As filed with the Securities and Exchange Commission on __________, 1998
Registration No. 33-39333
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
AMERICAN CORPORATE RECEIPTS, INC.
---------------------------------
(Originator of the Trusts described herein)
(Exact name of registrant as specified in its Charter)
NEW JERSEY 22-3545150
---------- ----------
(State or other (IRS employer
jurisdiction of identification
incorporation) Number)
c/o Rickel Securities, Inc.
45 Essex Street
Millburn, New Jersey 07041
973-379-0300
------------
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
----------------
John C. Sabo, President
American Corporate Receipts, Inc.
c/o Rickel Securities, Inc.
45 Essex Street
Millburn, New Jersey 07041
973-379-0300
------------
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
David F. Broderick, Esq.
McCarter & English, LLP
Four Gateway Center
100 Mulberry Street
Newark, New Jersey 07102
Approximate date of commencement of proposed sale to the public: From time to
time after the effective date of this Registration Statement as determined by
market conditions.
If the only securities being registered on this Form are to be offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, please check the following box. [X]
CALCULATION OF REGISTRATION FEE
====================================================================================================================================
Title of securities Amount to Proposed maximum Proposed maximum Amount of
Being registered be registered(1) Offering price per unit(2) aggregate offering price(2) registration fee
- ------------------------------------------------------------------------------------------------------------------------------------
American Corporate Receipts $60,000,000 100% $60,000,000 $18,181.82(3)
====================================================================================================================================
(1) Represents the face amount of Principal and/or Callable Principal Receipts to be Offered.
(2) Estimated solely for the purpose of calculating the registration fee.
(3) Previously paid.
----------
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.
PROSPECTUS
AMERICAN CORPORATE RECEIPTS
-----
AMERICAN CORPORATE RECEIPTS, INC.
DEPOSITOR
-----
The American Corporate Receipts (the "Receipts") described herein
may be sold from time to time in one or more series, in amounts, at prices and
on terms to be determined at the time of sale and to be set forth in a
supplement to this Prospectus (each a "Prospectus Supplement"). Each series of
Receipts will include two classes of Receipts.
The Receipts of each series will be issued by a newly formed,
limited purpose trust to be formed with respect to such series (each, a
"Trust"). The property of each Trust will be limited to a portion of one
discrete issue of taxable debt securities (the "Bonds") issued by a corporation
or other issuer that is eligible to offer and sell securities pursuant to a
registration statement on Form S-3 promulgated under the Securities Act of 1933,
and which issuer has a class of equity securities registered under Section 12 of
the Securities Exchange Act of 1934 and is therefore subject to the
informational requirements of the Securities Exchange Act of 1934 and in
accordance therewith will be obligated to file reports and other information
with the Securities and Exchange Commission. The Bonds will have been previously
publicly issued pursuant to an offering registered under the Securities Act, and
at the time that the Receipts are offered the Bonds shall have been rated by a
nationally recognized statistical rating organization (such as Moody's Investor
Service, Inc. ("Moody's") or Standard & Poor's Corporation ("S&P")) (each, a
"Rating Agency") in one of its generic rating categories which signifies
investment grade. The identity of and material terms of the Bonds held by a
particular Trust will be described in the related Prospectus Supplement. No
credit enhancement (in the form of over-collateralization, insurance or
guarantees) will be available to supplement payments made on the Bonds.
Each Trust will be formed pursuant to a Trust Agreement (the "Trust
Agreement") to be entered into between American Corporate Receipts, Inc. as
Depositor (the "Depositor") and the Trustee specified in the related Prospectus
Supplement (the "Trustee").
Each series of Receipts will represent fractional undivided
interests in all of the interest and principal payments on the Bonds in the
related Trust. Each class of Receipts of any series will represent the right to
receive a specified payment of principal and/or interest on the related Bonds in
the manner described herein and in the related Prospectus Supplement, to the
extent that such payment has been actually received by the Trustee. The amounts,
rates and dates of such payments will be set forth in the related Prospectus
Supplement, and will correspond to the payments on the related Bonds. In the
event of a payment default on the underlying Bonds which is not cured within ten
days, Receiptholders will obtain the right to proceed directly against the
issuer of the Bonds.
There will be no secondary market for the Receipts prior to the
offering thereof. While Rickel Securities, Inc., an affiliate of the Depositor,
intends to make a secondary market in the Receipts, it is not obligated to do
so. There can be no assurance that a secondary market for the Receipts will
develop or, if it does develop, that it will continue. The Receipts may or may
not be listed on a securities exchange. If the Receipts are listed on a
securities exchange, the name of such exchange will be disclosed in the related
Prospectus Supplement.
Receipts will be issued in book-entry form. Each class of Receipts
initially issued in book-entry form will be represented by a single physical
certificate registered in the name of Cede & Co., the nominee of The Depository
Trust Company ("DTC"). The interests of owners of such Receipts will be
represented by book entries on the records of DTC and participating members
thereof. Certificated Receipts will be available only under limited
circumstances.
----------
PROCEEDS OF THE BONDS HELD BY THE TRUST FOR ANY SERIES ARE THE SOLE
SOURCE OF PAYMENTS ON THE RECEIPTS FOR SUCH SERIES. THE RECEIPTS WILL NOT
REPRESENT AN INTEREST IN OR OBLIGATION OF, AND ARE NOT INSURED OR GUARANTEED BY,
THE DEPOSITOR OR RICKEL SECURITIES, INC., ANY OTHER TRUST OR ANY OF THEIR
RESPECTIVE AFFILIATES. THE RECEIPTS ARE DIFFERENT FROM, AND SHOULD NOT BE DEEMED
TO BE A SUBSTITUTE FOR, DIRECT OWNERSHIP OF THE BONDS.
----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
Receipts may be sold by the Depositor through agents designated from
time to time, through underwriting syndicates led by one or more managing
underwriters or through one or more underwriters acting alone, as more fully
described under "PLAN OF DISTRIBUTION" and in the related Prospectus Supplement.
If underwriters or agents are involved in the offering of the Receipts of any
series offered hereby, the name of the managing underwriter or underwriters or
agents will be set forth in the related Prospectus Supplement.
This Prospectus may not be used to consummate sales of securities
offered hereby unless accompanied by a Prospectus Supplement.
The date of this Prospectus is , 1998.
-2-
AVAILABLE INFORMATION
American Corporate Receipts, Inc., as depositor of each Trust, has
filed with the Securities and Exchange Commission (the "Commission") a
Registration Statement on Form S-3 (together with all amendments and exhibits
thereto, referred to herein as the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
Receipts offered pursuant to this Prospectus. This Prospectus, which forms a
part of the Registration Statement, omits certain information contained in such
Registration Statement pursuant to the rules and regulations of the Commission.
For further information, reference is made to the Registration Statement which
may be inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's regional offices at 500 West Madison Street, 14th Floor, Chicago,
Illinois 60661 and 75 Park Place, New York, New York 10007, or at the
Commission's Web site, http://www.sec.gov. Copies of the Registration Statement
may be obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates.
REPORTS TO RECEIPTHOLDERS
Quarterly and annual unaudited reports containing information
concerning the related Bonds, including an annual independent accountant's
statement of review regarding the payment of all income on the Bonds to the
Receiptholders ("Receiptholders" or "Holders"), will be prepared by the related
Trustee and sent on behalf of each Trust only to Cede & Co. ("Cede"), as nominee
of DTC and registered holder of the Receipts. See "CERTAIN INFORMATION REGARDING
THE RECEIPTS -- Book-Entry Registration" and "--Reports to Receiptholders". Such
reports will not constitute financial statements prepared in accordance with
generally accepted accounting principles. Each Trust will file with the
Commission such other reports as may required under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and the rules and regulations of the
Commission thereunder.
PROSPECTUS SUMMARY
This Prospectus Summary is qualified in its entirety by reference to
the detailed information appearing elsewhere in this Prospectus and by reference
to the information with respect to the Receipts contained in the related
Prospectus Supplement to be prepared and delivered in connection with the
offering of such Receipts. Certain capitalized terms used in this Prospectus
Summary are defined elsewhere in this Prospectus and in the related Prospectus
Supplement. A listing of the pages on which some of such terms are defined is
found in the "INDEX OF TERMS" on page 22 of this Prospectus.
Issuer.............. With respect to each series of Receipts, the Trust
to be formed by the Depositor and the Trustee
pursuant to the Trust Agreement. Each Trust will
be established for the primary purpose of issuing
Receipts of a single series representing
fractional ownership interests in the Bonds to be
described in the related Prospectus Supplement for
such series. The Bonds will be deposited into the
Trust by the Depositor in exchange for Receipts,
the aggregate face amount of which will correspond
exactly to the aggregate amount of principal and
interest payable on the Bonds from the date of
deposit to the date of maturity (or, in the case
of Callable Principal Receipts, the first date
upon which the Bonds are redeemable).
Depositor........... American Corporate Receipts, Inc.
Trustee............. The Trustee specified in the related Prospectus
Supplement.
The Receipts........ Each series of Receipts will include two classes
of Receipts issued pursuant to a Trust Agreement
between the Depositor and the Trustee: (i) Coupon
Receipts, which represent the right to receive a
single payment of interest on the Bonds, and (ii)
either (x) Principal Receipts, which represent the
right to receive a single payment of principal on
the Bonds upon maturity, or (y) in any case where
the Bonds are subject to early redemption,
Callable Principal Receipts, which represent the
right to receive
-3-
all interest payments from the first date upon
which the Bonds are redeemable and principal upon
redemption or maturity, plus any redemption
premium. The Receipts will be available initially
only in book-entry form. Receiptholders will be
able to receive Certificated Receipts only in the
limited circumstances described herein. See
"CERTAIN INFORMATION REGARDING THE RECEIPTS --
Certificated Receipts."
