As filed with the Securities and Exchange Commission on September 5, 2003
Registration No. 333-105055
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 3 TO
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
Bond Products Depositor LLC
(Exact name of registrant as specified in governing instruments)
Delaware
(State or other jurisdiction of incorporation or organization)
54-2104116
(I.R.S. employer identification number)
Bank of America Corporate Center
Charlotte, North Carolina 28255
(Address of principal executive offices)
Paul J. Polking, Esq.
Executive Vice President and General Counsel
Bank of America Corporation
Bank of America Corporate Center
Charlotte, North Carolina 28255
(704) 386-7484
(Name and address of agent for services)
Copy to:
C. Thomas Kunz
Skadden, Arps, Slate,
Meagher & Flom LLP
4 Times Square
New York, NY 10036
Approximate date of commencement of proposed sale to the
public: From time to time on or after the effective date of this Registration
Statement as determined by market conditions.
If the only securities being registered on this Form are being
offered pursuant to dividend or interest reinvestment plans, please check the
following box. |_|
If any of the securities being registered on this Form are to
be offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, as amended (the "Securities Act") other than
securities offered only in connection with dividend or interest reinvestment
plans, please check the following box. |X|
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant
to Rule 434, please check the following box. |_|
CALCULATION OF REGISTRATION FEE
- ------------------------------------------------------------------------------------------------
Proposed
Proposed Maximum
Offering Maximum Amount
Title of Securities Amount to be Offering Price of Offering Registration
Being Registered(1) Registered(2) Per Unit Price(1) Fee(3)
- ---------------------------------------------------------------------------------------------
Trust Certificates $1,000,000 100% $1,000,000 $80.90
- ---------------------------------------------------------------------------------------------
(1) The certificates are also being registered for the purpose of
market-making by Banc of America Securities LLC and its affiliates.
(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 or until the Registration Statement shall
become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
EXPLANATORY NOTE
This registration statement includes a base prospectus with a
corresponding form of prospectus supplement for offering series of
certificates representing, in each case, the entire beneficial ownership
interest in various trusts to be created from time to time, the assets of
which will consist primarily of securities within one of the following
categories: (1) a debt security or asset backed security or a pool of such
debt securities or asset backed securities issued or guaranteed by one or more
corporations, banking organizations, insurance companies or special purpose
vehicles (including trusts, limited liability companies, partnerships or other
special purpose entities); (2) a debt security or a pool of such debt
securities which represent obligations issued by or guaranteed by a foreign
government, political subdivision or agency or instrumentality thereof; (3) an
obligation or obligations of one or more foreign private issuers; or (4) a
debt security or a pool of such debt securities which represent obligations of
the United States of America, any agency thereof for the payment of which the
full faith and credit of the United States of America is pledged, or a United
States government-sponsored organization created pursuant to a federal
statute. All of such securities will either be publicly issued or available
for resale pursuant to an exemption from registration under the Securities
Act. In each case the assets will be deposited in the trust by Bond Products
Depositor LLC.
The information in this prospectus supplement and the
accompanying base prospectus is not complete and may be changed. We may not
sell these securities until this registration statement filed with the
Securities and Exchange Commission is effective. Neither this prospectus
supplement nor the accompanying base prospectus is an offer to sell and
neither document is intended to solicit an offer to buy these securities in
any state where the offer or sale is not permitted.
Subject to Completion Dated __________, 200__
Prospectus Supplement
(To Prospectus Dated _______________, 200_)
$[ ]
Trust Certificates, Series 200[ ] - [ ]
Bond Products Depositor LLC
Depositor
Principal Certificate Price to Underwriting
Balance Rate Public Discount
[Class [ ] $__________ [%][Variable][Auction [100.00%] __%
[Senior] Rate] [Pass-Through
Certificate] Rate][ ]%
[Class [ ] $__________ [%][Variable][Auction [100.00%] __%
[subordinated] Rate] [Pass-Through
Certificate] Rate][ ]%
The trust o is a [Delaware statutory business
trust][Delaware common law trust] formed
pursuant to a trust agreement between Bond
Products Depositor LLC, as depositor, and
[the trustee], as trustee, and
o will issue ____ classes of certificates, all
of which [except the class [ ] certificates]
are offered hereby; the class [ ]
certificates will be subordinated to the
class [ ] certificates with respect to
payments of principal, interest and
premiums.
The certificates o represent undivided beneficial interests in
the assets of the trust, which consist
[primarily] of a [security][pool of
securities] that are described herein [as
well as [describe other trust assets]],
o currently have no trading market, [and]
o are not insured or guaranteed by any
governmental agency.
The certificates represent interests in the trust only and do not
represent an interest in or an obligation of Bond Products Depositor LLC, the
trustee or any of their affiliates.
You should review the information in "Risk Factors" beginning on page
S-[ ] of this prospectus supplement and beginning on page [2] of the
accompanying base prospectus.
For complete information about the offered certificates, read both
this prospectus supplement and the accompanying base prospectus. This
prospectus supplement must be accompanied by the base prospectus if it is
being used to offer and sell the offered certificates.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these certificates or
passed upon the adequacy or accuracy of this prospectus supplement or the
accompanying base prospectus. Any representation to the contrary is a criminal
offense.
[Subject to the satisfaction of certain conditions, the
underwriter[s] named below will purchase the offered certificates from Bond
Products Depositor LLC. See "Underwriting" in this prospectus supplement]. It
is expected that delivery of the certificates will be made to investors in
book-entry form through the facilities of The Depository Trust Company for the
accounts of its participants, including Euroclear Bank S.A./N.A., as operator
of the Euroclear System and Clearstream Banking, a societe anonyme, on or
about [ ], 200[ ].
Banc of America Securities LLC
____________, 200_
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING BASE PROSPECTUS
We provide information to you about the certificates in two separate
documents that progressively provide more detail about the certificates: (a)
the accompanying base prospectus, which provides general information, some of
which may not apply to your series of certificates and (b) this prospectus
supplement, which describes the specific terms of your series of certificates.
As you read through these sections, cross-references will direct you
to more detailed descriptions in the base prospectus attached hereto and
elsewhere in this prospectus supplement.
In connection with making a decision to invest in the certificates,
you should rely only on the information contained in this prospectus
supplement and the accompanying base prospectus. We have not, and the
underwriter[s] [have] [has] not, authorized anyone to provide you with
different or additional information. If anyone provides you with different or
additional information, you should not rely on it. Neither Bond Products
Depositor LLC (the "Depositor") nor the underwriter[s] [is] [are] making an
offer to sell the certificates or soliciting an offer to buy the certificates
in any jurisdiction where the offer or sale is not permitted. You should not
assume that the information contained in this prospectus supplement is
accurate as of any date other than the date on the front cover of this
prospectus supplement or that the information contained in the accompanying
base prospectus is accurate as of any date other than the date on its front
cover.
Detailed information relating to certain underlying securities and
the related issuers will be included in this prospectus supplement. Additional
information is available from the SEC. Copies of offering memoranda relating
to issued underlying securities will not be distributed to prospective
investors. Accordingly, prospective investors must rely entirely on the
disclosure contained herein with respect to the underlying securities.
Information that is included or incorporated by reference in prospectuses or
other offering documents which relate to any of the underlying securities is
not, and shall not be deemed to be, a part of this prospectus in any respect.
In connection with the offering of the certificates, neither the Depositor nor
the trustee assumes any responsibility for the accuracy or completeness of any
of the information that is included or incorporated by reference in those
prospectuses or other offering documents.
Given the complexity of the transaction contemplated by this
prospectus supplement and the accompanying base prospectus, you are urged to
consult your own attorneys, business advisors and tax advisors for legal,
business and tax advice regarding a decision to invest in the certificates.
For 90 days following the date of this prospectus supplement, all
dealers selling the certificates are required to deliver a copy of this
prospectus supplement and the accompanying base prospectus to each potential
investor. This is in addition to the dealers' obligation to deliver a copy of
this prospectus supplement and the accompanying base prospectus to each
potential investor when acting as an agent of the Depositor in soliciting
offers to purchase certificates.
We include cross-references in this prospectus supplement and the
accompanying base prospectus to captions in these materials where you can find
further related discussions. The following table of contents and the table of
contents included in the accompanying base prospectus indicate the pages on
which these captions are located.
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
SUMMARY OF PROSPECTUS SUPPLEMENT.............................................S-1
RISK FACTORS.................................................................S-9
FORMATION OF THE TRUST......................................................S-12
USE OF PROCEEDS.............................................................S-12
DESCRIPTION OF THE DEPOSITED ASSETS.........................................S-12
YIELD ON THE CERTIFICATES...................................................S-19
DESCRIPTION OF THE CERTIFICATES.............................................S-19
INDEX LINKED CERTIFICATES...................................................S-22
DESCRIPTION OF THE TRUST AGREEMENT..........................................S-29
CERTAIN LEGAL ASPECTS OF THE DEPOSITED ASSETS...............................S-39
IMPORTANT FEDERAL INCOME TAX CONSIDERATIONS.................................S-39
ERISA CONSIDERATIONS........................................................S-60
UNDERWRITING................................................................S-61
RATINGS ...................................................................S-63
LEGAL MATTERS...............................................................S-64
INDEX OF TERMS FOR PROSPECTUS SUPPLEMENT....................................S-65
You can find a listing of the pages where capitalized terms used in
this prospectus supplement and the accompanying base prospectus are defined
under the caption "Index of Terms for Prospectus Supplement" beginning on page
S-[ ] in this document and under the caption "Index of Terms for Prospectus"
beginning on page [ ] in the accompanying base prospectus.
The underwriters[s] may engage in transactions that stabilize,
maintain or otherwise affect the price of the Certificates, including
over-allotment, stabilizing and short-covering transactions in such securities
and the imposition of penalty bids, in each case in connection with the
offering of the Certificates. For a description of these activities, see
"UNDERWRITING" herein.
------------------------
You should rely only on the information contained or incorporated by
reference in this prospectus supplement and the accompanying base prospectus.
We have not authorized anyone to provide you with different information.
We are not offering the offered certificates in any state or other
jurisdiction where the offer is not permitted.
We do not claim that the information in this prospectus supplement
and the accompanying base prospectus is accurate as of any date other than the
dates stated on their respective covers.
SUMMARY OF PROSPECTUS SUPPLEMENT
The following summary highlights certain of the material terms of the
Deposited Assets (as defined below) and the certificates being issued by the
trust and offered by this prospectus supplement. It does not contain all of
the information that you need to consider in making a decision to invest in
the certificates. As a result, you should carefully read this prospectus
supplement and the accompanying base prospectus in full.
The Trust.........................The Series 200[ ]-[ ] Trust (the "Trust") is
a [Delaware statutory business
trust][Delaware common law trust] formed
pursuant to the Standard Terms for Trust
Agreements (the "Standard Terms"), dated as
of [ ], 200 [ ] between the Depositor and [
], as trustee (the "Trustee") as amended by
a Series Supplement (the "Series
Supplement") for the Series 200[ ]-[ ]
Certificates, dated as of [ ], 200[ ],
between the Depositor and the Trustee (the
Series Supplement together with the Standard
Terms, the "Trust Agreement").
The Depositor.....................Bond Products Depositor LLC is a Delaware
limited liability company and a
wholly-owned, limited-purpose subsidiary of
NationsBanc Montgomery Holdings Corporation,
which is a wholly-owned subsidiary of Bank
of America Corporation. See "The Depositor"
in the accompanying base prospectus.
Certificates......................The certificates will consist of the class [
] [ ]% [Variable Rate] [Auction Rate]
[Senior] pass-through certificates (the
"Class [ ] Certificates") and the class [ ]
[ ]% [Variable Rate] [Auction Rate]
[Subordinated] pass-through certificates
(the "Class [ ] Certificates" and together
with the Class [ ] Certificates, the
"Certificates") each of which are being
offered hereby. The initial certificate
principal balance of the Class [ ]
Certificates will be $[ ] and the initial
certificate principal balance of the Class [
] Certificates will be $[ ]. The
Certificates will be issued pursuant to the
Trust Agreement and will constitute the
entire undivided beneficial ownership
interest in the assets of the Trust. Each
class of Certificates represents the right
to receive distributions on the assets of
the Trust up to their respective certificate
principal balances and interest thereon at
their applicable pass-through rate. The
Certificates will be issued in [book entry
form through The Depository Trust Company]
[definitive form] in minimum denominations
of $[1,000].
The Deposited Assets..............The Deposited Assets will consist of:
o the Underlying Securities (as
defined below), [and]
o [describe any interest rate
swaps, currency swaps, floors,
collars or other similar
instruments];
o [describe any letter of credit;
surety bond; or other applicable
credit support]; and
o [any other applicable assets of
the Trust].
The Underlying Securities.........The Underlying Securities will have an
initial aggregate principal balance of
approximately $[ ] as of [ ], 20[ ] (the
"Cut-off Date"). The Depositor will deposit
into the Trust the following fixed income
securities (the "Underlying Securities"):
[specify debt security or asset backed
security or a pool of such debt securities
or asset backed securities issued by one or
more corporations, banking organizations,
insurance companies or special purpose
vehicles (including trusts, limited
liability companies, partnerships or other
special purpose entities)] [a debt security
or a pool of such debt securities, in each
case which represents obligations issued or
guaranteed by a foreign government,
political subdivision or agency or
instrumentality thereof] issued by [specify
issuers] [specify obligations of one or more
foreign private issuers] [specify debt
security or a pool of such debt securities,
in each case which represents obligations of
the United States of America, any agency
thereof for the payment of which the full
faith credit of the United States of America
is pledged, or a United States
government-sponsored organization created
pursuant to a federal statute] which have
the characteristics described herein under
"Description of the Deposited Assets -
Description of Underlying Securities" and "-
Composition" and which satisfy the criteria
described in "Description of the Deposited
Assets - Description of Underlying
Securities" in the accompanying base
prospectus.
[As of the Cut-off Date, the following
information will apply to the Underlying
Securities to be acquired by the Depositor:
--------------------------------------------------------------------------------
% of
Aggregate Available
Principal Principal Moody's(1) S&P(1) Fitch(1) Issuer
Issuer Coupon Amount Amount Rating Rating Rating Information
--------------------------------------------------------------------------------
(2)
--------------------------------------------------------------------------------
(3)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(1) If applicable.
[(2) The related issuer is subject to the
information reporting requirements of the
Securities Exchange Act of 1934, as amended
(the "Exchange Act").]
[(3) The related issuer is not subject to
the Exchange Act reporting requirements and
the only available information regarding the
[related issuer and] [the Underlying
Security] is contained in the offering
memorandum related to the issuance of the
Underlying Security, the material terms of
which are set forth in this prospectus
supplement.]
Underlying Securities Issuers.....Each Underlying Security has been issued by
a separate issuer (each, an "Underlying
Securities Issuer"). For each Underlying
Security, certain summary information
regarding the related Underlying Securities
Issuer, including its rating, its industry
classification and pricing terms with
respect to the Underlying Security is set
forth herein. More detailed information is
provided herein with respect to Underlying
Securities Issuers whose securities
constitute 10% or more of the Trust's
assets. See "Description of the Deposited
Assets - Composition." The Underlying
Securities Issuers are not participating in
this offering, will not receive any proceeds
either from the sale of the Underlying
Securities to the Depositor or from the
issuance or the Certificates and have no
direct obligations under the Certificates.
[Other Deposited Assets]..........[The Trust's assets will also include
[describe any calls, interest rate swaps,
currency swaps, floors, caps, collars, other
derivatives or similar agreements] (the
"Other Deposited Assets"). See "Description
of the Deposited Assets - Description of
Other Deposited Assets."]
[Credit Support]..................[The Certificateholders [of the [specify
particular classes] Certificates] will also
have the benefit of [describe any letter of
credit; surety bond; or other applicable
credit support] (the "Credit Support") which
will be used to support or ensure the
[servicing and] [timely] [ultimate]
distribution of amounts due with respect to
the Underlying Securities, including
providing certain coverage with respect to
losses]. See "Description of the Deposited
Assets - Description of Credit Support."]
[Calculation Agent]...............[[ ] will act as Calculation Agent
(the "Calculation Agent")] and will calculate
the value of [the index] from time to time.]
[Call Option].....................[The Certificates are subject to a call
option in favor of [identify call option
holder (the "Call Option Holder")] pursuant
to which the Call Option Holder may, [on or
after [ ][on any Business Day], exercise its
right to purchase [all or a portion of] the
Certificates (the "Call Option") in
accordance with the terms of the Trust
Agreement and the call rights agreement,
dated as of [ ], 20[ ], between the
Depositor and the Call Option Holder (the
"Call Option Agreement".] See "Description
of the Deposited Assets - Description of the
Call Option."
Closing Date......................Certificates are expected to be offered on
or about ________, 200_ (the "Closing
Date").
Distribution Dates................Payments of interest, principal and premium
(if any) on the Certificates will be made on
each [monthly date] [quarterly date]
[semi-annual date], or if such date is not a
Business Day (as defined herein) on the
following Business Day (each, a
"Distribution Date").
Final Scheduled Distribution
Date..............................[ ] (the "Final Scheduled
Distribution Date").
Variable Pass-Through Rates.......[For each Interest Accrual Period (as
defined below), the Variable Pass-Through
Rate will be calculated [describe method for
determining variable pass-through rates]
[The initial Variable Pass-Through Rates for
the Class [ ] [Senior] Certificates and the
Class [ ] [Subordinated] Certificates will
be approximately [ ]% and [ ]%,
respectively, per annum.]] [The Pass-Through
Rates applicable to the calculation of
interest on the Class [ ] [Senior]
Certificates and the Class [ ]
[Subordinated] Certificates will be [ ]% and
[ ]%, respectively, per annum.]
[Auction Rates]...................[For each class of auction rate
certificates, the auction rate for each
Interest Accrual Period will be calculated
in accordance with the auction procedures
set forth in Annex I to this prospectus
supplement and will not exceed the maximum
auction rate. An Interest Accrual Period for
a class of auction rate certificates begins
on a distribution date for that class and
ends on the day before the next distribution
date for that class. The first accrual
period for a class of auction rate
certificates, however, will begin on the
closing date and end on the initial auction
date for that class.]
Interest Accrual Periods..........[Interest shall accrue on the outstanding
aggregate Certificate Principal Balance of
each Class of Certificates at the applicable
[Pass-Through] [Auction] Rate on a [monthly]
[quarterly] [semi-annual] basis from [ ] to
[ ] (each, an "Interest Accrual Period") and
such interest shall be paid in accordance
with the priority of payments set forth in
this prospectus supplement. In the case of
the first Interest Accrual Period, interest
shall accrue on the initial aggregate
Certificate Principal Balance of each Class
of Certificates at the applicable initial
[Pass-Through] [Auction] Rates from and
including the Closing Date to but excluding
[___, 200_].
Collection Period.................With respect to each Distribution Date, the
period beginning on [ ] and ending at the
close of business on [ ] (each such period,
a "Collection Period").
Principal Distributions...........The Certificate Principal Balance of each
Certificate represents the maximum amount
that the Certificateholder is entitled to
receive as distributions allocable to
principal. Payments of principal received by
the Trust on the Deposited Assets during
each Collection Period will be paid to the
Certificateholders on each Distribution Date
in accordance with the priority of
distributions set forth in this prospectus
supplement. The Certificate Principal
Balance of a Certificate will be reduced by
the amount of (x) distributions allocable to
principal made to Certificateholders, (y)
losses incurred with respect to the
Deposited Assets which are allocated to the
Certificateholders and (z) certain expenses
incurred by the Trustee with the consent of
the Certificateholders. [The Notional Amount
of the Class [ ] Certificates as of any date
of determination is equal to [specify].
Reference to the Notional Amount of the
Class [ ] Certificates is solely for
convenience in determining the basis on
which distributions on the Class [ ]
Certificates will be calculated [and
determining the relative voting rights of
Certificateholders of Class [ ] Certificates
for purposes of voting on a class-by-class
basis or otherwise]. The Notional Amount
does not represent the right to receive any
distributions allocable to principal.]
[Shortfalls in collections of principal with
respect to the Deposited Assets will be
allocated to reduce the Certificate
Principal Balance of the Class [ ]
Certificates and after the Certificate
Principal Balance of such Certificates has
been reduced to zero, such shortfalls shall
be applied to reduce the Certificate
Principal Balance of the Class [ ]
Certificates, as provided in this prospectus
supplement.]
Distributions.....................Certificateholders will be entitled to
receive on each Distribution Date, in
accordance with the priority of
distributions set forth in this prospectus
supplement and to the extent of available
funds, after payment of certain expenses of
the Trust [and amounts payable to the [Other
Deposited Assets Providers][Credit Support
Providers]]:
o interest accrued on the
Certificates during the related
Interest Accrual Period at the
applicable [Pass-Through]
[Auction] Rate on the
outstanding Certificate
Principal Balance of each class
of Certificates;
o distributions allocable to
principal, in an amount equal to
all payments allocable to
principal received on the
Deposited Assets during the
applicable Collection Period;
and
o distributions allocable to
premium (if any) in an amount
equal to all payments of
premiums (if any) received on
the Underlying Securities [or
from the Call Option Holder upon
the exercise of the Call Option]
during the applicable Collection
Period.
Distributions will be made to
Certificateholders only if, and to the
extent that, payments are made with respect
to the Deposited Assets.
[The holders of the Class [ ] Certificates
will [also] be entitled to receive on each
Distribution Date, distributions allocable
to interest in an amount equal to [describe
Stripped Interest].] [The holders of the
Class [ ] Certificates will not be entitled
to receive any distributions allocable to
principal or premium (if any).] See
"Description of the Certificates -
Distributions."
[Subordination; Allocation
of Losses]........................[The rights of the holders of the Class [ ]
Certificates to receive distributions of
interest, principal and premiums (if any),
with respect to the Deposited Assets will be
subordinated to the rights of the holders of
the Class [ ] Certificates to receive
interest, principal and premiums (if any).
In addition, losses attributable to the
Underlying Securities are allocable first to
the Class [ ] Certificates and then to the
Class [ ] Certificates. See "Description of
the Certificates - Allocation of Losses;
Subordination."]
[Optional Termination]............[The Depositor may purchase the Underlying
Securities in the Trust at a price equal to
the par amount [or liquidation preference
amount, as applicable] of the Underlying
Securities in the Trust on any Distribution
Date on which the aggregate principal amount
of the Underlying Securities remaining in
the Trust is less than [10%] of the
aggregate principal amount of the Underlying
Securities as of the [Cut-off Date]. This
would cause the termination of the Trust and
early retirement of the Certificates.
[Specify any other purchase or repurchase
option of the Depositor.] See "Description
of the Trust Agreement - Termination" herein
and "Description of Trust Agreement -
Termination" in the accompanying base
prospectus.]
Ratings...........................[It is a condition to the issuance of the
Certificates that the Certificates be rated
at least [" "] by [Standard & Poor's Ratings
Group, a division of The McGraw-Hill
Companies, Inc. ("S&P")], [" "] by [Moody's
Investors Service, Inc. ("Moody's")] and ["
"] by [Fitch Inc. ("Fitch")]. A security
rating is not a recommendation to buy, sell
or hold securities and may be subject to
revision or withdrawal at any time by the
assigning rating agency. A security rating
does not address the occurrence or frequency
of redemptions or prepayments on, or
extensions of the maturity of, the
Underlying Securities, the corresponding
effect on yield to investors [or whether
investors in the Class [ ] Certificates may
fail to recover fully their initial
investment]. See "Ratings."]
