or determined that this Prospectus
Supplement or the Prospectus is accurate or complete. Any representation to the
contrary is a criminal offense.
[The Units may only be purchased by "qualified institutional buyers" as defined
in Rule 144A under the Securities Act of 1933].
[The Units [may not be] [may be] purchased by pension plan investors subject to
the requirements of the Employee Retirement Income Security Act of 1974 [only
through special arrangements]. See "ERISA Considerations" in the Prospectus.]
[The Depositor will apply to list the Units on the New York Stock Exchange.]
Both the Prospectus and the Prospectus Supplement provide information about the
Units. The Prospectus provides general information. This Prospectus Supplement
describes the specific terms of the Units. The specific terms of the Units
described in this Prospectus Supplement qualify any related general discussion
in the accompanying Prospectus.
The Underwriter will purchase the Units from the Trust. The Underwriter will
then sell the Units in negotiated transactions at varying prices at the time of
sale. Proceeds from the Units are expected to total * . The Units will be
delivered in [book entry form through The Depository Trust Company and its
participating members][definitive form] on or about * .
MORGAN STANLEY DEAN WITTER
April __, 1999
Table of Contents
Page
SUMMARY............................................................1
RISK FACTORS.......................................................5
DESCRIPTION OF UNITS..............................................12
Interest Distributions.........................................12
Principal Distribution.........................................13
[[Amortizing Distributions]]...................................13
[[Call Rights]]................................................14
[[Optional Exchange]]..........................................14
DESCRIPTION OF TRUST PROPERTY.....................................15
The Securities.................................................15
The Security Issuer............................................17
[[Credit Support]].............................................24
[[DESCRIPTION OF SWAP AGREEMENT]].................................28
Guarantee of MSDW..............................................33
DESCRIPTION OF TRUST AGREEMENT....................................34
Trustee Compensation...........................................34
[[Retained Interest]]..........................................35
\U.S. FEDERAL INCOME TAX CONSEQUENCES..............................35
ERISA CONSIDERATIONS..............................................37
[[BEARER UNITS]]..................................................39
PLAN OF DISTRIBUTION..............................................40
RATINGS...........................................................41
LEGAL OPINIONS....................................................42
INDEX OF DEFINED TERMS............................................42
SUMMARY
Below is a concise summary of the principal terms of the Units. As a
summary, it does not contain all of the information that may be important to
you. A detailed description of the Units follows this summary.
Units .............................There will be * class(es) of Units, Class(es)
* [and * ]. The Units will be denominated
in [specified currency] (the "Specified
Currency"). The total principal amount of
Units being issued is * (the "Initial Unit
Principal Balance"). The Units will be
issued in [book-entry records of the
Depository Trust Company] [definitive form]
in minimum denominations of * .
Depositor .........................MSDW Structured Asset Corp.
The Trustee [Chase Bank of Texas, National Association]
The Trust .........................The Trust will be formed under a Trust
Agreement between the Depositor and the
Trustee.
Securities ........................The Depositor will deposit into the Trust
[the following fixed income securities (the
"Securities"):{identify}] [a pool of
Securities consisting primarily of
{identify}]. The Securities [have been
purchased by the Depositor or its affiliates
in the secondary market][are being deposited
into the Trust in connection with the initial
issuance of the Securities by * , an
affiliate of the Depositor]. See pages * -
* for a description of the terms of the
Securities.
Security Issuer ...................The issuer of the Securities deposited into
the Trust is [identify] [repeat for each]
(the "Security Issuer"). [Security Issuer]
is not participating in this offering and has
no obligations under the Units. Information
about [Security Issuer] is available in
[Security Issuer]'s filings with the
Commission.
Closing Date ......................On or about *
Interest and Principal
Distributions .....................[Interest will be distributed each * (each a
"Distribution Date"""). The interest rate
for the Units is [ * % per annum][variable]
(the "Interest Rate"). The Trust will pass
through interest to the holders of the Units
("Unitholders") based on payments [received
by the Trust under the Securities] [to the
Trust by the Swap Counterparty under the Swap
Agreement.] [Distributions of interest for
a given [period] will be based on the value
of [specify index] determined [as of the *
day prior to the first day] [on the last day]
(the "Interest Reset Date") [other basis of
determination] of that [period] [by the
Calculation Agent under the Swap Agreement]
[under the terms of the Securities].]]
[Principal will be distributed [on a final
Distribution Date occurring on * (the "Final
Scheduled Distribution Date") {or as the
Trust receives distributions of principal on
the Securities it holds}]]. [Describe any
other distributions]. [Distributions of
principal on the Class * Units may be less
than the full principal amount of the Units
[depending on the value of {describe index
and valuation period}] [if the Trust is
required to make a termination payment {or
payment under the credit swap transaction}
under the Swap Agreement]].
[The Class * Units have an amortizing
principal balance. The Class * Units will
receive all scheduled payments on interest
that the Trust receives on or before * on the
Securities it holds. Each payment will
reflect partial amortization of the principal
balance of the Class * Units and a
distribution of interest at a rate of * % per
annum.]
[The Class * Units will not receive scheduled
distributions of interest or principal, but
will receive a distribution of the Securities
on * .]
[If the Securities are in default or are
redeemed early, the Trust will terminate and
the Securities or proceeds of redemption will
be divided between the Class * and Class *
Units. The percentage share of the
Securities received by each Class will vary
based on when the Trust terminates. See
"Description of Units".]
[[Call Rights .....................The Units are subject to a call option in
favor of [identify] on * at a price of * ]]
[[Depositor] Optional Exchange ....[Holders of the Units have a limited right]
[The Depositor and its affiliates, but not
any other Holder of the Units, will have a
limited right] to exchange Units for
corresponding portions of the Securities. The
[Depositor's] right to make such an exchange
is subject to restrictions on advance notice,
frequency, and minimum amount of the
exchange. [In addition, an exchanging
Unitholder will be responsible for a partial
termination payment under the Swap
Agreement.]]]
[[Swap Counterparty ...............[identify]]]
[[Swap Agreement ..................[Swap Counterparty] will enter into [an
interest rate swap] [a cross-currency swap]
[a total return swap][a {call}{put}option
transaction] [a credit swap] [other]
transaction with the Trust. The Trust [will
pay to the Swap Counterparty the {interest}
{principal} amounts the Trust receives on the
Securities] [{will}{may be required to}
deliver to the Swap Counterparty the
Securities on {dates} at a price of * . [In
exchange for periodic payments made by the
Swap Counterparty, the Trust will deliver the
Securities to the Swap Counterparty if a
specified credit-related occurs with respect
to [specify entity].] The Trust will receive
payments under the Swap Agreement on the same
dates the Trust makes distributions on the
Units. [The Trust will apply the payments
it receives under the Swap Agreement to make
distributions of interest [and principal] on
the Units.]]]
[[Swap Agreement Guarantee ........Morgan Stanley Dean Witter will guarantee the
obligations of [Swap Counterparty] under the
Swap Agreement.
[[Calculation Agent ...............[Entity] will act as Calculation Agent under
the Swap Agreement and will calculate the
value of [index] from time to time.]]
[[Exchange Rate Agent .............[Entity] will act as Exchange Rate Agent and
will calculate applicable rates of exchange
between U.S. dollars and [specified
currency] for investors purchasing the Units
with U.S. dollars.]]
[[Credit Enhancement ..............The credit enhancements include [a financial
guaranty insurance policy] [letter of credit]
[guarantee] [subordination features].
[Describe]]]
[[Retained Interest ...............[Describe any retained interest of the
Depositor]]]
Tax Status ........................The Depositor will receive an opinion that
the Trust [{should}{will} be characterized as
a grantor trust and][will not be
characterized as an association taxable as a
corporation.]
Rating ............................The Units must be assigned a rating of * by *
in order to be issued.
[[Offering Restrictions ...........The Units are being offered only to
"qualified institutional buyers" as defined
in Rule 144A under the Securities Act of
1933.]]
ERISA Considerations ..............A plan subject to the fiduciary
responsibility provisions of the Employee
Retirement Income Security Act of 1974, as
amended, or Section 4975 or the Internal
Revenue Code [may not purchase the Units]
[must make special arrangements with the
Depositor and the Trustee in order to
purchase the Units] * [should consult with
its counsel before making an investment in
the Units]. * See "ERISA Considerations."
RISK FACTORS
In addition to the risk factors discussed in the Prospectus, prospective
purchasers of the Units should carefully consider the following risk factors:
[[[Describe any special risk
factors from
Securities]]]
[[ Prepayments Will Affect
Yield [and Recovery of Investment] The Securities
[can be redeemed early at the option of the
Security Issuer {specify dates or
conditions}] [may amortize early as a result
of {describe amortization features of
underlying security}]. If the Securities are
redeemed early, the Trust will be terminated
and [Unitholders will receive a return of
principal before the scheduled maturity of
the Units] [proceeds of the redemption will
be divided between the Class * and Class *
Units based on the outstanding Class * Unit
Principal Balance determined on the
termination date. See "Description of Units
-- Amortizing Distributions"] See "Risk
Factors" in the Prospectus.
If the Securities are redeemed early, the
Trust [and the Swap Agreement] will terminate
[, and the Trust may be required to pay a
termination payment. See "--Liability for
Swap Termination Payments" in this section
and "Risk Factors -- Swap Agreements have
special risks" in the Prospectus."]]]
[[The Class * Units are not entitled to
distributions of principal but receive
interest cash flows from the Securities for
so long as the Securities are outstanding. If
the Securities are prepaid or redeemed early
or the Trust is wound up early, returns on
the Class * Units will be adversely affected.
Such prepayment, redemption or wind up may
occur before holders of the Class * Units
have recovered the initial investment. See
"Risk Factors".]]
[[Sensitivity to Interest Rates]] [[The Class * Units do
not receive allocations of either interest or
principal until the Final Scheduled
Distribution Date. The market value of the
Class * Units from time to time will be
sensitive to changes in interest rates, more
so than the Securities.]]
[[[Interest] and [Principal]
Linked to Value of [Specify
Index] The Units are "Index-Linked Units" as
described in the Prospectus. Distributions
of [interest] [and principal] with respect to
the Units will depend on the value of the
[specify index]. The [specify index]
indexes the appreciation or depreciation in
the price of a designated group of
[securities commodities, currencies,
intangibles, goods or articles or other
objective price, economic or other measure]
over a given period of time. Depending on
the performance of the [specify index] over a
given interest period, Unitholders may
receive lesser amounts of interest on these
Units than they would otherwise have received
had they held the Securities. Depending on
[the performance of the index over the time
the Units are outstanding] [the value of the
index on the scheduled final distribution
date for the Units], Unitholders may receive
a lesser return of principal on the Units
than they would have received had they held
the Securities.
The value of the index is determined by
changes in the prices of the [securities
commodities, currencies, intangibles, goods
or articles or other objective price,
economic or other measure] making up the
index. Such changes generally depend on
factors -- such as economic and political
events and the supply of and demand for
[indexed assets] -- that the Depositor[, the
Swap Counterparty] and the Trustee and their
affiliates do not control and cannot foresee.
[The value of the index is not determined by
a nationally published source]. [The index
is published solely by third parties are not
subject to regulation under the laws of the
United States.] [The Depositor and the Swap
Counterparty cannot ensure that [publisher]
will determine the value of the index
accurately.]
The risk of [decreased interest payments]
[and loss of principal] as a result of the
linkage of payments on Index-Linked Units to
the index and to the Indexed Assets is
substantial. Prospective purchasers should
consult their own financial and legal
advisors as to the risks entailed by an
investment in Index-Linked Units.]]
[[Currency Risks The Units are not denominated in U.S.
dollars. Depreciation of [the specified
currency] against the U.S. dollar will
result in a decrease in the effective yield
of such Unit for an investor who pays dollars
to purchase the Units. * The value of the
U.S. dollar in comparison to the [specified
currency] depends on economic and political
factors, the supply and demand for such
currencies, and government interventions, and
can be highly unpredictable. [In recent
years, rates of exchange between the U.S.
dollar and [specified currency] have been
volatile.]
The [specified currency] may become
unavailable, due to exchange controls or
other events beyond the control of the
Depositor or the Trust. In such
circumstances, the Exchange Rate Agent will
determine in its sold discretion when and how
to make distributions on the Units. This may
include a delay until the [specified
currency] is again available or a
distribution in another currency at rates
determined by the Exchange Rate Agent.
Courts in the United States customarily have
not rendered judgments for money damages
denominated in any currency other than U.S.
dollars. In the New York courts, 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 exchange rate prevailing on
the date of judgment.
Prospective purchasers of such Units should
consult their own financial and legal
advisors about risks related to investments
in currencies other than U.S. dollars.]]
[[Liability for Swap
Termination Payments [The Swap Agreement] [Each swap transaction]
may be terminated early if
o the [related] Securities default [or are
redeemed early];
o the Trust or the Swap Counterparty fails to
make the required payments under the
agreement;
o MSDW fails to perform under its guarantee
of the Swap Agreement;
o the Swap Agreement becomes illegal or
invalid;
o the Trust or the Swap Counterparty becomes
bankrupt;
o withholding taxes are imposed on payments
made by the Trust or Swap Counterparty
under the Swap Counterparty;
o the Swap Counterparty or MSDW is involved
in a merger and disaffirms the Swap
Agreement; or
o [other]
At any time of early termination [the Swap
Agreement] [each swap transaction] may have
value to either the Trust or the Swap
Counterparty; if so, the other party will be
required to pay that value as a termination
payment. The termination payment corresponds
to the estimated cost to the Trust or the
Swap Counterparty of entering into a
replacement [Swap Agreement] [swap
transaction]. Such cost depends on the
comparative value of the remaining [specify]
payments to be made by the Trust and the
remaining [specify] payments to be made by
the Swap Counterparty.
The holders of the Units will effectively pay
any termination payment payable by the Trust,
in proportion to the amount of their
investment, up to the limit of the Trust's
assets. The value of [the Swap Agreement]
[each swap transaction] may be highly
volatile, and it is not possible to estimate
the maximum amount of the termination
payment.
Please carefully review "Risk Factors --
Swap Agreements have special risks" in
the Prospectus. ]]
[[High Yield Securities --
Greater Default Risk The Securities [are] [include] high yield
corporate debt obligations of U.S. [and
other] issuers rated below investment grade.
[The Securities are not secured by any
collateral.] [High yield debt obligations are
generally unsecured.] They [are] [may also
be] subordinated to other obligations of the
Security Issuer and 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 such transactions,
security 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, future default rates may differ.]]