The Bonds .......... The property of each Trust will be limited to
taxable debt securities (the "Bonds") acquired by
the Depositor from Rickel Securities, Inc., an
affiliate of the Depositor, in exchange for the
Receipts. The Bonds will be described in the
related Prospectus Supplement and will have been
issued by a corporation or other issuer eligible
to offer and sell securities registered on a
registration statement on Form S-3 promulgated
under the Securities Act, and which also has a
class of equity securities registered under
Section 12 of the Exchange Act and therefore is
subject to the periodic reporting requirements of
the Exchange Act. Each of the Bonds will have been
previously publicly issued in an offering
registered pursuant to the Securities Act, and at
the time that the Receipts are offered the Bonds
shall have been rated by a nationally recognized
statistical rating organization in one of its
generic rating categories which signifies
investment grade. The issuer of the Bonds will not
be involved in the issuance of the Receipts, and
will not be affiliated with the Depositor at the
time of the offering. Rickel Securities, Inc. will
have previously purchased, or will
contemporaneously purchase the Bonds in the
secondary market. Rickel Securities, Inc. will not
purchase the Bonds from the issuer thereof or any
of its affiliates, and the Bonds will not be
purchased by Rickel Securities, Inc. as a part of
the initial distribution thereof. After the date
of issuance by each Trust of the related Receipts
(the "Issuance Date"), such Trust will not
purchase or otherwise acquire any additional
securities and will not dispose of or create any
lien on its assets.
Payments............ Subject to timely receipt of payments on the
Bonds, payments in respect of each class of any
series of Receipts will be paid or distributed at
such times and in such manner as described in the
related Prospectus Supplement.
Certain Federal
Income Tax
Consequences....... Receipts will constitute "stripped coupons" or
"stripped bonds" for purposes of Section 1286 of
the Internal Revenue Code of 1986, as amended (the
"Code"). As such, the Receipts will be treated as
if issued with original issue discount.
Consequently, purchasers of Receipts should
understand that if they are subject to income
taxation, it is likely that they will be allocated
taxable income with respect to their Receipts each
year prior to maturity of the Receipts, although
they will not receive any cash distributions with
respect to the Receipts they hold prior to
Maturity. In any such event, a Holder would have
to use other cash resources to pay the tax on the
taxable income allocated as a result of his, her
or its ownership of the Receipts. Upon the
issuance of each series of Receipts, McCarter &
English, LLP, special tax counsel to the
Depositor, will deliver an opinion with respect to
certain federal income tax consequences. See
"FEDERAL INCOME TAX CONSEQUENCES" herein for
additional information concerning the application
of federal, state, local and other laws.
-4-
ERISA
Considerations..... Under a regulation issued by the Department of
Labor, the Trust assets represented by a series of
Receipts will not be deemed "plan assets" of an
employee benefit plan holding the Receipts if
certain conditions are met, including that such
class of Receipts must be held, upon completion of
the initial public offering of the Receipts, by at
least 100 investors who are independent of the
Depositor and of one another. For certain series
of Receipts the Depositor expects that (i) one or
more classes of Receipts of each series will be
held by at least 100 independent investors at the
conclusion of the initial public offering thereof
(although no assurance can be given, and no
monitoring or other measures will be taken to
ensure, that such condition will be met), and (ii)
the other conditions of the regulation will be
met. If the Trust assets represented by a series
of Receipts were deemed to be "plan assets" of an
employee benefit plan investor (e.g. if the 100
independent investor criterion is not satisfied),
violation of the "prohibited transaction" rules of
the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), could result and
generate excise tax and other liabilities under
ERISA and Section 4975 of the Code, unless a
statutory, regulatory or administrative exemption
is available. It is uncertain whether existing
exemptions from the "prohibited transaction" rules
of ERISA would apply to all transactions involving
the Trust assets represented by the related
Receipts. Accordingly, fiduciaries considering a
purchase of the Receipts on behalf of employee
benefit plans should consult their counsel before
making the purchase. See "ERISA CONSIDERATIONS"
herein.
Rating.............. It is a condition to the issuance of any series of
Receipts that they be rated by a nationally
recognized statistical rating organization (such
as Moody's Investor Service, Inc. ("Moody's") or
Standard & Poor's Corporation ("S&P")) (each, a
"Rating Agency") in one of its generic rating
categories which signifies investment grade;
typically, the four highest rating categories
(within which there may be sub-categories or
gradations indicating relative standing) signify
investment grade. For example, Moody's ratings
between Aaa and Baa, and S&P's ratings between AAA
and BBB, signify investment grade. The ratings of
any series of the Receipts by the Rating Agencies
address the likelihood of the full and timely
payment of the aggregate face amount of the
Receipts. There is no assurance that any such
rating will continue for any period of time or
that it will not be revised or withdrawn entirely
by such Rating Agency if, in its judgment,
circumstances (including, without limitation, the
financial health of the issuer of the underlying
Bonds) so warrant. A revision or withdrawal of
such rating may have an adverse effect on the
market price of the Receipts. A security rating is
not a recommendation to buy, sell or hold
securities. See "RISK FACTORS" in the related
Prospectus Supplement.
THE TRUSTS
GENERAL
With respect to each series of Receipts, the Depositor will
establish a Trust by depositing the Bonds in the Trust without recourse. After
the Issuance Date with respect to each Trust, such Trust will not purchase or
otherwise acquire any additional securities and will not dispose of or create
any lien on its assets. The Receipts of each series will evidence fractional
ownership interests in the related Bonds. The related Trust Agreement shall
terminate with respect to any Trust one year following the payment upon maturity
(or any earlier redemption) by the respective issuers of the entire principal
amount (and any redemption premium) of
-5-
the Bonds. If any Receipts shall remain outstanding after the date of
termination of the related Trust Agreement, the Trustee shall not perform any
further acts under the Trust Agreement, except that the Trustee shall hold the
proceeds of any payment, without liability for interest, for the pro rata
benefit of the Receiptholders which have not theretofore been surrendered for
payment unless otherwise required by applicable law.
THE TRUSTEE
The Trustee for each Trust and the principal offices of the Trustee
will be as specified in the related Prospectus Supplement. The Trustee will not
be affiliated with the Depositor at the time of the offering. The Trustee's
liability in connection with the issuance and sale of the Receipts is limited
solely to the express obligations of such Trustee set forth in the related Trust
Agreement. The Trustee's obligations under the Trust Agreement include issuing
and manually executing Receipts, receiving debt service payments on the
underlying Bonds and disbursing the same to the owners of the related Receipts,
maintaining the Receipt Register, giving notice to the Receiptholders in the
event of any payment default by the issuer of the underlying Bonds, and taking
actions as directed by the holders of the Receipts. The fee to be charged by the
Trustee for its services is negotiated by the Depositor and the Trustee for each
series and set forth in a separate agreement between them. The fee is paid by
the Depositor. The Trust Agreement provides that in no event shall the assets of
the Trust be used to pay such fees or be subject to any right, charge, security
interest, lien or claim of any kind in favor of the Trustee or any person
claiming through the Trustee.
A Trustee may resign at any time, in which event the Depositor will
be obligated to appoint a successor trustee. Any resignation or removal of a
Trustee and appointment of a successor trustee will not become effective until
acceptance of the appointment by the successor trustee. The Trust Agreement
requires that any Trustee be a bank with trust powers or trust company having a
principal office in the United States of America, having a combined capital and
surplus of at least $50,000,000, and having a rating of Baa or better assigned
by at least one nationally recognized statistical rating agency, as that term is
defined by SEC Rule 15C3-1(c)(2)(vi)(F).
THE BONDS
GENERAL
The Bonds to be purchased by each Trust will be taxable debt
securities issued by a corporation or other entity (each such entity, an
"Obligor") eligible to offer and sell securities registered on a registration
statement on Form S-3 promulgated under the Securities Act, and which also has a
class of equity security registered under Section 12 of the Exchange Act and
therefore is subject to the periodic reporting requirements of the Exchange Act.
Each of the Bonds will have been previously publicly issued in an offering
registered pursuant to the Securities Act, and at the time that the Receipts are
offered the Bonds shall have been rated by a Rating Agency (such as Moody's or
S&P) in one of its generic rating categories which signifies investment grade.
The Bonds will have been acquired by the Depositor from Rickel Securities, Inc.
in exchange for the Receipts. Rickel Securities, Inc. will have previously
purchased the Bonds in the secondary market. The Obligor will not be involved in
the issuance of the Receipts, and will not be affiliated with the Depositor at
the time of the offering. Rickel Securities, Inc. will not have purchased the
Bonds from the issuer thereof or any of its affiliates, and the Bonds will not
have been purchased by Rickel Securities, Inc. as part of the initial
distribution thereof. The specific terms and conditions of the Bonds to be
purchased by each Trust will be set forth in the related Prospectus Supplement.
THE OBLIGORS
In order to be eligible to offer and sell securities registered on a
registration statement on Form S-3, and thus fulfill that portion of the
criteria for Bond Obligors set forth above, an Obligor must:
1. Be incorporated or otherwise organized under the laws
of the United States or any State or territory or the District of
Columbia and have its principal business operations in the United
States or its territories;
-6-
2. Have a class of securities registered under the
Exchange Act and be required to file reports pursuant to that Act;
3. Have been subject to the periodic reporting
requirements of the Exchange Act for a period of at least 12
calendar months, and have filed in a timely manner all reports
required to be filed during the 12 calendar months and any portion
of a month preceding the relevant date; and
4. Have at least $75,000,000 in aggregate market value
of voting stock held by non-affiliates of the Obligor.
The Depositor will base its determination of whether a specific
Obligor meets this criteria on the basis of available public information. See
"AVAILABLE INFORMATION REGARDING THE OBLIGORS -- Public Information." The
Depositor will not confirm any such determination with the Obligor. In making
such determination, the Depositor will necessarily assume that all of the
information which an Obligor has filed with the Commission is true, accurate and
complete.
AVAILABLE INFORMATION REGARDING THE OBLIGORS
PUBLIC INFORMATION
The Obligors will be corporations or other entities that are subject
to the informational requirements of the Exchange Act and in accordance
therewith file reports and other information with the Commission. Such reports,
proxy and information statements and other information filed by the Obligors
with the Commission can be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's regional offices at 500 West Madison Street,
14th Floor, Chicago, Illinois 60661 and 75 Park Place, New York, New York 10007,
or at the Commission's Web site, http://www.sec.gov. Copies of such material can
be obtained from the Public Reference Section of the SEC at 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates. If the Bonds are listed on
the New York Stock Exchange, the material described above and other information
will also be available for inspection at the offices of the New York Stock
Exchange at 20 Broad Street, New York, New York. If the Bonds are listed on the
American Stock Exchange, the material described above and other information will
also be available for inspection at the offices of the American Stock Exchange
at 86 Trinity Place, New York, New York.