Specified Currency;
Denominations.....................The Class [ ] Certificates and the Class [ ]
Certificates will be denominated and payable
in [U.S. dollars] (the "Specified Currency")
and will be available for purchase in
minimum denominations of [$][1,000] and in
integral multiples of [$][25].
Form of Certificates..............[The Certificates will be issued as
book-entry certificates through the
facilities of The Depository Trust Company
("DTC"), except under circumstances
specified herein] See "Description of the
Certificates - Definitive Certificates."
Distributions will be settled in
[immediately available (same-day)] funds.
Trustee...........................[ ], as trustee.
Important Federal Income Tax
Considerations....................It is a condition to the issuance of the
Certificates that the Depositor receive an
opinion from special tax counsel to the
Trust to the effect that the Trust will [not
be classified for federal income tax
purposes as an association (or publicly
traded partnership) taxable as a
corporation][qualify as a grantor trust for
federal income tax purposes and will not be
classified for federal income tax purposes
as an association (or publicly traded
partnership) taxable as a
corporation][qualify as a partnership for
federal income tax purposes and will not be
classified for federal income tax purposes
as an association (or publicly traded
partnership) taxable as a
corporation][qualify as a "FASIT" for
federal income tax purposes]. See "Important
Federal Income Tax Considerations."
ERISA Considerations..............An employee benefit plan subject to the
Employee Retirement Income Security Act of
1974, as amended ("ERISA"), or Section 4975
of the Internal Revenue Code of 1986, as
amended (the "Code"), including an
individual retirement account (an "IRA") or
Keogh plan (each, a "Plan") should consult
its advisors concerning the ability of such
Plan to purchase Certificates under ERISA or
the Code. Although no assurances can be
given, the [Underwriter] believes that each
class of Certificates will qualify as
Publicly Offered Securities under
regulations issued by the U.S. Department of
Labor (i.e. freely tradeable, widely held
and registered under the Exchange Act) and
that, accordingly, the assets of the Trust
should not be treated as assets of any
employee benefit plan subject to ERISA by
reason of an investment in the Certificates.
See "ERISA Considerations" herein and in the
accompanying base prospectus.
Risk Factors......................See "Risk Factors" for discussion of some of
the factors you should carefully consider
prior to making a decision to invest in the
Certificates.
RISK FACTORS
[Describe risk factors applicable to the specific Underlying
Securities (including any material risks as a result of any repurchase option,
call or put and the inclusion in the Underlying Securities of GTCs), [and]
[any Other Deposited Assets] [any Credit Support] and the particular structure
of the Certificates being offered, including factors affecting the yield on
the Certificates and the terms thereof, as described elsewhere herein.] See
"Risk Factors" and "Maturity and Yield Considerations" in the accompanying
base prospectus.
Debt Securities; Defaults. The Underlying Securities are subject to
credit, liquidity and interest rate risks. [It is expected that a portion of
the Underlying Securities will be high yield debt securities issued by
entities rated below investment grade, which have greater credit and liquidity
risk than investment grade sovereign or corporate bonds.] To the extent that a
default occurs with respect to any Underlying Securities and the Trustee sells
or otherwise disposes of such Underlying Securities, it is not likely that the
proceeds of such sale or other disposition will be equal to unpaid principal
and interest accrued thereon.
While a number of articles and research reports have been written on
historical default rates, the timing of such defaults and subsequent
recoveries on [high yield] debt securities, there is no central source for
relevant data, or a standardized method of measuring default rates, the timing
of such defaults or any subsequent recoveries. Furthermore, the historical
performance of the bond markets is not necessarily indicative of their future
performance. Prospective purchasers of the certificates should consider and
determine for themselves the likely level of defaults and the level of
recoveries on the Underlying Securities during the term of the Certificates.
[Early Redemption or Amortization Will Affect Yield and Recovery of
Investment.] The Underlying Securities [can be redeemed early at the option of
the issuer of the Underlying Securities] [specify dates or conditions] [may
amortize early as a result of [describe amortization features of specific
Underlying Securities.]] If all or a significant portion of the Underlying
Securities are [redeemed] [amortized] early, the Trust will be terminated and
Certificateholders may receive a lower overall yield on the Certificates and a
distribution of principal before the scheduled maturity of the Certificates].
[In addition, if all of the Underlying Securities are [redeemed]
[amortized] early, the Trust [and the [describe Other Deposited Assets and/or
Credit Support] will terminate early[, and the Trust may be required to make a
termination payment in accordance with the terms of the [describe Other
Deposited Assets and/or Credit Support].]
[Insert the following for "stripped certificates" only] [The Class [
] Certificates are not entitled to distributions of principal but receive a
portion of interest collections on the Underlying Securities for so long as
the Underlying Securities are outstanding. If the Underlying Securities are
prepaid or redeemed early or the Trust is otherwise wound up early, returns on
the Class [ ] Certificates will be adversely affected.]
[Qualification of the Trust as a FASIT for Federal Income Tax
Purposes.] [No currently effective regulations or other guidance has been
issued concerning sections 860H through 860L of the Internal Revenue Code of
1986, as amended, and certain issues relevant to such provisions, that apply
to financial asset securitization investment trusts ("FASITs"). Final Treasury
regulations and other guidance relating to the qualification of the Trust as a
FASIT or the federal income tax consequences of FASITs and holders of
interests in FASITs could be issued, possibly with retroactive effect. Hence,
definitive guidance cannot be provided regarding many aspects of the federal
income tax treatment of Certificateholders. Furthermore, although the
Depositor will receive an opinion of Special Tax Counsel that the Trust will
qualify as a FASIT for federal income tax purposes, final Treasury regulations
and other guidance could affect this qualification. If the Trust failed to
qualify as a FASIT for federal income tax purposes, it might be classified as
an association, or publicly traded partnership, taxable as a corporation. In
such case, the Trust would be subject to federal income tax that could
materially reduce cash available to make payments on Certificates. Investors
are encouraged to consult their own tax advisors in determining the federal,
state, local, foreign, and any other tax consequences relating to FASITs and
holders of interests in FASITs.]
[Liability for Termination Payments.] [[The Swap Agreement] [Each
swap transaction] may be terminated early if:
o [there is a default with respect to] the [related]
Underlying Securities [or the Underlying Securities are
redeemed early];
o the Trust or the [Swap Counterparty] fails to make the
required payments under the [Swap Agreement];
o the [Swap Agreement] becomes illegal or invalid;
o the Trust or the [Swap Counterparty] becomes bankrupt;
o withholding taxes are imposed on payments made by the Trust
[or Swap Counterparty under the Swap Agreement;]
o the [Swap Counterparty] is involved in a merger and
disaffirms the [Swap Agreement]; or
o [other.]
At the time of any early termination of the [Swap Agreement], the
agreement may have value to either the Trust or the [Swap Counterparty]; if
so, the other party will be required to pay that value as a termination
payment. The termination payment generally corresponds to the estimated cost
to the Trust or the [Swap Counterparty], as the case may be, of entering into
a replacement [Swap Agreement]. Such cost generally depends on the value of
the remaining payments to be made by the Trust and the remaining payments to
be made by the [Swap Counterparty]. The value of the [Swap Agreement] may be
highly volatile, and it is not possible to estimate the maximum amount of any
termination payment which may be payable by the Trust.]
[Concentration Risk.] Approximately [ ]% (in par amount) of the
Underlying Securities are issued by [number of issuers] [issuers in the same
industry] [describe other areas of pool concentration]. The occurrence of
[downturns in the issuer's business] [an insolvency event with respect to such
issuers] [or regulatory, legal or other developments] could adversely affect
the issuer and its ability to satisfy its obligations under the Underlying
Securities. Accordingly, payments on the Certificates could be adversely
affected by the concentration of the Underlying Securities in any one [issuer
or industry].
[Subordination of the Class [ ] Certificates. Except as described
below, the Class [ ] Certificates are fully subordinated on each Distribution
Date to the Class [ ] Certificates. No payments of interest will be made on
the Class [ ] Certificates until interest on the Class [ ] Certificates has
been paid in full. No payment of principal on the Class [ ] Certificates will
be made until the Class [ ] Certificates have been paid in full. In addition,
to the extent that any losses are incurred on the Underlying Securities, such
losses will be borne in the first instance by holders of the Class [ ]
Certificates and, thereafter, by holders of the Class [ ] Certificates.]
[Index Linked Certificate Risk. To the extent that the investment
performance of the [specify index] exceeds the investment performance of the
pool of Underlying Securities, there may be a mismatch between your
Index-Linked Certificates and the [specify index] which could prevent, delay
or otherwise adversely effect the trust's ability to make interest payments on
your Index-Linked Certificates. Although the Depositor may enter into one or
more hedge agreements or credit support arrangements to reduce the impact of
such mismatches, there can be no assurance that Underlying Securities together
with any such hedge or credit support arrangements, will generate sufficient
proceeds to ensure the timely payment of all amounts payable as interest on
your Index-Linked Certificates.]
Reinvestment Risks. In the event the Call Option Holder exercises the
call option or the Depositor chooses to optionally terminate the Trust by
purchasing the Underlying Securities (under the circumstances described
herein), the Deposited Assets will be liquidated and the proceeds will be
distributed to the Certificateholders in accordance with the priority of
payments described in the Trust Agreement and the Certificateholders will
become subject to certain reinvestment risks. After the exercise of a Call
Option or upon the occurrence of an optional termination, there can be no
assurance that a Certificateholder will be able to reinvest any distribution
it receives at a rate which will equal or exceed the rate of return such
Certificateholder would have received if it's Certificates remained
outstanding until the scheduled maturity.
Potential Conflicts. Various potential and actual conflicts of
interest may arise from the roles of Banc of America Securities LLC ("BAS"),
Bond Products Depositor and other affiliated entities (collectively the "BAS
Entities") with respect to your Certificates. BAS may have initially
underwritten or placed certain of the Underlying Securities which may be
purchased by the Depositor for the trust and will underwrite the Certificates
issued by the trust. [In addition, a BAS Entity may function as a counterparty
with respect to one or more hedge agreements entered into by the Depositor on
behalf of the trust.] [BAS Entities [may][will] also act as the [Market Agent]
[Auction Agent] with respect to the Certificates.]
[Certain BAS Entities may have placed or underwritten certain of the
Underlying Securities at original issuance, may own equity or other securities
of Underlying Securities Issuers and will have provided investment banking
services, advisory, banking or other services to Underlying Securities
Issuers. In its selection of Underlying Securities, the Depositor may purchase
the securities of companies affiliated with any other BAS Entity provided such
purchases are negotiated on an arms length basis.]
BAS Entities may also have ongoing relationships with, render
services to or engage in transactions with, Underlying Securities Issuers and
may also own any other equity or debt securities issued by Underlying
Securities Issuers. As a result, officers of BAS Entities may possess
information relating to Underlying Securities Issuers which the Depositor may
not be aware of at the time the Depositor acquires the Underlying Securities.
In addition, BAS Entities may invest in securities issued by an Underlying
Securities Issuer which are senior to, or have interests different from, or
adverse to, the interests of holders of the Underlying Securities purchased by
the Depositor.
FORMATION OF THE TRUST
The Series 200[ ] -[ ] Trust (the "Trust") will be formed pursuant to
the Standard Terms for Trust Agreements, dated as of [ ], 20[ ] (the "Standard
Terms"), as amended by that certain series [ ] supplement, dated as of [ ],
20[ ] (the "Series Supplement" and together with the Standard Terms, the
"Trust Agreement"), each between the Depositor and the Trustee]. At the time
of the execution and delivery of the Trust Agreement, the Depositor will
contribute (a) the Underlying Securities, described under "Description of the
Deposited Assets - Description of the Underlying Securities" [and] (b) any
Other Deposited Assets, described under "Description of the Deposited Assets -
Description of Other Deposited Assets"] [and (c) [any Credit Support,
described under "Description of the Deposited Assets - Description of Credit
Support"] [and (d) [any other assets of the Trust]] (collectively, the "Trust
Estate")]. The Trustee, on behalf of the Certificateholders, will accept the
Trust Estate and, in consideration for the receipt thereof, will deliver the
Certificates to the Depositor.
USE OF PROCEEDS
The net proceeds received by the Depositor from the sale of the
Certificates will be used to purchase the Underlying Securities and to enter
into [describe any Other Deposited Assets and/or Credit Support], which will
be contributed to the Trust and will collectively constitute the Deposited
Assets.
DESCRIPTION OF THE DEPOSITED ASSETS
The assets of the Trust will consist primarily of the Underlying
Securities [and] [describe Other Deposited Assets] [and] [describe any Credit
Support] (collectively, the "Deposited Assets").
Description of the Underlying Securities
The Underlying Securities (other than Underlying Securities which are
issued by a government sponsored entity (a "GSE") or the United States of
America) will be purchased by the Depositor in the secondary market, either
directly or through an affiliate of Banc of America Securities LLC. No
Underlying Securities Issuer is participating in this offering and none will
receive any proceeds from the sale of the Underlying Securities to the
Depositor or any proceeds from the issuance of the Certificates. The
Underlying Securities Issuers will have no direct obligations under the
Certificates. [Banc of America Securities LLC, an affiliate of the Depositor,
participated in the initial [public] offering of certain of the Underlying
Securities as a [placement agent][underwriter]].
This prospectus supplement sets forth the relevant terms with respect
to the Underlying Securities but does not provide detailed information with
respect to the Underlying Securities. Prospective purchasers of the
Certificates should consider carefully the financial condition of the
Underlying Securities Issuers and their ability to make payments on the
related Underlying Securities.
[The disclosure contained herein with respect to the Underlying
Securities and their issuers is derived from [publicly available documents]
[and] [private placement memoranda]. [[Certain] [Each] issuer[s] of the
Underlying Securities is [are] subject to the information reporting
requirements of the Exchange Act.] Although the Depositor has no reason to
believe that any publicly available information concerning any Underlying
Security or its issuer is not reliable, neither the Depositor nor [any of] the
underwriter[s] has participated in the preparation of any such documents, or
has made any due diligence inquiry with respect to the information provided
therein. At the time of the acquisition of any Underlying Security, events
affecting the Underlying Security or its issuer may have occurred that may not
yet have been publicly disclosed. The occurrence of such events may affect the
accuracy or completeness of the publicly available documents described above
and may affect an Underlying Securities Issuer's ability to make required
payments on its Underlying Securities.
[The Underlying Securities, which primarily consist of specify debt
security or asset backed security or a pool of such debt securities or asset
backed securities issued by one or more corporations, banking organizations,
insurance companies or special purpose vehicles (including trusts, limited
liability companies, partnerships or other special purpose entities)] [a debt
security or a pool of such debt securities, in each case which represents
obligations issued or guaranteed by a foreign government, political
subdivision or agency or instrumentality thereof issued by [specify issuers]]
[specify obligations of one or more foreign private issuers] [specify debt
security or a pool of such debt securities, in each case which represents
obligations of the United States of America, any agency thereof for the
payment of which the full faith credit of the United States of America is
pledged, or a United States government-sponsored organization created pursuant
to a federal statute], and having the characteristics described under "-
Composition" and under this subsection"- Description of Underlying
Securities."
Composition
As of the Cut-off Date, the following information will apply to the
Underlying Securities to be acquired by the Depositor:
Principal % of
Name of Industry Amount Underlying Maturity Special Moody's(3) S&P(3) Fitch(3)
Issuer CUSIP Classification Rank Coupon ($MM) Securities Date Options(2) Rating Rating Rating
- ------- ----- -------------- ---- ------ --------- ---------- -------- ---------- ---------- ------- --------
[Composition of the Underlying Securities Pool
as of the Cut-off Date]
- -------------------
1 ["*" denotes an Underlying Security which constitutes a Concentrated
Underlying Security as of the Cut-off Date (i.e., the principal
balance of such Underlying Security constitutes 10% or more of the
aggregate principal balance of the Deposited Assets).]
2 [Describe any special put, call, redemption or conversion option
applicable to each Underlying Security.]
3 If applicable.
[Number of Underlying Securities: [ ]]
[Aggregate Principal Balance: $[ ]]
[Average Principal Balance: $[ ]]
[Largest Balance: $[ ]]
[Weighted Average Interest Rate: [ ]% per annum]
[Weighted Average Original Term to Maturity: [ ] years]
[Weighted Average Remaining Term to Maturity: [ ] years]
[Longest Remaining Term to Maturity: [ ] years]
[Based on publicly available information no],[the Depositor is not
aware that any] obligor of any Underlying Security was in default in the
payment of any installment of principal, interest [or premium (if any)] with
respect thereto. Any rating noted above with respect to any Underlying
Security is not a recommendation to purchase, hold or sell such Underlying
Security, and a rating may not remain for any given period of time or may be
lowered or withdrawn entirely by a rating agency in the future. See "Ratings"
herein and "Risk Factors - Ratings of the Certificates" in the accompanying
base prospectus regarding considerations applicable to the ratings of the
Certificates.]
Disclosure
The Deposited Assets [and certain other assets]] contributed to the
Trust represent the sole assets of the Trust that are available to make
distributions on the Certificates. This prospectus supplement relates only to
the Certificates being offered hereby and does not relate to an offering of
the Underlying Securities. Accordingly, the information contained herein is
intended primarily to describe the Underlying Securities and does not purport
to set forth the detailed terms of each Underlying Security or to provide the
type of information which would ordinarily be set forth in a prospectus or
private offering memoranda pursuant to which the Underlying Securities may
have been initially offered.
[Private placement offering memoranda relating to certain Underlying
Securities which were not publicly issued (other than treasury securities or
Underlying Securities issued by GSE's) will not be made available to
Certificateholders. For an understanding of the material terms of such
Underlying Securities, Certificateholders will have to rely solely on the
descriptions of the material terms of such Underlying Securities set forth
herein.]
[The following is a description of the material terms of the
Underlying Securities which were initially offered in exempt transactions. The
descriptions have been derived solely from the private placement offering
memoranda related to such Underlying Securities.] [SUMMARY OF MATERIAL TERMS
OF PRIVATELY OFFERED UNDERLYING SECURITIES.]
Underlying Securities Events of Default
[The following is a summary of the Underlying Security Events of
Default which are common to all of the Underlying Securities]:
o [failure to make scheduled payments of interest, principal, and
premium (if any) to holders of such Underlying Security when the
same shall become due;]
o [material breaches of certain representations, warranties or
covenants or failure to observe or perform in any material
respect any covenant or agreement which breach or failure
continues for a specified period of time after notice thereof is
given to the issuer of the Underlying Securities by the
Underlying Securities trustee or the holders of not less than a
specified percentage of such Underlying Securities;]
o [failure by the Underlying Securities Issuer to make any
required payment of principal (and premium, if any) or interest
with respect to certain of the other outstanding debt
obligations of the Underlying Securities Issuer or the
acceleration by or on behalf of the holders thereof of such
securities;]
o [certain events of bankruptcy or insolvency relating to the
Underlying Securities Issuer; [and]
o [describe any additional common events of default with respect
to the pool of Underlying Securities].]
Concentrated Underlying Securities
[The Underlying Securities have been issued pursuant to [an]
[indenture[s]] [fiscal agency agreement[s]] [certificate[s] of designation]
[pooling and servicing agreement[s]] [trust agreement[s]] between the
[various] [issuer[s] of the Underlying Securities and Underlying Securities
[trustee[s]] [fiscal agent[s]] [and describe others] (collectively, the
"Issuer Documents")]. With respect to all Underlying Securities which
constitute 10% or more of the Deposited Assets (the "Concentrated Underlying
Securities"), the following summary describes the material legal, financial
and other covenants of such Underlying Securities. The Trust will not contain
privately issued securities in amounts sufficient for such privately issued
securities to constitute Concentrated Underlying Securities.
[SUMMARY OF MATERIAL TERMS OF CONCENTRATED UNDERLYING SECURITIES,
AND ALL RELEVANT INFORMATION WITH RESPECT TO THE RELATED ISSUERS
(INCLUDING SUMMARIZED FINANCIALS FOR EACH RELATED ISSUER)]
[Name such obligor] is subject to the informational requirements of
the Exchange Act and in accordance therewith files reports and other
information (including financial information) with the SEC [and makes
available to the public upon request certain annual reports containing
financial and other information]. You can request copies of these documents,
upon payment of a duplicating fee, by writing to the SEC. Please call the SEC
at (800) SEC-0330 for further information on the operation of the SEC's public
reference rooms. In addition, such reports and other information [can be
inspected at the offices of the [New York Stock Exchange at 20 Broad Street,
New York, New York 10005] [American Stock Exchange, 86 Trinity Place, New
York, New York 10006]] [may be obtained from [name such obligor], according to
its most recent annual report, upon written or oral request to [name such
obligor].] You can inspect and copy the registration statement at the public
reference facilities maintained by the Securities and Exchange Commission. The
Securities and Exchange Commission's public reference facilities are located
at its Public Reference Section, 450 Fifth Street, N.W., Washington, D.C.
20549. Information as to the operation of the public reference facility is
available by calling the Securities and Exchange Commission at 1-800-SEC-0330.
The Securities and Exchange Commission maintains an Internet Web site that
contains reports, proxy and information statements and other information that
we file electronically with the SEC. The address of such Internet Web site is
(http://www.sec.gov).
[Description of Other Deposited Assets]
[The Swap Agreement will document an interest rate swap transaction
between the Trust and the Swap Counterparty under which the Trust will pay to
the Swap Counterparty the [fixed rate] [floating rate] coupon payments
received in respect of the Underlying Securities and receive from the Swap
Counterparty [floating rate] [fixed rate] payments. The swap transaction will
have the effect, subject to performance by the Swap Counterparty of its
obligations under the Swap Agreement, of converting the coupon received on the
Underlying Securities into the effective coupon the Trust will distribute with
respect to the Certificates.]
[The Swap Agreement will document a cross-currency swap transaction
between the Trust and the Swap Counterparty under which the Trust will pay to
the Swap Counterparty the [foreign currency] [dollar] payments received on the
Underlying Securities, and will receive from the Swap Counterparty [dollar]
[foreign currency] payments. The transaction will have the effect, subject to
performance by the Swap Counterparty of its obligations under the Swap
Agreement, of converting the currency of collections received on the
Underlying Securities into the currency in which the Trust will make
distributions with respect to the Certificates.]
[The Swap Agreement will document a total rate of return swap
transaction between the Trust and the Swap Counterparty under which the Trust
will pay to the Swap Counterparty the coupon, principal and premium payments
received on the Underlying Securities during the relevant period, and will
receive from the Swap Counterparty coupon, principal and premium payments
based on the increase in value of the index during the relevant period or make
payments to the Swap Counterparty based on the decrease in value of the index
during the relevant period. The Trust will not be required to make payments
under the total rate of return swap transaction if such payments would cause a
loss of principal to the Certificates. The transaction will have the effect,
subject to performance by the Swap Counterparty of its obligations under the
Swap Agreement, of converting the return on the Underlying Securities to the
return based on the performance of the index that the Trust will distribute on
the Certificates.]