[[Alternative Tax
Characterization]] The Depositor will receive an opinion of
counsel that the Trust should be treated as a
grantor trust for federal income tax
purposes, but the Internal Revenue Service
might disagree with this characterization.
See "U.S. Federal Income Tax Consequences" in
this Prospectus Supplement for a discussion
of the consequences of any alternative
characterization of the Trust that might be
asserted by the I.R.S.
[[Emerging Market
Securities -- Special
Risks The Securities [include] [are] emerging
market securities, and are subject to special
risks.
Special Credit Risks Investing in the debt of
emerging markets issuers involves special
credit risks not associated with investing in
more established capital markets such as the
United States and Western Europe. The risks
may include:
o risks attributable to fluctuations in
foreign exchange rates;
o political, economic and diplomatic
instability;
o hyperinflation;
o expropriation;
o different legal systems;
o exchange controls;
o confiscatory taxation;
o nationalization of private businesses; or
o other governmental restrictions
Tax Risks Foreign investments may also 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
Security
Issuer.
Price and Liquidity Risks The Securities are also subject to special
price volatility and liquidity risks.
[Specify market] [and other] emerging markets
have smaller capital markets with
substantially less volume than capital
markets of non-emerging markets. As a
result, the securities traded there are
generally less liquid and prices are
generally more volatile. A limited number
of issuers often represent a
disproportionately large percentage of market
capitalization and trading value in [specify
market] [and other] emerging markets. In
addition, large investors trading significant
blocks of securities, or dealers making large
dispositions of securities resulting from
failure to meet margin calls, may
significantly affect price and liquidity in
emerging markets. Should the Unitholders
receive a distribution of the Securities in
kind, as a result of early termination of the
Swap Agreement or the Trust, such factors may
affect the price at which the Unitholders'
can dispose of the Securities and their
ability to do so quickly.
Available Information Disclosure and regulatory standards in
emerging markets are often less stringent
than those in other international securities
markets. Many emerging market countries have
a low level of monitoring and regulation of
the market and market participants, and
limited and uneven enforcement of existing
regulations. An investor may be able to
obtain little publicly available information
about an issuer in an emerging market
country. The security 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.]]
DESCRIPTION OF UNITS
The Trust will be formed under a Trust Agreement between the Depositor and
the Trustee dated * . The Trust Agreement incorporates the provisions of the
Standard Terms of Trust Agreements between the Depositor and the Trustee dated *
and described in the Prospectus. When the Trust Agreement is executed, the
Depositor will deposit the Securities into the Trust. The Trustee, on behalf of
the Trust, will accept the Securities [, enter into the Swap Agreement] and
deliver the Units to or upon the order of the Depositor.
The Units will consist of * Class[es] of Units, designated as [specify
classes]. Each Class is denominated in [Specified Currency] (the "Specified
Currency"). The [Class * ] Units have in the aggregate an Initial Unit Principal
Balance of * . [The Class * Units do not have a Unit Principal Balance but are
entitled to distributions of interest based on a Notional Amount of * .][The
Unit Principal Balance of the Class * Units amortize, in accordance with the
schedule described under "Amortizing Distributions" below.][The Trust will also
issue Class * Units, which are not being offered by this Prospectus Supplement.
The Class * Units 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.]
[[[For Global Registered Units]:
The Units [(other than the Class * Units)] will be issued, maintained and
transferred on the book-entry records of DTC and its Participants in minimum
denominations of * and multiples of * in excess thereof.]]
[[[For Definitive Units]:
The Class * Units will be offered in registered, certificated form, in
minimum percentage interests corresponding to the [initial Notional Amount]
[Initial Unit Principal Balance], of * and integral multiples thereof. The
Trustee will maintain a register of the Unitholders of record and distributions
in respect of the Units will be made on each Distribution Date to holders of
record on a record date ("Record Date") occurring on the * day prior to each
Distribution Date.]]
Interest Distributions
Distribution Dates for the Units will occur on [the payment dates under the
Securities falling on] [the payment dates under the Swap Agreement falling on]
each [specify dates]. Exact Distribution Dates are subject to the provisions of
the Trust Agreement and [the Swap Agreement] [the Securities] as to shifting of
payment dates where Distribution Dates would otherwise fall on a date which is
not a business day. Specifically, if a Distribution Date would otherwise fall on
a day which is not a Business Day, the payment will instead be made on the next
following Business Day [other]. For purposes of the Units [and the Swap
Agreement], "Business Days" will include [specify].
The Interest Rate applicable to the Units is a [fixed rate of * % per
annum][variable rate]. Each [specify interval] period from (and including) a
Distribution Date to (but excluding) the following Distribution Date will be an
Interest Period. [The Trust will pass through to the Unitholders interest it
receives on the Securities. See "Description of Trust Property."] [Distributions
of interest for a given [period] will be based on the value of [specify index]
as determined [on the first day] [on the last day] [other basis of
determination] of that [period] by the Calculation Agent under the Swap
Agreement. The Trust will pass through interest at this rate to the holders of
the Units based on payments to the Trust by the Swap Counterparty under the Swap
Agreement.] [The Units will accrue interest for each Interest Period based on
the value of [specify index] [determined as of the ___ day prior to the first
day] [determined on the ___ day prior to the last day] of such Interest Period
by the Calculation Agent under the Swap Agreement.]
Principal Distributions
Principal will be distributed on the Final Scheduled Distribution Date
occurring on * [or as the Trust receives distributions of principal on the
Securities it holds]. The Trust will also pass through to the Unitholders
payments of principal received on the Securities due to any early amortization
or partial redemption of the Securities. [Describe any other distributions].
[Distributions of principal on the Class * Units may be less than the full
principal amount of the Units [depending on the value of {describe index and
valuation period}] [if the Trust is required to make a termination payment {or
payment under the credit swap transaction}under the Swap Agreement].]
[[Amortizing Distributions
On each Distribution Date, commencing on * and ending on the Final
Scheduled Distribution Date, the holders of the Class * Units will receive a
distribution equal to the interest payment, if any, received on the Securities,
minus fees and expense reimbursements paid to the Trustee. * The amount
distributed will be * % of the principal amount of the Securities held by the
Trust. The amount will be allocated between payment of interest on the
outstanding Unit Principal Balance of the Class * * at an Interest Rate of * %
per annum. and a partial return of principal on the Class * Units in accordance
with the amortization schedule set forth below (the "Amortization Schedule").
The Class * Principal Balance will be decreased on each Distribution Date by the
amount*allocated to return of principal on the Class * Unit on that date.
[Amortization Schedule]
[set out schedule]
Although distributions on the Class * Units are labeled as principal and
interest, the Class * Units generally will not be entitled to any allocation of
any principal payments received on the Securities and will be paid solely from
interest payments on the Securities.
Except upon early termination of the Trust, no cash distributions will
be made on the Class * Units until the Class * Unit Principal Balance has been
reduced to zero. On the Final Scheduled Distribution Date, the holders of Class
* Units will be entitled to a distribution of all of the Securities held by the
Trust as of such date.
If a Securities Default (as defined under "Description of the Trust
Agreement") occurs or the Securities are redeemed early, the Trust will
terminate and the Securities or proceeds of redemption will be divided between
the Class * and Class * . * The percentage shares of the Securities received by
the Class * and Class * Units will vary, as specified in the Amortization
Schedule, based on the outstanding Unit Principal Balance of the Class * on the
date Trust terminates. * The Class * Units will receive a percentage amount of
the Securities equal to the ratio between the Class * Unit Principal Balance on
the date of termination and the principal amount of the Securities [amount]. *
If the date of termination is not Distribution Date, the Class * Unit Principal
Balance will be determined by the Calculation Agent by linear interpolation (as
described below) between the Class * Unit Principal Balance on the Distribution
Date immediately preceding and immediately succeeding such date. * The Class *
Units will receive the remaining portion of the Securities.]]
[[Call Rights
The Units are a Callable Series. [Specify call holder] has the right to
purchase all or a portion of the Units at a price of * %, provided that such
right must be exercised with respect to a minimum Unit Principal Balance of *
and integral multiples thereof. [Specify any time restriction]. Each Unitholder
will be entitled to receive a distribution of a pro rata share of the price paid
in connection with exercise of the call option.]]
[[Optional Exchange
The Units are [an "Exchangeable Series."] [subject to "Depositor Optional
Exchange"] [A holder][The Depositor and its affiliates, but not any other Holder
of the Units] may exchange Units 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 dates ("Optional Exchange Dates"):
[specify] [(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 Securities to be distributed to
such holder by the Trustee;] [describe other limitations or provisions].]]
DESCRIPTION OF TRUST PROPERTY
The Securities
[[[Include for each Concentrated Security:]
[A significant portion of] [Virtually all of] [All of] the Trust Property
of the Trust will consist of the [amount] [ * %] [floating rate] [specify
publicly issued security] due * of [specify issuer][, exclusive of the Retained
Interest of {the Depositor} as described below]. The Securities were issued
under an [indenture][other agreement] dated as of * (the "Security Agreement")
between [Security Issuer] and [Security Trustee][Fiscal Agent][other
counterparty]. The Securities were part of a series of securities totaling * .
[The Securities have an amortizing principal and the Securities to be held by
the Trust had as of * (the "Cut-off Date") an aggregate principal amount of
approximately * .]
[[The Securities [have been] [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 Securities will not be acquired either
from [Security Issuer] or pursuant to any distribution by or agreement with
[Security Issuer]. All information contained in this Prospectus Supplement
regarding the Securities has been derived solely from [the Security Prospectus
[{and Security Registration Statement]} {other periodic filing} relating to such
Securities as filed with [{stock exchange or other agency} {the Commission} on
*] [{describe FNMA, FHLMC or other GSE offering circular} relating to such
Securities issued on * and periodic reports with respect thereto filed {describe
GSE periodic reporting}]. [Describe other publicly available documents.]
[Securities issued by a Security Issuer which is not an Eligible Issuer will be
described below and in periodic reporting.] Prospective purchasers of Units are
urged to read this Prospectus Supplement in conjunction with the Security
Prospectus and the Security Registration Statement. The Depositor, Morgan
Stanley and the Trustee, as well as their respective affiliates, did not
participate in the preparation of the Security Prospectus or Security
Registration Statement or other public information relating to the Securities,
and they take no responsibility for the accuracy or completeness of the
information provided in such Security Prospectus or Security Registration
Statement.]]
[[The Securities [were issued][will on the Closing Date be issued] by * ,
an affiliate of the Depositor and Morgan Stanley. In depositing the Securities
into the Trust, the Depositor is acting as an underwriter of the Securities. The
Security Prospectus was filed with the Securities and Exchange Commission on *
and is included as an annex to this Prospectus Supplement. Prospective
purchasers of Units are urged to read this Prospectus Supplement in conjunction
with the Security Prospectus and the Security Registration Statement.]]
The following is a summary of all material terms of the Securities:
Title and Original Issue Date:
Security Issuer:
Principal Amount Held By Trust:
Interest Rate:
Scheduled Payment Dates:
Scheduled Maturity:
Ranking:
Rating at Issuance:
Security Agreement:
Terms of Pledge, Lien or other Security Interest:
Guarantee or other Credit Support:
Currency of Denomination:
Redemption or Sinking Fund Terms:
Optional Redemption Terms:
Trustee or Other Agent for Security Holders
Listing:
Form:
CUSIP:
Security Prospectus:
Security Registration Statement:
Other Terms:
[Describe any put, call or other conversion or redemption options
applicable to the Securities].
[Describe material covenants and events of default under Security Agreement
relating to each Concentrated Security].
As of the Cut-off Date, the Securities were 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 Securities is not a recommendation to purchase, hold or
sell such 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" in this Prospectus*Supplement regarding certain
considerations applicable to the ratings of the Units.
The Security Issuer
[[ According to [Security Issuer]'s publicly available documents, [Security
Issuer] 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 [Security Issuer]. [Security Issuer] is subject to the
informational requirements of the Exchange Act and as required by the Exchange
Act 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 {Security Issuer}, according to its
most recent annual report, upon written or oral request to { Security Issuer
}].]]
[[This Prospectus Supplement does not provide information with respect to
the Security Issuer and no investigation of the financial condition or
creditworthiness of any of the Security Issuer or any of its subsidiaries or
other affiliates, has been made by the Depositor, Morgan Stanley or the Trustee,
or any of their affiliates, in connection with the issuance of the Units.
Prospective purchasers of Units should consider carefully the Security Issuer's
financial condition and its ability to make payments in respect of the
Securities. All information contained in this Prospectus Supplement regarding
the Security Issuer has been derived from [the related Security Prospectus and
reports filed by the Security Issuer pursuant to the Exchange Act] [describe GSE
public information]. It is possible that events affecting the Securities or the
Security Issuer have occurred, which have not yet been publicly disclosed, which
would affect the accuracy or completeness of the publicly available documents
described above.]]
[[In the event that [Security Issuer] [ceases to be a reporting company
under the Exchange Act][ceases to publish {describe GSE information}], the Trust
will [terminate] [partially terminate] and distribute the related Securities to
the Unitholders in kind [subject to payment of any termination payment owed to
the Swap Counterparty for the termination of the related swap transaction]. See
"Risk Factors -- Swap Agreements have special risks" in the Prospectus.
[[[Use the following where Units are backed principally by Treasury/FNMA/FHLMC
securities]:
[[[The Securities are [issued] [guaranteed] by [the United States of
America] [agency].][Payment of the Securities is guaranteed by the full faith
and credit of the United States of America.]]]
[[The Securities are obligations of the Federal National Mortgage
Association ("Fannie Mae"). 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. Fannie Mae receives guaranty fees
for its guaranty of timely payment of principal of and interest on
mortgaged-backed securities. Fannie Mae issues mortgage-backed securities
primarily in exchange for pools of mortgage loans from lenders. The issuance of
mortgaged-backed securities 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 Securities are obligations of the Federal Home Loan Mortgage
Association ("Freddie Mac"). Freddie Mac is a publicly held government-sponsored
enterprise created on July 24, 1970 pursuant to the Federal Home Loan Mortgage
Corporation Act, Title III of the Emergency Home Finance Act of 1970, as amended
(the "FHLMC Act"). Freddie Mac's statutory mission is to provide stability in
the secondary market for home mortgages, to respond appropriately to the private
capital market and to provide ongoing assistance to the secondary market for
home mortgages (including mortgages secured by housing for low-and
moderate-income families involving a reasonable economic return to Freddie Mac)
by increasing the liquidity of mortgage investments and improving the
distribution of investment capital available for home mortgage financing. The
principal activity of Freddie Mac consists of the purchase of first lien,
conventional, residential mortgages and participation interests in such
mortgages from mortgage lending institutions and the resale of the mortgages so
purchased in the form of guaranteed mortgage securities. Freddie Mac generally
matches and finances its purchases or mortgages with sales of guaranteed
securities. Mortgages retained by Freddie Mac are financed with short-and
long-term debt, cash temporarily held pending disbursement to security holders,
and equity capital.