POSSIBLE UNAVAILABILITY OF PUBLIC INFORMATION AND RESULTING TRANSFER
RESTRICTIONS
An Obligor whose common stock (or similar equity security) ceases to
be held of record by 300 or more holders, which has no class of security listed
on a national securities exchange, and which has no class of debt security held
of record by 300 or more holders, could elect to suspend its Exchange Act
reporting requirements. Such suspension could occur at any time after the
deposit of its Bonds in a Trust. In such event, the public information referred
to in the preceding paragraph would no longer be available. If such reports are
not available to the Trust, the Receipts of such series will, by their terms,
generally be required to be removed from the DTC book entry system, and
definitive physical certificates representing the Receipts of such series will
be issued to the Holders of the Receipts of such series. Such actions could
hinder a Holder's ability to transfer his Receipts.
In the event an Obligor suspends its Exchange Act reporting and the
Receipts are removed from the DTC book entry system, the Depositor will notify
the Obligor that the Bonds are held pursuant to the Trust Agreement and that the
holders of the Receipts constitute record holders of the Bonds. The issuance of
such definitive physical certificates representing the Receipts may increase the
likelihood that there will then be more than 300 holders of record of the Bonds,
requiring the Obligor to resume filing Exchange Act reports, in light of Rule
12g5-1(b)(1) under the Exchange Act, which appears to require an obligor with
actual knowledge that its bonds are held pursuant to a Trust Agreement to treat
holders of record of certificates or other evidences of interest issued by the
Trust as holders of record of the underlying Bonds. However, no assurances can
be given that this procedure will result in the Obligor resuming its Exchange
Act filings, due to, among other reasons, the fact that to the Depositor's
knowledge, no court of competent jurisdiction has interpreted and enforced Rule
12g5-1(b)(1) in the circumstances described above. In addition, the Depositor is
unable to predict whether, even if the Receiptholders are treated as holders of
the Bonds, the issuance of definitive physical certificates will cause there to
be more than 300 holders of record of the Bonds.
-7-
BONDHOLDER COMMUNICATIONS
Upon the receipt by the Trust of any Bondholder communications from
an Obligor, the Trustee, on behalf of the Trust, will transmit such
communications to the beneficial owners of the Receipts upon receipt from the
Obligor of assurances that the Trustee's reasonable expenses will be reimbursed
by the Obligor. In addition, upon receipt by the Trust of Bondholder
communications from a third party (other than the Obligor), the Trustee, on
behalf of the Trust, will transmit such Bondholder communications to the
beneficial owners of the Receipts upon receipt from such third party of
assurances that the Trustee's reasonable expenses will be reimbursed by such
third party. In either case, if the Trustee does not receive such assurances,
then the Trustee, at the sole discretion of the Depositor and at the expense of
the Depositor and/or the Trust, will transmit or cause to be transmitted any
such Bondholder communications to such beneficial owners.
USE OF PROCEEDS
There will be no cash proceeds received by the Depositor or the
Trust from the sale of the Receipts. The issuance of each series of Receipts
will involve the following steps, some or all of which may take place
simultaneously:
- Rickel Securities, Inc. will purchase the Bonds in the secondary
market for cash at the price(s) prevailing in the market.
- The Trust will issue the Receipts to the Depositor. The aggregate
face amount of Receipts will correspond exactly to the aggregate amount of
principal and interest payable on the Bonds from the date of deposit to the date
of maturity (or, in the case of Callable Principal Receipts, the first date upon
which the Bonds are redeemable).
- The Depositor will sell the Receipts to Rickel Securities, Inc. in
exchange for the Bonds.
- The Depositor will sell the Bonds to the Trust in consideration
for the Trust's issuance of the Receipts to the Depositor.
- Rickel Securities, Inc., acting as the Underwriter, will commence
the offering of the Receipts.
The Receipts will be offered from time to time through the
Underwriter in negotiated transactions, at various prices to be determined at
the time of sale. Any spread between the price at which the Receipts are sold
and the purchase price of the Bonds (less costs and expenses) will represent
underwriting compensation to Rickel Securities, Inc. Depending on the timing of
the various steps outlined above, Rickel Securities, Inc. may utilize a portion
of the net proceeds of the sale of the Receipts to finance or refinance the
purchase of the underlying Bonds.
The aggregate face amount of any series of Receipts will correspond
exactly to the aggregate amount of principal and interest payable on the
underlying Bonds from the date of deposit to the date of maturity (or, in the
case of Callable Principal Receipts, the first date upon which the Bonds are
redeemable). Therefore, the aggregate face amount of any particular series of
Receipts will not necessarily bear a direct relationship to the fair market
value of the underlying Bonds on the date that the Receipts are issued.
The simultaneous transfer of the Bonds from the Underwriter to the
Depositor in exchange for the Receipts, and the retransfer of the Bonds from the
Depositor to the Trust in exchange for the Receipts, are intended by the parties
to constitute sale transactions. Immediately following the completion of such
transactions, physical custody of and title to the Bonds will be irrevocably
vested in the Trust and/or the Trust's nominee(s), and neither the Underwriter
nor the Depositor will have any further control over the collection, disposition
or custody thereof, or over any other actions affecting the Bonds. Neither the
Trust nor the Receiptholders will have any recourse against the Underwriter or
the Depositor in the event of a default on the Bonds by the Obligor. Conversely,
neither the Trust nor the Receiptholders will be entitled to share in any net
profit, nor will the Trust or the Receiptholders be liable for any portion of
any net loss, which may be realized by the Underwriter in connection with its
purchase of the Bonds in the market and resale of the Receipts.
-8-
THE DEPOSITOR
The Depositor, a wholly owned subsidiary of Rickel Securities, Inc.,
was incorporated in the State of New Jersey in October, 1997. The Depositor was
organized for the limited purpose of acquiring Bonds from Rickel Securities,
Inc., forming Trusts, transferring Bonds to the Trusts, and engaging in related
activities. The principal executive offices of the Depositor are located at 45
Essex Street, Millburn, New Jersey 07041, and its phone number is 973-379-0300.
THE RECEIPTS
GENERAL
With respect to each Trust, the Receipts will be issued pursuant to
the terms of a Trust Agreement, a form of which has been filed as an exhibit to
the Registration Statement of which this Prospectus forms a part. The following
is a summary of the material terms of the Trust Agreement. The following summary
does not purport to be complete and is subject to, and qualified in its entirety
by reference to, all of the provisions of the Receipts and the Trust Agreement.
Where particular provisions or terms used in the Trust Agreement are referred
to, the actual provisions (including definitions of terms) are incorporated by
reference as part of this summary.
Each class of a series of Receipts issued in book-entry form will
initially be represented by a single Receipt registered in the name of DTC. The
Depositor has been informed by DTC that DTC's nominee will be Cede. Accordingly,
Cede is expected to be the holder of record of the Receipts issued in book-entry
form. Unless and until Certificated Receipts are issued under the limited
circumstances described herein, no Receiptholder will be entitled to receive a
physical certificate representing a Receipt. All references herein to actions by
Receiptholders refer to actions taken by DTC upon instructions from the
Participants and all references herein to distributions, notices, reports and
statements to Receiptholders refer to distributions, notices, reports and
statements to DTC or Cede, as the registered holder of the Receipts, as the case
may be, for distribution to beneficial owners in accordance with DTC's
procedures with respect thereto. See "CERTAIN INFORMATION REGARDING THE RECEIPTS
- -- Book Entry Registration" and "-- Certificated Receipts."
DISTRIBUTIONS OF INTEREST AND PRINCIPAL AMOUNT
There will not be any periodic interest payments on Coupon Receipts
or Principal Receipts. Each of such Receipts represents the right to receive a
single payment at its maturity.
With respect to Coupon Receipts, on and after the date of the
interest payment evidenced thereby, if the Obligor shall have paid in full and
the Trustee shall have confirmed receipt of the interest due on such interest
payment date on the underlying Bonds, the Trustee shall, upon surrender of such
Coupon Receipts at the office of the Trustee specified in the related Prospectus
Supplement, pay to the Holder thereof in lawful money of the United States of
America, if the Holder is DTC or its nominee, by wire transfer of immediately
available funds, and if the Holder is any other person, by check for New York
Clearing House funds in accordance with such regulations as the Trustee may
reasonably establish consistent with the provisions of the Trust Agreement, the
entire amount of such interest payment evidenced thereby, less any taxes or
governmental charges required to be withheld from such payment by the Trustee.
With respect to any Principal Receipts, if the Obligor shall have
paid in full and the Trustee shall have confirmed receipt of the amount of such
principal upon maturity of the underlying Bonds, the Trustee shall, upon
surrender of such Principal Receipts at the office of the Trustee specified in
the related Prospectus Supplement, pay to the Holder thereof in lawful money of
the United States of America, if the Holder is DTC or its nominee, by wire
transfer of immediately available funds, and if the Holder is any other person,
by check for New York Clearing House funds in accordance with such regulations
as the Trustee may reasonably establish consistent with the provisions of the
Trust Agreement, the entire amount of such principal evidenced thereby, less any
taxes or governmental charges required to be withheld from such payment by the
Trustee.
With respect to any Callable Principal Receipts: (i) on or after
each interest payment date, if the Obligor shall have paid in full and the
Trustee shall have confirmed receipt of the interest due on such interest
payment date on the underlying Bonds, the Trustee shall pay to
-9-
the Holder of record on the applicable record date in lawful money of the United
States of America , if the Holder is DTC or its nominee, by wire transfer of
immediately available funds, and if the Holder is any other person, by check for
New York Clearing House funds in accordance with such regulations as the Trustee
may reasonably establish consistent with the provisions of the Trust Agreement,
the entire amount of such interest, less any taxes or governmental charges
required to be withheld for such payment by the Trustee, and (ii) if the Obligor
shall have paid and the Trustee shall have confirmed receipt of all or any part
of the principal amount of and redemption premium, if any, due upon stated
maturity or upon earlier redemption of the underlying Bonds, the Trustee shall,
upon surrender of such Callable Principal Receipts at the office of the Trustee
specified therein, pay to the Holder thereof, in lawful money of the United
States of America, if the Holder is DTC or its nominee, by wire transfer of
immediately available funds, and if the Holder is any other person, by check for
New York Clearing House funds in accordance with such regulations as the Trustee
may reasonably establish consistent with the provisions of the Trust Agreement,
the entire amount of such principal and premium, if any, evidenced thereby, or
in the case of a partial redemption, the amount of such principal so redeemed
(and any redemption premium); in each case less any taxes or governmental
charges required to be withheld from such payment by the Trustee.