[The Swap Agreement will document an option transaction between the
Trust and the Swap Counterparty under which the Trust will [purchase a put
option from] [grant a call option to] the Swap Counterparty with respect to
the Certificates or the Underlying Securities, and the Trust will make a
payment to the Swap Counterparty of ____, and the Swap Counterparty will make
a payment to the Trust of ____. [The call option will effectively reserve to
the Swap Counterparty the right to realize all or a portion of the increase in
the market value of specified Underlying Securities at or prior to the
maturity of the Certificates or to effect a conversion of the Certificates
into the right to receive another security.] [The put option will entitle the
Trust to put to the Swap Counterparty the Certificates at par, thereby
protecting the Trust from a decline in the market value of the related
Certificates.] [The Trust Agreement will provide that the Trust will
automatically exercise the put option, unless otherwise instructed by the
Certificateholders, if the market value of the Certificates on the exercise
date for the put option is less than the par value of such Certificates.]]
[The notional amount of the [interest rate] [currency] [total rate of
return] swap transaction will be equivalent to the principal amount of
Certificates held by the Trust. Payment dates and accrual periods under the
Swap Agreement will match the Distribution Dates and interest accrual periods
on the Certificates. The [floating rate] [index value] applicable to payments
during each period under the Swap Agreement will be established by the
Calculation Agent on each payment date based on the value of [the [floating
rate] as of the ___ day prior to the first day of the Interest Accrual Period]
[the index as of the ___ day prior to the last day of the Interest Accrual
Period.]] The value of [floating rate] [index] will be determined by reference
to the [screen] or in the event such [screen] [rate] [value] is unavailable by
reference to quotations from market makers obtained by the Calculation Agent.]
[Description of the Call Option]
[On any Business Day on or after [________][On any Business Day after
the Call Option Holder gives notice indicating its intention to redeem the
Certificates,] the Call Option Holder may purchase, [in whole or in part,] the
outstanding Certificates from the Trust at a price equal to [the Certificate
Principal Balance of the Certificates plus accrued and unpaid interest to the
date of redemption] [plus a premium equal to [ ].] [If a Call Option is
exercised, [all or a portion of the] Class [ ] Certificates [and Class [ ]
Certificates] will be redeemed for an amount equal to $[ ] per Class [ ]
Certificate [and Class [ ] Certificate] plus accrued and unpaid interest to
the date of redemption.]
[Description of Credit Support]
[On or about the Closing Date, the Depositor and [credit support
provider] will enter into a [describe credit support agreement] (the "Credit
Support Agreement"). The Credit Support Agreement will be for the sole benefit
of the [Class [ ] Certificates [and the Class [ ] Certificates]]. The Credit
Support Agreement will constitute part of the assets owned by the Trust [to
the extent provided below] and will support or ensure the [servicing and]
[timely] [ultimate] distribution of amounts due with respect to the Underlying
Securities, in the manner described below.]
[The Letter of Credit]
[The Letter of Credit will be irrevocable and will [support the
[timely][ultimate] remittance of amounts due with respect to the Underlying
Securities [and the Other Deposited Assets]. [The maximum amount that the
Trustee may draw under the Letter of Credit will initially be equal to $[ ].
The initial amount of the Letter of Credit will be $[ ]. Thereafter, the
amount of the Letter of Credit with respect to any Distribution Date will
equal [the lesser of (i) [ ]% of the aggregate Certificate Principal Balance
outstanding on the preceding Distribution Date (after giving effect to any
payment of principal made on such preceding Distribution Date) but in any
event not less than $[ ], and (ii)] the amount of the Letter of Credit on the
preceding Distribution Date, plus [(a) reimbursement of certain advances under
the Letter of Credit and (b) recoveries on defaulted Underlying Securities and
[ Other Deposited Assets] [describe other methods]. The Letter of Credit
expires on [ ], 20[ ]. The Trustee will be obligated, in the event of a
drawing on the Letter of Credit, to pursue appropriate remedies against the
Underlying Securities, [ Other Deposited Assets], any other assets of the
Trust, and any realization thereon shall be paid to the letter of credit bank
to the extent of any amounts owing, in the manner and priority specified
herein.]]
[Add language regarding the letter of credit bank with respect to its
debt ratings, activities it engages in, regulatory authorities having
jurisdiction over it and the nature of such regulation, a narrative
description of its assets, liabilities (including deposits) and equity, and
include an address for further information concerning the letter of credit
bank. In addition, to the extent that the letter of credit will cover payment
of 20% or more of the aggregate principal amount of the Certificates covered
thereby, provide information of financial and other matters with respect to
the letter of credit bank, if necessary.]
[The Surety Bond]
[The Surety Bond will guaranty [timely] [ultimate] distributions of
the principal of and premium (if any) and interest with respect to the Class [
] Certificates. The Surety Bond expires on [ ], 20__. The Trustee will be
obligated, in the event of a drawing on the Surety Bond, to pursue appropriate
remedies against the Underlying Securities, [Other Deposited Assets], any
other assets of the Trust and any amounts realized thereon shall be paid to
the Surety Bond provider to the extent of any amounts owing, in the manner and
priority specified herein.]
[Describe the issuer of the Surety Bond including its debt rating,
activities it engages in, regulatory authorities having jurisdiction over it
and the nature of such regulation, a narrative description of its assets,
liabilities (including deposits) and equity, and include an address for
further information concerning the surety. In addition, to the extent that the
Surety Bond will cover payment of 20% or more of the aggregate principal
amount of the Certificates covered thereby, provide information of financial
and other matters with respect to the issuer of the Surety Bond, if
necessary.]]
[Reserve Account]
[Certain collections with respect to the Deposited Assets not
distributed with respect to the Certificates, the Deposited Assets, the
Certificate Account [the Reserve Account] [and] [the Call Option Agreement]
shall be deposited in the Reserve Account.] Amounts on deposit in the Reserve
Account may be used by the Trustee to make payments of interest on the
Certificates to the extent that funds to make such payments are not otherwise
available. Immediately after any Distribution Date, amounts in the Reserve
Account in excess of [indicate formula] [may be distributed to the
Depositor].]
YIELD ON THE CERTIFICATES
[Describe how the yield on the Certificates may be impacted by
factors relating to the Deposited Assets and the manner and priority in which
collections thereon are allocated to the Certificateholders of each class of
the Certificates.] See "Maturity and Yield Considerations" in the accompanying
base prospectus.
DESCRIPTION OF THE CERTIFICATES
General
The Certificates will be issued pursuant to the Trust Agreement. See
"Description of the Trust Agreement." Each Certificate will represent an
undivided beneficial interest in the assets of the Trust which will primarily
consist of the Deposited Assets. The Trust's assets will be held by the
Trustee for the benefit of the Certificateholders.
The Certificates will consist of [ ] classes of certificates, the
class [ ] [ ] [Senior][variable rate][auction rate] pass-through certificates
(the "Class [ ] Certificates") and the class [ ] [[ ]%][Subordinated][variable
rate][auction rate] pass-through certificates (the "Class [ ] Certificates"
and together with the Class [ ] Certificates, the "Certificates") each of
which are being offered hereby. The Certificates will be denominated and
distributions with respect thereto will be payable in the Specified Currency.
The Certificates represent in the aggregate the entire beneficial ownership
interest in the Trust. The Class [ ] Certificates will have in the aggregate
an initial [Certificate Principal Balance] [Notional Amount] of [$]________
(approximate) and the Class [ ] Certificates will have in the aggregate an
initial [Certificate Principal Balance] [Notional Amount] of [$]________
(approximate).]
The Certificates [(other than the Class [ ] Certificates (the
"Definitive Classes"))] will be in registered form and will be issued,
maintained and transferred on the book-entry records of DTC and its
participants in minimum denominations of $[1,000] and [integral multiples
thereof] [multiples of $[25] in excess thereof].
The Certificates will each initially be represented by one or more
global certificates registered in the name of the nominee of DTC (together
with any successor clearing agency selected by the Depositor, the "Clearing
Agency"), except as provided below. DTC's nominee will be Cede & Co. No holder
of an interest in any registered Certificate will be entitled to receive a
definitive certificate representing such person's interest, except as set
forth below under "-Definitive Certificates." Unless and until definitive
certificates are issued under the limited circumstances described herein, all
references to actions by Certificateholders with respect to any such
Certificates shall refer to actions taken by DTC upon instructions from its
participants. See "-Definitive Certificates" below and "Description of the
Certificates - Global Securities" in the accompanying base prospectus.
Under the rules, regulations and procedures creating and affecting
DTC and its operations, DTC will take actions permitted to be taken by a
Certificateholder under the Trust Agreement only at the direction of one or
more participants to whose DTC account such Certificates are credited.
Additionally, DTC will take action with respect to specified Voting Rights
only at the direction and on behalf of participants whose holdings of such
Certificates evidence such specified Voting Rights. DTC may take conflicting
actions with respect to Voting Rights, to the extent that participants whose
holdings of Certificates evidence such Voting Rights, authorize such divergent
actions.
Definitive Certificates
Definitive certificates will be issued to Certificateholders or their
nominees, respectively, 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 properly discharge its responsibilities as Clearing Agency with respect to
each class of Certificates [(other than the Definitive Classes)] 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 is required to notify all Certificateholders
of the availability through DTC of definitive certificates. Upon surrender by
DTC of the definitive certificates representing the Certificates [(other than
the Definitive Classes of certificates)] and receipt of instructions for
re-registration, the Trustee will reissue such Certificates as definitive
certificates issued in the respective principal amounts owned by the
individual owners of the Certificates. Thereafter the Trustee will recognize
the holders of the definitive certificates as Certificateholders under the
Trust Agreement.
[Listing on the New York Stock Exchange]
[The Certificates have been authorized for listing, upon official
notice of issuance, with [the New York Stock Exchange, Inc. (the "NYSE")].
There can be no assurance that the Certificates, once listed, will continue to
be eligible for trading on [the NYSE]].
Interest
The holders of the Class [ ] Certificates shall be entitled to
distributions of interest calculated on the Certificate Principal Balance of
the Class [ ] Certificates at [a fixed rate equal to [ ]% per annum] [a
variable rate equal to [describe variable rate calculation] [an auction rate
calculated in accordance with the auction procedures set forth in Annex I
hereto] and the holders of the Class [ ] Certificates shall be entitled to
distributions of interest calculated on the Certificate Principal Balance of
the Class [ ] Certificates at [a fixed rate of [ %] per annum] [a variable
rate equal to [describe variable rate calculation]] [an auction rate
calculated as described herein]. [The initial Variable Pass-Through Rates for
the Class [ ] Certificates [,] [and] the Class [ ] Certificates will be
approximately [ ]% and [ ]% per annum, respectively.] [The initial Auction
Rates for the Class [ ] Certificates [,] [and] the Class [ ] Certificates will
be [ ]% and [ ]% per annum, respectively.]
For each Distribution Date, interest shall accrue on each Certificate
during the period (i) for the first Distribution Date, beginning on and
including the Closing Date and ending on but excluding [
], 200__, and (ii) for each succeeding Distribution Date
[beginning on the first day of the month and ending on the last day of such
month] [beginning on and including the prior Distribution Date, to but
excluding the current Distribution Date] [describe quarterly] [describe
monthly] [describe semi-annually] (in each case, the "Interest Accrual
Period").
[On each Distribution Date, the interest payable to each holder of
the Class [ ] Certificates shall be equal to the product of (x) a fraction
equal to the actual number of days elapsed in the related Interest Accrual
Period divided by 360, (y) (i) the applicable Class [ ] Certificate Principal
Balance as of the preceding Distribution Date (after giving effect to all
payments of principal made on such preceding Distribution Date) (or in the
case of the initial Distribution Date, the Class [ ] Certificate
Principal Balance as of the Closing Date) and (ii) the Class [ ] Pass-Through
Rate for the related Interest Accrual Period. Such amounts will be distributed
to Certificateholders entitled thereto who are beneficial holders of record as
of the day immediately preceding such Distribution Date (in each case, the
"Record Date"), to the extent that Available Funds (as defined herein) on
deposit in the Certificate Account are sufficient to pay interest due on the
Class [ ] Certificates. [The right of the Class [ ] Certificateholders to
receive distributions of interest will be subordinated to the rights of the
Class [ ] Certificateholders to receive distributions of interest to the
extent described herein.]]
[On each Distribution Date, the interest payable to each holder of
the Class [ ] Certificates shall be equal to one-half] the product of (a) the
Class A-[ ] Certificate Rate and (b) the applicable Certificate Principal
Balance for the Class A-[ ] Certificates as of the preceding Distribution Date
(after giving effect to all payments of principal made on such preceding
Distribution Date) (or in the case of the initial Distribution Date, the Class
[ ] Certificate Principal Balance as of the Closing Date). Such amounts will
be distributed to Certificateholders entitled thereto who are beneficial
holders of record as of the day immediately preceding such Distribution Date
(in each case, the "Record Date"), to the extent that Available Funds (as
defined herein) on deposit in the Certificate Account are sufficient to pay
interest due on the Class [ ] Certificates. [The right of the Class [ ]
Certificateholders to receive distributions of interest will be subordinated
to the right of the Class [ ] Certificateholders to receive distributions of
interest to the extent described herein.]]
Principal
The Certificate Principal Balance of each Certificate represents the
maximum amount that the holder thereof will be entitled to receive as
distributions of principal from future collections on the Deposited Assets.
The outstanding Certificate Principal Balance of each Certificate will be
reduced to the extent of (x) distributions of principal thereon, (y) net
losses realized on any Deposited Asset (such amounts "Realized Losses"), and
(z) any Extraordinary Trust Expenses (as defined herein) incurred by the
Trustee with the consent of the Certificateholders allocated thereto.
Distributions of principal will be made on a pro rata basis to the
Certificateholders of each Class. On each Distribution Date, all payments in
respect of principal on the Deposited Assets received by the Trustee during
the preceding Collection Period, plus any amounts received in connection with
the liquidation or default of any Deposited Assets, will be distributed by the
Trustee to the Certificateholders of record as of the preceding Record Date.
[The right of the Class [ ] Certificateholders to receive distributions of
principal will be subordinated to the right of the Class [ ]
Certificateholders to receive distributions of interest and principal to the
extent described herein.]
[Index Linked Certificates]
[The Class [ ] Certificates are "Index-Linked Certificates" as
described in the accompanying base prospectus. Distributions of [interest]
[and principal] with respect to the Class [ ] Certificates will depend on the
value of the [specify index]. The [specify index] reflects the appreciation or
depreciation in the price of a designated [group of securities, commodities,
mutual funds, currencies, intangibles, goods or articles or other objective
price, economic or other indexed asset] over a given period of time. Depending
on the performance of [the [specify index] over the related Interest Accrual
Period][the performance of the [specify index] over the time the Class [ ]
Certificates are outstanding] [the value of the [specify index] on the final
scheduled distribution date for the Class [ ] Certificates],
Certificateholders may receive a lesser return of principal on the Class [ ]
Certificates than they would have received had they held the Underlying
Securities.]
[The value of the [specify index] is determined by changes in the
prices of the [securities, commodities, mutual funds, currencies, intangibles,
goods or articles or other objective price, economic or other indexed asset]
which make up the index. Such changes generally depend on factors -- such as
economic and political events and the supply of and demand for [indexed
assets] -- that the Depositor [, the Swap Counterparty] and the Trustee and
their affiliates do not control and cannot foresee.]
[[The risk of [decreased interest payments] as a result of the
linkage of payments on Index-Linked Certificates to the [specify index] is
substantial. Prospective purchasers should read "Risk Factors -- Index Linked
Certificate Risk" and consult their own financial and legal advisors as to the
risks entailed by an investment in Index-Linked Certificates.]]
[Auction Rate Certificates]
[The Class [ ] Certificates are "Auction Rate Certificates" as
described in the accompanying base prospectus. Distributions of interest with
respect to the Class [ ] Certificates will depend on the Auction Rate for the
related Interest Accrual Period. The Auction Rate for each Interest Accrual
Period will be calculated in accordance with the auction procedures set forth
in Annex I hereto and will not exceed the Maximum Auction Rate set forth
therein. The Auction Rate Certificates will have the stated maturity of
[specify date] and will bear interest at [ ]% through the first Interest
Accrual Period. The Interest Accrual Period for Auction Rate Certificates will
initially consist of [ ] days. The Auction Date will generally be the Business
Day which occurs three days prior to the first day of each Interest Accrual
Period.]
[Subordination of Class [ ] Certificates]
[Distributions of interest on the Class [ ] Certificates will be
subordinated in priority of payment to distributions of interest (but not
principal or premium) due on the Class [ ] Certificates, and distributions of
principal on the Class [ ] Certificates will be subordinated in priority of
payment to distributions of interest and principal due on the Class [ ]
Certificates. In addition, distributions of premium, if any, on the Class [ ]
Certificates, will be subordinated in priority of payment to distributions of
interest, principal and premium due on the Class [ ] Certificates.]
Distributions
On each Distribution Date, the Trustee will apply the Available Funds
on deposit in the Certificate Account to make the following distributions in
the following order of priority:
(a) the Trustee will apply Interest Proceeds as follows:
(i) to the Trustee, as reimbursement for all
Extraordinary Trust Expenses incurred by the
Trustee in accordance with the Trust Agreement [up
to [ ]];
(ii) [to the [providers of the Other Deposited Assets]
[providers of Credit Support], any amounts required
to be paid or reimbursed to, or deposited with, any
such person in accordance with the terms of the
[Other Deposited Assets Agreement and/or Credit
Support Agreement]];
(iii) to the Class [ ] Certificateholders, the Accrued
Certificate Interest for the Class [ ]
Certificates;
(iv) to the Class [ ] Certificateholders, the Accrued
Certificate Interest for the Class [ ]
Certificates;
(v) [to the Reserve Account, an amount equal to [the
Required Reserve Account Amount]]; [and]
(vi) all remaining amounts, if any, to the Depositor;
(b) the Trustee will apply Principal Proceeds as follows:
(i) [to the Trustee as reimbursement for all
Extraordinary Trust Expenses not reimbursed in
clause (a)(i) above;]
(ii) to the Class [ ] Certificateholders, up to the
Class [ ] Certificate Principal Balance; and
(iii) to the Class [ ] Certificateholders, up to the
Class [ ] Certificate Principal Balance; and
(c) the Trustee will apply Premium Proceeds (if any) as follows:
(i) to the Class [ ] Certificateholders, [in the
proportion that the Certificate Principal Balance
of the Class [ ] Certificates bears to the
Certificate Principal Balance of the Class [ ]
Certificates]; and
(ii) to the Class [ ] Certificateholders, [in the
proportion that the Certificate Principal Balance
of the Class [ ] Certificates bears to the
Certificate Principal Balance of the Class [ ]
Certificates].
Collections received on the Deposited Assets during any Collection
Period may not be sufficient, after payment of [all] Extraordinary Trust
Expenses [and payment of [all] [certain] amounts required to be paid to the
Other Deposited Assets Providers [and][or] Credit Support Providers] for such
period, to make all required distributions to the Certificateholders. To the
extent Available Funds are insufficient to make any such distributions due to
any such series or class, any shortfall will be carried over and will be
distributable on the next Distribution Date on which sufficient funds exist to
pay the shortfall.
For purposes hereof, the following terms have the following meanings:
" Accrued Certificate Interest" shall mean the interest to
be distributed to the Class A-[ ] Certificates and the Class A-[ ]
Certificates on each Distribution Date which shall consist of (i)
previously accrued Required Interest Amount that remained unpaid on
the previous Distribution Date (on a cumulative basis) with respect
to each class of Certificates and (ii) Required Interest Amount
accrued during the related Interest Accrual Period with respect to
each class of Certificates.
"Available Funds" means for any Distribution Date the sum of
(a) all amounts actually received on or with respect to the
Underlying Securities (including Liquidation Proceeds and investment
income on amounts on deposit in the Certificate Account [and the
Reserve Account]) during the related Collection Period with respect
to such Collection Period, [(b) amounts received by the Trust as of
such Distribution Date under the terms of any Credit Support
Instruments described herein,] [(c)] [all amounts received by the
Trust under the terms of any Other Deposited Assets,] [(d)] [all
amounts transferred to the Certificate Account from the Reserve
Account to cover shortfalls in the amounts available to pay the
Required Interest Amount in respect of the Certificates, (e) [any
additional amounts that the Depositor may remit to the Trustee from
time to time according to the terms of the Trust Agreement for
application as Available Funds.]
"Certificate Principal Balance" means for any class of
Certificates [(other than the Class [ ] Certificates)] as of any date
of determination an amount equal to the initial Certificate Principal
Balance thereof, reduced by the aggregate of (a) all amounts
allocable to principal previously distributed with respect to such
class of Certificates, (b) any reductions attributable to
Certificates surrendered in exchange for Underlying Securities and
(c) any reductions in the Certificate Principal Balance based on
allocations to such Certificates of (i) Realized Losses allocable to
principal on the Deposited Assets and (ii) Extraordinary Trust
Expenses as allocated to such Class pursuant to the Series
Supplement.
"Eligible Investments" means, with respect to the
Certificates, any one or more of the following obligations or
securities; provided, however, that the total stated return specified
by the terms of each such obligation or security is at least equal to
the purchase price thereof; and provided, further, that no such
instrument may carry the symbol "R" in its rating;
(1) direct obligations of, and obligations fully
guaranteed by, the United States, the Federal Home
Loan Mortgage Corporation, the Federal National
Mortgage Association, the Federal Farm Credit
System, the Student Loan Marketing Association,
the Resolution Funding Corporation, the Federal
Home Loan Banks (to the extent such obligations
represent the joint and several obligations of the
twelve Federal Home Loan Banks), the Tennessee
Valley Authority, the Federal Farm Credit Banks or
any agency or instrumentality of the United States
the obligations of which are backed by the full
faith and credit of the United States of America;
provided, however, that obligations of, or
guaranteed by, the Federal Home Loan Mortgage
Corporation, the Federal National Mortgage
Association, the Federal Farm Credit System , the
Student Loan Marketing Association, the Resolution
Funding Corporation, the Federal Home Loan Banks
(to the extent such obligations represent the
joint and several obligations of the twelve
Federal Home Loan Banks), the Tennessee Valley
Authority, the Federal Farm Credit Banks shall be
Eligible Investments only if, at the time of
investment, they have a minimum rating of [ ];
(2) demand and time deposits in, certificates of
deposit of, or banker's acceptances issued by any
depository institution or trust company (including
the Trustee or any agent of the Trustee acting in
their respective commercial capacities)
incorporated under the laws of the United States
or any state and subject to supervision and
examination by federal and/or state banking
authorities so long as the commercial paper and/or
the short-term debt obligations of such depository
institution or trust company (or, in the case of a
depository institution which is the principal
subsidiary of a holding company, the commercial
paper or other short-term debt obligations of such
holding company) at the time of such investment or
contractual commitment providing for such
investment have a minimum rating of [ ];
(3) repurchase agreements with respect to (a) any
security described in clause (i) above or (b) any
other security issued or guaranteed by an agency
or instrumentality of the United States, with an
entity having a minimum rating of [ ];
(4) securities bearing interest or sold at a discount
issued by any corporation incorporated under the
laws of the United States or any State that have a
minimum rating of [ ] at the time of such
investment or contractual commitment providing for
such investment; provided, however, that such
rating shall be no lower than the rating on the
Underlying Securities;
(5) commercial paper having at the time of such
investment a minimum rating of [ ]; and
(6) a Guaranteed Investment Contract, provided that
the Rating Agency Condition is met.