Freddie Mac prepares an Information Statement annually which describes
Freddie Mac, its business and operations and contains Freddie Mac's audited
financial statements. From time to time Freddie Mac prepares supplements to its
Information Statement which include certain unaudited financial data and other
information concerning the business and operations of Freddie Mac. These
documents can be obtained from Freddie Mac by writing or calling Freddie Mac's
Investor Inquiry Department at 8200 Jones Branch Drive, McLean, Virginia 22102
(outside Washington, D.C. metropolitan area, telephone (800) 336-3672; within
Washington, D.C. metropolitan area, telephone (703) 759-8160). Freddie Mac is
not subject to the periodic reporting requirements of the Securities Exchange
Act of 1934.]]]]
[[Set forth similar summary statement for other GSE Eligible Issuer.]]]]
[[[Use the following where the Concentrated Security is issued by a foreign
sovereign agency or instrumentality]
The Securities are [obligations of][guaranteed by] [identify foreign
government, foreign political subdivision, or agency and instrumentality]. In
the absence of a waiver of immunity by [Security Issuer], it would not be
possible to obtain a United States judgment against such [Security Issuer],
unless a court were to determine that such issuer is not entitled under the
Foreign Sovereign Immunities Act of 1976 to sovereign immunity with respect to
such action. Even if [Security 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 Securities represent direct or indirect obligations of
[Security Issuer], 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 [Security
Issuer] makes 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 Securities of [Security Issuer] have been issued under 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 [Security Issuer]'s as would a trustee. [The due and punctual payment
of the Securities and the due and timely performance of all obligations with
respect thereto [are backed by the full faith and credit of the sovereign
entity] [unconditionally guaranteed by {identify}].]]]]]
[[[Use the following where the Securities consist of a pool of obligations of
multiple obligors.]
The Securities Pool
[The Securities consist of Securities of [specify all types of issuers --
domestic, foreign, corporate, government]. The 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
Securities will not be acquired either from the respective obligors on the
Securities or pursuant to any distribution by or agreement with such obligors.
The composition of the Securities pool and the distribution by ratings,
remaining term to maturity and interest rate of the Securities as of the Cut-off
Date are as set forth in Tables 1 through 5 below:
Composition Of The Securities Pool
As Of The Cut-Off Date
----------------------
Number of 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 Securities Pool As Of The Cut-Off Date
Industry Aggregate Principal Percent of Aggregate
Classification Number Balance Principal Balance
- -------------- ------ ------- -----------------
Total
Distribution By Remaining Term To Maturity
Of The Securities Pool As Of The Cut-Off Date
---------------------------------------------
Remaining Term Aggregate Principal Percent of Aggregate
to Maturity Number Balance Principal Balance
- ----------- ------ ------- -----------------
Total
Distribution By Interest Rate
Of The Securities Pool As Of The Cut-Off Date
---------------------------------------------
Interest Aggregate Principal Percent of Aggregate
Rate Change Number Balance Principal Balance
- ----------- ------ ------- -----------------
Distribution By Ratings Of The
Securities Pool As Of The Cut-Off Date
--------------------------------------
Aggregate Principal Percent of Aggregate
Rating Number Balance Principal Balance
- ------ ------ ------- -----------------
Total:
[[As of the Cut-off Date, [all of] [approximately % of] such Securities
were rated [investment grade] [specify particular rating] by at least one
nationally recognized rating agency, and no obligor of any 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 Securities is not a
recommendation to purchase, hold or sell such Security or the Units, and it is
possible that a rating will not remain for any given period of time or that a
rating will be lowered or withdrawn entirely by a rating agency if in its
judgment circumstances in the future so warrant. See "Ratings" in this
Prospectus Supplement regarding certain considerations applicable to the ratings
of the Units.]]
[[Add the following where pool includes Foreign Government Issuers:
[The Securities will include obligations of, or guaranteed by, the
following foreign governments, foreign political subdivisions, or agencies and
instrumentalities (collectively referred to as "Foreign Governments"):
[list]
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 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 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 Security 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 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 Securities as would a trustee. The due and
punctual payment of each 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 Governments in
respect of the Securities. The 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 Securities. Certain actions in respect
of the Securities of Foreign Governments may also be subject to proper
executive, legislative or administrative approval.]]
Security Agreements
Each of the Security Agreement[s] limits the [respective] Security Issuer's
ability to engage in certain activities and transactions and requires that the
Security Issuer perform certain obligations with respect to the Securities.
[Describe common restrictive, financial and other covenants on the Security
Issuer contained in the Security Agreement.]
The following is a summary of the typical events of default for each series
of Securities:
(a) failure to make payments of principal (and premium, if any) and
interest to holders of the Securities in the time periods given in the 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 Security Agreement continuing for a specified period of time
after notice thereof is given to the Security Issuer by the trustee or the
holders of not less than a specified percentage of the Securities;
(c) failure by the 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 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 Security
Issuer; and
[(e) describe any additional common events of default with respect to the
pool of Securities].
As of the Cut-off Date, [approximately __% of] the Securities were [subject
to [describe any put, call or other conversion or redemption options applicable
to the Securities as well as the nature of the obligation represented by such
Securities (i.e., senior, subordinate, secured) and describe commonalities with
respect to any subordination or security provisions or collateral].]] (including
guarantees thereof)
[Each of the] [The] Securities [was] [were] registered under the Securities
Act of 1933 other than [specify], which was issued in reliance on the exemption
from registration provided by [specify].
[[Credit Support -- [Letter of Credit][Insurance Policy][Reserve
Account][Subordination Feature]
For the benefit [solely] of the [Class * ] Units, Credit Support will be
obtained [and will constitute part of the Trust to the extent provided below],
in the form of [a letter of credit] [insurance policy] [reserve account]
[subordination feature] as described below.
[[Simultaneously with the Depositor's assignment of the Trust Property to
the Trust, the Depositor will obtain a letter of credit (the "Letter of Credit")
from [LOC Issuer] 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 * . 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 [LOC Issuer] to the extent of any amounts owing, in the manner
and priority applicable to the Units that have been paid with proceeds of the
Letter of Credit.
[Add description of the LOC Issuer 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 LOC Issuer. 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 or incorporate by reference
financial statements and other information with respect to the LOC Issuer.]]]
[[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 [identify] (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 * . 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 applicable to the Units
that have been paid with proceeds of the Policy.
[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 or incorporate by
reference financial statements and other information with respect to the issuer
of the Policy.]]]
[[In the event that [Credit Support provider] ceases to be a reporting
company under the Exchange Act, [the Trust will terminate and distribute the
related Securities to the Unitholders in kind {subject to payment of any
termination payment owed to the Swap Counterparty for the termination of the
related swap transaction}] [describe any provisions for replacement of Credit
Support provider]. See "Risk Factors -- Swap Agreements have special risks" and
"Description of Trust Agreements - Trust Wind-Up Events in the Prospectus.
[[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].]]
[[The subordination described herein provided by 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].]]]]
[Describe any other Trust Property]
[[DESCRIPTION OF SWAP AGREEMENT
As described 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 the Securities and receive from the Swap Counterparty [floating
rate][fixed rate] payments. The swap 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 Securities into
the effective coupon the Trust will distribute with respect to the Units.]]
[[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] 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, of converting the interest rate and currency otherwise
applicable to payment of interest and principal under the Securities into the
interest rate and currency in which the Trust will make distributions with
respect to the Units.]]
[[The Swap Agreement will document a total rate of return swap transaction
between the Trust and the Swap Counterparty under which the Trust [will pay to
the Swap Counterparty coupon and principal payments received in respect of the
Securities during the relevant period, and] will receive from the Swap
Counterparty [interest][principal] payments based on the increase in value of
the [index] during the relevant period or make payments to the Swap Counterparty
based on the decrease in value of the [index] during the relevant period. [The
Trust will not be required to make payments under the total rate of return swap
transaction if such payments would cause a loss of principal to the Units.] The
transaction will have the effect, subject to performance by the Swap
Counterparty of its obligations under the Swap Agreement, of converting the
return on the Securities to the return based on the performance of the [index]
that the Trust will distribute on the Units.]]
[[The Swap Agreement will document an option transaction between the Trust
and the Swap Counterparty under which the Trust will [purchase a put option
from] [grant a call option to] the Swap Counterparty with respect to the
Securities or other Trust Property[, and the Trust will make a payment to the
Swap Counterparty of * ] [, 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 Securities into the right to receive another
security.] [The put option will entitle the Trust to put to the Swap
Counterparty the Securities at par, thereby protecting the Trust from a decline
in the market value of the related Securities in circumstances where the
Securities may be outstanding on the Final Scheduled 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 Securities on the exercise date for the
put option is less than the par value of such Securities.]]]
[[The Swap Agreement documents a credit swap transaction, under which the
Trust will receive payments from the Swap Counterparty of * % per annum on
payments dates which occur on each Interest Payment Date for the Units. In
exchange, the Trust will agree to exchange the Securities for [specify
Deliverable Obligations] of [specify entity] (the "Reference Entity") upon the
occurrence of one or more defined Credit Events (as described below) with
respect to [specify entity]. Effectively, the credit swap transaction will
expose the Trust to the credit risks associated with holding the [Deliverable
Obligation] directly. A purchaser of the Units should therefore carefully review
the following information regarding the terms of the [Deliverable Obligation]:
[set forth information comparable to disclosure for Concentrated Debt
Security].]]
The notional amount of the [interest rate] [currency] [total rate of
return] [credit] swap transaction will be equivalent to the principal amount of
Securities held by the Trust. Payment dates and payment accrual periods under
the Swap Agreement will match the Distribution Dates and Interest Periods on the
Units. The [floating rate] [index value] applicable to payments during each
period under the Swap Agreement will be established by the Calculation Agent on
each payment date based on the value of [the [floating rate] as of the * day
prior to the first day of the Interest Period] [the [index] as of the ___ day
prior to the last day of the Interest Period]. The value of [floating rate]
[index] will be determined by reference to the [screen] or in the event such
screen [rate][value] is unavailable by reference to quotations from market
makers obtained by the Calculation Agent.
The principal economic terms of the swap transaction will set forth in a
confirmation under the Master Agreement (the "Confirmation") dated * . A Current
Report on Form 8-K relating to the Units containing a copy of the Confirmation
as executed will be filed by the Depositor with the Commission following the
issuance and sale of the Units. The material terms of the Confirmation are
described below:
Effective Date:
Termination Date:
Fixed Amounts:
Fixed Rate Payer
[Notional][Currency]
[Calculation] Amount:
Fixed Rate Payer:
Fixed Rate Payer
Payment Dates:
Fixed Rate:
Floating Amounts:
Floating Rate Payer
[Notional][Currency]
[Calculation] Amount:
Floating Rate Payer:
Floating Rate:
Floating Rate Payer Payment Dates:
Floating Rate Option:
Designated Maturity:
Floating Rate Day Count Fraction:
Reset Dates:
[Method of Averaging:]
[Compounding:]
Calculation Agent:
Business Days:
[Reference Entity]
[Deliverable Obligations]
[Credit Events]
[Materiality Terms]
[Conditions to Payment]
[Settlement Terms]
[[Credit Events are defined to include the following:
Bankruptcy means [the Reference Entity]:
(i) is dissolved (other than pursuant to a consolidation, amalgamation or
merger; (ii) becomes insolvent or is unable to pay its debts or fails or
admits in writing its inability generally to pay its debts as they become
due; (iii) makes a general assignment, arrangement or composition with or
for the benefit of its creditors; (iv) institutes or has instituted against
it a proceeding seeking a judgment of insolvency or bankruptcy or any other
relief under any bankruptcy or insolvency law or other similar law
affecting creditors' rights, or a petition is presented for its winding-up
or liquidation, and, in the case of any such proceeding or petition
instituted or presented against it, such proceeding or petition (A) results
in a judgment of insolvency or bankruptcy or the entry of an order for
relief or the making of an order for its winding-up or liquidation or (B)
is not dismissed, discharged, stayed or restrained in each case within 30
days of the institution or presentation thereof; (v) has a resolution
passed for its winding-up, official management or liquidation (other than
pursuant to a consolidation, amalgamation or merger); (vi) seeks or becomes
subject to the appointment of an administrator, provisional liquidator,
conservator, receiver, trustee, custodian or other similar official for it
or for all or substantially all its assets; (vii) has a secured party take
possession of all or substantially all its assets or has a distress,
execution, attachment, sequestration or other legal process levied,
enforced or sued on or against all or substantially all its assets and such
secured party maintains possession, or any such process is not dismissed,
discharged, stayed or restrained, in each case within 30 days thereafter;
(viii) causes or is subject to any event with respect to it which, under
the applicable laws of any jurisdiction, has an analogous effect to any of
the events specified in clauses (i) to (vii) (inclusive); or (ix) takes any
action in furtherance of, or indicating its consent to, approval of, or
acquiescence in foregoing acts.
[Credit Event Upon Merger means [Reference Entity] consolidates or
amalgamates with, or merges with or into, or transfers all or substantially
all its assets to, another entity and the creditworthiness of the
resulting, surviving or transferee entity is materially weaker than that of
the [Reference Entity] immediately prior to such action.]
[Cross Acceleration means the occurrence of a default, event of default or
other similar condition or event (however described), other than a failure
to make any required payment, in respect of [Reference Entity] under one or
more obligations [in an aggregate amount of not less than * ] which has
resulted in such obligations becoming due and payable before they would
otherwise have been due and payable.]
[Cross Default means the occurrence of a default, event of default or other
similar condition or event (however described), other than a failure to
make any required payment, in respect of the Reference Entity under one or
more obligations [in an aggregate amount of not less than * ] which has
resulted in such obligations becoming capable at such time of being
declared due and payable before they would otherwise have been due and
payable.]
[Downgrade means the credit rating of [Reference Entity] is lower than * or
the obligation is no longer rated by any Rating Agency.]
Failure to Pay means, after giving effect to any applicable grace period
(under any terms in effect at the Trade Date), the failure by the Reference
Entity to make, when due, any payments equal to or exceeding the Payment
Requirement (if any) under [the Reference Obligation] [any obligations].