The Trust Agreement provides that all moneys received from Obligors
by the Trustee which represent payments of interest, principal or redemption
premium on the underlying Bonds shall be held by the Trustee without interest in
a special account until required to be disbursed. Therefore, to the extent that
the Trustee holds in trust any payments of interest or principal for any period
prior to disbursement of the same to the Receiptholders, these amounts will not
be invested, and there will be no income generated. However, because the payment
dates of the Receipts will correspond to the payment dates of the underlying
Bonds, and because the Trustee is under a duty to transfer payments received on
the Bonds to the Receiptholders following receipt (including, in the case of
Callable Principal Receipts, following the receipt of redemption proceeds prior
to the maturity date of the Bonds), it is anticipated that any such payments
will be held by the Trustee for only that period of time as may be necessary to
arrange re-transfer to the Receiptholders. To the extent DTC is the only
Receiptholder of record, as is presently contemplated, DTC will follow its own
internal procedures in crediting the accounts of its Participants following the
receipt of any such payments.
REDEMPTION OF CALLABLE PRINCIPAL RECEIPTS
Any class of Callable Principal Receipts of any series is subject to
redemption on the optional redemption dates and any mandatory redemption dates,
if applicable, of the related Bonds as set forth in the related Prospectus
Supplement. The Bonds related to each series of Callable Principal Receipts will
be subject to redemption prior to maturity on and after the dates and at the
redemption prices set forth in the Prospectus Supplement relating to such
series.
If the Bonds underlying any series of Callable Principal Receipts
are redeemed in whole or in part, the Trustee shall redeem a principal amount of
Callable Principal Receipts of such series equal to the principal amount of the
Bonds held in trust so redeemed. Upon redemption of any Callable Principal
Receipts, the Holder will have no right to receive payments of any interest
maturing after the redemption date thereof.
In the event of a partial redemption of the Bonds underlying any
series of Callable Principal Receipts, the particular Callable Principal
Receipts to be redeemed shall be selected by the Trustee from the outstanding
Callable Principal Receipts of such series by lot or such other method as the
Trustee shall deem fair and appropriate and which may provide for the selection
for redemption of portions (in amounts equal to the minimum authorized
denomination of such series and integral multiples thereof) of the principal
amount represented by such Callable Principal Receipts. To the extent
practicable the Trustee shall, in the case of partial redemption, redeem
Callable Principal Receipts so that no more than one Callable Principal Receipt
is thereby rendered other than in an authorized denomination.
Notice of redemption shall be given by the Trustee to each Holder of
any Callable Principal Receipts to be redeemed within thirty (30) days after
notice of redemption of the underlying Bonds has been given by the Obligor,
trustee or paying agent of or for the Bonds, as the case may be. All notices of
redemption shall state the redemption date, the amount payable on such date, the
place at which such Callable Principal Receipts are to be surrendered for
payment, that interest on amounts redeemed will cease to accrue and, if less
than all of a Holder's Callable Principal Receipt is to be redeemed, the
principal amount of such Callable Principal Receipt to be redeemed.
DEFAULT ON BONDS
-10-
If the Obligor defaults on the payment of any interest or principal
which is evidenced by the Receipts, the Trustee shall promptly give notice to
Holders thereof as provided in the Trust Agreement. Such notice shall set forth
(a) the identity of the issue of Bonds, (b) the date and nature of such default,
(c) the amount of the interest, principal or callable principal to which such
default relates, (d) the identifying numbers or the class of Receipts, or any
combination, evidencing the interest, Principal or Callable Principal (or
portions thereof) described above in clause "(c)", and (e) any other information
which the Trustee may deem appropriate.
Upon any default by the issuer of any Bond on the payment of any
Interest, Principal or Callable Principal which is evidenced by a Receipt, the
Trustee shall take all such steps as the Trustee, in its capacity as Trustee and
as the registered owner or nominal holder of the Bond to which the Receipt owned
by the Holder relates, shall deem necessary to protect the rights of the
Receiptholders. In order to protect such rights, the Trustee may, in its own
name and as trustee of an express trust, institute any action or proceedings at
law or in equity for the collection of the sums due and unpaid upon any Bond,
and may prosecute any such action or proceeding to judgment or final decree. In
addition, the Trustee shall be entitled and empowered, either in its own name or
as trustee of an express trust or as attorney-in-fact for the Receiptholders or
in any one or more of such capacities to file such proofs of claim, claims,
petitions, amendments thereto or any other document as may be necessary or
advisable in order to have the claims of the Holders allowed in any judicial
proceedings involving the Obligor under the Bonds or the trustee under the
indenture governing the Bonds.
The Bonds may be subject to United States or state laws permitting
bankruptcy, moratorium, reorganization or other actions which, in the event of
extreme financial difficulties of the Obligor, could result in delays in payment
or in non-payment of the Receipts relating to Bonds. In certain cases the
bankruptcy, reorganization or moratorium could result in non-payment of one or
more Coupon Receipts while the related Principal Receipts and Callable Principal
Receipts were paid in part or in full.
In the event that the Trustee receives money or other property in
respect of the Bonds (other than a scheduled interest payment with respect to an
Interest Payment Date or the scheduled payment of principal on or with respect
to the stated maturity date of the Bonds) as a result of a payment default on
the Bonds, or actual notice that such moneys or other will be paid to the
Trustee, the Trustee shall promptly give notice to DTC or, if the Receipts are
not then held by DTC, directly to the Holders of the Receipts then outstanding
and unpaid. Such notice shall state that, not later than thirty (30) days after
the receipt of such moneys or other property, the Trustee shall allocate and
distribute such moneys or other property to the Holders of the Receipts then
outstanding and unpaid, in proportion to the Accreted Value of each outstanding
class of Receipts, and within each class pro rata by face amount. Property
received, other than cash, shall be liquidated by the Trustee in a commercially
reasonable manner and the proceeds thereof, after deduction of all reasonable
costs and expenses of such liquidation, distributed in cash; provided, however,
that if such property consists of securities, such securities shall be
liquidated only to the extent necessary to avoid distribution of fractional
securities.
The term "Accreted Value" means, for any Receipt, (a) the original
issue price for such Receipt as set forth in Exhibit A to the Series Trust
Agreement, plus (b) an amount equal to an investment return thereon accrued to
the date of determination calculated based on a semiannual compounding rate, on
the basis of a 360-day year composed of twelve 30-day months, equal to the
original yield to maturity of such Receipt as set forth in Exhibit A to the
Series Trust Agreement. With respect to the allocation of proceeds of the Bonds
received in connection with a payment default on the Bonds, the relevant
determination date shall be the date of such default.
The Trustee may consult with and rely upon the calculations of an
advisor (which may be the Depositor) in connection with any calculation of
Accreted Value to the extent such amount must be determined in order for the
Trustee to carry out its duties under the Trust Agreement. The expenses of such
an advisor (other than the Depositor) shall be borne by the Holders and shall
not exceed $5,000.
Neither the Trustee nor the Depositor shall be under any obligation
whatsoever to appear in, prosecute or defend any action, suit or other
proceeding in respect of the Bonds or Receipts. Pursuant to the terms of the
Trust Indenture Act of 1939, as amended, each Receiptholder, as the beneficial
owner of the right to receive the payment(s) on the Bonds which are represented
by his or her Receipt, shall have the right to institute suit directly against
the Obligor of the underlying Bonds in accordance with the law governing the
underlying Bonds, subject to certain limitations allowed by the Act which may be
contained in the indenture pursuant to which the underlying Bonds were issued.
-11-
CERTAIN INFORMATION REGARDING THE RECEIPTS
BOOK-ENTRY REGISTRATION
DTC is a limited purpose trust company organized under the laws of
the State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code and a
"clearing agency" registered pursuant to Section 17A of the Exchange Act. DTC
was created to hold securities for its Participants and to facilitate the
clearance and settlement of securities transactions between Participants through
electronic book-entries, thereby eliminating the need for physical movement of
certificates (such electronic book-entry system, the "DTC Book Entry Only
System"). Participants include securities brokers and dealers, banks, trust
companies and clearing corporations. Indirect access to the DTC system also is
available to others such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a Participant, either
directly or indirectly ("Indirect Participants").
Holders of book-entry Receipts that are not Participants or Indirect
Participants but desire to purchase, sell or otherwise transfer ownership of, or
other interests in, such Receipts may do so only through Participants and
Indirect Participants. In addition, such Holders will receive all distributions
of principal and interest through DTC Participants. DTC will forward such
payments to its Participants, which thereafter will forward them to Indirect
Participants or such Holders. Except for the Depositor, it is anticipated that
the only "Receiptholder" will be Cede, as nominee of DTC. Beneficial owners will
not be recognized by the Trustee as Receiptholders as such term is used in the
Trust Agreement, and beneficial owners will be permitted to exercise the rights
of Receiptholders only indirectly through DTC and its Participants.
Under the rules, regulations and procedures creating and affecting
DTC and its operations (the "Rules"), DTC is required to make book-entry
transfers of Receipts among Participants on whose behalf it acts with respect to
the Receipts and to receive and transmit distributions of principal of and
interest on Receipts. Participants and Indirect Participants with which Holders
have accounts with respect to the Receipts similarly are required to make
book-entry transfers and receive and transmit such payments on behalf of their
respective customers. Accordingly, although Holders will not possess Receipts,
the Rules provide a mechanism by which beneficial owners will receive payments
and will be able to transfer their Receipt interests.
The Certificated Receipts delivered to the Trustee will be
registered in the name of Cede, as nominee for DTC. The Holders, as purchasers
of Receipts, will not receive physical certificates representing their Receipts.
Instead, the ownership interests of the Holders will be recorded, directly or
indirectly, through the records of the respective Participants and Indirect
Participants. Transfers among Holders will be accomplished through and reflected
on the records of DTC and the Participants or Indirect Participants of which
those Holders are customers. DTC will maintain records for the payment, transfer
and exchange of Receipts held by DTC Participants on behalf of Holders, but will
not make payments directly to Holders or record specific transfers of Receipts
from one Holder to another.