"Extraordinary Trust Expenses" means any and all costs,
expenses or liabilities of the Trustee incurred on behalf of the
Trust, which [100%] of the Certificateholders have expressly
consented to and which arise out of the establishment, existence or
administration of the Trust, other than [(i)] customary fees and
expenses of the Trustee incurred in the ordinary course of
administration of the Trust [and (ii) costs and expenses payable by a
particular Certificateholder, the Trustee or the Depositor pursuant
to the Trust Agreement.]
"Interest Proceeds" shall mean the portion of Available
Funds which includes (i) all payments of interest (including any
accrued interest) received with respect to any Deposited Assets, (ii)
all payments of interest received upon a sale or other disposition of
any defaulted Underlying Security, (iii) all payments of interest
received as part of any recovery on any defaulted Underlying
Security, (iv) the interest portion of any amount received in
connection with a redemption of an Underlying Security, (v) all
amendment and waiver fees, late payment fees, commitment fees and
other commissions received with respect to any Deposited Asset, and
(vi) any other amount the Depositor determines to characterize as
"Interest Proceeds".
["Notional Amount" means with respect to the Class [ ]
Certificates, as of any date of determination an amount equal to
[specify amount].] [Holders of the Class [ ] Certificates are not
entitled to receive any distributions allocable to principal.]
"Premium Proceeds" shall mean the portion of Available Funds
which includes (i) all payments of premium received from the Call
Holder under the Call Option Agreement, (ii) all premiums (including
make whole amounts) received in connection with any redemption or
other prepayment of any Underlying Security, and (iii) any other
amount the Depositor determines to characterize as "Premium
Proceeds".
"Principal Proceeds" shall mean the portion of Available
Funds which includes (i) all payments of principal (including
principal prepayments) received with respect to any Deposited Assets,
(ii) all sinking fund payments, (iii) payments of principal received
upon the maturity of any Underlying Security, (iv) the principal
portion of any amount received in connection with a redemption of an
Underlying Security, (v) all payments received upon the sale or other
disposition of any defaulted Underlying Security allocable to
principal, (vi) the principal portion of any recovery received on any
defaulted Underlying Security and (vii) any other amount the
Depositor determines to characterize as "Principal Proceeds".
"Rating Agency Condition" with respect to any action or
occurrence, that each Rating Agency shall have been given ten (10)
days (or such shorter period as may be acceptable to each Rating
Agency) prior notice thereof and that each Rating Agency shall have
notified the Depositor and the Trustee in writing that such action or
occurrence will not result in a reduction, withdrawal or
qualification of the then current rating of any Certificate.
"Required Interest Amount" means [(I) ][for the Class [ ]
Certificates, on any Distribution Date, an amount equal to the
product of (x) a fraction equal to the actual number of days elapsed
in the related Interest Accrual Period divided by 360, (y) (i) the
applicable Class [ ] Certificate Principal Balance as of the
preceding Distribution Date (after giving effect to all payments of
principal made on such preceding Distribution Date) (or in the case
of the initial Distribution Date, the Class [ ] Certificate Principal
Balance as of the Closing Date) and (ii) the Class [ ] Pass-Through
Rate for the related Interest Accrual Period] [and [(II)] for the
Class [ ] Certificates, an amount equal to one-half] the product of
(a) the Class A-[ ] Certificate Rate and (b) the applicable
Certificate Principal Balance for the Class A-[ ] Certificates as of
the preceding Distribution Date (after giving effect to all payments
of principal made on such preceding Distribution Date) (or in the
case of the initial Distribution Date, the Class [ ] Certificate
Principal Balance as of the Closing Date).
[Notwithstanding the priorities described above, holders of the Class
[ ] Certificates and the Class [ ] Certificates will be entitled to receive on
any Distribution Date 100% of all principal collections received in the
related Collection Period with respect to the Deposited Assets, to be
distributed [on a pro rata basis] which amounts will reduce the Certificate
Principal Balance of the Class [ ] Certificates and the Class [ ]
Certificates, if any of the following conditions shall be satisfied: [describe
conditions, if any, by which a certain class is given 100% of the principal
cash flow other than pursuant to subordination that is in effect from the
Closing Date].]
[Advances
Advances, if any, are intended to maintain a regular flow of
interest, principal and premium (if any) payments to holders of the class or
classes of Certificates entitled thereto, rather than to guarantee or insure
against losses. On or before each Distribution Date, subject to the following
limitations, the Trustee will be obligated to advance, or cause to be
advanced, its own funds [or funds available in the Certificate Account [or the
Reserve Account] that are not included in the Available Funds for the
Distribution Date], in an amount equal to the sum of the [aggregate of
payments of interest, principal, and premium (if any) on the Deposited Assets
[(net of any Retained Interest)], that were delinquent on the related
Determination Date (each such payment, an "Advance")].
[Advances are required to be made only to the extent they are deemed
by the Trustee to be recoverable from (i) late collections on the related
Underlying Securities, (ii) [payments due on Other Deposited Assets, [and]
[or] any Credit Support], or (iii) proceeds from the disposition of any
Underlying Security [or Other Deposited Assets [and] [or] any Credit Support]
("Liquidation Proceeds"). The Trustee will not be required to make any
Advances with respect to reductions in the amount of payments on any Deposited
Asset due to bankruptcy proceedings with respect to any Underlying Securities
Issuer [or any Other Deposited Assets Provider [or] any Credit Support
Provider ]. In addition, any Advances previously made in respect of any
Underlying Security [or Other Deposited Asset [or] any Credit Support] that
are deemed by the Trustee to be nonrecoverable from late collections on the
related Underlying Securities, [payments due on Other Deposited Assets [and]
[or] any Credit Support] or Liquidation Proceeds may be reimbursed to the
Trustee out of any funds in the Certificate Account received on the Deposited
Assets prior to the distributions on the Certificates.]
Allocation of Losses; Subordination
[The subordination described herein provided by the Class [ ]
Certificates is designed to protect holders of the Class [ ] Certificates from
certain losses and other shortfalls with respect to the Deposited Assets. As a
result, losses and other shortfalls with respect to the Deposited Assets will
be borne by the Class [ ] Certificates, to the extent described below, only if
such losses and other shortfalls are not so covered by reductions in the
Certificate Principal Balance of the Class [ ] Certificates, or the coverage
in respect thereof has been exhausted.]
[Realized Losses will be allocated on any Distribution Date as
follows: [describe allocation among the various classes].]
[Restrictions on Transfer of the Class [ ] Certificates]
[Because the Class [ ] Certificates are subordinate to the Class [ ]
Certificates to the extent set forth herein, the Class [ ] Certificates may
not be purchased by or transferred to a Plan except upon the delivery of an
opinion of counsel as described herein. See "ERISA Considerations."]
DESCRIPTION OF THE TRUST AGREEMENT
General
The following summary of material provisions of the Trust Agreement
does not purport to be complete and is qualified in its entirety by reference
to the detailed provisions of the Trust Agreement, a copy of which is
available upon request from the Trustee.
The Certificates will be issued pursuant to the Trust Agreement, a
form of which is filed as an exhibit to the registration statement. A Current
Report on Form 8-K relating to the Certificates which contains a copy of the
Standard Terms and the Series 20[ ]-[ ] Series Supplement, as executed will be
filed by the Depositor with the SEC following the issuance and sale of the
Certificates. The assets of the Trust created under the Trust Agreement will
consist of:
o the Deposited Assets [(exclusive of any Retained Interest,
which is not part of the Trust)];
o all payments on or collections in respect of the Deposited
Assets due after the Cut-off Date, together with any
proceeds thereof[;]
o [the Certificate Account [and the Reserve Account] [;]
o [the rights of the Depositor under the purchase agreements
between the Depositor and each seller of the Underlying
Securities, to the extent assigned to the Trust][;]
o [the rights of the Depositor under all other agreements
related to the [Other Deposited Assets] [and] [the Credit
Support]; [and]
o [the rights of the Depositor under the Call Option
Agreement].
Reference is made to the accompanying base prospectus for important
information in addition to that set forth herein regarding the Trust, the
terms and conditions of the Trust Agreement and the Certificates. The
following summaries of certain provisions of the Trust Agreement do not
purport to be complete and are subject to the detailed provisions contained in
the form of Trust Agreement, to which reference is hereby made for a full
description of such provisions, including the definition of certain terms used
herein.
Assignment of Deposited Assets
On the [Closing Date], the Depositor will contribute to the Trust:
(i) the Underlying Securities, [(ii)] [the Other Deposited Assets,] [and (iii)
the Credit Support], together with all interest, principal, and premium (if
any) received on or with respect to such Deposited Assets after the Cut-off
Date. The Deposited Assets will not include amounts received as principal,
interest, and premium (if any) for periods prior to the [Cut-off Date] [and
amounts received in respect of any Retained Interest]. The Trustee will
concurrently deliver to the Depositor, the Certificates in consideration for
the Depositor's contribution of the Deposited Assets to the Trust. Each
Underlying Security will be identified in a schedule appearing as an exhibit
to the Trust Agreement. Such schedule will include certain statistical
information with respect to each Underlying Security as of the [Cut-off Date],
and in the event any Underlying Security is a Concentrated Underlying
Security, such schedule will include, to the extent applicable, information
regarding the payment terms thereof [, the Retained Interest, if any, with
respect thereto,] the maturity or term thereof, the rating, if any, thereof
and certain other information with respect thereto.
In addition, with respect to each Underlying Security, the Depositor
will promptly deliver, or cause to be delivered, to the Trustee, all documents
necessary to transfer ownership of each such Underlying Security to the
Trustee. [In addition, the Depositor shall deliver to the Trustee all
documents related to the [Other Deposited Assets and/or Credit Support] in
accordance with the terms of the Trust Agreement.] The Trustee will review
such documents within [ ] days of its receipt thereof, and will promptly
notify the Depositor of any missing or defective documents. The Trustee will
hold such documents in trust for the benefit of the Certificateholders.
The Trustee
[ ], a [ ] [ ], (or any successor trustee), will
act as Trustee for the Certificateholders and the Trust pursuant to the Trust
Agreement. The Trustee's offices are located at [ ] and its telephone
number is [ ].
[As compensation for its services under the Trust Agreement, the
Trustee shall be entitled to receive a periodic fee, which shall be paid by
the Depositor and not from the Deposited Assets. [On each Distribution Date
the Depositor will pay to the Trustee an amount equal to [one half] [one
quarter] [one twelfth] of the annual Trustee's Fee. Failure by the Depositor
to pay such amount on any Distribution Date shall not entitle the Trustee to
any payment or reimbursement from the Depositor, nor shall such failure
release the Trustee from its duties under the Trust Agreement.] Extraordinary
Trust Expenses shall not be paid out of the Deposited Assets unless [100%] of
the Certificateholders of each of the Class [ ] and Class [ ] Certificates
then outstanding vote to require the Trustee to incur such Extraordinary Trust
Expenses.]
[The Trust Agreement will provide that the Trustee and any director,
officer, employee or agent of the Trustee will be indemnified by the Trust and
will be held harmless against any loss, liability or expense incurred in
connection with any legal action relating to the Trust Agreement or the
Certificates or the performance of the Trustee's duties under the Trust
Agreement, other than any loss, liability or expense:
o that constitutes a specific liability of the Trustee under
the Trust Agreement; or
o that is incurred by reason of willful misconduct, bad faith
or negligence in the performance of the Trustee's duties
under the Trust Agreement or as a result of a breach, or by
reason of reckless disregard, of the Trustee's obligations
and duties under the Trust Agreement.]
The Trustee may resign or may be removed by the Depositor at any
time, in which event the Depositor will be obligated to appoint a successor
trustee. Any successor trustee must be a [bank or trust company] organized, in
good standing, conducting business, and authorized to exercise corporate trust
powers, under the laws of the United States or any state thereof, have
combined capital and surplus of at least $[50,000,000], and be subject to
supervision or examination by U.S. federal or state banking authorities. Any
resignation or removal of the Trustee and appointment of a successor trustee
will not become effective until acceptance of the appointment by such
successor trustee.
Collections
General. The Trustee will make reasonable efforts to collect all
scheduled payments due on the Deposited Assets and will pursue such collection
procedures, if any, as it would follow with respect to comparable financial
assets that it held for its own account, provided that such procedures are
consistent with the Trust Agreement, [and [describe any related instrument
governing any Other Deposited Assets and/or Credit Support]] and provided
that, it shall not be required to expend or risk its own funds.
Realization upon Defaulted Deposited Assets and Exchanged Securities.
Notwithstanding anything else contained herein (A) in the event of the
occurrence of (i) an Event of Default with respect to any Underlying Security
or (ii) an acceleration of the date of maturity of any Underlying Security in
connection with a default thereon, or (B) upon the exchange by an Underlying
Securities Issuer of an Underlying Security for a new security, the Depositor
shall, within __ days of the occurrence of such event [instruct the Trustee to
make a distribution "in-kind" of the related Underlying Security to the
Certificateholders on a pro rata basis in proportion to their outstanding
Certificate Principal Balances][instruct the Trustee to direct the Market
Agent to sell such Underlying Security and distribute the proceeds of such
sale to the Certificateholders pro rata in accordance with their respective
Certificate Principal Balances.] If the Depositor instructs the Trustee to
make such an "in-kind" distribution to the Certificateholders, the procedures
described herein under "Collections - "In-kind" Distributions by the
Depositor" will apply.
"In-kind" Distributions by the Depositor. If the Depositor instructs
the Trustee to make an "in-kind" distribution to the Certificateholders,
individual Certificateholders may elect to either (x) receive such "in-kind"
distribution or (y) have the Depositor (or its Affiliate) sell their allocable
share of such Underlying Security (or security received in exchange for any
Underlying Security), in lieu of receiving such "in-kind" distribution. If a
Certificateholder determines to accept an "in-kind" distribution, the Trustee
shall distribute to such Certificateholder its pro rata share of the related
Underlying Security (or security received in exchange for any Underlying
Security). If as a result of any minimum denomination requirements applicable
to the Underlying Securities (or securities received in exchange for any
Underlying Securities), the Trustee cannot make a full distribution to such
Certificateholders of their pro rata share of such Underlying Securities (or
securities received in exchange for any Underlying Securities), the Depositor
will instruct the Trustee to direct the Market Agent to sell, in accordance
with the Bidding Procedures described below under "Collections - Bidding
Procedures," the portion of such securities which cannot be sold in compliance
with the applicable minimum denomination requirements. The amount of the
Underlying Securities (or securities received in exchange for any Underlying
Securities), to be sold by the Market Agent will equal the difference between
such Certificateholder's pro rata share of such Underlying Securities (or
securities received in exchange for any Underlying Securities), held by the
Trust and the maximum amount of such Underlying Securities (or securities
received in exchange for any Underlying Securities), that can be distributed
to such Certificateholder in compliance with the applicable minimum
denomination requirements with respect to such Underlying Securities (or
securities received in exchange for any Underlying Securities).
Sale by the Depositor. In the event the Underlying Securities (or
securities received in exchange for any Underlying Securities), subject to
distribution, are to be sold rather than distributed in kind, as described
herein; the Depositor will instruct the Trustee to direct the Market Agent to
sell such Underlying Securities (or securities received in exchange for any
Underlying Securities), in accordance with the Bidding Procedures described
below under "Collections - Bidding Procedures" and upon disposition of such
Underlying Securities (or securities received in exchange for any Underlying
Securities), the Trustee will distribute the proceeds of such sale to the
Certificateholders.
Bidding Procedures. Prior to selling any Underlying Securities or
securities received in exchange for any Underlying Securities (or securities
received in exchange for any Underlying Securities), the Market Agent shall
solicit bids from not less than 3 dealers in such securities (which bidders
may include Banc of America Securities LLC) for the sale of such securities
with settlement thereof on or before the third Business Day after such sale.
Each bid shall be solicited from a financial institution with not less than
$100 million in assets under management or $100 million in invested assets.
Neither the Market Agent nor the Trustee shall be responsible for the failure
to obtain a bid provided the Market Agent has made reasonable efforts to
obtain bids. In the event one or more bids are received by the Market Agent,
the Market Agent shall accept the highest bid received, subject to best
execution. If a bid for the purchase of a security has been accepted by the
Market Agent but the sale has failed to settle on the proposed settlement
date, the Market Agent shall solicit new bids. Upon any sale
of any applicable Underlying Security (or security received in exchange for
any Underlying Security), the proceeds of such sale (less expenses and
commissions) shall be distributed to the Certificateholders pro rata, in
proportion to their respective Certificate Principal Balances no later than
[two] Business Days after receipt of immediately available funds. In the event
the Market Agent receives no bids to purchase such Underlying Security (or
security received in exchange for any Underlying Security), by the close of
business on the fifth Business Day after the distribution of bid
solicitations, [or is unable to settle with any Purchaser within [15] days
from the date the Market Agent was first directed to sell such Underlying
Security (or security received in exchange for any Underlying Security),] the
Trustee shall distribute such security "in kind" to the Certificateholders on
a pro rata basis in proportion to their respective Certificate Principal
Balances; provided, however, that if the bidding process is undertaken to
comply with any minimum denomination requirement, the Market Agent shall
repeat the foregoing bid solicitation until such Underlying Securities (or
securities received in exchange for any Underlying Securities), have been
sold.
Liquidated Underlying Securities. If an Underlying Security (or
security received in exchange for any Underlying Security) is liquidated and
the proceeds of such liquidation are less than the sum of (i) the outstanding
principal balance of the Underlying Security (or security received in exchange
for any Underlying Security), (ii) interest accrued thereon at the applicable
interest rate and (iii) the aggregate amount of expenses incurred by the
Trustee in connection with such liquidation to the extent reimbursable from
the assets of the Trust under the Trust Agreement, the Trust will realize a
loss in an amount equal to such difference. The Trustee will be entitled to
withdraw or cause to be withdrawn from the net proceeds recovered on any
Underlying Security (or security received in exchange for any Underlying
Security), prior to the distribution of such proceeds to Certificateholders,
amounts representing its compensation with respect to such Underlying Security
(or security received in exchange for any Underlying Security), including
unreimbursed administrative expenses incurred to liquidate such Underlying
Security (or security received in exchange for any Underlying Security) and
any unreimbursed advances of delinquent payments made with respect to such
Underlying Security (or security received in exchange for any Underlying
Security).
[Defaulted Other Deposited Assets/Credit Support Agreement]. [Upon
discovery or notice that a default has occurred with respect to the [describe
Other Deposited Assets Agreement and/or Credit Support Agreement], the
Trustee, on behalf of the Certificateholders, will present claims under the
[describe Other Deposited Assets Agreement and/or Credit Support Agreement],
and will take such reasonable steps as are necessary to receive payment or to
permit recovery thereunder. All collections by, or on behalf of, the Trustee
under the [describe Other Deposited Assets Agreement and/or Credit Support
Agreement] are to be deposited in the Certificate Account.
Underlying Securities Reporting Failure. In the event an issuer of an
Underlying Security (the outstanding principal balance of which equals or
exceeds ten percent (10%) of the aggregate principal balance of the Deposited
Assets) ceases to file periodic reports (to the extent such periodic reports
are required to be filed by such Underlying Securities Issuer under the
Exchange Act), the Depositor shall, within thirty (30) days after the earlier
of (i) the date the Underlying Securities Issuer shall have stated in writing
that it intends to permanently cease filing periodic reports required to be
filed under the Exchange Act and (ii) the date the Underlying Securities
Issuer failed to file such periodic report, instruct the Trustee to make a
distribution "in-kind" of the related Underlying Security to the
Certificateholders on a pro rata basis in proportion to their outstanding
Certificate Principal Balances. An Underlying Securities Issuer shall not be
deemed to have ceased filing required periodic reports for this purpose merely
because reporting by such issuer is delayed or temporarily suspended. The
requirement above to make an "in-kind" distribution of an Underlying Security
shall not apply unless an Underlying Securities Issuer either (x) states in
writing that it intends permanently to cease filing reports required under the
Exchange Act or (y) fails to file any required reports within the period such
report is required to be filed, as provided in (i) and (ii) above." If the
Depositor instructs the Trustee to make an "in-kind" distribution to the
Certificateholders, the procedures described herein under "Collections - "In-
Kind" Distributions by the Depositor" will apply.
Termination Events
A termination event ("Termination Event") with respect to any Class
of Certificates under the Trust Agreement, will consist of:
o [the failure by the Trust to pay the Required Interest
Amount on the Class A-[ ] Certificates or the Class A-[ ]
Certificates when due and payable and such failure continues
unremedied for thirty (30) Business Days;];
o [on any Distribution Date, a default in the payment to the
Certificateholders of the Principal Proceeds received by the
Trustee or a default in the payment in full of the
Certificate Principal Balance of the Class A-[ ]
Certificates or the [Certificate Principal Balance]
[Accreted Principal Amount] of the Class A-[ ] Certificates
on the Final Scheduled Distribution Date;]
o [the entry of a decree or order by a court having
jurisdiction over the Trust, adjudging the Trust as bankrupt
or insolvent, or approving as properly filed a petition
seeking reorganization, arrangement, adjustment or
composition of or in respect of the Trust under any
Bankruptcy Law, or appointing a receiver, liquidator,
assignee, or sequestrator (or other similar official) of the
Trust or of any substantial part of its property, or
ordering the winding up or liquidation of its affairs, and
the continuance of any such decree or order unstayed and in
effect for a period of [sixty (60)] consecutive days;]
o [the institution by the Trust of proceedings to be
adjudicated as bankrupt or insolvent, or the consent by the
Trust to the institution of bankruptcy or insolvency
proceedings against it, or the filing by the Trust of a
petition or answer or consent seeking reorganization or
relief under any Bankruptcy Law, or the consent by either
the Trust to the filing of any such petition or to the
appointment of a receiver, liquidator, assignee, trustee or
sequestrator (or other similar official) of the Trust or of
any substantial part of its property, or to the ordering of
the winding up or liquidation of its affairs, or the making
by the Trust of an assignment for the benefit of creditors,
or the admission by the Trust in writing of its inability to
pay its debts generally as they become due, or the taking of
any action by the Trust in furtherance of any such action;]
o [a failure on the part of the Trust to perform any covenant
of the Trust which failure has a material adverse effect on
the Certificateholders and which continues unremedied for a
period of sixty (60) days after written notice thereof shall
have been given by registered mail, certified mail or
overnight courier to the Trustee by the Depositor or the
Holders of at least [50%] of the Outstanding Certificates;]
o the Trust becomes an "investment company" required to
register under the Investment Company Act; and
o a failure on the part of the Trust to pay any amount payable
under the terms of any [Other Deposited Asset] [Credit
Support].