[Repudiation means [the Reference Entity] disaffirms, disclaims, repudiates
or rejects, in whole or in part, or challenges the validity of, [the
Reference Obligation] [any obligations] in any material respect.]
[Restructuring means a waiver, deferral, restructuring, rescheduling,
exchange or other adjustment occurs with respect to [the Reference
Obligation] [any obligations] of the Reference Entity and the effect of
such is that the terms of [the Reference Obligation] [such Obligation] are,
overall, materially less favorable from an economic, credit or risk
perspective to any holder of the Reference Obligation] [such Obligation].]
The Confirmation sets forth terms for the Trust to make a cash payment to
the Swap Counterparty in the event that it becomes illegal or impossible for the
Trust. The Confirmation also provides for notice of the occurrence of a Credit
Event to be based on publicly available sources of information and for
resolution by a third party of any dispute as to whether a Credit Event has
occurred.]]
As set forth in the Prospectus, early termination of the Swap Agreement
upon the occurrence of a 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 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. ]]
In the event that the Swap Counterparty ceases to be a reporting company
under the Exchange Act, [the Trust will {terminate} {partially terminate} and
distribute the related Secrities to the Unitholders in kind {subject to payment
of any termination payment owed to the Swap Counterparty for the termination of
the related swap transaction}][described any provisions for Swap
Counterparty\replacement]. See "Risk Factors -- Swap Agreements have special
risks" 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 TRUST AGREEMENT
The following summarizes the material terms of the Trust Agreement to the
extent they are not set forth in the Prospectus.
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 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]. 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.
[[In the event the Trustee is required to vote the Securities on the basis
of instructions from the Unitholders, voting rights will be allocated between
the Class * Unitholders and the Class * Unitholders based on the percentages set
forth in the table appearing under "Description of the Units -- Amortizing
Distributions". If the date on which the relative voting rights are to be
determined is not a Distribution Date, the percentage will be established by the
Calculation Agent based on linear interpolation between the values on the
immediately preceding and immediately following Distribution Dates.]]
[[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. See "Description of Units--Form" in the
Prospectus.]]
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 Reimbursable
Amount is * .
Trust Wind-Up Events
The following events of default with respect to the Securities will
constitute a "Securities Default" which will cause an early winding up of the
Trust [and an early termination of the swap transaction related to such
Securities] [list].
Retained Interest
[Description of any Retained Interest of Depositor]
U.S. FEDERAL INCOME TAX CONSEQUENCES
The following discussion, insofar as it states conclusions of law,
represents the opinion of Cleary, Gottlieb, Steen & Hamilton, special counsel to
the Depositor.
[Discuss any special tax features not discussed in Base Prospectus,
including, if applicable, FASIT election, partnership classification of Trust]
[[The Trust is a Stripped Bond Trust and the discussion pertaining to
Stripped Bond Trusts in the Prospectus is applicable. The Security Prospectus
indicates that the Securities underlying the Units were sold based on the
Security Issuer's belief that they should constitute indebtedness of the
Security Issuer for U.S. federal income tax purposes. As stated in the
Prospectus, the discussion under "U.S. Federal Income Tax Consequences" in the
Prospectus and herein is based on the assumption that the Securities will
constitute debt instruments in their entirety.
The Trust Agreement provides for fees of the Trustee to be paid from the
Trust Property. A holder 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 would be deducted by the holder if the holder paid directly a pro
rata portion of the amounts paid by the Trust.
As described under "Description of the Trust Property," the Securities may
become subject in certain circumstances to an optional redemption. It is not
clear how the possibility of an optional redemption, and the resulting
distribution to Class * Unitholders of a portion of the payment received by the
Trust on the optional redemption date should be taken into account for purposes
of determining the taxation of holders at, and prior to, the optional redemption
date (including, but not limited to, the amount of OID required to be included
by holders in ordinary gross income). The Trustee intends to take the position
that the possibility of an optional redemption should not affect the U.S.
federal income tax consequences to holders prior to the optional redemption
date. Under this treatment, if the maturity of the Securities were shortened as
a result of an optional redemption, a holder would be treated as disposing of
the Securities in whole, in the case of an optional redemption of all of the
Securities, or in part, in the case of an optional redemption of less than all
of the Securities, on the optional redemption date with the consequences
described in the Prospectus under "Stripped Bond Trusts -- Sale or Exchange of
Units or Debt Securities." There can be no assurance, however, that the IRS will
not take a different position on the effect of a potential optional redemption,
which position may have less favorable tax consequences. See "Stripped Bond
Trusts- Alternative Characterizations" in the Prospectus and the discussion
below. Prospective purchasers should consult their tax advisers with respect to
the effect of a potential optional redemption.
In addition to the consequences discussed in the Prospectus under "Stripped
Bond Trusts- Alternative Characterizations" adverse tax consequences might also
result if the IRS takes a different position than the position described in the
Prospectus under "Stripped Bond Trusts --Purchase and Holding of Units" with
respect to the effect on holders of a potential distribution to Class * Unit
holders of a portion of the payment received by the Trust on an optional
redemption date. For example, the IRS might treat the Unit as a right to
payments on the Securities coupled with a separate agreement, in the nature of
an option, between Class * Unit holders, on the one hand, and Class * Unit
holders, on the other hand. The existence of a deemed option might trigger the
Code's "straddle" rules, in which case, among other matters, gain or loss on the
sale of a Unit would be short-term capital gain or loss regardless of the period
during which the holder held the Unit.]]
[[Similar discussion if Risk Factor of alternative tax characterization is
included for other reasons.]]
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 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 "Deemed Representations" 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.]]
[[BEARER UNITS
The [Class * ] Units will be issued in bearer form ("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 * (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.]
The Depositor has been advised by the Underwriter[s] that [it][they]
propose[s] to acquire such Units for their own account and to resell the Units
from time to time in one or more transactions including negotiated transactions,
at fixed public offering prices or at varying prices to be determined at the
time of sale or at the time of commitment therefor. 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 IBCA, Inc. ("Fitch IBCA")] [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 Securities
and other Trust Property[, as well as the Swap Counterparty and MSDW as
guarantor of the Swap Counterparty][and providers of Credit Support][, and 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].
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.].
INDEX OF DEFINED TERMS
Page
----
Amortization Schedule...................................S-14
Bearer Units............................................S-38
Business Day............................................S-14
Confirmation............................................S-28
Cut-off Date............................................S-16
Distribution Date........................................S-2
Duff & Phelps...........................................S-40
ERISA...................................................S-36
Fannie Mae..............................................S-19
FHLMC Act...............................................S-20
Final Scheduled Distribution Date........................S-2
Fitch IBCA..............................................S-40
Foreign Governments.....................................S-23
Freddie Mac.............................................S-19
Index-Linked Units.......................................S-7
Initial Unit Principal Balance...........................S-1
Insurer.................................................S-26
Interest Rate............................................S-2
Interest Reset Date......................................S-2
Letter of Credit........................................S-25
Moody's.................................................S-40
Optional Exchange Dates.................................S-15
Policy..................................................S-26
PTCE....................................................S-36
qualified institutional buyers...........................S-1
Rating[Agency][Agencies]................................S-40
Record Date.............................................S-13
Reference Entity........................................S-28
Securities...............................................S-1
Securities Default......................................S-34
Security Agreement......................................S-16
Security Issuer..........................................S-1
Specified Currency.......................................S-1
Standard & Poor's.......................................S-40
Trigger Amount..........................................S-33
Underwriter[s]..........................................S-39
Underwriting Agreement..................................S-39
Unitholders..............................................S-2
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 SUPPLEMENT
SUMMARY..............................................
AVAILABLE INFORMATION................................ MSDW STRUCTURED ASSET CORP.
RISK FACTORS.........................................
DESCRIPTION OF UNITS.................................
DESCRIPTION OF TRUST PROPERTY........................ STRUCTURED ASSET TRUST UNIT REPACKAGINGS
[DESCRIPTION OF SWAP AGREEMENT......................]
DESCRIPTION OF TRUST AGREEMENT.......................
U.S. FEDERAL INCOME
TAX CONSEQUENCES................................
ERISA CONSIDERATIONS................................. PROSPECTUS
[BEARER UNITS.......................................] SUPPLEMENT
PLAN OF DISTRIBUTION.................................
LEGAL MATTERS........................................
INDEX OF DEFINED TERMS...............................
PROSPECTUS
PROSPECTUS SUPPLEMENTS...............................
AVAILABLE INFORMATION................................
INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE..........................
IMPORTANT CURRENCY INFORMATION....................... Dated , 199__
RISK FACTORS.........................................
THE DEPOSITOR........................................
USE OF PROCEEDS......................................
FORMATION OF TRUSTS..................................
DESCRIPTION OF TRUST PROPERTY........................
DESCRIPTION OF SWAP AGREEMENTS.......................
MSDW.................................................
DESCRIPTION OF UNITS.................................
DESCRIPTION OF TRUST AGREEMENTS......................
U.S. FEDERAL INCOME
TAX CONSEQUENCES..................................
ERISA CONSIDERATIONS.................................
CURRENCY RISKS.......................................
LIMITATIONS ON ISSUANCE OF
BEARER UNITS......................................
PLAN OF DISTRIBUTION.................................
LEGAL MATTERS........................................
INDEX OF DEFINED TERMS...............................
- ------------------------------------------------------------
Until [date], all dealers that effect transactions in these securities,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealers' obligation to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX X
Information contained herein is subject to completion X X or amendment. A
registration statement relating to these X X securities has been filed with the
Securities and Exchange X X Commission. These securities may not be sold nor may
offers to X X buy be accepted prior to the time the registration statement X X
becomes effective. This prospectus shall not constitute an offer X X to sell or
the solicitation of an offer to buy nor shall there be X X any sale of these
securities in any State in which such offer, X X solicitation or sale would be
unlawful prior to registration or X X qualification under the securities laws of
any such State. X
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
[GRAPHIC OMITTED]
Subject to Completion, Dated __________, 199___.
PROSPECTUS
Structured Asset Trust Unit Repackagings (SATURNSSM)
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, asset-backed or other fixed income
securities or loans (the "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 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 the Prospectus Supplement sets forth the
material financial and other information with respect to the issuer of the
underlying Securities (the "Security Issuer"), each Security which represents on
the date of formation of the Trust 10% or more by principal amount of the
Securities held by such Trust (a "Concentrated Security") will constitute or be
serviced fully by cash flow from (i) obligations of or guaranteed by the United
States government, (ii)obligations of one or more corporations, limited
partnerships, trusts, limited liability companies or other organizations,
banking organizations or insurance companies, in each case which meet the market
capitalization and other requirements for a primary issuance of common stock on
Form S-3 under the Securities Act of 1933, as amended, and 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), (iii) obligations of the
Federal National Mortgage Association or Federal Home Loan Mortgage Corporation
or other government sponsored enterprises that have a comparable market
capitalization and which make information publicly available comparable to that
of Exchange Act reporting companies or (iv) obligations of Eligible Foreign
Issuers (as defined herein). 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 any 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.
------------------
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
April __, 1999
SM SATURNS is being registered as a service mark of Morgan Stanley Dean Witter &
Co.
i
TABLE OF CONTENTS
Page
----
PROSPECTUS SUPPLEMENTS...............................1
AVAILABLE INFORMATION................................1
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE......2
RISK FACTORS.........................................2
REPORTS TO UNITHOLDERS...............................8
IMPORTANT CURRENCY INFORMATION.......................8
THE DEPOSITOR........................................8
USE OF PROCEEDS......................................9
FORMATION OF TRUSTS..................................9
MATURITY AND YIELD CONSIDERATIONS...................10
DESCRIPTION OF TRUST PROPERTY.......................11
DESCRIPTION OF SWAP AGREEMENTS......................18
MSDW................................................24
DESCRIPTION OF UNITS................................25
DESCRIPTION OF TRUST AGREEMENTS.....................44
U.S. FEDERAL INCOME TAX CONSEQUENCES................53
ERISA CONSIDERATIONS................................66
LIMITATIONS ON ISSUANCE OF BEARER UNITS.............68
PLAN OF DISTRIBUTION................................69
LEGAL MATTERS.......................................71
INDEX OF DEFINED TERMS..............................72
PROSPECTUS SUPPLEMENTS
A Prospectus Supplement which describes the specific matters described
below will be provided with this Prospectus. The Prospectus provides information
regarding terms generally applicable to the Units, and must be read in
conjunction with the related Prospectus Supplement which describes the specific
terms applicable to the Units of a specific Series and may modify general terms
described in the Prospectus. The specific terms of the Units described in the
Prospectus Supplement qualify any related general discussion in the accompanying
Prospectus.
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, premium, if
any, and any interest are distributable on such Units (the "Specified
Currency"), if other than U.S. dollars; (iii) the interest rate on such Units or
the method of calculation thereof (the "Interest 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 an affiliate of Morgan Stanley Dean Witter & Co. ("MSDW"), 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.
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 later of (i) the termination of the offering of the
Units and (ii) the date on which Morgan Stanley, Morgan Stanley & Co.
International Limited and other affiliates of the Depositor cease offering and
selling previously issued Units shall be deemed to be incorporated by reference
in this Prospectus and to be a part hereof from the date of filing of such
documents. 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 (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.
RISK FACTORS
The following is a discussion of the most significant factors to be
considered as risks associated with an investment in the Units:
There is no recourse to the Depositor or Morgan Stanley for payments on the
Units. 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, 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 no
recourse against any of them or their respective assets in respect of payments
not made on such Units.
An investment in the units is not liquid and there is limited potential for
resale. There will be no market for any Series of Units prior to the issuance of
the Units. Furthermore, 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 the life of such Units. In addition,
Morgan Stanley is not obligated to make a market for the Units, and may or may
not do so. Limited liquidity may adversely affect the timing of an investor's
resale of Units or the price obtainable upon resale.
Early payments may leave an investor unable to reinvest in comparable
investments. The timing of distributions of interest, premium (if any) and
principal of Units will be affected by any early redemption, amortization or
prepayment of the related Securities. The applicable Prospectus Supplement will
describe any puts, calls or other mandatory or optional redemption or early
amortization features, any extension of maturity provisions applicable to such
Securities. The timing of distributions on Units will also be affected by any
exchange of the related Securities pursuant to a tender offer or otherwise.
Early payment or amortization may adversely affect an investor by returning
principal to the investor when prevailing interest rates have declined and
reinvestment of such funds at the rate applicable to the Units is not possible.