Payments on the Bonds that are received by the Trustee from the
Obligor, including payments upon redemption of the Bonds, will be paid to DTC as
the registered holder of the related Receipts. DTC, under its current practices,
would credit those payments to the accounts of the Participants in accordance
with their respective holdings of Receipts as shown on DTC's records. Payment by
Participants and Indirect Participants to Holders will be governed by standing
instructions and customary practices, and will be the responsibility of each
such Participant or Indirect Participant and not of DTC or the Trustee, subject
to any statutory and regulatory requirements as may be in effect from time to
time.
DTC may determine to discontinue the DTC Book Entry Only System with
respect to the Receipts at any time by giving notice to the Trustee and the
Depositor and discharging its responsibilities with respect thereto. In
addition, the Depositor may cause the removal of DTC (or a successor or
substitute depository) if the Depositor determines such removal is in the best
interest of the Holders or is in the best interests of the Depositor as long as
the removal will not adversely affect the Holders. If DTC (or a successor or
substitute depository) is removed and the Depositor, after a good faith effort,
is unable to procure the services of a successor depository, the Trustee will
serve as depository of the Bonds.
-12-
Because DTC can only act on behalf of Participants, who in turn act
on behalf of Indirect Participants and certain banks, the ability of a Holder to
pledge Receipts to persons or entities that do not participate in the DTC
system, or to otherwise act with respect to such Receipts, may be limited due to
the lack of a physical certificate for such Receipts.
DTC has advised the Depositor that it will take any action permitted
to be taken by a Receiptholder under the related Trust Agreement only at the
direction of one or more Participants to whose accounts with DTC the Receipts
are credited. DTC may take conflicting actions with respect to other fractional
interests to the extent that such actions are taken on behalf of Participants
whose holdings include such fractional interest.
Except as required by law, the Trustee will not have any liability
for any aspect of the records relating to or payments made on account of
beneficial ownership interest of the Receipts of any series held by Cede, as
nominee for DTC, or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
CERTIFICATED RECEIPTS
Receipts will initially be issued in book-entry form. Receipts will
be issued in fully registered, certificated form ("Certificated Receipts") to
Receiptholders or respective nominees, rather than to DTC or its nominee, only
if (i) the Depositor advises the Trustee in writing that DTC is no longer
willing or able to discharge properly its responsibilities as depository with
respect to such Receipts and the Depositor is unable to locate a qualified
successor, or (ii) the Depositor, at its option, elects to terminate the
book-entry system through DTC.
Upon the occurrence of any event described in the immediately
preceding paragraph, the Trustee will execute, register the transfer of and
exchange Certificated Receipts as requested by DTC or any other Holders of such
Receipts in appropriate amounts and in accordance with the Receipt registry of
DTC.
Distributions of principal of, and interest on, the Certificated
Receipts will thereafter be made in accordance with the procedures set forth in
the related Trust Agreement directly to holders of Certificated Receipts in
whose names the Certificated Receipts were registered at the close of business
on the day before the related Payment Date. Such distributions will be made by
check mailed to the address of such holder as it appears on the register
maintained by the Trustee. The final payment on any Certificated Receipt,
however, will be made only upon presentation and surrender of such Certificated
Receipt at the office or agency specified in the notice of final distribution to
the holders of such class.
REPORTS TO RECEIPTHOLDERS
Quarterly and annual unaudited reports containing information
concerning the related Bonds, including an annual independent accountant's
statement of review regarding the payment of all income on the Bonds to the
Receiptholders, will be prepared by the Depositor and sent on behalf of each
Trust only to Cede as nominee of DTC and registered holder of the Receipts. Such
reports will not constitute financial statements prepared in accordance with
generally accepted accounting principles. Each Trust will file with the
Commission such other reports as may be required under the Exchange Act, and the
rules and regulations of the Commission thereunder.
In addition to the foregoing, within the prescribed period of time
for tax reporting purposes after the end of each calendar year during the term
of each Trust, the Trustee will mail to each person who at any time during such
calendar year has been a Receiptholder with respect to such Trust and received
any payment thereon a statement containing certain information for the purposes
of such Receiptholder's preparation of federal income tax returns. See "FEDERAL
INCOME TAX CONSEQUENCES - Additional Tax Considerations; Tax Information
Reporting."
In addition to the foregoing, the Trustee shall transmit to the
Holders of the Receipts any communications received by the Trustee from the
issuer of the related Bonds. To the extent that the issuer of the Bonds fails to
reimburse the Trustee for its reasonable expenses in connection with the
transmission of communications to the Holders of the Receipts, the Depositor
shall pay such expenses.
-13-
THE TRUST AGREEMENT
Pursuant to the Trust Agreement, the Bonds underlying any series of
Receipts will be held for the Holders of that series of Receipts by the Trustee
in physical certificate form or as book-entry credits to an account of the
Trustee at DTC. Under the DTC Book Entry Only System, DTC will be the sole
registered holder of the Receipts. For each series of Receipts, the Trustee will
establish a separate trust account of the Bonds relating to such Receipts and
two subaccounts within such separate account, the first for interest payments
underlying Coupon Receipts and the second for principal payments underlying
Principal Receipts or principal payments and interest payments underlying
Callable Principal Receipts. Unless otherwise set forth in the related
Prospectus Supplement, it is the intent of the Depositor that all of the Bonds
will be held by the Trustee by book-entry credit to its account at DTC. If, for
any reason, the Bonds may no longer be held by book-entry credit at DTC, the
Bonds will thereafter be held by the Trustee in a separate trust account.
The Depositor shall also in connection with the Series Trust
Agreement enter into a separate agreement with the Trustee providing for the
payment of the charges and expenses of the Trustee in respect of the related
Receipts. In no event shall the assets of the Trust be used to pay such fees.
Prior to a payment default by the Obligor, the only responsibility
of the Trustee with respect to payments on Receipts will be to apply all
payments received in respect of the Bonds to the registered holders of the
related Receipts without making any deductions other than for any taxes and
governmental charges.
Trust accounts established for Receipts will be special accounts
separate from the general assets of the Trustee and the interest payments and
principal payments therein will not be subject to any right, charge, security
interest, lien or claim of any kind in favor of the Trustee or any person
claiming through it. The Trustee will not have the power or authority to assign,
transfer, pledge or otherwise dispose of any of the assets of the trust accounts
to any person except as otherwise permitted by the Trust Agreement.
The Trust Agreement provides that the Trustee shall keep at its
designated office in New York, New York a register (the "Receipt Register") in
which, subject to such reasonable regulations as it may prescribe, the Trustee
shall provide for the registration of, and for the registration of transfers or
exchanges of, Receipts, which will be accomplished as described herein under
"Certain Information Regarding the Receipts -- Book-Entry Registration."
The Trust Agreement provides that, in the event of any action
requiring a vote of the registered holders of any Bonds, the Trustee (as the
owner of record of the Bonds), upon receipt of the Bond proxy, will notify DTC
(in its capacity as the owner of record of the Principal Receipts or Callable
Principal Receipts) of such action. Pursuant to currently existing procedures,
it is expected that DTC, in turn, will notify its Participants who, in turn,
will notify the beneficial owners of Principal Receipts or Callable Principal
Receipts of such event. Thereafter, except when the approval of the beneficial
owners of the Coupon Receipts is also required as described below, the Trustee
shall vote solely in accordance with the instructions received from DTC (or
pursuant to the applicable procedures of DTC) and shall apportion its voting
power on the basis of the face amount of such Principal Receipts or Callable
Principal Receipts. For any Receipts which are not then held by DTC or any other
depository, the Trustee, upon receipt of the Bond proxy, will notify the
registered holders directly of such action and shall vote in the same manner as
noted above. In no event shall the Depositor be allowed or entitled (other than
in its capacity as a safekeeper for a registered holder) to vote, directly or
indirectly any Receipts.
By their affirmative vote, the Holders of more than 50% in principal
amount of Receipts of any series may direct the Trustee to take or omit to take
any action required or permitted under the Trust Agreement or the Trust
Indenture Act of 1939, as amended; provided, however, that the Trustee shall not
vote in favor of any proposal with regard to the Bonds which would have the
effect of permitting a redemption or prepayment of the Bonds unless the Holders
of 100% of the Receipts then outstanding of the applicable series (including all
Coupon Receipts, Principal Receipts or Callable Principal Receipts, as the case
may be) vote in favor of such action.
-14-
The Trustee will maintain a fidelity bond for the protection of
registered Receiptholders in customary amounts against losses due to dishonest
or fraudulent action by its employees in connection with its obligations under
the Trust Agreement.
The Trust Agreement provides that neither the Trustee nor the
Depositor shall be subject to any liabilities to registered Receiptholders other
than by reason of willful misconduct, bad faith or negligence in the performance
of duties set forth in the Trust Agreement and that neither of them shall be
liable to such registered holders if any law, government regulation or other
circumstance prevents or delays performance of duties set forth in the Trust
Agreement.
DTC will not be deemed an agent of the Trustee. The Trustee may own
and deal in bonds of the same issue and maturity as the Bonds and in Receipts.
The Trustee and the Depositor may amend the Trust Agreement,
provided that no amendment may be made which defers or alters the maturity of a
Receipt or in any manner adversely affects the rights of a Holder of a Receipt
to the interest or principal payments evidenced thereby or otherwise materially
prejudices any substantial existing right of a Holder.
No amendment to the Trust Agreement shall be effective unless the
Depositor shall have provided the nationally recognized statistical rating
agency which has rated the Receipts of each Trust to be effected by such
amendment with ten days prior written notice of such proposed amendment, and
shall have received a written confirmation from such nationally recognized
statistical rating agency that such amendment will not cause the nationally
recognized statistical rating agency to downgrade its rating of the subject
Receipts.
The Trustee shall be entitled to receive, and shall be fully
protected in relying upon, an opinion of counsel stating that the execution of
any amendment, supplement or waiver is authorized and permitted by the Trust
Agreement. Such opinion shall not be an expense of the Trustee.