If a Termination Event involving a bankruptcy event were to occur and
be continuing, the Certificate Principal Balance and any accrued interest on
the Certificates will be immediately due and payable without demand,
presentment or notice by any Certificateholder. If any other Termination Event
described above shall have occurred and be continuing (i) the Trustee, by
notice to the Depositor or (ii) the holders of not less than [50%] of the
Certificate Principal Balance of the Certificates, by notice to the Depositor
and to the Trustee, may declare the Certificate Principal Balance of the
Certificates to be immediately due and payable and upon any such declaration,
such amounts together with all accrued and unpaid interest due thereon (if
any) shall become immediately due and payable. The Trust Agreement will
provide that, upon the declaration of a Termination Event, the Trustee will
give to the Certificateholders notice, transmitted by mail, of any uncured or
unwaived Termination Events known to it. [However, except in the case of a
Termination Event relating to the payment of interest, principal or premium
(if any), on any of the Underlying Securities, the Trustee will be protected
in withholding such notice if in good faith it determines that the withholding
of such notice is in the interest of the Certificateholders of such class.]
If the Certificates are accelerated, the Trustee may, at the
direction of the Certificateholders, sell the Deposited Assets in accordance
with the terms described in the Trust Agreement and use the proceeds to pay
certain obligations of the Trust and to pay interest, principal and premiums
(if any), remaining unpaid on the Certificates.
No holder of any Certificate will have the right to institute any
proceeding with respect to the Trust Agreement, unless (i) the holder
previously has given to the Trustee written notice of a continuing breach,
(ii) the Certificateholders of such series evidencing not less than [ ]% of
the Certificate Principal Balance of the Certificates have requested in
writing that the Trustee institute such proceeding in its own name as Trustee,
(iii) the holder or holders have offered the Trustee reasonable indemnity,
(iv) the Trustee has for [15] days failed to institute such proceeding and (v)
no direction inconsistent with such written request has been given to the
Trustee during such [15-day] period by the Certificateholders of such series
evidencing not less than the Required Percentage.
Voting Rights
[At all times,] [Subject to the succeeding paragraph,] the voting
rights will be allocated among all Certificateholders in proportion to the
then outstanding Certificate Principal Balances [or Notional Amounts] of each
class of Certificates. [Specify whether and under what circumstances voting
will be class-by-class.]
[Specify conditions, if any, under which allocation of Voting Rights
might change from the foregoing.] ["Required Percentage-Amendment" of Voting
Rights necessary to consent to amendment or modification of the Trust shall be
[ %].] ["Required Percentage-Waiver" shall mean [ %] [of the Voting Rights].]
Amendments
The Trust Agreement may be amended by the Depositor and the Trustee,
without notice to, or consent of, the Certificateholders, for specified
purposes, including:
o to cure any ambiguity or to correct or supplement any
provision in the Trust Agreement which may be defective or
inconsistent with any other provision therein;
o to add covenants, restrictions or obligations of the
Depositor or to modify any provisions of the Trust
Agreement provided that such addition or modification shall
not adversely affect the interests of the Certificateholders
in any material respect;
o to add or supplement any Credit Support for the benefit of
any Certificateholders;
o to evidence and provide for the acceptance of appointment
under the Trust Agreement of a successor trustee; and
o to comply with any requirements imposed by the Code.
Without limiting the generality of the foregoing, the Trust Agreement
may also be modified or amended from time to time by the Depositor and the
Trustee with the consent of the Certificateholders representing the Required
Percentage-Amendment of the aggregate Voting Rights of those Certificates to
which such modification or amendment relates for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions
of the Trust Agreement or of modifying in any manner the rights of
Certificateholders; provided, however, that no such amendment shall (i) reduce
in any manner the amount of, or delay the timing of, payments received on
Underlying Securities which are required to be distributed on any Certificate
without the consent of all of the holders of such Certificates, (ii) adversely
affect in any material respect the interests of the holders of any Series (or
Class within such Series) (other than as described in (i)) of Certificates in
a manner other than as described in (i), without the consent of the holders
of such Series or Class evidencing not less than the Required
Percentage--Amendment of the aggregate Voting Rights of such Series or Class
or (iii) reduce the percentage of aggregate Voting Rights required by (ii), as
described in (ii), without the consent of the holders of all Certificates of
such Series or Class then Outstanding.
The Trustee will not enter into any amendment or modification of the
Trust Agreement which would adversely affect in any material respect the
interests of the holders of any class of Certificates without the consent of
the holders of [100%] of such class of Certificates; provided, however, that
no such amendment or modification will be permitted which would alter the
status of the Trust as a grantor trust for federal income tax purposes or
cause the Trust to be required to register as an Investment Company under the
Investment Company Act of 1940, as amended. Further, no amendment will be
permitted which would adversely affect in any material respect the interests
of any Class of Certificateholders without confirmation by each Rating Agency
that such amendment would not result in a downgrading or withdrawal of its
rating of such Certificates.
Notwithstanding any other provision of the Trust Agreement, in
the event the Rating Agency Condition is not satisfied with respect to such
modification or amendment, the Required Percentage--Amendment will be
increased to require an aggregate percentage of the aggregate Voting Rights in
the amount of [ ]. Notwithstanding any other provision of the Trust Agreement,
the amendment provisions of the Trust Agreement will not be amended without
the unanimous consent of the Certificateholders.
Voting of Underlying Securities
The Trustee, as holder of the Underlying Securities, has the right to
vote and give consents and waivers in respect of such Underlying Securities as
permitted by DTC and except as otherwise limited by the Trust Agreement but
will only do so if and as directed in writing by the holders of the
outstanding Certificates. In the event that the Trustee receives a request
from DTC for its consent to any amendment, modification or waiver related to
the Underlying Securities, or receives any other solicitation requiring a vote
or other action with respect to the Underlying Securities, the Trustee shall
mail a notice of such proposed amendment, modification, waiver or solicitation
to each Certificateholder of record as of such date. The Trustee shall request
instructions from the Certificateholders as to what action it should take on
behalf of such Certificateholder with respect to the request. The Trustee
shall consent or vote, or refrain from consenting or voting, in the same
proportion (based on the relative Certificate Principal Balances [or Notional
Amounts] of the Certificates, as applicable]) as the Certificates of the Trust
were actually voted or not voted by the Certificateholders thereof as of a
date determined by the Trustee prior to the date on which such consent or vote
is required; provided, however, that, notwithstanding anything to the
contrary, the Trustee shall at no time vote or consent to any matter (i)
unless such vote or consent would not (based on an opinion of counsel) alter
the status of the Trust as a grantor trust for federal income tax purposes,
(ii) which would alter the timing or amount of any payment on the Underlying
Securities, including, without limitation, any demand to accelerate the
Underlying Securities, except in the event of an event of default with respect
to the Underlying Securities or an event which with the passage of time would
become an event of default with respect to the Underlying Securities and with
the unanimous consent of all holders of outstanding Certificates or (iii)
which would result in the exchange or substitution of any of the outstanding
Underlying Securities pursuant to a plan for the refunding or refinancing of
such Underlying Securities except in the event of a default of the Underlying
Securities and only with the consent of Certificateholders representing 100%
of the aggregate voting rights of each outstanding class of Certificates;
provided further that any exchanged or substituted security must satisfy the
criteria set forth in the accompanying base prospectus supplement for
inclusion herein as an Underlying Security. The Trustee will not be liable for
any failure to act resulting from any Certificateholder's late return of, or
failure to return, directions requested by the Trustee from the
Certificateholders.
In the event that an offer is made by any Underlying Securities
Issuer to issue new obligations in exchange for any of the Underlying
Securities or any other offer is made for the Underlying Securities, the
Trustee will notify the Certificateholders of such offer as promptly as
practicable. The Trustee must reject any such offer unless an event of default
with respect to the Underlying Securities has occurred, the Trustee is
directed by the affirmative vote of 100% of the Certificateholders to accept
such offer and the Trustee has received the tax opinion described above. The
Depositor will sell or distribute in kind any security which an Underlying
Securities Issuer proffers in exchange for an existing Underlying Security in
accordance with the procedures for "in kind" distributions and the bidding
procedures described herein. See, "Description of the Trust Agreement --
Collections."
[If an event of default under any Underlying Security occurs and is
continuing and if directed by all the holders of outstanding Class [ ]
Certificates and[, unless the Class [ ] Certificates are no longer
outstanding, by all the holders of outstanding Class [ ] Certificates,] the
Trustee will vote the Underlying Securities in favor of directing, or take
such other action as may be appropriate to direct, the Underlying Securities
trustee to declare the unpaid principal amount of the Underlying Securities
and any accrued and unpaid interest thereon to be due and payable. In
connection with a vote concerning whether to declare the acceleration of the
Underlying Securities, the Certificateholders' interests of each class may
differ and the interests of either class may differ from holders of other
outstanding debt securities of the Underlying Securities Issuer[s].]
Termination
The Trust and the interests of Certificateholders will terminate upon
the earlier to occur of the (i) distribution to the Certificateholders of all
amounts held in all of the Accounts specified in the Series Supplement and
required to be paid to such Certificateholders pursuant to the Series
Supplement on the Distribution Date succeeding the final payment on, or other
liquidation of (which may include redemption or other purchase thereof by the
applicable Underlying Securities Issuer), the last Underlying Security
remaining in the Trust or the disposition of all property acquired upon
liquidation of any such Underlying Security [and the termination of all of the
Deposited Assets in the Trust other than the Underlying Securities (the "Other
Deposited Assets") and Credit Support,] and (ii) distribution in full of all
amounts due to the Class [ ] and Class [ ] Certificateholders. The Trustee
shall provide written notice of any termination to the Certificateholders.
Upon presentation and surrender of the Certificates by the Certificateholders
to the Trustee at the principal office of the Trustee on the Final Scheduled
Distribution Date or the Distribution Date succeeding the earlier to occur of
the occurrences specified in clauses (i) and (ii) above, the Trustee will
distribute to each Holder presenting and surrendering its Certificates, the
amount otherwise distributable on such Distribution Date in respect of the
Certificates so presented and surrendered. The other circumstances under which
the interests of Certificateholders in the Trust will terminate are described
in "Description of the Trust Agreement - Termination" in the accompanying base
prospectus.
[The Depositor has the Right to Effect the Early Retirement of the
Certificates Under Limited Circumstances. The Depositor will have the right to
purchase all remaining Underlying Securities in the Trust and thereby effect
early retirement of the Certificates on any Distribution Date, on or after the
date on which the aggregate outstanding principal amount of such Underlying
Securities is reduced to less than [ten percent (10%)] of the aggregate
principal amount of the Underlying Securities as of the Cut-Off Date;
provided, however, that the right to exercise any such option is contingent on
such exercise being consistent with the Depositor's and the Trust's continued
satisfaction of the applicable requirements for an exemption under Rule 3a-7
under the Investment Company Act of 1940, as amended, and all applicable rules,
regulations and interpretations thereunder. The purchase price payable by the
Depositor in such event shall be not less than the aggregate outstanding
principal amount of such Underlying Securities on the date of purchase. See
"Description of the Trust Agreement - Termination" in the accompanying base
prospectus.
CERTAIN LEGAL ASPECTS OF THE DEPOSITED ASSETS
[Describe any applicable legal aspects of the Deposited Assets or
issues relating to the enforceability by the Certificateholders of the
security interest, if any, securing such Deposited Assets.]
IMPORTANT FEDERAL INCOME TAX CONSIDERATIONS
The following is a general summary of the material federal income tax
consequences of the purchase, ownership and disposition of the Certificates.
This summary is based on the advice of Skadden, Arps, Slate, Meagher & Flom
LLP, special federal income tax counsel to the Depositor ("Special Tax
Counsel"), which has delivered an opinion to the Depositor that the discussion
of federal income tax consequences below is accurate in all material respects.
An opinion of Special Tax Counsel, however, is not binding on the Internal
Revenue Service (the "Service") or the courts. Prospective investors should
note that no rulings have been or will be sought from the Service with respect
to any of the federal income tax consequences discussed below, and no
assurance can be given that the Service will not take contrary positions.
Except as provided below, Special Tax Counsel will provide no other opinions
with respect to the federal income tax consequences of the purchase, ownership
or disposition of the Certificates or the Trust.
This summary is based upon laws, regulations, rulings, decisions and
interpretations currently in effect, all of which are subject to change,
possibly on a retroactive basis. This summary does not address the federal
income tax consequences of purchasing, owning, and disposing of Certificates
that may be relevant to certain investors in light of their own investment
circumstances or their special tax situations, such as certain financial
institutions, tax-exempt organizations, life insurance companies, pass-through
entities, investors in pass-through entities, dealers in securities, non-U.S.
persons (except as provided below), persons whose functional currency is not
the U.S. Dollar or investors holding Certificates as part of a "straddle," a
"hedge" or a "conversion transaction." In addition, this summary is generally
limited to beneficial owners of Certificates who purchase the Certificates at
original issuance and who will hold the Certificates as "capital assets"
(generally, property held for investment) within the meaning of Section 1221
of the Internal Revenue Code of 1986, as amended (the "Code"). This summary is
intended as an explanatory discussion of the consequences of holding the
Certificates generally and does not purport to furnish information in the
level of detail or with the investor's specific tax circumstances that would
be provided by an investor's own tax advisor. Investors are encouraged to
consult their own tax advisors to determine the federal, state, local and
other tax consequences of the purchase, ownership and disposition of the
Certificates.
[FOR GRANTOR TRUST TRANSACTIONS]
[Tax Status of Trust as a Grantor Trust
[In connection with the issuance of the Certificates, Special Tax
Counsel will render an opinion to the effect that, and subject to the
assumptions and representations set forth therein, the Trust will be
classified as a grantor trust and not as an association (or publicly traded
partnership) taxable as a corporation for federal income tax purposes. An
opinion of Special Tax Counsel, however, is not binding on the Service or the
courts. Prospective investors should note that no rulings have been or will be
sought from the Service with respect to classification of the Trust for
federal income tax purposes, and no assurance can be given that the Service
will not take contrary positions. The Trust will agree, by entering into the
Trust Agreement, and the investors will agree, by their purchase and holding
of Certificates, to treat the Trust as a grantor trust for federal income tax
purposes. [FOR GRANTOR TRUST TRANSACTIONS PURSUANT TO WHICH SPECIAL TAX
COUNSEL OPINES THAT TRUST WILL BE GRANTOR TRUST]][In connection with the
issuance of the Certificates, Special Tax Counsel will render an opinion to
the effect that, and subject to the assumptions and representations set forth
therein, the Trust will not be classified as an association (or publicly
traded partnership) taxable as a corporation for federal income tax purposes.
An opinion of Special Tax Counsel, however, is not binding on the Service or
the courts. Prospective investors should note that no rulings have been or
will be sought from the Service with respect to classification of the Trust
for federal income tax purposes, and no assurance can be given that the
Service will not take contrary positions. The Trust will agree, by entering
into the Trust Agreement, and the investors will agree, by their purchase and
holding of Certificates, to treat the Trust as a grantor trust for federal
income tax purposes. For possible alternative consequences see "- Possible
Alternative Characterizations."[FOR GRANTOR TRUST TRANSACTIONS PURSUANT TO
WHICH SPECIAL TAX COUNSEL DOES NOT OPINE THAT TRUST WILL BE GRANTOR TRUST]]
[Pursuant to the classification of the Trust as a grantor trust, each
owner of a Certificate (a "Certificateholder") will be subject to federal
income taxation as if it owned directly the portion of the Deposited Assets
allocable to such Certificates, and as if it paid directly its share of
expenses paid by the Trust. The following discussion assumes that the
Underlying Securities were not issued with original issue discount ("OID")
and, accordingly, the Certificateholders will not realize OID except with
respect to a "stripped interest" (as defined below).
[The Trust has identified the Underlying Securities and any Call
Options as part of an integrated transaction within the meaning of Treasury
Regulations ss. 1.1275-6. Among other consequences of such identification is
the treatment generally of each Certificate as a synthetic debt instrument
issued on the date that it is acquired by the holder thereof.] Similar
treatment will also generally apply to Certificates representing "stripped
coupons" and/or "stripped bonds," which generally will be the case when
Certificates are issued in multiple classes and the different classes
represent the ownership of differing percentage ownership interests of the
right to interest and principal on the Underlying Securities.
Income of Certificateholders
[In General. A Certificateholder will allocate the amount it pays for
its Certificate among the Underlying Securities and the Other Deposited Assets
allocable to such Certificate, in proportion to their relative fair market
values on the date of purchase of the Certificate. A Certificateholder would
calculate separately its income, gain, loss or deduction realized with respect
to each such asset.]
The federal income tax treatment of a holder of a particular class of
Certificates will depend upon whether the interest in the Underlying
Securities represented by such class will be considered, in whole or in part,
to be a "stripped bond" or "stripped coupon" (together, a "stripped interest")
within the meaning of Section 1286 of the Code. A class of Certificates will
not be considered to represent a stripped interest in the Underlying
Securities to the extent the Certificate is entitled to receive a
proportionate amount of all principal and interest on the Underlying
Securities. A class of Certificates will be considered in its entirety to
represent a stripped interest in the Underlying Securities if it is entitled
to receive interest on the Underlying Securities which is disproportionately
less than the principal which it is entitled to receive on the Underlying
Securities, or if it is entitled to receive all or part of the interest on the
Underlying Securities but no principal on the Underlying Securities. In
addition, if a class of Certificates is entitled to receive interest and
principal on the Underlying Securities, but the interest it is entitled to
receive on the Underlying Securities is disproportionately more than the
principal it is entitled to receive on the Underlying Securities, it could be
argued that the Certificates represent (a) an interest in the Underlying
Securities that is not a stripped interest to the extent it represents a
proportional amount of all the principal and interest on the Underlying
Securities and (b) a stripped interest in the Underlying Securities to the
extent of any additional interest to which it is entitled on the Underlying
Securities. If a Certificate represents in part a stripped interest and in
part not a stripped interest, such interests will be treated as two separate
items for tax purposes and a purchaser of Certificates will be required to
allocate its purchase price among the two items [(as well as any Other
Deposited Assets)] in proportion to their relative fair market values on the
date of purchase.
Tax Treatment of Certificates to the Extent They Are Not Stripped
Interests. To the extent a class of Certificates does not represent a stripped
interest in the Underlying Securities, each Certificateholder will be required
to report on its federal income tax return, in a manner consistent with its
method of accounting, its share of the gross income of the Trust, including
interest and discount earned on the Underlying Securities[, income derived
from the Other Deposited Assets held by the Trust,] and any gain or loss upon
collection or disposition of the Underlying Securities [or Other Deposited
Assets]. The portion of each monthly payment to a Certificateholder that is
allocable to principal on the Underlying Securities (other than amounts
representing discount, as described below) will represent a recovery of
capital, which will reduce the tax basis of such Certificateholder's undivided
interest in the Underlying Securities.
To the extent that the portion of the purchase price of a Certificate
allocated to a Certificateholder's undivided interest in a Underlying Security
is greater than or less than the portion of the principal balance of the
Underlying Security allocable to the Certificate, such interest in the
Underlying Security will have been acquired at a premium or discount, as the
case may be. In determining whether a Certificateholder has purchased its
interest in the Underlying Securities at a premium or discount, a portion of
the purchase price for a Certificate will be allocated to (i) [the Other
Deposited Assets and Credit Enhancement (including in each case, any accrued
interest thereon) held by the Trust and (ii)] the accrued interest on the
Underlying Securities at the time of purchase as though such accrued interest
were a separate asset, thus, in each case, reducing the portion of the
purchase price allocable to the Certificateholder's undivided interest in the
Underlying Securities (the "Allocated Purchase Price"). To the extent that the
Allocated Purchase Price is less than the principal balance of an Underlying
Security, the Certificateholder's interest in such Underlying Security will
generally be treated as purchased at a "market discount." The market discount
on a Underlying Security will, however, be considered to be zero if it is less
than a statutorily defined de minimis amount. Conversely, to the extent that
the Allocated Purchase Price exceeds the principal balance of an Underlying
Security, the Certificateholder's interest therein will generally be treated
as purchased with "bond premium." See the discussion below under "- Bond
Premium."
For example, if the Allocated Purchase Price paid by a
Certificateholder who purchases a Certificate in the initial public offering
were equal to or within the de minimis amount of the portion of the principal
balance of the Underlying Security that is allocable to the Certificate, the
Certificateholder would generally be treated as acquiring the portion of the
Underlying Security without a discount or a premium. Moreover, if the total
purchase price of a Certificate is equal to the principal amount of the
Underlying Securities allocable to the Certificate, because a portion of such
purchase price may be allocated to accrued interest on the Underlying Security
[or to Other Deposited Assets of the Trust], in the aggregate a
Certificateholder's interest in the Underlying Securities may be treated as
purchased at a discount.
In general, under the market discount provisions of the Code,
principal payments received by the Trust, and all or a portion of the gain
recognized upon a sale or other disposition of an Underlying Security or upon
the sale or other disposition of a Certificate, will be taxable as ordinary
income to the extent of accrued market discount, and a portion of the interest
deduction attributable to any indebtedness treated as incurred or continued to
purchase or carry an Underlying Security (or a Certificate) must generally be
deferred. The ordinary income treatment on principal payments and dispositions
and deferral of interest deductions described in the preceding sentence will
not apply if a Certificateholder elects to include market discount in income
currently as it accrues for each taxable year during which it holds the
Certificate. Any such election will also apply to all debt instruments held
by the certificate owner during the year in which the election is made and all
debt instruments acquired thereafter. Market discount will accrue in the
manner to be provided in Treasury regulations, but the Conference Report
accompanying the Tax Reform Act of 1986 states that, until such regulations
are issued, taxpayers may elect to accrue market discount either (i) under a
constant yield (economic accrual) method or (ii) in the proportion that the
stated interest paid on the obligation for the current period bears to total
remaining interest on the obligation.
Tax Treatment of Certificates to the Extent They Are Stripped
Interests. To the extent that a class of Certificates represents a stripped
interest in the Underlying Securities, each such Certificate will be subject
to the OID rules. The amount of OID on a stripped interest is equal to the
excess of all amounts payable on the stripped interest (other than qualified
stated interest) over the portion of the purchase price for the certificate
allocable to the stripped interest.
Under the Treasury regulations issued under Section 1286 of the Code
(the "Regulations"), the interest payable with respect to the stripped
interest will, in the appropriate circumstances, be treated as "qualified
stated interest" if it represents a fixed periodic payment on principal on the
Underlying Securities to which the stripped interest (i.e., the
Certificateholder) is also entitled. If none of the amounts payable to a
Certificateholder with respect to a stripped interest constitute qualified
stated interest, then the stripped interest will have OID in an amount equal
to the excess of all payments to be received on the stripped interest over the
purchase price for the Certificate allocable to the stripped interest.
Moreover, in determining the amount paid for the stripped interest, a portion
of the purchase price for a Certificate must be allocated to accrued interest
[and the Certificateholder's share of Other Deposited Assets].