Extension of maturity may cause illiquidity and loss of more favorable
investment opportunities. The timing of distributions of interest, premium (if
any) and principal of Units will also be affected by any extension of maturity
of the related Securities. The applicable Prospectus Supplement will describe
any extension of maturity provisions applicable to the Securities. Extension of
maturity prevents an investor from obtaining principal funds at the originally
scheduled maturity date and may prevent an investor from obtaining favorable
reinvestment at a time when prevailing interest rates have risen.
Swap Agreements have special risks. 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 from that which a holder would be
entitled to receive from the related Securities directly. Where the Securities
or all of the cash flows on the Securities are subject to the Swap Agreement,
the holders of the related Units will effectively be exchanging the right to
receive interest payments on the related Securities for the right to receive
payments on such Units in accordance with the terms of such Swap Agreement for
so long as it is in effect. The Swap Agreement is not a guarantee of the
Securities in whole or in part, and no assurance can be given that the Trustee
will receive either the payments due to be received on such Securities or any
payment due to be received under such Swap Agreement, 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. Moreover, unless expressly entered
into for such purpose and so described in the Prospectus Supplement, a Swap
Agreement does not protect an investor against risks associated with prepayment
or early redemption or amortization, or extension of the maturity, of the
Securities. To the extent that the aggregate principal amount of the related
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 subject to the Swap Agreement,
and accordingly, the amounts payable by the Swap Counterparty, may be ratably
reduced. See "Description of Swap Agreements - Payments Under Swap Agreements".
Alternatively, if so described in the Prospectus Supplement, such events may be
treated as "Termination Events" and create potential liability for Swap
Termination Payments as described below.
Changes in the value of a Swap Transaction may cause losses if a Swap
Transaction terminates early. 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 Supplement, a payment (a "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 for any Transaction will be
based on the estimated cost, at prevailing market values, that would be
incurred by the Trust or by the Swap Counterparty to enter into a
transaction having economic terms similar to that of the terminated
Transaction (or, if such market value cannot be determined or does not
produce a commercially reasonable result, the losses suffered by the
Trust or the Swap Counterparty as a result of the termination of the
Swap Agreement or specific Transaction(s)). The Swap Termination
Payment for the Swap Agreement as a whole is the net amount payable
after offsetting individual termination payments applicable to each
Transaction. The Swap Counterparty will have the sole right to
determine in good faith the amount of the Swap Termination Payment. 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 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
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 Security
Default, to the Trust Property. See "Description of Units -- Early
Distribution of 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.
The price obtained upon liquidation of Trust assets to pay a Swap
Termination Payment may be unfavorable. 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)), and
any applicable Swap Termination Payment will be paid by or to the
Trust. If the Trust is liable for a Swap Termination Payment,
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 the
Prospectus Supplement designates a different Selling Agent, the Selling
Agent may 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 Securities. The Selling
Agent shall be permitted to sell 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 Securities. It is possible that
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. Unitholders could be materially adversely affected
if the Trust is required to sell Securities in order to pay Swap
Termination Payments at a time when prices for the Securities in the
secondary market are depressed as a result of a default on the
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 Securities;
Secured Party Rights".
Early swap termination may leave the Trust with Securities that have
unexpected or unfavorable investment characteristics. During its term,
the Swap Agreement may enable the Trust to make scheduled distributions
of principal and interest in the currency, on the interest rate basis
and at the maturity specified under the Swap Agreement, notwithstanding
that the Securities may have a different currency, interest rate basis
or maturity, or other features different from those of the Units. Upon
early termination of the Swap Agreement, after giving effect to any
sales of the Securities and payment or receipt of any Swap Termination
Payment as set forth above, the remaining Securities, if any, and any
Swap Termination Payment received by the Trust, will be distributed pro
rata 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. After such distribution of
the related Securities, the holders thereof will only be entitled to
distributions of principal and interest in accordance with the terms of
such 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.
Certain events can require the Trust to wind up early on terms that may
result in losses to investors. Unless the Prospectus Supplement sets forth
specific provisions for the continuation of the Trust after a Trust Wind-up
Event 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". Upon
the occurrence of a Trust-Wind Up Event, any related Swap Agreement, including
each Transaction thereunder, will terminate and any applicable Swap Termination
Payment will be incurred or received by the Trust. A partial Trust Wind-Up may
occur as a result of events affecting only specific Securities or Transactions,
in which case the affected Transaction will terminate and any applicable Swap
Termination Payment will be incurred or received by the Trust, but the Trust may
continue as to other unaffected assets. The Trust will be required to sell
Securities as necessary to pay any Swap Termination Payment. Trust Wind-Up
Events include:
Swap Agreement default or termination. The Trust will be wound up if
certain standard events of default or termination events have occurred
under any related Swap Agreement, including a Security Default (as
defined herein) that results in termination of all affected
Transactions under the Swap Agreement. A Security Default may be
specified in the Prospectus Supplement to affect only specific
Transactions under the Swap Agreement, in which case only the affected
Transaction will terminate.
Unexpected Trust expenses. The Trust will be wound up if 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".
A change in the available public information about the Trust's assets.
If any Security Issuer, Swap Counterparty or Credit Support Provider
ceases to be an Eligible Issuer and no additional means of replacing or
providing current information regarding such party is described in the
Prospectus Supplement; or if, whether or not the related Security
Issuer, Swap Counterparty or Credit Support Provider was initially an
Eligible Issuer, it becomes impossible or impractical for the Depositor
to satisfy its reporting obligations under the Exchange Act with
respect to the related Security, Transaction or Credit Support, a Trust
Wind-Up Event will occur in whole or in part. Unless the Prospectus
Supplement specifies that the Trust will be wound up only as a whole,
if the Trust holds assets other than the affected Securities,
Transactions or Credit Support, a Trust Wind-Up Event will be limited
to a partial termination of the Trust with respect to the Security,
Transaction or Credit Support as to which the Depositor's reporting
obligations can no longer be satisfied. See "Description of Trust
Agreements - Trust Wind-Up Events".
The Prospectus Supplement may also specify other Trust Wind-Up Events.
Claims of the Trustee and the Swap Counterparty may adversely affect
distributions on the Units. 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, if so
specified in the Prospectus Supplement, to a claim pro rata with that of the
Unitholders for the aggregate Unit Principal Balance other than in connection
with a Security Default), and (ii) all amounts due to the Trustee with respect
to Extraordinary Trust Expenses (as defined under "Description of Trust
Agreements -- Certain Matters Regarding the Trustee and the Depositor") have
been paid. 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.
The Trust's counterparties may have conflicts of interest. A prospective
purchaser should be aware of the possibility for conflicts of interest arising
in the responsibilities assumed by Morgan Stanley and its affiliates.
The Swap Counterparty has discretion to calculate the amount of its
payment obligations and those of the Trust. 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. All determinations by the Swap
Calculation Agent under the Swap Agreement shall, in the absence of
manifest error, be conclusive for all purposes and binding on the Trust
and the Unitholders.
The Swap Counterparty may be responsible for liquidating the Trust's
assets to pay the Swap Counterparty's own claims. The Swap
Counterparty, Morgan Stanley or another affiliate of Morgan Stanley may
act as Selling Agent and will have the right to sell 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 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 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 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.
The Trustee does not actively manage the Trust for investors. 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 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 Securities or take certain other actions in respect of
the Trust Property. The restrictions on the Trustee's powers and obligations may
mean that the Trust will not take actions with respect to the Securities -- in
particular, to sell such Securities or enforce remedies under such Securities --
that an investor would take if it held the Securities directly.
The Prospectus Supplement for the Units may set forth additional
information regarding special considerations applicable to such Units.
REPORTS TO UNITHOLDERS
On each Distribution Date (or in accordance with another period specified
in the Prospectus Supplement), 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 the Prospectus Supplement sets forth terms for the payment by
purchasers in a currency other than the Specified Currency, purchasers will be
required to pay for each Unit in the Specified 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 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
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.
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. 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 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 (as defined herein)
in the Trust Property, and engaging in 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
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
(or repay any financing by the Depositor in respect of) 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 or for other
purposes as may be described in the Prospectus Supplement.
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. Concurrently with the
execution and delivery of such Trust Agreement, (i) the Depositor will transfer
the related Securities and other Trust Property to the Trustee, in its capacity
as Trustee, for the benefit of the Unitholders and deposit such 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 Securities and other
Trust Property and deliver the Units to or upon the order of the Depositor. The
Depositor's transfer of such Securities to the Trustee will be without recourse.
The Trust Property with respect to a Trust will consist of: (i) the related
Securities and all payments on or collections in respect of such 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 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 limitation, any
Swap Termination Payments (as limited in the case of a termination other than
for a 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".
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. The Trustee will receive customary fees
(the "Trustee Fees") as compensation and in payment of all its regular and
ordinary expenses, which will be paid by the Depositor or another entity (other
than any Trust). Unless the Prospectus Supplement specifies terms for payment of
Trustee Fees from the Trust Property, 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 Securities
and the terms, if any, upon which such Securities may be subject to early
redemption (either by the applicable obligor or pursuant to a third-party call
option), amortization, repayment (at the option of the holders thereof) or
extension of maturity. The provisions of the Securities with respect to the
foregoing will 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 Securities that consist of one or more
redeemable securities, extendible securities or securities subject to a
third-party call option or early amortization, the yield to maturity of such
Series (or Class within such Series) may be affected by any optional or
mandatory redemption or early amortization or repayment or extension of the
related 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 Securities, the likelihood of redemption would be
expected to increase. There can be no certainty as to whether any Security
redeemable at the option of the related Security Issuer will be repaid prior to
its stated maturity.
Unless the related Prospectus Supplement describes other remedies
applicable to the Securities, each of the 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 Securities as a result of any acceleration of the Outstanding
Securities (as hereinafter defined) by the holders thereof. See "Description of
Trust Property -- Security Agreement." If a Security Issuer becomes subject to a
bankruptcy proceeding, 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 security issuers and correspondingly may
affect a Security Issuer's ability to satisfy its obligations under the
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
Interest 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 Securities, disproportionate principal payments
(whether resulting from differences in amortization schedules, payments due on
scheduled maturity or upon early redemption) on the related Securities having
interest rates higher or lower than the then applicable Interest 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 Securities.
DESCRIPTION OF TRUST PROPERTY
The Securities will have been purchased by the Depositor (or an affiliate
thereof) in the secondary market or, if so described in the Prospectus
Supplement, in connection with an initial distribution of the Securities as to
which additional information will be provided in or concurrently with the
Prospectus Supplement. Unless the Prospectus Supplement sets forth the material
financial and other information with respect to the Security Issuer, each
Security which represents on the date of formation of the Trust 10% or more by
principal amount of the Securities held by such Trust (a "Concentrated
Security") will constitute or be serviced fully by cash flow from (i)
obligations of or guaranteed by the United States government, (ii) obligations
of one or more corporations, limited partnerships, trusts, limited liability
companies or other organizations, banking organizations or insurance companies,
in each case which meet the market capitalization and other requirements for a
primary issuance of common stock on Form S-3 under the Securities Act and are
subject to the informational requirements of 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), (iii) obligations of the Federal National Mortgage
Association or Federal Home Loan Mortgage Corporation or other government
sponsored enterprises that have a comparable market capitalization and which
make information publicly available comparable to that of Exchange Act reporting
companies or (iv) obligations of or guaranteed by a foreign sovereign or
political subdivision or instrumentality thereof which has offered debt
securities in the United States pursuant to a registration statement filed with
the Commission containing information required by Schedule B of the Securities
Act ("Schedule B"), that qualifies as a "seasoned" issuer under Commission
practice and which issuer or guarantor the Depositor reasonably believes (based
on publicly available information) is eligible to use Schedule B as of the time
of the offering of the related Units (an "Eligible Foreign Issuer") (each of the
entities referred to in (i), (ii), (iii) and (iv) an "Eligible Issuer"). 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 designed to support or ensure the servicing and
distribution of amounts due in respect of the Trust Property (collectively,
"Credit Support").
Unless the Prospectus Supplement sets forth the material information with
respect to a Security Issuer as described in the following sentence, each
Security Issuer will on the date of issuance of the Units be an Eligible Issuer,
and the Prospectus Supplement will refer investors to the related Security
Prospectus, reports filed by the Security Issuer pursuant to the Exchange Act,
or publicly available information issued by GSEs for the material information
regarding the Security Issuer, and any information contained in a Prospectus
Supplement regarding such Security Issuer will be derived from such publicly
available information. For any Security Issuer which at the time the Units are
issued is not an Eligible Security Issuer, (i) the Prospectus Supplement will
separately set forth or incorporate by reference the material information for
such Security Issuer with respect to the Units, which in the case of a
Concentrated Security that represents on the date of formation of the Trust 20%
or more by principal amount of the Securities held by such Trust, includes
audited financial statements of such Security Issuer, and (ii) the Depositor
will file with Commission periodic reporting information with respect to such
Security Issuer in connection with the periodic filings on behalf of the Trust
in respect of the Units.
All information set forth in a Prospectus Supplement with respect to a
Concentrated Security or any other Security will be derived solely from the
description of such Security contained in a publicly available prospectus or
offering document relating to such Security ("Security Prospectus"), other
periodic filings with the Commission, or publicly available information issued
by GSEs. For any Securities issued by a Security Issuer which does not file
reports with the Commission or which is not a GSE, the Prospectus Supplement or
periodic reporting will provide financial and other information on the
Securities. The related Prospectus Supplement will state whether the Security
Prospectus with respect to any Concentrated Security was filed with the
Commission in connection with the issuance of the related Security or otherwise
in public filings by the related Security Issuer. Prospective purchasers of
Units are urged to read this Prospectus and the applicable Prospectus Supplement
in conjunction with (i) each related Security Prospectus and (ii) each
registration statement of which any Security Prospectus is a part (a "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 Security Prospectus or Security
Registration Statement.