The Trustee may at any time resign as Trustee by written notice to
the Depositor, such resignation to take effect upon the appointment of a
successor Trustee, subject to the terms and conditions of the Trust Agreement. A
successor Trustee shall be a bank with trust powers or trust company having its
principal office in the United States of America, having a combined capital and
surplus of at least $50,000,000, and having a rating of Baa or better assigned
by at least one nationally recognized statistical rating agency, as that term is
defined under Securities and Exchange Commission Rule 15C3-1(c)(2)(vi)(F).
The Depositor may at any time remove the Trustee as Trustee under
the Trust Agreement by written notice of its election to do so, delivered to the
Trustee, and such removal shall take effect upon the appointment of a successor
Trustee and its acceptance of such appointment, subject to the terms and
conditions of the Trust Agreement.
In the event that the Trustee becomes incapable of action, is
adjudged to be bankrupt or insolvent, or a receiver of the Trustee or of its
property is appointed, or any public officer takes charge or control of the
Trustee or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation, then the Trustee may be removed by court action
instituted by any registered holder of a Receipt who has been a registered
holder for six months or by registered holders of 10% of the face amount of
Receipts of a series which is outstanding at such time.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material federal income tax
consequences that may result from the purchase, ownership and disposition of
Receipts. This summary is based on the Internal Revenue Code of 1986, as amended
(the "Code"), as well as final, temporary and proposed Treasury regulations and
-15-
administrative and judicial decisions in effect as of the date hereof.
Legislative, judicial and administrative changes may occur, possibly with
retroactive effect, affecting the accuracy of the statements set forth herein.
In particular, purchasers of the Receipts should be aware that changes in, or
clarifications of, the tax law applicable to Receipts, including the regulations
that address the federal income tax consequences relating to obligations issued
with original discount (the "OID Regulations") and adoption of regulations under
section 1286 of the Code, may occur after issuance of Receipts and may be
applied retroactively to owners of Receipts. Additional United States federal
income tax considerations applicable to particular series and/or classes of
Receipts may be set forth in the applicable Prospectus Supplement.
This summary does not purport to address all federal income tax
matters that may be relevant to purchasers of Receipts or to address the tax
consequences of a purchase of Receipts by any particular investor. For example,
it deals only with Receipts held as capital assets within the meaning of Section
1221 of the Code. It does not address tax consequences that may be relevant to
particular holders subject to special treatment under federal income tax law
(e.g., banks and other financial institutions, life insurance companies, dealers
in securities or currencies, tax-exempt entities, taxpayers holding Receipts as
a hedge, or whose "functional currency" is not the United States dollar). Except
as indicated, this summary is directed to prospective purchasers in the initial
offering described herein, and not to subsequent purchasers of Receipts.
Consequently, purchasers of Receipts (in particular dealers in securities and
purchasers of the Callable Principal Receipts) should consult their own tax
advisors concerning the tax consequences to them under federal income tax law,
as well as the tax law of any state, local or foreign jurisdiction, of the
purchase, ownership and disposition of Receipts.
Upon the issuance of each series of Receipts, McCarter & English,
LLP will render an opinion to the effect that, for federal income tax purposes:
(1) the Trust will be a grantor trust and not a partnership or an association
taxable as a corporation; (2) each Receipt will be considered a "stripped bond"
or a "stripped coupon," as appropriate, under section 1286 of the Code, for
purposes of applying the original issue discount rules of the Code to a
purchaser; (3) a Receipt purchased in an original sale or subsequent purchase
will be treated, for purposes of applying the original issue discount rules of
the Code to such purchaser, as if the Receipt held by such purchaser was issued
on the purchase date with original issue discount; (4) the original issue
discount with respect to a Receipt, other than certain Callable Principal
Receipts, will equal the excess of the amount payable at maturity of the Receipt
over the purchase price of such Receipt; (5) each of the Callable Principal
Receipts should be treated under Section 1286 of the Code as a single stripped
bond for purposes of calculating original issue discount and gain or loss on
disposition; (6) in the case of a Callable Principal Receipt with respect to
which the related Bond is required to be redeemed prior to its stated maturity
date, original issue discount and yield to maturity will likely be required to
be calculated by taking into account events that have occurred prior to the
purchase date of such Callable Principal Receipt and therefore, as if the date
on which the redemption is to take place and the redemption price were the
maturity date and amount payable at maturity, respectively; (7) in the case of a
Callable Principal Receipt not required to be redeemed prior to its stated
maturity date, the final regulations under sections 1272 through 1275 of the
Code provide that, if based on all the facts and circumstances as of the issue
date it is more likely than not that a debt instrument's stated payment schedule
will not occur, then the yield and maturity of the debt instrument are computed
based on the payment schedule most likely to occur. The Depositor will undertake
to file a copy of this opinion with the Commission as an exhibit to Form 8-K
prior to the deposit of Bonds by the Depositor with the Trustee and the issuance
of Receipts with respect to any Series.
CLASSIFICATION OF THE TRUST
In the opinion of McCarter & English, LLP the Trust will be
classified as a grantor trust under subpart E, Part I of subchapter J of the
Code and not as a partnership or an association taxable as a corporation. As a
grantor trust, the Trust will not be not subject to federal income tax, although
Receiptholders will be subject to the tax treatment discussed below.
-16-
FEDERAL TAX TREATMENT OF STRIPPED BONDS AND STRIPPED COUPONS
Under section 1286 of the Code, the separation of ownership of the
right to receive some or all of the principal payments on a bond from the
ownership of the right to receive some or all of the interest payments on that
bond which have not become payable results in the creation of "stripped bonds"
with respect to the principal payments and "stripped coupons" with respect to
the interest payments. Receipts will be considered "stripped bonds" or "stripped
coupons," as appropriate, and a Receipt (whether purchased by a purchaser in an
original sale or in a subsequent transaction) will be treated, under section
1286 of the Code, solely for purposes of applying the original issue discount
rules of the Code to such purchaser, as if the Receipt held by such purchaser
was issued on the purchase date with original issue discount ("OID"). Purchasers
of the Receipts will be required to include the accrued portion of the OID (as
described below) in gross income for the taxable year even though the
corresponding payment may not be received during the taxable year.
PRINCIPAL RECEIPTS AND COUPON RECEIPTS
--------------------------------------
In the opinion of McCarter & English, LLP the Coupon Receipts will
be treated as "stripped coupons" and Principal Receipts will be treated as
"stripped bonds," within the meaning of section 1286 of the Code. The total
amount of OID with respect to a Principal Receipt or Coupon Receipt will equal
the excess of the amount payable at maturity of the particular Principal Receipt
or Coupon Receipt over the purchase price of the respective Receipt.
CALLABLE PRINCIPAL RECEIPTS
---------------------------
It is believed by the Depositor that purchasers of the Callable
Principal Receipts will be treated, for purposes of calculating original issue
discount and gain or loss on disposition, as having purchased a single "stripped
bond" (rather than multiple debt components representing separate rights to
receive principal and to receive interest on each interest payment date
subsequent to the first optional call date thereof, for which tax basis must be
separately allocated and original issue discount separately calculated). In the
event that the scheduled maturity date of a particular Callable Principal
Receipt is properly treated as the maturity date of such Receipt for purposes of
the original issue discount rules, it is believed by the Depositor that such
Callable Principal Receipt will be regarded as evidencing a single "installment
obligation", within the meaning of the regulations promulgated by the U.S.
Treasury with respect to original issue discount. This treatment is based on an
interpretation of the interrelationship between section 1286 of the Code and
certain Treasury regulations promulgated under sections 1272, 1273, and 1275 of
the Code, and there can be no assurance that the Internal Revenue Service would
agree with such interpretation. Certain of the Bonds related to Callable
Principal Receipts may be required to be redeemed prior to their stated maturity
date at a price equal to their principal amount plus, in some cases, a fixed
call premium. Under section 1286 the U.S. Treasury is given specific authority
to adopt regulations modifying treatment under such section where necessary to
accurately reflect the income of the holder of a stripped right by reason of
applicable call options or other circumstances. Because section 1286 of the Code
treats a "stripped bond" as being issued on the date of purchase for purposes of
applying the original issue discount rules of the Code, the original issue
discount and yield to maturity of the Principal Receipts will likely be required
by the Internal Revenue Service to be calculated by taking into account events
that have occurred prior to such purchase date and therefore as if the date on
which the redemption is to take place and the redemption price were the maturity
date and amount payable at maturity, respectively, of such Callable Principal
Receipts. Under regulations promulgated pursuant to sections 1271 through 1275
of the Code, if based on all the facts and circumstances as of the issue date it
is more likely than not that a debt instrument's stated payment schedule will
not occur, then the yield and maturity of the debt instrument are computed based
on the payment schedule most likely to occur. It is otherwise uncertain whether
the scheduled maturity date of a particular Callable Principal Receipt will be
viewed as the maturity date of such Callable Principal Receipt for purposes of
the original issue discount rules (e.g., determination of yield to maturity and
amount payable at maturity), particularly where on the date of purchase of such
Callable Principal Receipt objective market factors suggest that in the absence
of any market change, it can be expected to be in the economic interest of the
issuer of the related Bond to call such Bond on a date prior to scheduled
maturity. As described above, the OID Regulations provide that if, based on all
the facts and
-17-
circumstances as of the issue date, it is more likely than not that a debt
instrument's stated payment schedule will not occur, then the yield and maturity
of the debt instrument are computed based on the payment schedule most likely to
occur. It is likely that future Treasury regulations promulgated pursuant to a
specific grant of regulatory authority under section 1286 of the Code with
respect to stripped rights with call options will address this question.
ACCRUAL OF ORIGINAL ISSUE DISCOUNT
----------------------------------
In general, OID on a Receipt accrues on a daily basis, based on the
constant yield to maturity of the Receipt over the term of the Receipt and is to
be allocated ratably to each day in an accrual period. The constant yield to
maturity means that interest rate which when used in computing the present value
of all of the principal and coupon payments to be made on the Receipts produces
an amount equal to the purchase price of such Receipts, calculated based on
compounding at the end of each accrual period.