The tax treatment of a Certificateholder will depend upon whether the
amount of OID on the stripped interest represented by the Certificate is less
than a statutorily defined de minimis amount. In general, under the
Regulations, the amount of OID with respect to the stripped interest will be
de minimis if it is less than 1/4 of one percent multiplied by the product of
the "stated redemption price at maturity" and the number of full years
remaining after the purchase date until the maturity of such stripped
interest. However, if the stripped interest provides for amortization of
principal, the amount of OID will be de minimis if it is less than 1/4 of one
percent multiplied by the product of the stated redemption price at maturity
and the weighted average maturity (i.e., the sum of the amounts obtained by
multiplying the amount of each payment under the stripped interest (other than
a payment of qualified stated interest) by a fraction, the numerator of which
is the number of complete years from the purchase date until the payment is
made and the denominator of which is the stated redemption price at maturity)
of the stripped interest. In general, "stated redemption price at maturity"
means the sum of all amounts payable on the stripped interest other than
qualified stated interest.
If the amount of OID on the stripped interest represented by the
Certificate is de minimis under the rules discussed above, the stripped
interest would not be treated as having OID. Each Certificateholder would be
required to report on its federal income tax return its share of the gross
income of the Trust, including interest on the Underlying Securities and any
gain upon sale or other disposition by the Trust of the Underlying Securities.
Such gross income would exceed the pass-through rate on the Certificate by an
amount equal to the Certificateholder's share of the expenses of the Trust for
the period during which it owns a Certificate. Each Certificateholder would be
required to include the de minimis OID in income as each payment (other than
payments of qualified stated interest) on the stripped interest is received,
in proportion to the amount that each payment bears to the redemption price at
maturity of the stripped interest; such income would be capital gain,
short-term or long-term depending upon the Certificateholder's holding period
in the Certificate (which as discussed below may be eliminated as a result of
the rules relating to "straddles"). The Certificateholder would be entitled to
deduct its share of expenses of the Trust to the extent described below. Any
amounts received by a Certificateholder from any credit support or any
subordination feature will generally be treated for federal income tax
purposes as having the same characteristics as the payments they replace.
Except as described below, a Certificateholder would report its share
of the income of the Trust under its usual method of accounting. Accordingly,
except as described below, interest on an Underlying Security would be
includable in a Certificateholder's gross income when it accrues on the
Underlying Securities, or, in the case of Certificateholders who are cash
basis taxpayers, when received by the administrative agent, if any, or
otherwise the Trustee on behalf of Certificateholders. Because the interest
collected on the Underlying Securities generally is paid to Certificateholders
in the following month, the amount of interest includable in a
Certificateholder's gross income during any calendar month will generally not
equal the interest distributed in that month.
If the OID with respect to the stripped interest in the Underlying
Securities represented by a Certificate is not treated as being de minimis, a
Certificateholder will be required to include in income, in addition to any
qualified stated interest on the stripped interest as described above, any OID
accruing on the stripped interest. OID must be included in income as it
accrues on a daily basis, regardless of when cash payments are received, using
a method reflecting a constant yield as described below. Such treatment could
result in the accrual of income by such Certificateholder prior to the receipt
of cash by such Certificateholder. Under the rules described below, the
amounts includable in income by a Certificateholder on a stripped interest
that has OID are lesser in the early years and greater in the later years than
the amounts that would be includable on a straight-line basis.
In general, if a stripped interest is treated as having OID, the
Certificateholder will be required, whether such Certificateholder uses the
cash or the accrual method of tax accounting, to include in ordinary gross
income the sum of the "daily portions" of OID on the stripped interest for all
days during the taxable year that the Certificateholder owns the Certificate.
The daily portions of OID on a stripped interest are determined by allocating
to each day in any "accrual period" a ratable portion of the OID allocable to
that accrual period. The amount of OID on a stripped interest allocable to
each accrual period is determined by (i) multiplying the "adjusted issue
price" (as defined below) of the stripped interest by a fraction, the
numerator of which is the annual yield to maturity of the stripped interest
and the denominator of which is the number of accrual periods in a year and
(ii) subtracting from that product the amount of qualified stated interest (if
any) payable on the stripped interest during (or allocable to) such accrual
period.
An "accrual period" would generally be each period ending on an
interest payment date on the Underlying Securities, although Treasury
regulations allow a Certificateholder to elect other accrual periods of no
more than a year in length, as long as each scheduled payment on the
Underlying Securities occurs at the beginning or end of an accrual period.
The "adjusted issue price" of a stripped interest at the beginning of
any accrual period is the purchase price for a Certificate allocable to the
stripped interest (i) increased by the amount of OID allocable to all prior
accrual periods and (ii) reduced by the amount of all payments other than
qualified stated interest payments (if any) in all prior accrual periods. In
addition, if an interval between payments of qualified stated interest
contains more than one accrual period, the adjusted issue price at the
beginning of each accrual period in the interval is increased by the amount of
qualified stated interest that has accrued prior to the first day of the
accrual period but that is not payable until the end of the interval.
Bond Premium. In the event that a Certificate represents either an
unstripped interest in an Underlying Security, or a stripped interest which
includes qualified stated interest, and the stripped or unstripped interest is
treated as having been purchased at a premium (i.e., the purchase price of a
Certificate allocable to the Underlying Security exceeds the total amount
payable on the Underlying Security to the Certificateholder other than
qualified stated interest), such premium will be amortizable by the
Certificateholder as an offset to interest income (with a corresponding
reduction in the Certificateholder's basis) under a constant yield method over
the term of the Underlying Security if an election under Section 171 of the
Code is made or was previously in effect. Any such election will also apply to
all debt instruments held by the Certificateholder during the year in which
the election is made and all debt instruments acquired thereafter.
Election to Treat All Interest as Original Issue Discount. Any
Certificateholder may elect to include in gross income all interest (including
stated interest, OID, de minimis OID, market discount and de minimis market
discount, as adjusted by any bond premium or acquisition premium) that accrues
on an unstripped or stripped interest using the constant yield method
described above, treating the instrument as having been issued on the
Certificateholder's acquisition date at an issue price equal to such owner's
adjusted basis with no interest payments being qualified stated interest. Such
an election with respect to a unstripped or stripped interest having
amortizable bond premium or market discount would constitute, respectively, an
election to apply the market discount rules or bond premium rules with respect
to all other debt instruments with market discount or amortizable bond
premium, as the case may be, of such Certificateholder.
Modification or Exchange of Underlying Securities. Depending upon the
circumstances, it is possible that a modification of the terms of the
Underlying Securities, or a substitution of other assets for the Underlying
Securities following a default on the Underlying Securities, would be a
taxable event to Certificateholders on which they would recognize gain or
loss.
Foreign Tax Credits. Any foreign income taxes withheld from payments
to the Trust will generally be includable in the income of Certificateholders
and may be deductible to Certificateholders, or, alternatively, may entitle a
Certificateholder to a U.S. foreign tax credit. The federal income tax law
dealing with foreign tax credits is complex and the utilization of a deduction
or credit related to foreign income taxes is subject to various limitations.
Investors are encouraged to consult their tax advisors with respect to the
federal, state, local and foreign tax consequences of foreign income taxes.
Other Deposited Assets of the Trust
[DESCRIBE TAX CONSEQUENCES OF THE OTHER DEPOSITED ASSETS.]
Deductibility of Trust's Fees and Expenses
In computing its federal income tax liability, a Certificateholder
will generally be entitled to deduct, consistent with its method of
accounting, its share of reasonable administrative fees, trustee fees and
other fees paid or incurred by the Trust as provided in Section 162 or 212 of
the Code and any allowable amortization deductions with respect to certain
other assets of the Trust. If a Certificateholder is an individual, estate or
trust, the deduction for his or its share of fees will be a miscellaneous
itemized deduction that may be disallowed in whole or in part. The deduction
of expenses may be subject to various limitations. Investors are encouraged to
consult their tax advisors with respect to the federal, state, local and
foreign tax consequences of deducting expenses of the Trust.
Purchase and Sale of a Certificate
A Certificateholder's tax basis in a Certificate generally will equal
the cost of such Certificate, increased by any amounts of undistributed
taxable income (e.g., OID) and reduced by any amortized premium (each as
described above) and any payments other than payments of qualified stated
interest on an Underlying Security made on such Certificate.
If a Certificate is sold, gain or loss will be recognized equal to
the difference between the proceeds of sale allocable to each of the assets of
the Trust and the Certificateholder's adjusted basis in each of the foregoing.
[However, a Certificateholder's position in the [Underlying Securities] and
the Call Option and/or the Swap Agreement likely will constitute a straddle
for federal income tax purposes. Thus, any gain or loss realized upon sale,
redemption, or other disposition of the Certificates will be short-term
capital gain or loss, even if you have held the Certificate for more than one
year. In addition, a portion of any interest expense incurred to acquire (or
carry) the Certificates may be deferred and added to your basis in the
Certificates.] Any gain or loss will generally be a capital gain or loss,
except that gain will be treated in whole or in part as ordinary interest
income to the extent of the Certificateholder's interest in accrued market
discount not previously taken into income on Underlying Securities.
Foreign Certificateholders
To the extent that amounts paid to Certificateholders that are not
United States persons ("Foreign Certificateholders") are treated as interest,
subject to exceptions applicable to certain types of interest, with respect to
Underlying Securities originated after July 18, 1984, such amounts will
generally be treated as "portfolio interest" and will generally not be subject
to federal income or withholding tax, provided that the interest is not
effectively connected with the conduct of a trade of business within the
United States by the Foreign Certificateholder and provided that such Foreign
Certificateholder (i) fulfills certain certification requirements, (ii) does
not own, actually or constructively, at least 10% of the total combined voting
power of all classes of stock of the Underlying Securities issuer (or 10% of
the capital or profits of an issuer that is a partnership for federal income
tax purposes), and (iii) is not a "related controlled foreign corporation."
Under such requirements, the holder must certify, under penalties of perjury,
that it is not a "United States person" and provide its name and address. If
the interest is not portfolio interest, it will generally be subject to
federal income and withholding tax at a rate of 30%, unless that tax is
reduced or eliminated pursuant to an applicable tax treaty or that interest is
effectively connected with the conduct of a trade or business within the
United States and, in either case, the appropriate statement has been
provided.
Any capital gain realized on the sale, redemption, retirement or
other taxable disposition of an Underlying Security or a Certificate by, or
treated as by, a Certificateholder will be exempt from federal income tax and
withholding tax, provided that (a) that gain is not effectively connected with
the conduct of a trade or business in the United States by the Foreign
Certificateholder, and (b) in the case of an individual Foreign
Certificateholder, that individual is not present in the United States for 183
days or more in the taxable year.
If the interest, gain or income on a Certificate or Underlying
Security is effectively connected with the Foreign Certificateholder's conduct
of a trade or business in the United States, the Foreign Certificateholder
will generally be subject to federal income tax on the interest, gain or
income at standard federal income tax rates. In addition, if the Foreign
Certificateholder is a foreign corporation, it may be subject to a branch
profits tax equal to 30% of its "effectively connected earnings and profits
within the meaning of the Code for the taxable year, as adjusted for certain
items, unless it qualifies for a lower rate under an applicable tax treaty.
[DESCRIBE THE FEDERAL INCOME TAX CONSEQUENCES TO FOREIGN
CERTIFICATEHOLDERS OF AN INTEREST IN ANY OTHER DEPOSITED ASSETS OF THE
TRUST.]
A "United States person" means, as determined for U.S. federal income
tax purposes, (a) a citizen or resident of the U.S., (b) a corporation created
or organized in or under the laws of the United States, any State or the
District of Columbia, (c) an estate the income of which is includable in gross
income for U.S. Federal income tax purposes, regardless of its source, or (d)
a trust with respect to which a court within the United States is able to
exercise primary supervision over its administration and one or more United
States fiduciaries have the authority to control all of its substantial
decisions.
Possible Alternative Characterizations
It is possible that each Certificate will be treated as an actual
debt instrument issued on the Closing Date. In that case, the Certificates
would be taxed like conventional debt instruments and the discussion above
under "- Income of Certificateholders" would not apply. If a series of
Certificates has more than one class and some but not all classes are treated
as actual debt instruments issued on the Closing Date, income on the classes
not so treated may be treated as unrelated business taxable income (and thus
subject to tax) in the hands of pension plans, individual retirement accounts
and other tax-exempt investors. [It is also possible that the Trust will be
treated as a partnership for federal income tax purposes. As described above,
Special Tax Counsel will render an opinion to the effect that the Trust will
not be classified for federal income tax purposes as an association (or
publicly traded partnership) taxable as a corporation. In that case, the
Certificateholders would treated as partners in a partnership (unless each
Certificate were treated as an actual debt instrument issued on the Closing
Date) and the discussion above under "- Income of Certificateholders" would
not apply. As a partnership, the Trust will not be subject to federal income
tax, but each Certificateholder treated as a partner will generally be
required to separately take into account such holder's allocable share of
income, gains, losses, deductions and credits of the Trust regardless of the
cash distributions received by such Certificateholder. A Certificateholder's
allocable share of income and gain may exceed the amount of current cash
distributions received by such Certificateholder. In certain circumstances,
the Trust may be subject to federal withholding tax with respect to the income
and gain separately allocated to Foreign Certificationholders.[FOR GRANTOR
TRUST TRANSACTIONS PURSUANT TO WHICH SPECIAL TAX COUNSEL DOES NOT OPINE THAT
TRUST WILL BE GRANTOR TRUST]]
Backup Withholding
Payments made on the Certificates and proceeds from the sale,
retirement or other disposition of the Certificates will not be subject to a
"backup" withholding tax unless, in general, the Certificateholder fails to
comply with certain reporting procedures and is not an exempt recipient under
applicable provisions of the Code. Exempt recipients are encouraged to comply
with the reporting procedures to avoid erroneous backup withholding. Any
amount deducted and withheld will be allowed as a credit against the
Certificateholder's federal income tax, provided that appropriate proof is
provided under rules established by the Internal Revenue Service. Investors
are encouraged to consult their tax advisors regarding their qualification for
exemption from backup withholding and the procedure for obtaining such an
exemption.]
[FOR PARTNERSHIP TRANSACTIONS]
[Tax Characterization of The Trust as a Partnership
[In connection with the issuance of the Certificates, Special Tax Counsel will
render an opinion to the effect that, and subject to the assumptions and
representations set forth therein, the Trust will be classified as a
partnership and not as an association (or publicly traded partnership) taxable
as a corporation for federal income tax purposes. However, there are no
authorities on similar transactions involving interests issued by an entity
with terms similar to those of the Certificates. Furthermore, an opinion of
Special Tax Counsel is not binding on the Service or the courts. Prospective
investors should note that no rulings have been or will be sought from the
Service with respect to classification of the Trust for federal income tax
purposes, and no assurance can be given that the Service will not take
contrary positions. The Depositor and the administrative agent, if any, have
agreed, and the Certificateholders will agree by their purchase of
Certificates, to treat the Trust as a partnership for purposes of federal,
state and local income, franchise and any other tax measured in whole or in
part by income. [FOR PARTNERSHIP TRANSACTIONS PURSUANT TO WHICH SPECIAL TAX
COUNSEL OPINES THAT TRUST WILL BE PARTNERSHIP]][In connection with the
issuance of the Certificates, Special Tax Counsel will render an opinion to
the effect that, and subject to the assumptions and representations set forth
therein, the Trust will not be classified as an association (or publicly
traded partnership) taxable as a corporation for federal income tax purposes.
However, there are no authorities on similar transactions involving interests
issued by an entity with terms similar to those of the Certificates.
Furthermore, an opinion of Special Tax Counsel is not binding on the Service
or the courts. Prospective investors should note that no rulings have been or
will be sought from the Service with respect to classification of the Trust
for federal income tax purposes, and no assurance can be given that the
Service will not take contrary positions. The Depositor and the administrative
agent, if any, have agreed, and the Certificateholders will agree by their
purchase of Certificates, to treat the Trust as a partnership for purposes of
federal, state and local income, franchise and any other tax measured in whole
or in part by income. For possible alternative consequences see "- Possible
Alternative Characterizations."[FOR PARTNERSHIP TRANSACTIONS PURSUANT TO WHICH
SPECIAL TAX COUNSEL DOES NOT OPINE THAT TRUST WILL BE PARTNERSHIP]]
If the Trust were deemed to be a "publicly traded partnership" it
could be subject to corporate income tax. Any such corporate income tax could
materially reduce or eliminate cash that would otherwise be distributable with
respect to the Certificates (and Certificateholders could be liable for any
such tax that is unpaid by the Trust). A publicly traded partnership is taxed
in the same manner as a corporation unless at least 90% of its gross income
consists of specified types of "qualifying income." Such qualifying income
includes, among other things, interest income not derived in the conduct of a
financial or insurance business, dividend income, and gain from the
disposition of assets producing such income.
Partnership Taxation
As a partnership, the Trust will not be subject to federal income
tax, but each Certificateholder will be required to separately take into
account such holder's allocable share of income, gains, losses, deductions and
credits of the Trust. The Trust's income will consist primarily of [ ] and any
gain upon collection or disposition of [ ]. The Trust's deductions will
consist primarily of [ ].
The tax items of a partnership are allocable to the partners in
accordance with the Code, Treasury regulations and the partnership agreement
(here, the Trust Agreement and related documents). The Trust Agreement will
provide that each class of Certificateholders will be allocated taxable income
of the Trust for each monthly period equal to the sum of (i) the amount
payable (or accruing) at the pass-through rate on such class of Certificates
for such month (to the extent such amount would not economically represent a
return of capital); (ii) an amount equivalent to interest that accrues during
such month on amounts previously due on such class of Certificates but not yet
distributed; (iii) any Trust income for such month attributable to discount on
the Underlying Securities that corresponds to any excess of the principal
amount of such class of Certificates over their initial issue price; and (iv)
[any other income economically accruing for such class of Certificates during
such month. [All remaining taxable income of the Trust will be allocated to
the [ ]]. It is believed that this allocation will be valid under applicable
Treasury regulations, although no assurance can be given that the Service
would not require a greater amount of income to be allocated to
Certificateholders. Moreover, even under the foregoing method of allocation,
holders may be allocated income equal to the entire pass-through rate plus the
other items described above even though the Trust might not have sufficient
cash to make current cash distributions of such amount. Thus, cash basis
holders in effect could be required to report income from the Certificates on
the accrual basis. In addition, tax allocations and tax reporting will be done
on a uniform basis for all Certificateholders, even though their Certificates
may have been purchased at different times and at different prices.
An individual taxpayer's miscellaneous itemized deductions (which do
not include interest expense) are subject to limitations and as a result may
be disallowed in whole or in part. Those limitations, which also apply to
estates and trusts, would apply to a Certificateholder's share of expenses of
the Trust (including fees to the administrative agent, if any) and might
result in such holder being taxed on an amount of income that exceeds the
amount of cash actually distributed to such holder over the life of the Trust.
If the Trust holds a large number of Underlying Securities, it
intends to make all tax calculations relating to income and allocations to
Certificateholders on an aggregate basis. Were the Service to require that
such calculations be made separately for each Underlying Security, the Trust
might be required to incur additional expense but the Depositor believes that
there would not be a material adverse effect on Certificateholders.
A Certificateholder would increase or decrease its tax basis in its
Certificate for its allocable share of the Trust's income or loss,
respectively. Any cash distributions by the Trust to a Certificateholder will
constitute (i) first, a return of capital to the extent of such
Certificateholder's tax basis in the Certificate (with a corresponding
dollar-for-dollar reduction in such tax basis), and (ii) thereafter, to the
extent in excess thereof, gain on the sale or exchange of such
Certificateholder's Certificate. See "- Disposition of Certificates" below.
Discount and Premium
The Depositor believes that the Underlying Securities were not issued
with original issue discount ("OID") and, therefore, the Trust should not have
OID income. However, the purchase price paid by the Trust for the Underlying
Securities may be greater or less than the remaining principal balance of the
Underlying Securities at the time of purchase. If so, the Underlying
Securities will have been acquired at a premium or discount, as the case may
be. (As indicated above, if the Trust acquires a large number of Underlying
Securities it will make this calculation on an aggregate basis, but might be
required to recompute it on an instrument-by-instrument basis.)
The Trust will make an election that will result in any market
discount on the Underlying Securities being included in income currently as
such discount accrues over the life of the Underlying Securities. As indicated
above in the discussion under "- Partnership Taxation," a portion of such
market discount income may be allocated to Certificateholders.
Modification or Exchange of Underlying Securities
Depending upon the circumstances, it is possible that a modification
of the terms of the Underlying Securities, or a substitution of other assets
for the Underlying Securities following a default on the Underlying
Securities, would be a taxable event to Certificateholders on which they would
recognize gain or loss.
Foreign Tax Credits
Any foreign income taxes withheld from payments to the Trust will
generally be includable in the income of Certificateholders and may be
deductible to Certificateholders, or, alternatively, may entitle a
Certificateholder to a U.S. foreign tax credit. The federal income tax law
dealing with foreign tax credits is complex and the utilization of a deduction
or credit related to foreign income taxes is subject to various limitations.
Investors are encouraged to consult their tax advisors with respect to the
federal, state, local and foreign tax consequences of foreign income taxes.
Tax Consequences of Other Assets Held by Trust
The manner in which income with respect to the other assets of the
Trust should be accrued will depend on the nature of those assets.
[DISCUSS SPECIFIC TAX CONSEQUENCES OF OTHER ASSETS.]
Section 708 Termination
Under Section 708 of the Code, the Trust will be deemed to terminate
for federal income tax purposes if 50% or more of the capital and profits
interests in the Trust are sold or exchanged within a 12-month period. Were
such a termination to occur, the Trust would be considered to have contributed
its assets to a new partnership and distributed the interests in the new
partnership in liquidation to the Certificateholders. If any such constructive
termination occurs, the Trust does not intend to comply with certain technical
requirements that might be applicable for various reasons including the likely
lack of relevant data. As a result, the Trust may be subject to certain tax
penalties and may incur additional expenses. Moreover, the Schedule K-1
information thereafter distributed to the Certificateholders may be incorrect.
Disposition of Certificates
Generally, capital gain or loss will be recognized on a sale or other
disposition of Certificates in an amount equal to the difference between the
amount realized and the seller's tax basis in the Certificates sold. A
Certificateholder's tax basis in a Certificate will generally equal its cost,
increased by his share of trust income includable in his income (including for
the taxable year of sale) and decreased by his share of deductible trust
losses and any distributions received with respect to such Certificate. In
addition, both its tax basis in, and the amount realized on a sale of, a
Certificate would include the holder's share of liabilities of the Trust. A
holder acquiring Certificates at different prices may be required to maintain
a single aggregate adjusted tax basis in such Certificate and, upon sale or
other disposition of some of the Certificates, allocate a pro rata portion of
such aggregate tax basis to the Certificates sold (rather than maintaining a
separate tax basis in each Certificate for purposes of computing gain or loss
on a sale of that Certificate).
[A Certificateholder's position in the Underlying Securities and the
Call Option and/or the Swap Agreement likely will constitute a straddle for
federal income tax purposes. Thus, any gain or loss realized upon sale,
redemption, or other disposition of the Certificates will be short-term
capital gain or loss, even if you have held the Certificate for more than one
year. In addition, a portion of any interest expense incurred to acquire (or
carry) the Certificates may be deferred and added to your basis in the
Certificates.][Gain or loss realized upon sale, redemption, or other
disposition of the Certificates will generally be capital gain and will be
long-term capital gain or loss depending upon the holding period of the
Certificateholder. The utilization of capital losses is subject to
limitation.]