Unless the related Prospectus Supplement describes diligence undertaken by
the Depositor or Morgan Stanley or the Trustee or any of their affiliates with
respect to the Security Issuer, no investigation of the financial condition or
creditworthiness of any Security Issuer or any of its subsidiaries or other
affiliates, or of the ratings, if any, on the related Securities, will be made
by the Depositor, Morgan Stanley or the Trustee or any of their affiliates in
connection with the issuance of the related Units. Prospective purchasers of
Units should consider carefully each Security Issuer's financial condition and
its ability to make payments in respect of the related Securities. Unless the
related Prospectus describes diligence undertaken by the Depositor, Morgan
Stanley or the Trustee or any of their affiliates with respect to the Security
Prospectus, none of the Depositor, Morgan Stanley or the Trustee or any of their
respective affiliates has participated in the preparation of any Security
Prospectus or Security Registration Statement or other public information
relating to the Securities or takes any 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 material terms, as applicable, of
any Concentrated Security: (i) the title and series of such Concentrated
Securities, the aggregate principal amount, denomination and form thereof; (ii)
whether such securities are senior or subordinated to any other obligations of
the related 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 securities; (v) the dates on which, or the
range of dates within which, the principal of (and premium, if any, on) such
securities will be payable; (vi) the rate or rates or the method of
determination thereof, at which such Concentrated Securities will bear interest,
if any; the date or dates from which such interest will accrue; and the dates on
which such interest will be payable; (vii) the obligation, if any, of the
Security Issuer to redeem the Outstanding 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 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 securities may be redeemed, if any, in whole or in part, at the
option of the Security Issuer; (ix) whether the 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 Securities are denominated, or in
which payment of the principal of (and premium, if any) or any interest on such
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 Securities; (xii) the rating thereof, if any;
(xiii) the Retained Interest, if any, with respect thereto; and (xiv) all other
material terms of such Securities.
With respect to any portion of the Trust Property comprised of Securities
other than Concentrated 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 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 all
other material terms regarding such portion of the Trust Property.
In addition to the foregoing, with respect to each Concentrated Security
the applicable Prospectus Supplement will disclose the identity of the
applicable obligor and any trustee under the applicable Security Agreement (as
defined below), and will describe the existence and type of certain information
that is made publicly available by each obligor regarding such Concentrated
Security or Concentrated 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. Where the Security
Issuer with respect to a Concentrated Security is not an Eligible Issuer and the
Depositor has provided the material information with respect to such Security
Issuer in the Prospectus Supplement, periodic information with respect to such
Security Issuer will be directly set forth in the periodic filings with respect
to the Units.
Security Agreement
General. Each Security will have been issued pursuant to an indenture,
trust agreement or other agreement (each, a "Security Agreement"). Except as
specifically described in any Prospectus Supplement, all information set forth
therein with respect to the provisions of any Security Agreement pertaining to a
Concentrated Security will be based solely on the version of the Security
Agreement filed with the Commission in connection with the registration of such
Concentrated Security.
Certain Covenants. A 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 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 Security Agreement
typically may be amended or supplemented and past defaults may be waived with
the consent of the trustee (if any), the consent of the holders of not less than
a specified percentage of the outstanding securities or both.
The Security Agreement related to one or more 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
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 Securities against losses.
The Prospectus Supplement used to offer any Series of Units will describe
material covenants in relation to any Concentrated Security (as defined below)
and, as applicable, will describe material covenants which are common to other
Securities included in the Trust Property.
Events of Default. A 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 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 Security Issuer.
Each 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 Security Agreement with respect to any Concentrated
Security (each a "Covenant Default") and applicable remedies with respect
thereto. With respect to any portion of the Trust Property comprised of
Securities other than Concentrated 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 Securities, against losses. If a Covenant Default
occurs and the Trust as a holder of the Securities is entitled to vote or take
such other action to declare the principal amount of a 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 Security ("Outstanding Securities") in determining whether to
declare the acceleration of the Securities.
Limitations on Remedies. A Security Agreement will generally provide that
upon the occurrence of an event of default, the trustee (if any) may, and upon
the written request of the holders of not less than a specified percentage of
the outstanding securities must, take such action as it may deem appropriate to
protect and enforce the rights of the security holders. In certain cases, the
indenture trustee (if any) 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.
Subordination. As set forth in the applicable Prospectus Supplement,
certain of the Securities with respect to any Trust may be either senior
("Senior Securities") or subordinated ("Subordinated Securities") in right to
payment to other existing or future obligations of the Security Issuer. With
respect to Subordinated 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
Securities, if any, may be entitled to receive payment of the full amount due
thereon before the holders of any Subordinated 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
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 Securities
would receive all payments in respect of such securities even if holders of
Subordinated Securities receive amounts in respect of such securities. Reference
is made to the Prospectus Supplement used to offer any Series of Units for a
description of any subordination provisions with respect to any Concentrated
Securities and the percentage of Senior Securities and Subordinated Securities,
if any, in the portion of a Trust comprised of other than Concentrated
Securities.
Secured Obligations. Certain of the Securities with respect to any Trust
may represent secured obligations of the Security Issuer ("Secured 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 agreement
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 agreement 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 trustee or upon the direction of not less than a
specified percentage of the security holders. The agreement 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 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 Security Agreement with respect to any Secured 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 Securities which are Secured Securities, will describe the security
provisions of such Securities and the related collateral. With respect to any
portion of the Trust Property comprised of Secured Securities other than
Concentrated 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 specify that certain assets constituting a part of the Trust
Property relating to any given Series can be beneficially owned solely by or
deposited solely for the benefit of one Class or a group of Classes within such
Series. In such event, the other Classes of such Series will not possess any
beneficial ownership interest in those specified assets constituting a part of
the 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 audited financial information with respect to any such
Credit Support Provider (as defined below) providing Credit Support for 20% or
more of the aggregate principal amount of such Class or Classes (which may be
incorporated by reference where such obligor is subject to the informational
requirements of the Exchange Act). Any Credit Support which takes the form of a
guaranty of the Units, rather than a guaranty of payment on the underlying Trust
Property will be issued by an insurance company or another entity eligible to
issue guaranties exempt from registration under Section 3(a) of the Securities
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. In addition, if so provided in the applicable Prospectus Supplement,
the obligor of any other forms of Credit Support may be reimbursed for amounts
paid pursuant to such Credit Support out of amounts otherwise payable to one or
more of the Classes of the 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") (either of a Letter of Credit Bank or
Guarantor a "Credit Support Provider"). 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.
The applicable Prospectus Supplement will specify whether the Letter of
Credit Bank or the Guarantor, as applicable, will be required to satisfy any
ongoing credit rating or other applicable requirements. In the event any such
requirements cease to be satisfied, 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.
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 summary of certain terms and provisions of
the Swap Agreement, which, together with the information set forth in the
Prospectus Supplement, describes all material terms thereof, is subject to the
detailed provisions of the form of Swap Agreement filed as an exhibit to the
Registration Statement. 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.
The Trust may enter into Swap Agreements with more than one Swap
Counterparty, in which case the following discussion will apply to each Swap
Agreement with each Swap Counterparty severally.
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.
The 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. The 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") 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 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 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 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 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 Securities in circumstances where the Securities
may be outstanding on the Scheduled Final Distribution Date with respect to the
Units. The applicable Prospectus Supplement may specify that a put option
written in favor of the Trust will be automatically exercised by the Trustee
upon the occurrence of specified events.
The Swap Agreement may also document a credit swap transaction, under which
the Trust will receive periodic payments from the Swap Counterparty in return
for the Trust's agreement to exchange the Securities for securities
("Deliverable Obligations") of a different security issuer (the "Reference
Entity") upon the occurrence of certain credit-related events ("Credit Events")
with respect to the Reference Entity. Where a credit swap transaction relates to
more than 10% by principal amount of the Securities held by the Trust, the
Prospectus Supplement and periodic filings with respect to the Trust will set
forth information regarding the Deliverable Obligations and the Reference Entity
similar to that provided for Concentrated Securities and the issuer of
Concentrated Securities. The Swap Agreement pertaining to a Series of Units for
which the Trust has entered into a credit swap transaction will include
supplemental terms particular to credit swaps, including the specified Credit
Events, which will be based on standard forms promulgated by ISDA and described
in the Prospectus Supplement.
On any given Swap Payment Date (including a Swap Payment Date occurring
upon the maturity of the related Securities or a portion thereof), each exchange
of payments in the same currency and in respect of the same Transaction 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. The
Prospectus Supplement may also provide for such netting among more than one
Transaction. 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 Securities. No assurance can be given that the Trustee will
receive either any payment due to be received on such 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
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. The Prospectus Supplement
will describe any other circumstances in which the Swap Agreement may be
amended.
Defaults Under Swap Agreements
"Events of Default" under the Swap Agreement (each, a "Swap Default")
include: (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 as modified by
the Schedule. 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. The Prospectus Supplement will describe any additional Events
of Default applicable to the Swap Agreement.
Termination Events
The "Termination Events" under the related Swap Agreement will consist of
the following: (i) a Security Default (as defined below) occurs with respect to
the related Security or the related Security becomes a Disqualified Security
(which Termination Event shall apply only to the specific Transaction under the
Swap Agreement relating to such Security); (ii) the occurrence of an Excess
Expense Event (as defined under "Description of Trust Agreements - Trust Wind-Up
Events"); (iii) any Transaction becomes a Disqualified Transaction (as defined
under "Description of Trust Agreements - Trust Wind-Up Events") (which
Termination Event shall apply only to the specific Disqualified Transaction);
or, (iv) other Trust Wind-Up Events; or (v) 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 of (i), (ii), (iii) and (iv), both the Trust and
the Swap Counterparty will be deemed to be a party affected by the relevant
event ("Affected Party") and will be 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
and as a result the Swap Counterparty will have the sole right to determine in
good faith the amount of any Swap Termination Payment. 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. The
Prospectus Supplement will describe any additional Termination Events that will
apply or any of the above Termination Events that are inapplicable to a specific
Series of Units.
Early Termination of Swap Agreements
Unless the applicable Prospectus Supplement sets forth terms for the
assignment or continuation of the Swap Agreement, or automatic termination, upon
specified Termination Events or Events of Default, upon the occurrence of a
Termination Event of the types referred to in clauses (i), (ii), (iii) and (iv)
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
has occurred 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 for each "Affected Transaction" (as defined in the Swap
Agreement); provided, however, that if the Trust would thereby owe the Swap
Counterparty a Swap Termination Payment, it will not designate a Termination
Event. The Swap Counterparty will have no obligation to the Trust to exercise
any right the Swap Counterparty may have to terminate the Swap Agreement or any
Transaction, and will not act on behalf of the Trust to exercise any right of
the Trust to terminate the Swap Agreement or any Transaction. 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. If the
Trust is liable for a Swap Termination Payment, 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.
See "Description of Trust Agreements -- Trust Wind Up Events". Unless the
Prospectus Supplement sets forth terms for replacing the Swap Counterparty after
early termination or for the Trust's continued holding of a Security after a
related Transaction has terminated, in the event the Trust terminates one or
more Transactions and a Trust Wind Up Event has not occurred, the Securities
related to such Transactions will be distributed in kind to the Unitholders.
Unless the Prospectus Supplement specifies that such events will not
constitute a Termination Event, to the extent that the aggregate principal
amount of the Securities held by the Trust is reduced through redemption,
prepayment or exchange, the corresponding Swap Amount subject to the Swap
Agreement will be subject to a partial termination and the Trust or the Swap
Counterparty may incur liability for a Swap Termination Payment.
In general, not all events of default under the applicable Security
Agreement will trigger a Security Default for purposes of the Swap Agreement.
Rather, a "Security Default" shall mean one of the following events: (i) the
acceleration of the outstanding Securities under the terms of the Securities
and/or the applicable Security Agreement, (ii) the failure of the applicable
Security Issuer to pay an installment of principal of, or any amount of interest
due on, the related Securities after the due date thereof specified in such
Prospectus Supplement and after the expiration of any applicable grace period;
(iii) the occurrence of certain events of default under such Securities and/or
Security Agreement relating to the insolvency or bankruptcy of the applicable
Security Issuer; or (iv) the occurrence of a waiver, deferral, restructuring,
rescheduling, exchange or other adjustment with respect to the Security such
that the Swap Counterparty reasonably determines that the economic terms of the
Security are materially different or the Security represents materially greater
credit or other risks. In each case, the Trust will be the Affected Party (as
defined below) for purposes of the calculation of any Swap Termination Payment.
Notwithstanding the existence of a grace period with respect to a Security, the
failure of a 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 Security Default. The Prospectus Supplement will specify any
additional circumstances constituting a "Security Default."
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. If the market value of a
Transaction is positive for the Trust, or the termination would result in a loss
to the Trust, a Swap Termination Payment will be due from the Swap Counterparty
to the Trust in respect of that Transaction; if such market value is positive
for or termination of such Transaction would result in a loss to the Swap
Counterparty, a Swap Termination Payment will be due from the Trust. The Swap
Termination Payment for the Swap Agreement as a whole is the net amount payable
after offsetting individual termination payments applicable to each Transaction.
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 Securities. The Trust may be
required to sell 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 Securities. It is possible
that 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. 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 Securities
would be made pursuant to the Securities without the benefit of the Swap
Agreement.
Unitholders could also be materially adversely affected if the Trust is
required to sell Securities in order to pay Swap Termination Payments at a time
when prices for the Securities in the secondary market are depressed as a result
of a default on the Securities or for any other reason. See "Risk Factors."
If a Swap Agreement is terminated for reasons other than a 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
Unless the applicable Prospectus Supplement specifies arrangements for
securing the obligations of the Swap Counterparty, 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 an affiliate of MSDW 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 "Aa3" 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
The Units of any Series to be offered pursuant to this Prospectus and the
applicable Prospectus Supplement will be subject to the terms of a Trust
Agreement to be entered into between the Depositor and the Trustee. The Trust
Agreement for each Series of Units will be in the form filed as an exhibit to
the Registration Statement, together with specific terms applicable to the Trust
and the Units for such Series depending upon the related Securities and any Swap
Agreement. The following summary of the terms of the Units, which, together with
the information set forth in the Prospectus Supplement, describes all material
terms thereof, is subject to the summary of the Trust Agreement set forth herein
under "Description of the Trust Agreement" and any related discussion in the
Prospectus Supplement, and to the detailed provisions of the form of Standard
Terms of Trust Agreement filed as an exhibit to the Registration Statement. The
specific terms of each Series of Units, to the extent they materially differ
from or are in addition to the summaries below, will be set forth in the
applicable Prospectus Supplement.
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 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 Interest 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 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
and transferable; (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 (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, the
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. The applicable Prospectus Supplement may
provide that, where 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 Currency other than U.S. dollars may be determined by the Exchange
Rate Agent in its sole discretion.
Registered 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 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. Any Unitholder which will receive payments in a
Specified Currency other than U.S. dollars must 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 the Prospectus Supplement sets forth additional terms as to the
conversion of currencies, 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 distributions will be made
in such Specified Currency, except in the circumstances described under
"Currency Risks".
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. The Prospectus Supplement may
also provide for distributions to be made by check or against presentation of
the Unit. 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.
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 Interest 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 Interest 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 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 Interest 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 Interest 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 Securities, the Interest 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 Interest 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 Interest Rate set forth in the applicable
Prospectus Supplement. Thereafter, the Interest Rate on such Series or Class for
each Interest 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 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; (ii) the Commercial Paper Rate; (iii) the Treasury Rate;
(iv) the Federal Funds Rate; (v) the CD Rate; 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 Interest
Rate") and (ii) a minimum limitation, or floor, on the rate at which interest
may accrue during any such interest accrual period (a "Minimum Interest Rate").