In the case of any Receipt that matures more than one year after its
date of purchase, the OID will be allocated to accrual periods which may be of
any length and may vary over the term of the Receipt, provided that no period is
longer than one year and the principal payment and each coupon payment with
respect to the Receipt occurs on the first or last day of an accrual period. The
portion of the OID that is allocated to an accrual period will equal the product
of (i) the purchase price of such Receipts increased by the portion of the OID
allocated to prior accrual periods during which the purchaser held such Receipts
(and, in the case of a Callable Principal Receipts, if properly treated as an
installment obligation maturing on the scheduled maturity date, reduced by any
payments on such Receipts received in prior accrual periods during which the
purchaser held such Receipts), and (ii) the yield to maturity of the Receipts
appropriately taking into account the length of the accrual period. The
resulting portion of OID allocated to an accrual period will be divided by the
number of days in the accrual period to determine the daily portions of OID for
that accrual period.
In the case of a Receipt maturing within one year of the date on
which it is purchased, OID accrues on a straight-line basis and is apportioned
equally to each of the days subsequent to the date of purchase of such Receipt
through the date of maturity, provided that, at the owner's election, OID may be
accrued under a constant yield method based on the yield to maturity calculated
as described above but with daily compounding (rather than compounding at the
end of each accrual period).
GAIN OR LOSS
A purchaser's tax basis in a Receipt will equal the purchase price
for such Receipt increased by the portion of the original issue discount accrued
on such Receipt during the period such purchaser owns the Receipt and, in the
case of a Callable Principal Receipt, if properly treated as an installment
obligation maturing on the scheduled maturity date, reduced by any payments
actually received prior to maturity. Gain or loss on sale or at maturity of a
Receipt will be equal to the difference between the amount realized in such sale
or at maturity and the owner's tax basis at the time of sale or at maturity and
will be taxable capital gain or loss.
ADDITIONAL TAX CONSIDERATIONS
BACKUP WITHHOLDING
------------------
Payments of interest (including OID) and principal, as well as
proceeds from the disposition or retirement of Receipts, may be subject to a
"backup" withholding tax of 31 percent if a recipient fails to furnish to the
payor (in the case of Receipts, the Trustee) certain identifying information.
Certain penalties also may be imposed by the IRS on a recipient of payments who
is required to supply information, but fails to do so in the proper manner.
Backup withholding will not apply with respect to payments made to
certain exempt recipients, such as corporations and financial institutions.
Holders should consult their own tax advisers with respect to qualification for
-18-
exemption from backup withholding and the procedure for obtaining such an
exemption. Any amounts deducted and withheld would be allowed as a credit
against such recipient's federal income tax.
TAX INFORMATION REPORTING
-------------------------
Within a reasonable time after the end of each calendar year, the
Trustee will furnish each Receiptholder (DTC or other holders of Certificated
Receipts) such customary information as the Trustee deems necessary or desirable
to enable Receiptholders to prepare their tax returns. The Trustee will furnish
comparable information to the IRS as and when required by law to do so. Because
the rules for accruing discount and amortizing premium with respect to Receipts
are uncertain in various respects, there is no assurance that the IRS will agree
with the information reports. Moreover, even if otherwise accepted as accurate
by the IRS, such information reports will be based on the original issue price
of the Receipt and will, therefore, in the case of Receiptholders who purchased
their Receipt after their initial issuance or at a price different from the
original issue price, require adjustments to account for such Receiptholders'
holding periods and purchase prices. Receiptholders who hold their Receipt
through DTC participants should consult the party from whom they receive tax
reports concerning the Receipts to determine whether such reports reflect such
adjustments. Receiptholders who hold Certificated Receipts should consult their
tax advisors concerning the method for making any such required adjustments.
NON-UNITED STATES HOLDERS
-------------------------
A Non-United States Holder is a beneficial owner of a Receipt other
than a United States citizen or resident, a domestic partnership or corporation,
or a trust subject to U.S. income tax on income regardless of its source. Under
present federal income and estate tax law:
(a) No withholding of federal income tax will be required
with respect to the payment of interest or OID
attributable to a Receipt owned by a Non-United States
Holder, provided that such Holder (i) does not actually
or constructively own 10 percent or more of any issuer
of Bonds, and (ii) in accordance with specified
procedures, supplies the person otherwise required to
withhold with a certification to the effect that the
beneficial owner is not a United States person, citizen
or resident. In certain circumstances, the requisite
certification may be provided by or through a bank or
other financial institution.
(b) If certain conditions are met, a nonresident alien
individual will not be subject to Federal income tax
with respect to certain gains realized on the sale,
exchange, or retirement of a Receipt.
(c) A Receipt beneficially owned by an individual who at the
time of such individual's death is a Non-United States
Holder will not be subject to federal estate tax as a
result of such individual's death, provided that the
payments with respect to such Receipt are not
effectively connected with a United States trade or
business of such individual and the Receipts constitute
portfolio debt obligations, interest on which is exempt
from withholding under the Code.
Notwithstanding the foregoing, Non-United States Holders may be
subject to income tax withholding and estate taxation with respect to any Bonds
that were issued before July 18, 1984. Further, a Non-United States Holder
engaged in a trade or business within the United States whose income from a
Receipt is effectively connected with that trade or business generally will be
subject to regular United States federal income tax on such income and gain as
if it were a United States Holder. In addition, if a Non-United States Holder is
a foreign corporation, it may be subject to a branch profits tax equal to 30
percent of its effectively connected earnings and profits for the taxable year,
subject to adjustments.
Backup withholding will not apply to payments to a Non-United States
Holder on a Receipt if the holder has certified as to its foreign status under
penalty of perjury (or has otherwise established an exemption) and certain other
-19-
requirements are met, provided that the payor does not know that the payee is a
United States person. Payments on the sale, exchange or other disposition of a
Receipt to or through a foreign office of a broker will not be subject to backup
withholding provided certain requirements are met; payments to or through the
United States office of a broker will be subject to backup withholding unless
the Non-United States Holder makes the certification or otherwise establishes an
exemption under the conditions previously described.
NON-UNITED STATES HOLDERS ARE URGED TO CONSULT THEIR OWN TAX
ADVISORS REGARDING THE APPLICATION OF UNITED STATES FEDERAL INCOME TAX LAW TO
THEIR PARTICULAR SITUATIONS.
STATE AND OTHER TAX CONSIDERATIONS
In addition to the federal income tax consequences described above,
potential investors should consider the state, local and foreign tax
consequences of the acquisition, ownership and disposition of Receipts. State,
local and foreign tax law may differ substantially from federal tax law, and
this discussion does not purport to describe any aspect of the tax law of a
state or other jurisdiction. Therefore, prospective purchasers should consult
their own tax advisors with respect to such matters.
ERISA CONSIDERATIONS
Section 406 of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), and section 4975 of the Code, prohibit "plan assets" of a
pension, profit sharing and other employee benefit plans, as well as individual
retirement accounts and Keogh plans (each a "Plan"), from engaging in certain
transactions involving "plan assets" with persons that are "parties in interest"
under ERISA or "disqualified person" under the Code with respect to the Plan. A
violation of these "prohibited transaction" rules may result in an excise tax
and other liabilities under ERISA and Section 4975 of the Code for such persons,
unless a statutory, regulatory or administrative exemption is available.
A violation of the prohibited transaction rules could occur if
Receipts of any series were purchased with assets of a Plan, and if the
Depositor, the Trustee, or any of their affiliates were a "party in interest" or
a "disqualified person" with respect to such Plan, unless a statutory,
regulatory or administrative exemption is available or an exception applies
under a regulation (the "Plan Asset Regulation") issued by the Department of
Labor (the "DOL"). The Depositor, the Trustee, or their affiliates may be
"parties in interest" and "disqualified persons" with respect to certain Plans;
in particular, it is likely that the Trustee will be treated as a "party in
interest" and "disqualified person" with many Plans. Before purchasing Receipts
of any particular series, a Plan fiduciary (as defined in ERISA section 3(21)
and the regulations issued thereunder) or other Plan investor should consider
whether a prohibited transaction might arise by reason of the relationship
between the Plan and the Depositor, the relevant Trustee or any of their
affiliates, and should consult its counsel regarding the purchase in light of
the considerations described below.
The DOL has issued three class exemptions that may apply to
otherwise prohibited transactions arising from the purchase or holding of the
Receipts: DOL Prohibited Transaction Exemption 91-38 (Class Exemption for
Certain Transactions Involving Bank Collective Investment Funds), 90-1 (Class
Exemption for Certain Transactions Involving Insurance Company Pooled Separate
Accounts), and 84-14 (Class Exemption for Plan Asset Transactions Determined by
Independent Qualified Professional Asset Managers).
Under certain circumstances, the Plan Asset Regulation treats the
underlying assets of an entity in which a Plan holds an equity interest as "plan
assets" of such Plan. Because the Receipts will represent beneficial interests
in a Trust, the Receipts will be considered equity interests for purposes of the
Plan Asset Regulation, with the result that the assets of the Trust will be
treated as "plan assets" of the investing Plans for purposes of ERISA and
section 4975 of the Code, unless either of the following exceptions applies.
-20-
The first exception applies to a "publicly offered security." A
publicly-offered security is a security that is (a) freely transferable, (b)
part of a class of securities that is owned, immediately subsequent to the
initial offering, by 100 or more investors who are independent of the issuer and
of one another ("Independent Investors"), and (c) either is (i) part of a class
of securities registered under section 12(b) or 12(g) of the Exchange Act, or
(ii) sold to a Plan as part of an offering of securities to the public pursuant
to an effective registration statement under the Act and the class of securities
of which such security is a part is registered under the Exchange Act within 120
days (or such later time as may be allowed by the Commission) after the end of
the fiscal year of the issuer during which the offering of such securities to
the public occurred. For purposes of the 100 Independent Investor criterion,
each class of Receipts should be deemed to be a "class" of securities that would
be tested separately from any other securities that may be issued by the Trust.
It is anticipated that each class of Receipts will meet the foregoing criteria
for treatment as "publicly-offered securities," although no assurance can be
given that each class of each Series will meet this criteria.
The second exception applies if equity participation in the entity
by "benefit plan investors" (i.e., Plans and other employee benefit plans not
subject to ERISA, such as governmental or foreign plans, as well as entities
holding assets deemed to be "plan assets") is not "significant." Benefit plan
investors' equity participation in an entity is not significant on any date on
which an equity interest in the entity is issued and outstanding if, immediately
after the most recent acquisition or any equity interest in the entity, less
than 25% of the value of each class of equity interests in the entity (excluding
interests held by any person who has discretionary authority or control with
respect to such assets of the entity, received direct or indirect compensation
for providing investment advice with respect to such assets, or is an affiliate
of such person) is held by benefit plan investors. No assurance can be given by
the Depositor as to whether or not the value of each class of Receipts in any
Trust held by benefit plan investors will be "significant" upon completion of
the offering of any series of Receipts or thereafter, and no monitoring or other
measures will be taken with respect to the satisfaction of the conditions to
this exception.