On the sale of a Certificate, any gain attributable to the holder's
share of any accrued market discount on the Underlying Securities that has not
otherwise been included in the holder's income would generally be treated as
ordinary income to the holder and would give rise to special tax reporting
requirements. The Trust does not expect to have any other assets that would
give rise to such special reporting requirements. Thus, to avoid those special
reporting requirements, the Trust will elect to include market discount in
income as it accrues.
If a Certificateholder is required to recognize an aggregate amount
of income (not including income attributable to disallowed itemized deductions
described above) over the life of the Certificates that exceeds the aggregate
cash distributions with respect thereto, such excess will generally give rise
to a capital loss upon the retirement of the Certificate. The utilization of
capital losses is subject to limitation.
Allocations Between Transferors and Transferees
In general, the Trust's taxable income and losses will be determined
monthly and the tax items for a particular calendar month allocable to a
particular class of Certificates will be apportioned among holders of such
Certificates in proportion to the principal amount of such Certificates owned
by them as of the first business day following the end of such month. As a
result, a holder purchasing Certificates may be allocated tax items (which
will affect its tax liability and tax basis) attributable to periods before
the actual transaction.
The use of such a monthly convention may not be permitted by existing
regulations. If such a convention is not allowed (or only applies to transfers
of less than all of a partner's interest), taxable income or losses of the
Trust might be reallocated among the Certificateholders. The Trustee is
authorized to revise the Trust's method of allocation between transferors and
transferees to conform to a method permitted by future regulations.
Section 754 Election
In the event that a Certificateholder sells its Certificates at a
profit (loss), the purchasing Certificateholder will have a higher (lower)
basis in the Certificates than the selling Certificateholder had. The tax
basis of the Trust's assets will not be adjusted to reflect that higher (or
lower) basis unless the Trust were to file an election under Section 754 of
the Code. In order to avoid the administrative complexities that would be
involved in keeping accurate accounting records, as well as potentially
onerous information reporting requirements, the Trust will not make such
election. As a result Certificateholders might be allocated a greater or
lesser amount of trust income than would be appropriate based on their own
purchase price for Certificates.
Administrative Matters
The Trustee is required to keep complete and accurate books of the
Trust. Such books will be maintained for financial reporting and tax purposes
on an accrual basis and the fiscal year of the Trust will be the calendar
year. The Trustee will file a partnership information return (Internal Revenue
Service Form 1065) with the Service for each taxable year of the Trust and
will report each Certificateholder's allocable share of items of trust income
and expense to holders and the Service on Schedule K-1. The Trust will provide
the Schedule K-1 information to nominees that fail to provide the Trust with
the information statement described below and such nominees will be required
to forward such information to the beneficial owners of the Certificates.
Generally, holders must file tax returns that are consistent with the
information return filed by the Trust or be subject to penalties, unless the
holder notifies the Service of all such inconsistencies.
Under Code Section 6031, any person that holds Certificates as a
nominee at any time during a calendar year is required to furnish the Trust
with a statement containing certain information on the nominee, the beneficial
owners and the Certificates so held. Such information includes (i) the name,
address and taxpayer identification number of the nominee and (ii) as to each
beneficial owner (x) the name, address and taxpayer identification number of
such person, (y) whether such person is not a United States person, a
tax-exempt entity, or a foreign government, an international organization, or
any wholly-owned agency or instrumentality of either of the foregoing, and (z)
certain information on Certificates that were held, bought or sold on behalf
of such person throughout the year. In addition, brokers and financial
institutions that hold Certificates through a nominee are required to furnish
directly to the Trust information as to themselves and their ownership of
Certificates. A clearing agency registered under Section 17A of the Exchange
Act is not required to furnish any such information statement to the Trust.
The information referred to above for any calendar year must be furnished to
the Trust on or before the following January 31. Nominees, brokers and
financial institutions that fail to provide the Trust with the information
described above may be subject to penalties.
The Depositor, as the tax matters partner, will be responsible for
representing the Certificateholders in any dispute with the Service. The Code
provides for administrative examination of a partnership as if the partnership
were a separate and distinct taxpayer. Generally, the statute of limitations
for partnership items does not expire before three years after the date on
which the partnership information return is filed. Any adverse determination
following an audit of the return of the Trust by the appropriate taxing
authorities could result in an adjustment of the returns of the
Certificateholders and, under certain circumstances, a Certificateholder may
be precluded from separately litigating a proposed adjustment to the items of
the Trust. An adjustment could also result in an audit of a
Certificateholder's returns and adjustments of items not related to the income
(or loss) of the Trust.
Tax Consequences to Foreign Certificateholders
[It is not clear whether the Trust would be considered to be engaged
in a trade or business in the United States for purposes of federal
withholding taxes with respect to non-U.S. persons because there is no clear
authority dealing with that issue under facts substantially similar to those
described herein.][It is not expected that the Trust would be engaged in a
trade or business in the United States for such purposes and the Trust does
not expect to withhold as if it were so engaged. Subsequent adoption of
Treasury regulations or the issuance of other administrative pronouncements
may require the Trust to change its withholding procedures. In determining a
holder's nonforeign status, the Trust may rely on Form W-8BEN or the holder's
certification of nonforeign status signed under penalties of perjury.]
[If the Trust were determined to be engaged in a trade or business in
the United States, each foreign holder would be required to file a U.S.
individual or corporate income tax return (including, in the case of a
corporation, the branch profits tax) on its share of the Trust's income. Each
Foreign Certificateholder must obtain a taxpayer identification number from
the Service and submit that number to the Trust on Form W-8 in order to assure
appropriate crediting of the taxes withheld. A Foreign Certificateholder
generally would be entitled to file with the Service a claim for refund with
respect to taxes withheld by the Trust, taking the position that no taxes were
due because the Trust was not engaged in a U.S. trade or business. The Trust
will cooperate in any such refund claim if it can do so without incurring any
out-of-pocket cost. No assurance can be given as to whether any such refund
claim would be granted.]
[THE FOREGOING SUMMARY WILL BE MODIFIED, AS NECESSARY, TO REFLECT
DIFFERENCES CAUSED BY THE PRECISE NATURE OF THE DEPOSITED ASSETS RELATING
TO A GIVEN SERIES OF CERTIFICATES.]
[Possible Alternative Characterizations
It is possible that the Trust could be characterized as a grantor
trust for federal income tax purposes. In such case, each owner of a
Certificate (a "Certificateholder") will be subject to federal income taxation
as if it owned directly the portion of the Deposited Assets allocable to such
Certificates, and as if it paid directly its share of expenses paid by the
Trust. As a result, the timing and amount of income, gain, loss, deduction,
and credit includable by a Certificateholder may differ from the discussion
above. [FOR PARTNERSHIP TRANSACTIONS PURSUANT TO WHICH SPECIAL TAX COUNSEL
DOES NOT OPINE THAT TRUST WILL BE PARTNERSHIP]]
Backup Withholding
Payments made on the Certificates and proceeds from the sale of the
Certificates will not be subject to a "backup" withholding tax unless, in
general, the Certificateholder fails to comply with certain reporting
procedures and is not an exempt recipient under applicable provisions of the
Code.]
[FOR FASIT TRANSACTIONS]
[Tax Characterization of The Trust as a "FASIT"
No currently effective regulations or other guidance has been issued
concerning sections 860H through 860L of the Code, and certain issues relevant
to such provisions, that apply to financial asset securitization investment
trusts ("FASITs"). Hence, definitive guidance cannot be provided regarding
many aspects of the federal income tax treatment of Certificateholders. This
summary is subject to the issuance of final Treasury regulations and other
guidance relating to the federal income tax consequences of FASITs and holders
of interests in FASITs, which guidance may provide federal income tax
consequences contrary to those described below and may apply retroactively.
Investors are encouraged to consult their own tax advisors in determining the
federal, state, local, foreign, and any other tax consequences relating to
FASITs and holders of interests in FASITs.
The Trust will qualify as a FASIT if (i) a FASIT election is in
effect, (ii) certain tests concerning the composition of the Trust's assets
(the "asset test") and the nature of the investors' interests in the Trust
(the "interests") are met on a continuing basis, and (iii) the Trust is not a
RIC as described in Section 851(a) of the Code. In connection with the
issuance of the Certificates, Special Tax Counsel will render an opinion to
the effect that, and subject to the assumptions and representations set forth
therein, the Trust will qualify as a FASIT under sections 860H through 860L of
the Code. However, an opinion of Special Tax Counsel is not binding on the
Service or the courts. Prospective investors should note that no rulings have
been or will be sought from the Service with respect to classification of the
Trust for federal income tax purposes, and no assurance can be given that the
Service will not take contrary positions. Furthermore, final Treasury
regulations and other guidance could affect this qualification, possibly with
retroactive effect. If the Trust failed to qualify as a FASIT for federal
income tax purposes, it might be classified as an association, or publicly
traded partnership, taxable as a corporation. In such case, the Trust would be
subject to federal income tax that could materially reduce cash available to
make payments on Certificates.
FASIT interests will be classified as either FASIT regular interests,
which will generally be treated as debt for federal income tax purposes, or
FASIT ownership interests, which will generally not be treated as debt for
such purposes, but rather as representing rights and responsibilities with
respect to the taxable income or loss of the related FASIT. The FASIT
ownership interests must be owned by domestic "C" corporations. [The
Certificates will be designated as FASIT regular interests.]
If the Trust fails to comply with one or more ongoing requirements
for FASIT status during any taxable year, the Code provides that its FASIT
status may be lost for that year and thereafter. If FASIT status is lost, the
federal income tax treatment of the former FASIT and the related securities is
uncertain. Although the Code authorizes the Treasury to issue regulations that
address situations where a failure to meet the requirements for FASIT status
occurs inadvertently and in good faith, such regulations have not yet been
issued. It is possible that disqualification relief might be accompanied by
sanctions, such as the imposition of a corporate tax on all or a portion of
the FASIT's income for the period of time in which requirements for FASIT
status are not satisfied.
[Taxation of Holders of FASIT Ownership Interests.
A FASIT ownership interest represents the residual equity interest in
a FASIT. As such, the holder of a FASIT ownership interest determines its
taxable income by taking into account all assets, liabilities, and items of
income, gain, deduction, loss and credit of the related FASIT. In general the
character of the income to the holder of a FASIT ownership interest will be
the same as the character of such income to the FASIT, except that any
tax-exempt interest income taken into account by the holder of a FASIT
ownership interest is treated as ordinary income. In determining that taxable
income, the holder of a FASIT ownership interest must use a constant yield
methodology and an accrual method of accounting and generally will be subject
to the same rules of taxation for Original Issue Discount ("OID"), market
discount, and amortizable premium as the holder of a FASIT regular interest.
See "Taxation of Holders of FASIT Regular Interests- OID, --Market Discount,
and --Amortizable Premium" below. In addition, a holder of a FASIT ownership
interest is subject to the same limitations on its ability to use non-FASIT
losses to offset income from the FASIT ownership interest as are holders of
high-yield interests, discussed below.
Losses on dispositions of a FASIT ownership interest generally will
be disallowed where within six months before or after the disposition, the
seller of such interest acquires any other FASIT ownership interest that is
economically comparable to the disposed FASIT ownership interest. In addition,
if any security that is sold or contributed to a FASIT by the holders of the
related FASIT ownership interest was required to be marked to market under
section 475 of the Code by such holder, then section 475 of the Code generally
will continue to apply to such security.
The Code contains various limitations on the ability of individuals,
trusts, and estates that own interests in entities that are taxed on a
pass-though basis (such as holders of FASIT ownership interests) to deduct
their respective shares of the entity's deductions. Accordingly, such a holder
will be entitled to deduct such fees and expenses under Section 212 of the
Code only to the extent that the amount of the fees and expenses, when
combined with its other miscellaneous itemized deductions for the taxable year
in question, exceeds 2% of its adjusted gross income. In addition, Code
Section 68 provides that the amount of itemized deductions otherwise allowable
for the taxable year for an individual whose adjusted gross income exceeds a
specified amount (the "Applicable Amount") -- will be reduced by the lesser
of:
(1) the excess of adjusted gross income over the Applicable
Amount, or
(2) 80% of the amount of itemized deductions otherwise allowable
for the taxable year for taxable years ending on or before
December 31, 2005, and by a reduced portion of such amount
for taxable years beginning on or after January 1, 2006.
Non-corporate holders of securities also should be aware that
miscellaneous itemized deductions are not deductible for purposes of the
Alternative Minium Tax. The amount of such additional taxable income
recognized by holders who are subject to the limitations of either Section 67
or Section 68 may be substantial and may reduce or eliminate the after-tax
yield to such holders of an investment in the certificates of an affected
series.]
Taxation of Holders of FASIT Regular Interests.
Payments received by holders of FASIT regular interests should
generally be accorded the same tax treatment under the Code as payments
received on other taxable debt instruments. Except as described below for
FASIT OID, market discount or premium, interest paid or accrued on FASIT
regular interests will be treated as ordinary income and a principal payment
on these certificates will be treated as a return of capital to the extent
that the adjusted basis in the Certificate is allocable to that payment.
Holders of FASIT regular interests must report income from such interests
under an accrual method of accounting, even if they otherwise would have used
the cash method. The trustee or the administrator will report annually to the
Internal Revenue Service (the "IRS") and to holders of record (which generally
will not include the beneficial owner of a certificate) the interest paid or
accrued and OID, if any, accrued on the certificates. The trustee or the
administrator (the "") will be the party responsible for computing the amount
of OID to be reported to the FASIT regular interest holders each taxable year.
Taxation of Holders of High-Yield Interests. High-yield interests are
FASIT regular interests that are subject to additional special rules regarding
the eligibility of holders of such interests, and the ability of such holders
to offset income derived from those interests with losses. High-yield
interests may be held only by eligible domestic corporations, other FASITs,
and dealers in securities which acquire such interests as inventory. If a
securities dealer (other than an eligible corporation) initially acquires a
high-yield interest as inventory, but later begins to hold it for investment,
the dealer will be subject to an excise tax equal to the income from the
high-yield interest multiplied by the highest corporate tax rate. In addition,
transfers of high-yield interests to disqualified holders will be disregarded
for federal income tax purposes, and the transferor will continue to be
treated as the holder of the high-yield interest.
The holder of a high-yield interest may not use non-FASIT current
losses or net operating loss carryforwards or carrybacks to offset any income
derived from the high-yield interest, for either regular federal income tax
purposes or for alternative minimum tax purposes. In addition, the FASIT
provisions contain an anti-abuse rule that imposes corporate income tax on
income derived from a FASIT regular interest that is held by a pass-through
entity (other than another FASIT) that issues debt or equity securities backed
by the FASIT regular interest and that have the same features as high-yield
interests.
Taxation of OID. Certificateholders of FASIT regular interests that
are treated as issued with OID will be required to include that OID on that
FASIT regular interest in income on a constant yield basis. A FASIT regular
interest will be treated as issued with original issue discount under the Code
if the excess of its "stated redemption price at maturity" over its "issue
price" equals or exceeds 0.25 percent of the stated redemption price at
maturity multiplied by the number of complete years to the weighted average
maturity date of that FASIT regular interest. Under a constant yield basis, a
Certificateholder of a FASIT regular interest will be required to include in
income for any period the sum of the accrued OID allocated to each day in that
period regardless of payments made on those FASIT regular interests during
that period. Consequently, holders of FASIT regular interest treated as issued
with OID may be required to include OID in income prior to the receipt of
payments representing that income. Certificateholders of FASIT regular
interest issued with OID that does not exceed the amount described above must
include that OID in income ratably as principal payments are received.
[IF NECESSARY, INCLUDE DISCLOSURE RELATING TO VRDI INSTRUMENTS AND/OR CPDI
INSTRUMENTS]
Market Discount. A Certificateholder of a FASIT regular interest who
purchases an interest in the Certificate at a discount that exceeds any OID
not previously includable in income may be subject to the "market discount"
rules of sections 1276 through 1278 of the Code. These rules provide, in part,
that gain on the sale or other disposition of a Certificate and partial
principal payments on a Certificate are treated as ordinary income to the
extent of accrued market discount. The market discount rules also provide for
deferral of certain interest deductions with respect to debt incurred to
purchase or carry a note that has market discount.
Market Premium. A Certificateholder of a FASIT regular interest who
purchases an interest in the Certificate at a premium may elect to deduct the
premium against interest income on an amortized basis over the remaining term
of the Certificate in accordance with the provisions of section 171 of the
Code.
Disposition of Certificates Treated as Regular Interests. Subject to
certain exceptions, such as in the case of "wash sales," upon the sale,
exchange or retirement of a Certificate, the Certificateholder will recognize
taxable gain or loss in an amount equal to the difference between the amount
realized on the disposition, other than amounts attributable to accrued
interest, and the Certificateholder's adjusted tax basis in the Certificate.
The Certificateholder's adjusted tax basis in the Certificate will generally
equal the cost of the Certificate to that Certificateholder, increased by any
market or OID previously included in income by that holder with respect to the
Certificate, and decreased by the amount of any bond premium previously
deducted and any payments of principal or OID previously received by that
Certificateholder with respect to that Certificate. Except to the extent of
any accrued market discount not previously included in income and except as
provided below, that gain, if any, will be treated as a capital gain which
will be long-term capital gain if the Certificate has been held for more than
one year, and that loss, if any, will be treated as a capital loss, the
deductibility of which may be limited.
Gain from the disposition of a FASIT regular interest that otherwise
would be capital gain will be treated as ordinary income to the extent that
the amount actually includable in income with respect to the Certificate by
the Certificateholder during its holding period is less than the amount that
would have been includable in income if the yield on that certificate during
the holding period had been 110% of the "applicable federal rate" as of the
date that the holder acquired the Certificate.
In the case of a FASIT regular interest that is a "high yield
interest," a holder's taxable income will not be less than its income
determined solely by reference to such interests.
Taxation of Certain Foreign Holders of FASIT Regular Interests
To the extent that amounts paid to Certificateholders of FASIT
regular interests that are not United States persons ("Foreign
Certificateholders") are treated as interest or OID, such amounts will
generally be treated as "portfolio interest" and will generally not be subject
to federal income or withholding tax, provided that the interest or OID is not
effectively connected with the conduct of a trade of business within the
United States by the Foreign Certificateholder and provided that such Foreign
Certificateholder (i) fulfills certain certification requirements, (ii) is
not, actually or constructively, a "10 percent shareholder" of the FASIT, and
(iii) is not a "related controlled foreign corporation" with respect to the
FASIT. Under such requirements, the holder must certify, under penalties of
perjury, that it is not a "United States person" and provide its name and
address. If the interest is not portfolio interest, it will generally be
subject to federal income and withholding tax at a rate of 30%, unless that
tax is reduced or eliminated pursuant to an applicable tax treaty or that
interest is effectively connected with the conduct of a trade or business
within the United States and, in either case, the appropriate statement has
been provided.
Any capital gain realized on the sale, redemption, retirement or
other taxable disposition of a Certificate by a Certificateholder will be
exempt from federal income tax and withholding tax, provided that (a) that
gain is not effectively connected with the conduct of a trade or business in
the United States by the Foreign Certificateholder, and (b) in the case of an
individual Foreign Certificateholder, that individual is not present in the
United States for 183 days or more in the taxable year.
If the interest, gain or income on a Certificate or Underlying
Security is effectively connected with the Foreign Certificateholder's conduct
of a trade or business in the United States, the Foreign Certificateholder
will generally be subject to federal income tax on the interest, gain or
income at standard federal income tax rates. In addition, if the Foreign
Certificateholder is a foreign corporation, it may be subject to a branch
profits tax equal to 30% of its "effectively connected earnings and profits
within the meaning of the Code for the taxable year, as adjusted for certain
items, unless it qualifies for a lower rate under an applicable tax treaty.
A "United States person" means, as determined for U.S. federal income
tax purposes, (a) a citizen or resident of the U.S., (b) a corporation created
or organized in or under the laws of the United States, any State or the
District of Columbia, (c) an estate the income of which is includable in gross
income for U.S. Federal income tax purposes, regardless of its source, or (d)
a trust with respect to which a court within the United States is able to
exercise primary supervision over its administration and one or more United
States fiduciaries have the authority to control all of its substantial
decisions.
The foregoing does not apply to FASIT High -Yield Interests, which
must be owned by a U.S. corporation.
Backup Withholding
Payments made on the Certificates and proceeds from the sale,
retirement or other disposition of the Certificates will not be subject to a
"backup" withholding tax unless, in general, the Certificateholder fails to
comply with certain reporting procedures and is not an exempt recipient under
applicable provisions of the Code. Exempt recipients are encouraged to comply
with the reporting procedures to avoid erroneous backup withholding. Any
amount deducted and withheld will be allowed as a credit against the
Certificateholder's federal income tax, provided that appropriate proof is
provided under rules established by the Internal Revenue Service. Investors
are encouraged to consult their tax advisors regarding their qualification for
exemption from backup withholding and the procedure for obtaining such an
exemption.]
CERTAIN STATE TAX CONSIDERATIONS
[Describe any applicable state tax consequences that may arise,
including as a result of the specific nature of the Deposited Assets relating
to a given series of Certificates or the degree of servicing required with
respect to such Deposited Assets.
ERISA CONSIDERATIONS
General
The Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and the Code, impose certain restrictions on (a) employee benefit
plans (as defined in Section 3(3) of ERISA), (b) plans described in section
4975(e)(1) of the Code, including individual retirement accounts or Keogh
plans, (c) any entities whose underlying assets include plan assets by reason
of a plan's investment in such entities (each, a "Plan") and (d) persons who
have certain specified relationships to such Plans ("Parties-in-Interest"
under ERISA and "Disqualified Persons" under the Code).
[Although no assurances can be given, the [Underwriter] believes that
each class of Certificates will qualify as Publicly Offered Securities under
regulations issued by the U.S. Department of Labor ("DOL") (i.e., freely
tradeable, widely held and registered under the Exchange Act) and that,
accordingly, the assets of the Trust should not be treated as assets of any
employee benefit plan subject to ERISA by reason of an investment in the
Certificates.]
[The [Underwriter] intends to [limit equity participation in the
Trust by Benefit Plan Investors (as defined under DOL Regulation Section
2510.3-101(f)(2)) to less than 25% of any class of Certificates][prohibit
investors using assets of employee benefit plans subject to Title I of ERISA
or Section 4975 of the Code (including assets of an insurance company general
account) from acquiring [the offered class of Certificates]]. Accordingly,
each purchaser of [the offered class of Certificates] will be required to make
representations with respect to [whether or not it is a Benefit Plan Investor
and whether or not it has discretionary authority or control with respect to
the assets of the Trust or any person who provides investment advice for a fee
(direct or indirect) with respect to such assets][whether or not it is using
assets of employee benefit plans subject to Title I of ERISA or Section 4975
of the Code, as applicable].