In addition to any Maximum Interest Rate that may be applicable to any Floating
Rate Units, the Interest 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.
If the Swap Agreement provides for all interest payments on the Securities
to be paid to the Swap Counterparty, the Interest 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). If the Prospectus Supplement specifies a Calculation Agent, the
Calculation Agent shall calculate the Interest 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.
The applicable Prospectus Supplement will state whether the Interest Rate
on each Series of Floating Rate Units will be reset daily, weekly, monthly,
quarterly, semiannually or annually or on another periodic basis (such period
being the "Interest Period" for such issuance, and the first day of each
Interest Period being an "Interest Reset Date"). The Interest Reset Dates with
respect to a given Series of Floating Rate Units will be specified in the
applicable Prospectus Supplement. 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 as specified in the
applicable Prospectus Supplement.
Unless otherwise specified in the applicable Prospectus Supplement,
interest payable in respect of Floating Rate Units will 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 the
Prospectus Supplement specifies a different period, the interest factor
(expressed as a decimal calculated to seven decimal places without rounding) for
each such day is computed by dividing the Interest Rate in effect on such day by
360, in the case of Floating Rate Units bearing interest on a Base Rate of
LIBOR, the Commercial Paper Rate, the Federal Funds Rate or the CD Rate or by
the actual number of days in the year, in the case of the Treasury Rate. For
purposes of making the foregoing calculation, the Interest 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 Interest 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. For each Floating Rate Unit for which LIBOR is the Base Rate and
LIBOR is indexed to the offered rates for U.S. dollar deposits, "LIBOR" for each
Interest 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 Period (a "LIBOR Determination
Date"), the Calculation Agent for such 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 LIBOR 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
LIBOR Page ("LIBOR Reuters"), or (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
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
Period will be the arithmetic mean of such quotations. If
fewer than two such quotations are provided, "LIBOR" for such
Interest 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 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 Period will be the same as
LIBOR for the immediately preceding Interest Period (or, if
there was no such Interest Period, the Initial Interest Rate).
If LIBOR with respect to any Unit is indexed to the offered rates for
deposits in a currency other than U.S. dollars, or the method for determining
dollar LIBOR varies from that described above, the applicable Prospectus
Supplement will set forth the method for determining such rate.
Commercial Paper Rate. For each Floating Rate Unit bearing interest on a
Base Rate equal to the Commercial Paper Rate the "Commercial Paper Rate" for
each Interest Period will be determined by the Calculation Agent for such Unit
as of the second Business Day prior to the Interest Reset Date for such Interest
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 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 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 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 Period will be the same as the Commercial Paper Rate for
the immediately preceding Interest Period (or, if there was no such Interest
Period, the Initial Interest 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 (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. For each Floating Rate Unit bearing interest on a Base Rate
equal to the Treasury Rate, the "Treasury Rate" for each Interest Period will be
the rate for the auction held on the Treasury Rate Determination Date (as
defined below) for such Interest 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 Period shall be
calculated by the Calculation Agent for such 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 Period will be the same as the Treasury
Rate for the immediately preceding Interest Period (or, if there was no such
Interest Period, the Initial Interest Rate).
The "Treasury Rate Determination Date" for each Interest Period will be the
day of the week in which the Interest Reset Date for such Interest 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 Period commencing in
the next succeeding week. Unless otherwise provided in the Prospectus
Supplement, if an auction date will fall on any day that would otherwise be an
Interest Reset Date, 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. For each Floating Rate Unit bearing interest on a Base
Rate equal to the Federal Funds Rate, the "Federal Funds Rate" for each Interest
Period shall be the effective rate on the Interest Reset Date for such Interest
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 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 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
Period will be the same as the Federal Funds Rate in effect for the immediately
preceding Interest Period (or, if there was no such Interest Period, the initial
Interest Rate). Unless otherwise specified in the applicable Prospectus
Supplement, in the case of a Unit for which the applicable Federal Funds Rate
resets daily, the Interest 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. For each Floating Rate Unit that bears interest on a Base Rate
equal to the CD Rate, the "CD Rate" for each Interest Period will be the rate as
of the second Business Day prior to the Interest Reset Date for such Interest
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 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 Period will be calculated by the Calculation Agent for such 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 Period will be the same as the CD Rate for the immediately preceding
Interest Period (or, if there was no such Interest Period, the initial Interest
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.
If any of the Commercial Paper Rate, Treasury Rate, Fed Funds Rate or CD
Rate is the applicable Base Rate and is not to be determined as set forth above,
the Prospectus Supplement will describe the method for determining such rate.
Principal of Units
General. Unless the Prospectus Supplement specifies a Notional Amount or
other reference amount for a Unit, 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
Securities.
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 on specified dates; (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 is 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 specify 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.
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 as specified in the related Prospectus
Supplement. 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 when the outstanding Unit Principal Balance is
greater than 25% of the initial Unit Principal Balance, 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"). The Call Price will be at least 100% of the
then outstanding Unit Principal Balance.
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; 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:
(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-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 Securities to be distributed by the
Trustee.
If the Prospectus Supplement states that "Depositor Optional Exchange" is
applicable to the Units of a given Series, any Units held by the Depositor or
its affiliates from time to time will be subject to optional exchange by the
Depositor or such affiliates, but not by other Unitholders, for a pro rata
portion of the Trust Property of the related Trust, subject to one or more of
the conditions set forth above as described in the Prospectus Supplement, to the
above limitations under Rule 3a-7 and to such other conditions as may be
specified in the Prospectus Supplement.
Unless the Securities distributable to the holders of the Units upon an
Optional Exchange have been registered concurrently with the Units and the
exchange otherwise satisfies the registration requirements of the Securities
Act, no Optional Exchange will be provided for except where such Optional
Exchange is eligible for the exemption from registration set forth in Section
4(1) of the Securities Act.
Unless additional or different terms for an Optional Exchange are set forth
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 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).
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.
Prior to any optional exchange, only the Trustee is a holder of the
Securities and only the Trustee will have the ability to enforce the obligations
of the Security Issuer under the Securities. After an optional exchange, the
Unitholders will be holders of the Securities and can enforce such obligations
directly.
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 an additional basis for such rating is described in the
Prospectus Supplement, the rating of any Series or Class of Units will be 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.
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. All Units of a given Series (or, if more than one Class exists,
any given Class within that Series) other than Definitive Units 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"), Cedelbank, 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.
During such time as the Units are 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.
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 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 Trust 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 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.
Voting of Securities; Modification of 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 Securities, the Trustee will give notice to the
Unitholders, setting forth (i) such information as is contained in such notice
to owners of Securities, (ii) a statement that the Unitholders will be entitled,
subject to any applicable provision of law and any applicable provisions of such
Securities, to instruct the Trustee as to the exercise of voting rights, if any,
pertaining to such 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 a different allocation of voting rights is described in the
Prospectus Supplement, the voting rights allocable to the owners of the
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 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 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 Securities underlying the Units held by such
Unitholder or (ii) consent to any redemption or prepayment of the Securities
underlying the Units held by such Unitholder or (iii) consent to the issuance of
new obligations in exchange or substitution for any Securities pursuant to a
plan or refunding of the Securities or any other offer for the 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 Securities would not result in a "sale or other disposition"
of such 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 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 Securities
Unless specific terms for the continuation of the Trust Agreement are
described 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 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
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 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 Securities or cash in
accordance with such transfer instructions by physical delivery or, if
applicable, by causing the book-entry depositary for such Securities to credit
such Securities to an account of such holder with such depositary or an account
of a designated participant in such depositary.
Unless the Prospectus Supplement describes specific terms for the
continuation or assignment of the Swap Agreement in whole or in part upon the
occurrence of the Trust Wind- Up Event, upon the occurrence of a Trust Wind-Up
Event, any related Swap Agreement will terminate. Thereafter, the only
distributions (other than the early distribution of the related Securities
themselves) from the related Trust to which the holders of Units issued thereby
will be entitled will be any payments on the Securities, if any, minus any Swap
Termination Payment payable by the Trust to the Swap Counterparty or plus Swap
Termination Payment payable by the Swap Counterparty, 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 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
Securities held by such Trustee.
DESCRIPTION OF TRUST AGREEMENTS
General
Each Trust Agreement will be entered into by the Depositor and the Trustee,
and will incorporate the Standard Terms of Trust Agreements agreed between the
Depositor and the Trustee and filed as an exhibit to the Registration Statement,
as they may be amended from time to time. The Trust Agreement for each Series of
Units will also set forth specific terms of the Trust for such Series depending
upon the terms of the Units to be issued thereunder, the related Securities and
any Swap Agreement. The following summary of certain terms and provisions of the
Trust Agreement, which, together with the information set forth in the
Prospectus Supplement, describes all material terms thereof, is subject to the
detailed provisions of the form of Standard Terms of Trust Agreement filed as an
exhibit to the Registration Statement. 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.
Collections on Securities
With respect to any Series of Units, the Trustee shall make reasonable
efforts to collect all scheduled payments on the related 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.
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 the Trustee and the Depositor
The 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 the Trust Agreement specifies
terms for payment of Trustee Fees from the Trust Property, 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 the Trustee for any
other loss, liability or expense, other than Trustee Fees, incurred by the
Trustee ("Extraordinary Trust Expenses") relating to the applicable Trust
Agreement, Swap Agreement or 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. Unless the Prospectus Supplement
specifies another source of payment, 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.
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 will
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, now or hereafter in effect, or any action which would likely
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 a different allocation is described in the
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
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, 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--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.
The applicable Prospectus Supplement will set forth the extent to which any
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.
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.
Any terms relating to modification or waiver of the Trust Agreement for a
particular Series in addition to or that differ from the foregoing will be set
forth in the applicable Prospectus Supplement.
Reports to Unitholders
Reports to Unitholders. 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 Interest 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
Securities as of the Distribution Date and the interest rate
applicable to such Securities for the accrual period therefor
next beginning;
(iv) the amount received by the Trustee on the related
Securities for the accrual period therefor last ended;
(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.
The Prospectus Supplement may specify that certain of the information set
forth above will not be furnished with respect to a particular Series.
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 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 Security Issuer, including notice of any call of the
Securities by the Security Issuer. The Trustee will also notify the Unitholders
of any call of the 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
In the event 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.
Trust Wind-Up Events
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 Security Defaults
where either (a) a Security Default has occurred with respect to all 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) and all Transactions are Affected
Transactions; 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"; (vi) in the circumstances described in the following paragraph;
(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". The
Prospectus Supplement will specify whether any of the foregoing will not apply
to the Trust Agreement for a particular Series. Unless the Prospectus Supplement
sets forth terms for the continuation of the Trust Agreement in whole or in part
following a Trust Wind-Up Event, upon the occurrence of a Trust Wind-Up Event,
such Trust Agreement and the related Swap Agreement will terminate, and the
Trustee, through the Selling Agent, will sell some or all of the Securities to
fund the payment of applicable Swap Termination Payments, if any, and hold all
related Securities and any proceeds thereof until the satisfaction of certain
conditions, at which time the Trustee will distribute such Securities to the
Unitholders. See "Description of Units - Early Distribution of Securities".
If the issuer of any Security ceases to be an Eligible Issuer and no
additional means of providing current information regarding the related Security
Issuer is described in the Prospectus Supplement; or if, whether or not the
related Security Issuer was initially an Eligible Issuer, it becomes impossible
or impractical for the Depositor to satisfy its reporting obligations under the
Exchange Act with respect to such Security (whether or not it is a Concentrated
Security), such Security will be considered a "Disqualified Security." If with
respect to any Transaction (i) the Swap Counterparty ceases to be an Eligible
Issuer and no means of replacing such Swap Counterparty or otherwise satisfying
the Depositor's reporting obligations under the Exchange Act regarding such
Transaction is described in the Prospectus Supplement; (ii) whether or not the
related Swap Counterparty was initially an Eligible Issuer, it becomes
impossible or impractical for the Depositor to satisfy its reporting obligations
under the Exchange Act regarding such Transaction; or (iii) such Transaction is
a credit swap transaction with respect to which the Deliverable Obligation has
become a Disqualified Security; such Transaction will be considered a
"Disqualified Transaction" ." Upon any Security becoming 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 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. Upon
any Transaction becoming a Disqualified Transaction, (i) a Termination Event
will occur with respect to such Disqualified Transaction and the Trust shall
terminate the Disqualified Transaction and sell the related Securities (and if
necessary other Securities) to the extent necessary to pay any related Swap
Termination Payment; (ii) any remaining Securities related to such Disqualified
Transaction shall be distributed pro rata to the Unitholders; and (iii) a Trust
Wind-Up Event shall occur if (A) the Trust holds no Trust Property other than
Securities having related Transactions which are Disqualified Transactions or
(B) if so provided in the Prospectus Supplement. If any Credit Support Provider
ceases to be an Eligible Issuer and no means of replacing such Credit Support
Provider or otherwise satisfying the Depositor's reporting obligations under the
Exchange Act regarding the related Credit Support is described in the Prospectus
Supplement; or if, whether or not the Credit Support Provider was initially an
Eligible Issuer, it becomes impossible or impractical for the Depositor to
satisfy its reporting obligations under the Exchange Act regarding the related
Credit Support, such Credit Support will be considered "Disqualified Credit
Support" ". Upon any Credit Support becoming Disqualified Credit Support, (i)
the Trust shall terminate such Credit Support; (ii) any proceeds of such
termination shall be distributed pro rata to the Unitholders; and (iii) a Trust
Wind-Up Event shall occur if so provided in the Prospectus Supplement. For
purposes of the foregoing, a Security Issuer, Swap Counterparty or Credit
Support Provider which is fully guaranteed by a guarantor who is an Eligible
Issuer will be considered an Eligible Issuer.
The Trustee will give notice as promptly as possible to the Unitholders, in
accordance with the terms of the Trust Agreement, of any Trust Wind-Up Event or
Termination Event. However, 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 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 Event by an officer of the Trustee assigned to its Corporate Trust
Department or (iii) receipt of notice of an event constituting a Security
Default.
Under each Trust Agreement, 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 Expenses (and Extraordinary Trust Expenses that have already
been incurred at the time of the agreement to indemnify) that exceed 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.
If so specified 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 Security Default, the claim of the Swap Counterparty against
the 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 Swap 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 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.