If neither of the foregoing exceptions under the Plan Asset
Regulation were satisfied with respect to a Trust and the Trust were considered
to hold "plan assets," transactions involving the Trust and "parties in
interest" or "disqualified persons" with respect to Receipts held by the Plan
might be prohibited under section 406 of ERISA and/or section 4975 of the Code,
and might result in excise tax and other liabilities under ERISA or Section 4975
of the Code unless an exemption were available. The three DOL class exemptions
mentioned above may not provide relief for all transactions involving the assets
of a Trust, even if they would otherwise apply to the purchase of a Receipt by a
Plan.
Receipts of any series may not be purchased with the assets of a
Plan if the Depositor, the Trustee, or any of their affiliates is deemed a Plan
fiduciary under the definition set forth above and, among other things, (a) has
investment or administrative discretion with respect to such Plan assets; (b)
has authority or responsibility to give, or regularly gives, investment advice
with respect to such Plan assets, for a fee and pursuant to an agreement or
understanding that such advice (i) will serve as a primary basis for investment
decisions with respect to such Plan assets, and (ii) will be based on the
particular investment needs of such Plan; or (c) is an employer maintaining or
contributing to such Plan.
In light of the foregoing, fiduciaries and other investors
considering the purchase of Receipts with "plan assets" (as defined in ERISA and
the regulations thereunder) of any Plan should consult their tax and/or legal
counsel regarding whether the assets of the Trust would be considered "plan
assets" of the Plan of such investors and fiduciaries, and the availability of
an exemption from the prohibited transaction rules.
PLAN OF DISTRIBUTION
The Receipts offered hereby and by the related Prospectus Supplement
will be offered in series through one or more of the methods described below.
The Prospectus Supplement prepared for each series will describe the method
-21-
of offering being utilized for that series. The Receipts will be transferred to
Rickel Securities, Inc. in exchange for the Bonds, and there will be no cash
proceeds received by the Depositor from the sale of the Receipts.
Any Receipts acquired by Rickel Securities, Inc. in exchange for
Bonds as described above will be acquired by Rickel Securities, Inc. for its own
account and may be resold from time to time in one or more transactions,
including negotiated transactions at fixed public offering prices or a varying
prices to be determined at the time of sale or at the time of commitment
therefor. If any underwriters other than Rickel Securities, Inc. participate as
co-managers in the distribution of the Receipts of a particular series, their
names and Rickel Securities, Inc.'s will be set forth on the cover of the
Prospectus Supplement relating to such series and the members of the
underwriting syndicate, if any, will be named in such Prospectus Supplement.
In connection with any sale of the Receipts in which Rickel
Securities, Inc. is not the sole underwriter, the other underwriters may receive
compensation from Rickel Securities, Inc. or from purchasers of the Receipts in
the form of discounts, concessions or commissions. Underwriters and dealers
participating in the distribution of the Receipts may be deemed to be
underwriters in connection with such Receipts, and any discounts or commissions
received by them from Rickel Securities, Inc. and any profit on the resale of
Receipts by them may be deemed to be underwriting discounts and commissions
under the Securities Act.
It is anticipated that the underwriting agreement pertaining to the
sale of any series of Receipts in which Rickel Securities, Inc. is not the sole
underwriter will provide that the obligations of the underwriters will be
subject to certain conditions precedent, that the underwriters will be obligated
to purchase all such Receipts if any are purchased (other than in connection
with an underwriting on a best efforts basis), and that the Depositor will
indemnify the several underwriters and the underwriters will indemnify the
Depositor against certain civil liabilities, including liabilities under the
Securities Act, or will contribute to payments required to be made in respect
thereof.
LEGAL OPINIONS
Certain legal and federal income tax matters relating to the
Receipts will be passed upon for the Depositor and Rickel Securities, Inc. by
McCarter & English, LLP, counsel to the Depositor and Rickel Securities, Inc.
INDEX OF TERMS
Set forth below is a list of the defined terms used in this
Prospectus and the pages on which the definitions of such terms may be found
herein.
TERMS PAGE
- ----- ----
Accreted Value ............................................................ 11
Bonds ..................................................................... 1
Cede ...................................................................... 3
Certificated Receipts ..................................................... 13
Code ...................................................................... 4
Commission ................................................................ 3
Depositor ................................................................. 1
DOL ....................................................................... 20
DTC ....................................................................... 1
DTC Book Entry Only System ................................................ 12
ERISA ..................................................................... 5
-22-
Exchange Act .............................................................. 3
Holders ................................................................... 3
Independent Investors ..................................................... 21
Indirect Participants ..................................................... 12
Issuance Date ............................................................. 4
Obligor ................................................................... 6
OID ....................................................................... 17
OID Regulations ........................................................... 16
Plan ...................................................................... 20
Plan Asset Regulation ..................................................... 20
Prospectus Supplement ..................................................... 1
Receiptholders ............................................................ 3
Receipt Register .......................................................... 14
Receipts .................................................................. 1
Registration Statement .................................................... 3
Rules ..................................................................... 12
Securities Act ............................................................ 3
Trust ..................................................................... 1
Trust Agreement ........................................................... 1
Trustee ................................................................... 1
-23-
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses to be incurred
in connection with the offering of the Receipts, other than underwriting
discounts and commissions, described in this Registration Statement:
Securities & Exchange Commission Registration Fee............$18,182
Printing.......................................................5,000
Legal Fees and Expenses.......................................75,000
Blue Sky Filing and Counsel Fees...............................4,500
Accountants' Fees..............................................5,000
Trustee Fees and Expenses.....................................10,000
Rating Agencies' Fees.........................................10,000
Miscellaneous.................................................18,104
-------
Total.......................................................$145,786
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
American Corporate Receipts, Inc. is incorporated under the laws of
New Jersey. Section 14A:3-5 of the New Jersey General Corporation Business Act
provides that a New Jersey corporation may indemnify any persons, including
officers and directors, who are, or are threatened to be made, parties 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 such corporation, by reason of the fact that such person was an
officer, director, employee or agent of such corporation, or is or was serving
at the request of such corporation as a director, officer, employee or agent of
another corporation or enterprise). The indemnity may include expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such action,
suit or proceeding, provided such person acted in good faith and in a manner he
reasonably believed to be in or not opposed to the corporation's best interests
and, for criminal proceedings, had no reasonable cause to believe that his
conduct was illegal. A New Jersey corporation may indemnify officers and
directors in an action by or in the right of the corporation under the same
conditions, except that no indemnification is permitted without judicial
approval if the officer or director is adjudged to be liable to the corporation.
Where an officer or director is successful on the merits or otherwise in the
defense of any action referred to above, the corporation must indemnify him
against the expenses which such officer or director actually and reasonably
incurred.
American Corporate Receipts, Inc.'s Certificate of Incorporation
provides, in effect, that, subject to certain limited exceptions, such
corporation will indemnify its officers and directors to the extent permitted by
New Jersey law.
ITEM 16. EXHIBITS.
Exhibits
1.1 -- Form of Underwriting Agreement.*
3.1 -- Certificate of Incorporation of the Depositor
(as amended by Certificate of Amendment).**
3.2 -- By-laws of the Depositor.*
4.1 -- Form of Master Trust Agreement and Standard Terms
and Provisions **
-24-
5.1 -- Opinion of McCarter & English, LLP with respect
to legality.**
8.1 -- Opinion of McCarter & English, LLP with respect to
federal tax matters.**
24.1 -- Consent of McCarter & English, LLP
(included as part of Exhibits 5.1 and 8.1).
25.1 -- Power of Attorney.*
99.1 -- Form of Prospectus Supplement**
- -------------------
* Previously filed.
** Amended form of document previously filed.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(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;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the 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.
(4) To file an application for the purpose of determining the
eligibility of the Trustee to act under subsection (a) of
Section 310 of the Trust Indenture Act of 1939 in accordance
with the rules and regulations prescribed by the Commission
under Section 305(b)(2) of the Trust Indenture Act of 1939.
(5) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon
Rules 430A and contained in a form of prospectus filed by the
registrant pursuant to Rules 424(b)(1) or (4) or 497(h) under
the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(6) For purposes of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
-25-
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors and officers of the
Depositor pursuant to the provisions discussed in Item 14 above, or otherwise,
the Depositor has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 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 or officer of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director or officer 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 Securities Act of 1933 and will be governed by the
final adjudication of such issue.
-26-
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, that it reasonably believes that the
securities to be offered for sale pursuant to this Registration Statement will
meet the security rating requirements for registration pursuant to Form S-3 at
the time of their sale, and has duly caused this Pre-Effective Amendment No. 1
to the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the Township of Millburn, State of New Jersey, on
the 29th day of December, 1997.
AMERICAN CORPORATE RECEIPTS, INC.
/S/ JOHN C. SABO
-------------------
John C. Sabo
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below on December 29, 1997 by the
following persons in the capacities indicated.
SIGNATURE TITLE
--------- -----
/S/ JOHN C. SABO President and Sole Director
- ----------------
John C. Sabo (Principal Executive Officer)
/S/ SUSAN P. BOWEN Senior Vice President
- ------------------
Susan P. Bowen (Chief Financial Officer)
-27-
EXHIBIT INDEX
1.1 - Form of Underwriting Agreement*
3.1 - Certificate of Incorporation of the Depositor
(as amended by Certificate of Amendment)**
3.2 - By-laws of the Depositor*
4.1 - Form of Master Trust Agreement and Standard
Terms and Provisions**
5.1 - Opinion of McCarter & English, LLP with respect to legality**
8.1 - Opinion of McCarter & English, LLP with respect to
federal tax matters**
24.1 - Consent of McCarter & English, LLP (included as part
of Exhibits 5.1 and 8.1)
25.1 - Power of Attorney*
99.1 - Form of Prospectus Supplement**
- -------------------
* Previously filed.
** Amended form of document previously filed.
-28-