Sale of 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 Securities, the Selling
Agent (unless it declines to act as Selling Agent as described below) will
undertake to sell 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 Securities. Where a
Security Default has occurred or a Security has become a Disqualified Security
and such event does not result in termination of the Trust, sales shall be
limited to the Securities affected by such event, except where the proceeds from
the affected Securities are insufficient to make payment of the Swap Termination
Payment.
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 (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 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 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 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 Securities by oral or 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
Securities in the open market or, if the Swap Counterparty elects, to sell the
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.
The Trust Agreement will provide that the Unitholders will have no
liability as sellers of the Trust Property in connection with any sale of Trust
Property by the Trustee or the Selling Agent.
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 the 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 another Trustee is
identified in the Prospectus Supplement, the Trustee for each Trust initially
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, subject to a successor
trustee which is an Eligible Trustee having been appointed by the Depositor and
accepted such appointment. 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
with the Trust; provided, however, that if it acquires any "conflicting
interest" (as defined in the TIA) 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.
U.S. FEDERAL INCOME TAX CONSEQUENCES
The discussion under the heading "U.S. Federal Income Tax Consequences"
herein and in the applicable Prospectus Supplement discusses and represents the
opinion of Cleary, Gottlieb, Steen & Hamilton pertaining to the material federal
income tax consequences of the purchase, ownership and disposition of Units by a
Unitholder who acquires its Units on the date on which the net proceeds of an
offering of the Units of a particular Series 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 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
Upon the issuance of each Series of Units, Cleary, Gottlieb, Steen &
Hamilton, counsel to the Depositor, will provide to the Depositor on the Closing
Date for such Series its opinion that, under current law and assuming compliance
by the Depositor and the Trustee for such Series with all of the provisions of
the related Trust Agreement (and such other agreements and representations as
may be referred to in such opinion), the Trust will not be classified as a
corporation or as an association taxable as a corporation for U.S. federal
income tax purposes and will not be subject to federal income taxation, and
either (i) the Trust will be classified as a grantor trust for federal income
tax purposes, (ii) the Trust will be classified as a partnership or FASIT (as
defined below) for federal income tax purposes, in which case the Prospectus
Supplement will describe the additional federal income tax consequences
associated with classification of the Trust as a partnership or a FASIT or (iii)
the Trust should be classified as a grantor trust for federal income tax
purposes, in which case the potential alternative characterization of the Trust
and the material consequences thereof will be described under "Risk Factors" and
"U.S. Federal Income Tax Consequences" in the applicable Prospectus Supplement.
With respect to each Trust that will be characterized as a grantor trust,
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 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 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.
The remainder of this discussion assumes that the Trust will be a grantor
trust for U.S. federal income tax purposes.
Treatment of the Securities and Swap Agreement as Integrated or Separate
Transactions
The tax treatment of the 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 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 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
Securities underlying Dual Currency Units.
The discussion in the two preceding paragraphs assumes that the Securities
are considered to be owned by the Trust for federal income tax purposes. In some
circumstances, the 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 Securities and Swap Agreements that Do Not Hedge Currency Risk
In general, under the Integration Regulations, a 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 Units. The synthetic debt instrument may be denominated
in U.S. dollars or another single currency. Certain 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 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 Securities. The issue price will be the adjusted issue price of the
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 Securities. Income from the 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 Securities and Swap Agreements that Hedge Currency Risk
If a Swap Agreement hedges currency risk, then integration of the Swap
Agreement and 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 Securities and Swap Agreements not hedging currency
risk. One difference is that to qualify for integration, the combined cash flows
on the 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 Securities and Swap Agreements.
The issue price of the synthetic debt instrument is determined by
translating the adjusted issue price of the 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 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
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 Securities and the
denominator of which is the sum of the fair market value of the 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 Securities will equal such allocated purchase price. The
Unitholder's tax basis in the 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 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 Securities.
Upon a sale of a Unit, the same method would apply in allocating the amount
realized by the selling Unitholder between the 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 Securities
It is assumed for purposes of the following discussion that the Securities
underlying the Units of each Series will constitute debt instruments in their
entirety and that such Securities are not acquired by the Trust at their
original issuance. If the 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 Securities in gross income as ordinary interest income, in accordance with
such Unitholder's method of accounting, to the extent such stated interest is
qualified stated interest. Stated interest on a 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 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.
Securities Issued With OID. If a 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 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 Security exceeds its adjusted issue price but
is less than the stated redemption price at maturity of such Security, a
Unitholder will have acquired such Security with acquisition premium and such
premium will offset and reduce a Unitholder's share of OID. If the purchase
price allocated to such 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 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 Security or
in some cases deducted. If the purchase price allocated to such a Security is
less than its adjusted issue price by more than a de minimis amount, a
Unitholder will have acquired such 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 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.
Securities Issued Without OID. If a Security was initially issued without
OID, a Unitholder will be required to take into account only stated interest
payments on such Security, unless the purchase price allocated to such Security
differs from the stated redemption price at maturity of such Security. If the
purchase price allocated to a 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
Security or in some cases deducted. In general, if the purchase price allocated
to a Security is less than its stated redemption price at maturity by more than
a de minimis amount, a Unitholder will have acquired such 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 Security under the principles of the OID rules, as if such Security
were newly issued on the date of purchase of the Units by the Unitholder, the
issue price of such 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 Securities
Upon the sale, exchange or retirement of 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 Securities.
Except as discussed above with respect to market discount and below under
"-- 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 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 Securities for more than one year at the time of the disposition.
Securities Providing for Contingent Payments
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.
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 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 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
Securities to the extent such gain is capital gain.
Straddle Rules
The 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 Securities that are positions in a straddle will be
short-term unless such 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 Securities. Further, if the 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 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 Securities, under
section 263(g) of the Code.
Other Characterizations of the 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 Securities may be considered offsetting positions in personal
property for purposes of the straddle rules discussed in the preceding
paragraph.
In some cases, Securities and a related Swap Agreement may represent
economically a loan to the Swap Counterparty secured by the 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 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 Securities."
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 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 Securities. In the case of a Trust that holds only 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 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 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 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 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 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 Securities were
acquired and the rate when the payment is made. Upon a sale of the 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 Securities.
The principles described above would also apply to any synthetic debt
instrument created by integrating the 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 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 Securities (or synthetic
debt instrument, if the 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 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."
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 Securities or income from the Swap Agreement if (i) the
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 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 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 Securities (or,
in the case of a loan to the Swap Counterparty, the Swap Counterparty), except
that this clause will not apply to 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 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 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.
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 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.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 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. 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, 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.
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 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 a sale of any Units, such 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 fixed
public offering prices or at varying prices to be determined at the time of sale
or at the time of commitment therefor. 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. Any such agent will act on a best efforts
basis for the period of its appointment or be subject to another standard in the
Prospectus Supplement.
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 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.
Sales of certain Series of Units may be restricted to "qualified
institutional buyers" ("QIB"s) as defined in Rule 144A under the Securities Act,
in which case each underwriter will be required to exercise reasonable care to
ensure that such Units are sold and will be resold to QIBs. The Prospectus
Supplement relating to such Units may provide that a purchaser of the Units is
deemed to represent for the benefit of the Depositor, the Trust and the
Underwriters that such purchaser is qualified as a QIB.
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 Securities may be deposited
into the Trust in connection with a distribution of the 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
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
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 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 Security Issuer or related persons, and in connection
therewith, may obtain or be in possession of non-public information regarding
the 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.
LEGAL MATTERS
Certain legal matters with respect to the issuance of Units will be passed
upon for the Depositor by Cleary, Gottlieb, Steen & Hamilton.
INDEX OF DEFINED TERMS
Page
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Affected Party............................................26
Base Rate.................................................34
Bearer Units..............................................46
Book-Entry Units..........................................46
Business Day..............................................33
Calculation Date..........................................41
Call Date.................................................43
Call Price................................................43
Callable Series...........................................43
CD Rate...................................................40
CD Rate Determination Date................................40
CDs (Secondary Market)....................................40
CEDEL.....................................................46
Certificate of Non-U.S. Beneficial Ownership..............78
Certificates of Deposit...................................40
Class......................................................1
Closing Date..............................................61
Code......................................................50
Commercial Paper..........................................38
Commercial Paper Rate.....................................38
Commercial Paper Rate Determination Date..................38
Commission.................................................4
Composite Quotations......................................35
Concentrated Security......................................1
Contingent Payment Regulations............................68
Covenant Default..........................................18
Credit Events.............................................24
Credit Support............................................15
Credit Support Provider...................................22
Cut-off Date..............................................12
Definitive Units..........................................46
Deliverable Obligations...................................24
Depositary................................................46
Depositor..................................................1
Direct Participants.......................................47
Disqualified Entity.......................................58
Disqualified Security.....................................58
Distribution Date..........................................3
DOL.......................................................76
DTC.......................................................31
Dual Currency Units.......................................42
Early Termination Date....................................27
EDGAR......................................................4
Eligible Foreign Issuer...................................15
Eligible Issuer...........................................15
Eligible Trustee..........................................61
ERISA.....................................................75
Euroclear.................................................46
Exchange Act...............................................1
Exchange Rate Agent.......................................11
Exchangeable Series.......................................43
Extraordinary Trust Expenses..............................52
Face Amount...............................................42
FASIT.....................................................63
Federal Funds (Effective).................................40
Federal Funds Rate........................................40
Federal Funds Rate Determination Date.....................40
Federal Funds/Effective Rate..............................40
Fixed Rate Unit...........................................34
Floating Rate Unit........................................34
Foreign Currency Integration Regulations..................63
Foreign Currency Unit.....................................42
Global Security...........................................46
GSEs...................................................1, 15
Guarantee..................................................3
Guarantor.................................................21
Guaranty..................................................21
H. 15(519)................................................35
Index Maturity............................................35
Indexed Commodity.........................................42
Indexed Currency..........................................42
Indexed Principal Amount..................................42
Index-Linked Units........................................42
Indirect Participants.....................................47
Insolvency Law............................................53
Integration Regulations...................................63
Interest Period...........................................35
Interest Rate..............................................3
Interest Reset Date.......................................35
IRS.......................................................62
ISDA......................................................23
ISDA Definitions..........................................23
Letter of Credit..........................................21
Letter of Credit Bank.....................................21
LIBOR.....................................................36
LIBOR Determination Date..................................36
LIBOR Reuters.............................................36
LIBOR Telerate............................................37
London Banking Day........................................33
Maximum Interest Rate.....................................35
Maximum Reimbursable Amount................................9
Minimum Interest Rate.....................................35
Money Market Yield........................................38
Morgan Stanley.............................................1
MSDW.......................................................3
Notional Amount...........................................34
OID.......................................................64
Option to Elect Exchange..................................45
Optional Exchange Date....................................44
Outstanding Securities....................................19
Participants..............................................47
Parties in Interest.......................................75
Plan Asset Regulations....................................76
Plans.....................................................75
Prospectus Supplement......................................1
PTCE......................................................77
QIB.......................................................80
Rating Agency.............................................45
Reference Entity..........................................24
Registered Units..........................................46
Registration Statement.....................................4
Reserve Account...........................................22
Retained Interest.........................................12
Reuters...................................................36
Reuters Screen LIBO Page..................................37
Rule 3a-7.................................................31
Schedule..................................................23
Secured Securities........................................19
Securities.................................................1
Security Agreement........................................17
Security Default..........................................28
Security Issuer............................................1
Security Prospectus.......................................15
Security Registration Statement...........................16
Security Reporting Event..................................28
Senior Securities.........................................19
Series.....................................................1
Specified Currency.........................................3
Spread....................................................34
Spread Multiplier.........................................34
Stock Index...............................................42
Strip Units...............................................31
Subordinated Securities...................................19
Swap Agreement.............................................3
Swap Calculation Agent....................................10
Swap Counterparty..........................................3
Swap Default..............................................26
Swap Payment Date.........................................24
Swap Premium..............................................65
Swap Termination Payment...................................6
Tax Projected Payment Schedule............................68
Telerate..................................................36
Telerate Page 3750........................................37
Termination Events.........................................6
TIA.......................................................61
Transaction................................................3
Treasury bills............................................39
Treasury Rate.............................................39
Treasury Rate Determination Date..........................39
Trigger Amount.............................................9
Trust......................................................1
Trust Agreement............................................1
Trust Property.............................................1
Trustee....................................................1
Trustee Fees..............................................13
U.S. person...............................................75
Unit Principal Balance....................................41
Unit Register.............................................47
United States real property interest......................74
Units......................................................1
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. MSDW STRUCTURED ASSET CORPORATION
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 accompanyin Prospectus
Supplement). This Prospectus (including the accompanying STRUCTURED ASSET TRUST UNIT REPACKINGS
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
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PROSPECTUS SUPPLEMENTS...............................
AVAILABLE INFORMATION................................ PROSPECTUS
INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE..........................
IMPORTANT CURRENCY INFORMATION.......................
RISK FACTORS.........................................
THE DEPOSITOR........................................
USE OF PROCEEDS......................................
FORMATION OF TRUSTS..................................
DESCRIPTION OF TRUST PROPERTY........................
DESCRIPTION OF SWAP AGREEMENTS.......................
MSDW.................................................
DESCRIPTION OF UNITS................................. Dated April __, 1999
DESCRIPTION OF TRUST AGREEMENTS......................
U.S. FEDERAL INCOME
TAX CONSEQUENCES................................
ERISA CONSIDERATIONS.................................
LIMITATIONS ON ISSUANCE OF
BEARER UNITS....................................
PLAN OF DISTRIBUTION.................................
LEGAL MATTERS........................................
INDEX OF DEFINED TERMS...............................
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.
(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.
(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."
Exhibits (Item 16 of Form-3)
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 ISDA Master Agreement
23.1 -- Consent of Cleary, Gottlieb, Steen & Hamilton (included in
Exhibits 5.1 and 8.1)
26.1 -- Statement of Eligibility of Trustee
*Final signed opinions to be filed upon amendment.
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.
(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.
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 28th day of
April, 1999.
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 April 28, 1999
- ---------------------------- and Chief Executive
Officer
/s/ Michael Harpe Director, Treasurer April 28, 1999
- ---------------------------- and Chief Financial
Officer
/s/ Donald J. Puglisi Assistant Secretary April 28, 1999
- ----------------------------
Registration No. 333-64879
================================================================================
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
-------------- -------
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 ISDA Master Agreement
23.1 Consent of Cleary, Gottlieb, Steen &
Hamilton (included in Exhibits 5.1
and 8.1)
25.1 Statement of Eligibility of Trustee
* Final signed opinions to be filed upon amendment.