UNDERWRITING
Subject to the terms and conditions set forth in the underwriting
agreement, dated as of [ ] relating to the Certificates, the Depositor has
agreed to sell and [Banc of America Securities LLC (an affiliate of the
Depositor)] [each of the underwriters named below, including [Banc of America
Securities LLC] [has] [have severally] agreed to purchase, the [Certificates]
[the principal amount of each class of Certificates set forth below opposite
its name]].
Principal Amount of
Class [ ] Underwriters Class [ ] Certificates
- ----------------------- -----------------------
Banc of America Securities LLC ...................... $
[ ]...................... $
Total.......................................
=======================
Principal Amount of
Class [ ] Underwriters Class [ ] Certificates
- ----------------------- -----------------------
Banc of America Securities LLC ...................... $
[ ]...................... $
Total.......................................
=======================
In the Underwriting Agreement, the Underwriters have agreed, subject
to the terms and conditions set forth therein, to purchase all of the
Certificates offered hereby, if any of the Certificates are purchased.
The Underwriters propose initially to offer the Class [ ]
Certificates to the public at the price set forth on the cover page hereof and
to certain dealers at such price less concessions not in excess of [ ]% of the
principal amount of the Class [ ] Certificates. The Underwriters may allow,
and such dealers may reallow, concessions not in excess of [ ]% of the
principal amount of the Class [ ] Certificates to certain brokers and dealers.
After the initial public offering, the public offering price and other selling
terms may be changed by the Underwriters.
The Underwriters of the Class [ ] Certificates propose initially to
offer the Class [ ] Certificates to the public at the price set forth on the
cover page hereof and to certain dealers at such price less concessions not in
excess of [ ]% of the principal amount of the Class [ ] Certificates. The
Underwriters may allow, and such dealers may reallow, concessions not in
excess of [ ]% of the principal amount of the Class [ ] Certificates to
certain brokers and dealers. After the initial public offering, the public
offering price and other selling terms may be changed by the Underwriters.
The Depositor will indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, and/or contribute
to payments the Underwriters may be required to make in respect thereof.
In addition to the underwriting discount to be paid to the
Underwriters as set forth on the cover page hereto, the Depositor has agreed
to reimburse the Underwriters for their reasonable out-of-pocket costs and
expenses incurred in connection with the offering, including the reasonable
fees and disbursements of Underwriters' counsel.
In connection with the sale of these Certificates, the underwriters
may engage in:
o over-allotments, in which members of the syndicate selling
these Certificates sell more Certificates than the issuer
actually sold to the syndicate, creating a syndicate short
position;
o stabilizing transactions, in which purchases and sales of
these Certificates may be made by the members of the selling
syndicate at prices that do not exceed a specified maximum;
o syndicate covering transactions, in which members of the
selling syndicate purchase these Certificates in the open
market after the distribution has been completed in order to
cover syndicate short positions; and
o penalty bids, by which underwriters reclaim a selling
concession from a syndicate member when any of these
Certificates originally sold by that syndicate member are
purchased in a syndicate covering transaction to cover
syndicate short positions.
These stabilizing transactions, syndicate covering transactions and
penalty bids may cause the price of these Certificates to be higher than it
would be otherwise be. These transactions, if commenced, may be discontinued
at any time.
[Each Underwriter has represented and agreed that:
o it has not offered or sold, and will not offer or sell, any
Certificates to persons in the United Kingdom except to
persons whose ordinary activities involve them in acquiring,
holding, managing or disposing of investments (as principal
or agent) for the purposes of their businesses or otherwise
in circumstances which do not constitute an offer to the
public in the United Kingdom for the purposes of the Public
Offers of Securities Regulations 1995;
o it has complied and will comply with all applicable
provisions of the Financial Services Act 1986 with respect
to anything done by it in relation to the Certificates in,
from or otherwise involving the United Kingdom; and
o it has only issued or passed on, and will only issue or pass
on, in the United Kingdom any document received by it in
connection with the issue or sale of Certificates to a
person who is of a kind described in Article 11(3) of the
Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1996 (as amended) or is a person to whom
the document may otherwise lawfully be issued or passed on.]
In the ordinary course of their respective businesses, the
Underwriters and their affiliates have engaged, and may in the future engage,
in commercial banking and investment banking and other transactions with
Underlying Securities Issuers and their affiliates.
Banc of America Securities LLC is an affiliate of the Depositor, and
the participation by Banc of America Securities LLC in the offering of the
Certificates complies with [Section 2720 of the Conduct Rules of the National
Association of Securities Dealers, Inc.] regarding underwriting securities of
an affiliate.
RATINGS
[It is a condition to the issuance of the Certificates that the
Certificates be rated not lower than [specify ratings applicable to each
class] by [Standard & Poor's Ratings Group, a division of The McGraw-Hill
Companies, Inc. ("S&P")] [Moody's Investors Service, Inc. ("Moody's")] [and]
[Fitch Inc. ("Fitch Ratings")] (the "Rating [Agency] [Agencies]"). The ratings
address the likelihood of the receipt by the Certificateholders of payments
described in the Trust Agreement, and are based primarily on the credit
quality of the Underlying Securities [and any providers of Other Deposited
Assets and/or Credit Support], as well as on the relative priorities of the
Certificateholders of each class of the Certificates with respect to
collections and losses with respect to the Underlying Securities. The rating
on the Certificates does not, however, constitute a statement regarding the
occurrence or frequency of redemptions or prepayments on, or extensions of the
maturity of, the Underlying Securities, the corresponding effect on yield to
investors, or whether investors in the Class [ ] Certificates [specify class
with Notional Amount] may fail to recover fully their initial investment.]
[A security rating is not a recommendation to buy, sell or hold
securities and may be subject to revision or withdrawal at any time by the
assigning Rating Agency. Each security rating should be evaluated
independently of any other security rating.]
[The Depositor has not requested a rating on the Certificates by any
rating agency other than the Rating [Agency] [Agencies]. However, there can be
no assurance as to whether any other rating agency will rate the Certificates,
or, if it does, what rating would be assigned by any such other rating agency.
A rating on the Certificates by another rating agency, if assigned at all, may
be lower than the ratings assigned to the Certificates by the Rating [Agency]
[Agencies].]
LEGAL MATTERS
Certain legal matters relating to the issuance of the Certificates
and the federal income tax consequences of such issuance will be passed upon
for the Depositor and for the Underwriter[s] by Skadden, Arps, Slate, Meagher
& Flom LLP, New York, New York.
INDEX OF TERMS FOR PROSPECTUS SUPPLEMENT
Page
Accrued Certificate Interest..............................................S-24
Advance...................................................................S-28
Allocated Purchase Price..................................................S-42
Applicable Amount.........................................................S-57
Available Funds...........................................................S-25
Calculation Agent..........................................................S-4
Call Option................................................................S-4
Call Option Agreement......................................................S-4
Call Option Holder.........................................................S-4
Certificate Principal Balance.............................................S-25
Certificateholder...................................................S-41, S-55
Certificates.........................................................S-1, S-19
Class [ ] Certificates.............................................S-1, S-19
Clearing Agency...........................................................S-20
Closing Date...............................................................S-4
Code.................................................................S-8, S-40
Collection Period .........................................................S-5
Concentrated Underlying Securities........................................S-16
Credit Support.............................................................S-4
Credit Support Agreement..................................................S-18
Cut-off Date...............................................................S-2
Definitive Classes........................................................S-20
Deposited Assets..........................................................S-12
Depositor....................................................................6
Distribution Date .........................................................S-4
DOL.......................................................................S-61
DTC........................................................................S-8
Eligible Investments......................................................S-25
ERISA................................................................S-8, S-60
Exchange Act...............................................................S-3
Extraordinary Trust Expenses..............................................S-26
Final Scheduled Distribution Date..........................................S-4
Fitch Ratings........................................................S-7, S-63
Foreign Certificateholders..........................................S-47, S-59
GSE.......................................................................S-12
Interest Accrual Period..............................................S-5, S-21
Interest Proceeds.........................................................S-27
IRA........................................................................S-8
Issuer Documents..........................................................S-16
Liquidation Proceeds......................................................S-28
Moody's..............................................................S-7, S-63
Notional Amount...........................................................S-27
NYSE......................................................................S-21
OID.................................................................S-41, S-51
Other Deposited Assets...............................................S-3, S-39
Plan.................................................................S-8, S-60
Premium Proceeds..........................................................S-27
Principal Proceeds........................................................S-27
Rating [Agency] [Agencies]................................................S-63
Realized Losses...........................................................S-22
Record Date.........................................................S-21, S-22
Regulations...............................................................S-43
Required Interest Amount..................................................S-27
Required Percentage-Amendment.............................................S-36
Required Percentage-Waiver................................................S-36
S&P..................................................................S-7, S-63
Securities Act...............................................................2
Series Supplement....................................................S-1, S-12
Service...................................................................S-40
Special Tax Counsel.......................................................S-40
Specified Currency.........................................................S-7
Standard Terms.......................................................S-1, S-12
Termination Event.........................................................S-34
Trust................................................................S-1, S-12
Trust Agreement......................................................S-1, S-12
Trust Estate..............................................................S-12
Trustee....................................................................S-1
Underlying Securities......................................................S-2
Underlying Securities Issuer.........................................S-3, S-12
United States person................................................S-48, S-60
ANNEX I
AUCTION PROCEDURES
ARTICLE 1
SECTION 1.1 DEFINITIONS.
"All Hold Rate" means [ ].
"Auction" means with respect to each Class of Auction Rate
Certificates, the implementation of the Auction Procedures on an Auction Date
for such Class.
"Auction Agent" means [ ], a [ ], or any
successor appointed under the Auction Agent Agreement.
"Auction Agent Agreement" means the Auction Agent Agreement
dated as of the Closing Date, among the Trustee, the Auction Agent and the
Depositor, including any amendment thereof or supplement thereto.
"Auction Agent Fee" means the fee paid to the Auction Agent
pursuant to the Auction Agent Agreement.
"Auction Rate Certificate[s]" means the Class [ ]
Certificates [and the Class [ ] Certificates].
"Auction Date" means, with respect to each class of Auction
Rate Certificates, the third Business Day immediately preceding the first day
of each Interest Accrual Period, commencing [ ], 2003. Notwithstanding the
foregoing, the Auction Date for one or more Interest Accrual Periods may be
changed pursuant to the Auction Agent Agreement, as described herein.
"Auction Procedures" means the procedures set forth in
Section 2.1.1 hereof by which the Auction Rate is determined.
"Auction Rate" means with respect to a Class of Auction Rate
Certificates, the rate of interest per annum that results from implementation
of the Auction Procedures.
"Auction Spread Amount" means with respect to each Class of
Auction Rate Certificates, the highest Bid Spread Amount contained in the
Clearing Bids selected on any Auction Date with respect to such Class in
accordance with the Auction Procedures.
"Authorized Denominations" means, with respect to each Class
of Auction Rate Certificates, [$25,000] and integral multiples of [$25,000] in
excess thereof.
"Available Certificates" has the meaning set forth in
Section 2.1.1(b)(i)(A) hereof.
"Bid" has the meaning set forth in Section 2.1.1(a)(i)
hereof.
"Bid Spread Amount" means the spread over [describe index]
requested by a Bidder.
"Bidder" has the meaning set forth in Section 2.1.1(a)(i)
hereof.
"Book-Entry Form" or "Book-Entry System" means a form or
system under which (i) the beneficial right to principal and interest may be
transferred only through a book entry, (ii) physical securities in registered
form are issued only to a Depository or its nominee as registered owner, with
the securities "immobilized" to the custody of the Depository, and (iii) the
book entry is the record that identifies the owners of beneficial interests in
that principal and interest.
"Broker-Dealer" means [BAS Affiliate] or any other broker or
dealer (each as defined in the Securities Exchange Act of 1934, as amended),
commercial bank or other entity permitted by law to perform the functions
required of a Broker-Dealer set forth in the Auction Procedures that (a) is a
Participant (or an Affiliate of a Participant), (b) has been appointed as such
by the Depositor and (c) has entered into a Broker-Dealer Agreement that is in
effect on the date of reference.
"Broker-Dealer Agreement" means each agreement among the
Auction Agent, a Broker-Dealer and the Depositor, pursuant to which the
Broker-Dealer agrees to participate in Auctions in accordance with the Auction
Procedures.
"Broker-Dealer Fee" means the fee paid to a Broker-Dealer
pursuant to its Broker-Dealer Agreement.
"Class" means the Class [ ] Certificates or the Class [ ]
Certificates, as applicable.
"Clearing Bids" refers to those Bids selected in accordance
with the procedures set forth in Section 2.1.1(b)(i)(c) hereof.
"Depositor" means Bond Products Depositor LLC, a Delaware
limited liability company.
"Existing Certificateholder" means with respect to an
Auction, a Person who is a beneficial owner of Auction Rate Certificates as of
the close of business on the Business Day immediately preceding the Auction
Date.
"Failed Auction" shall have the meaning set forth in Section
2.1.1(b)(iii) hereof.
"Hold Order" shall have the meaning set forth in Section
2.1.1(a)(i) hereof.
"Maximum Auction Rate" means, with respect to each Class of
Auction Rate Certificates [select one of the following], [[ ]%], [Describe
Index] plus [ ]%], [(A) [Describe Index]] plus [ ]% (if the ratings assigned
by the Rating Agencies to such Class are "AAA" and "Aaa"), (B) [Describe
Index] plus [ ]% (if the ratings assigned by the Rating Agencies to such Class
are "AA" and "Aa2" or better), (C) [Describe Index] plus [ ]% (if the ratings
assigned by the Rating Agencies to such Class are "A" and "A2" or better) or
(D) [Describe Index] plus [ ]% (if any one of the ratings assigned by the
Rating Agencies to such Class is less than "A" or "A2").] For purposes of the
Auction Agent and the Auction Procedures, the ratings referred to in this
definition shall be the last rating of which the Auction Agent has been given
notice pursuant to the Trust Agreement and the Auction Agent Agreement.
"Order" shall have the meaning set forth in Section
2.1.1(a)(i) hereof.
"Outstanding" means, as of the date of determination, all
Certificates of a Class theretofore authenticated and delivered under the
Trust Agreement other than: (i) Certificates of such Class theretofore
cancelled by the Certificate Registrar or delivered to the Certificate
Registrar for cancellation, (ii) Certificates of such Class or portions
thereof the payment for which money in the necessary amount has been
theretofore deposited with the Trustee in trust for the Certificateholders
thereof, and (iii) Certificates of such Class in exchange for or in lieu of
other Certificates of such Class which have been authenticated and delivered
pursuant to the Trust Agreement unless proof satisfactory to the Trustee is
presented that any such Certificates are held by a bona fide purchaser.
"Participant" means a broker, dealer, bank, other financial
institution or other Person for whom from time to time, the Depository effects
Book-Entry transfers and pledges of securities deposited with the Depository.
"Potential Certificateholder" means any Person (other than
an Existing Certificateholder) who is interested in acquiring Auction Rate
Certificates.
"Sell Spread Amount" means the spread over [describe the
index] indicated by an Existing Certificateholder pursuant to its Sell Order.
"Sell Order" has the meaning set forth in Section
2.1.1(a)(i) hereof.
"Submission Deadline" means 1:00 p.m., Eastern Standard
Time, on any Auction Date or such other time on any Auction Date by which
Broker-Dealers are required to submit Orders to the Auction Agent as specified
by the Auction Agent from time to time.
"Submitted Bid" has the meaning set forth in Section
2.1.1(b)(i) hereof.
"Submitted Hold Order" has the meaning set forth in Section
2.1.1(b)(i) hereof.
"Submitted Order" has the meaning set forth in Section
2.1.1(b)(i) hereof.
"Submitted Sell Order" has the meaning set forth in Section
2.1.1(b)(i) hereof.
"Substitute Auction Agent" means the Person with whom the
Trustee enters into a Substitute Auction Agent Agreement.
"Substitute Auction Agent Agreement" means an auction agent
agreement containing terms substantially similar to the terms of the Initial
Auction Agent Agreement, whereby a Person having the qualifications required
by Section 2.1.4 of these Auction Procedures agrees with the Trustee to
perform the duties of the Auction Agent under this Agreement.
"Sufficient Bids" has the meaning set forth in Section
2.1.1(b)(i)(E) hereof.
"Trustee" means [name of trustee].
SECTION 1.2 GENERAL PROVISIONS.
Each Class of Auction Rate Certificates shall bear interest
at the applicable Auction Rate. For each Interest Accrual Period, interest at
the applicable Auction Rate shall accrue daily and shall be computed for the
actual number of days elapsed in the related Interest Accrual Period on the
basis of a year consisting of 360 days.
The Auction Agent shall promptly give written notice to the
Trustee and the Depositor of the applicable Auction Rate for each Class of
Auction Rate Certificates. The Trustee shall notify the Certificateholders of
the applicable Auction Rate for the related Interest Accrual Period no later
than 5:00 p.m. Eastern Standard Time on the first Business Day of such
Interest Accrual Period; provided it has previously received notice of such
Auction Rate from the Auction Agent.
ARTICLE 2
SECTION 2.1 AUCTION RATE.
SECTION 2.1.1 DETERMINING THE AUCTION RATE FOR THE AUCTION
RATE CERTIFICATES.
By purchasing an Auction Rate Certificate, whether in an
Auction or otherwise, each such purchaser and its Broker-Dealer shall be
deemed by such purchase to have agreed (i) to participate in Auctions on the
terms described herein, (ii) to have its beneficial ownership of the Auction
Rate Certificates maintained at all times in Book-Entry Form through the
account of its Participant, which in turn will maintain records of such
beneficial ownership, and (iii) to authorize such Participant to disclose to
the Auction Agent information with respect to such beneficial ownership as the
Auction Agent may request.
An Existing Certificateholder may sell, transfer or
otherwise dispose of Auction Rate Certificates pursuant to a Sell Order placed
in an Auction or otherwise through a Broker-Dealer, provided that, in the case
of all transfers other than pursuant to an Auction, such Existing
Certificateholder, its Broker-Dealer or its Participant shall advise the
Auction Agent of such transfer. Auctions shall be conducted on each applicable
Auction Date in the following manner:
(a) (i) Prior to the Submission Deadline on each related
Auction Date:
(A) each Existing Certificateholder may
submit to a Broker-Dealer (by telephone or otherwise)
information as to:
(1) the principal amount of the
Outstanding class owned by such Existing
Certificateholder which such Existing
Certificateholder desires to continue to own
without regard to the Auction Spread Amount for
such Class for the next succeeding Interest Accrual
Period;
(2) the principal amount of the
Outstanding Class owned by such Existing
Certificateholder which such Existing
Certificateholder offers to sell if the Auction
Spread Amount for such Class for the next
succeeding related Interest Accrual Period shall be
less than the Sell Spread Amount specified by such
Existing Certificateholder;
(3) the principal amount of the
Outstanding Class owned by such Existing
Certificateholder which such Existing
Certificateholder offers to sell without regard to
the Auction Spread Amount for such Class for the
next succeeding related Interest Accrual Period;
and/or
(4) the principal amount of the
Outstanding Class that the Existing
Certificateholder offers to purchase if the Auction
Spread Amount for such Class for the next
succeeding related Interest Accrual Period exceeds
the Bid Spread Amount specified by such Existing
Certificateholder.
(B) one or more Broker-Dealers may contact
Potential Certificateholders to determine the principal
amount of Certificates of the related Class which each
Potential Certificateholder offers to purchase, if the
Auction Spread Amount for such Class for the next succeeding
related Interest Accrual Period equals or exceeds the Bid
Spread Amount specified by such Potential Certificateholder.
The statement of an Existing Certificateholder or a
Potential Certificateholder referred to in (A) or (B) of this paragraph (i) is
herein referred to as an "Order," and each Existing Certificateholder and each
Potential Certificateholder placing an Order is herein referred to as a
"Bidder"; an Order described in clause (A)(1) is herein referred to as a "Hold
Order"; an Order described in clauses (A)(4) and (B) is herein referred to as
a "Bid"; and an Order described in clause (A)(2) and (A)(3) is herein referred
to as a "Sell Order."
(ii) Each Broker-Dealer shall submit in writing to
the Auction Agent prior to the Submission Deadline on each Auction
Date, all Orders obtained by such Broker-Dealer and shall specify
with respect to each such Order:
(A) the name of the Bidder placing such
Order;
(B) the aggregate principal amount of the
Outstanding Class that are the subject of such Order;
(C) if such Bidder is an Existing
Certificateholder:
(1) the principal amount of the
Outstanding Class, if any, subject to any Hold
Order placed by such Existing Certificateholder;
(2) the principal amount of the
Outstanding Class, if any, subject to any Bid
placed by such Existing Certificateholder and the
Bid Spread Amount specified in such Bid; and
(3) the principal amount of the
Outstanding Class, if any, subject to any Sell
Order placed by such Existing Certificateholder
(and the Sell Spread Amount, if any, specified in
such Sell Order); and
(D) to the extent such Bidder is a
Potential Certificateholder, the Bid Spread Amount specified
in such Potential Certificateholder's Bid.
(iii) The Bid Spread Amount or Sell Spread Amount
specified in any Bid or Sell Order, shall be expressed as a
percentage and the Auction Agent shall round such Bid Spread Amount
or Sell Spread Amount to the nearest one thousandth of one percent.
(iv) If an Order or Orders covering all of the
Auction Rate Certificates owned by an Existing Certificateholder is
not submitted to the Auction Agent prior to the Submission Deadline,
the Auction Agent shall deem a Hold Order to have been submitted on
behalf of such Existing Certificateholder covering the principal
amount of the Certificates owned by such Existing Certificateholder
and not subject to an Order submitted to the Auction Agent.
(v) None of the Depositor, the Trustee or the
Auction Agent shall be responsible for any failure of a Broker-Dealer
to submit an Order to the Auction Agent on behalf of any Existing
Certificateholder or Potential Certificateholder.
(vi) If any Existing Certificateholder submits one
or more Orders covering in the aggregate more than the principal
amount of the Outstanding Class owned by such Existing
Certificateholder, such Order(s) shall be considered valid as follows
and in the following order of priority:
(A) All Hold Orders shall be considered
valid but only up to the aggregate principal amount of the
Outstanding Class owned by such Existing Certificateholder;
(B) (1) any Bid shall be considered valid
up to an amount equal to the excess of the principal amount
of the Outstanding Class owned by such Existing
Certificateholder over the aggregate principal amount of
such Class subject to any Hold Order referred to in clause
(A) of this paragraph (vi);
(2) if more than one Bid with
different rates is submitted on behalf of such
Existing Certificateholder, such Bids shall be
considered valid (to the extent of the excess of
the principal amount of the Outstanding Class owned
by the Existing Certificateholder over the
aggregate principal amount of such Class subject to
any Hold Order referred to in clause (A) of this
paragraph (vi)) first in the ascending order of
their respective Bid Spread Amounts until the
highest Bid Spread Amount is reached and the amount
of such excess is covered; and
(3) in any such event, the amount
of the Outstanding Class, if any, subject to Bids
not valid under this clause (B) shall be treated as
the subject of a Bid by a Potential
Certificateholder at the Bid Spread Amounts therein
specified; and
(C) All Sell Orders shall be considered
valid up to an amount equal to the excess of the principal
amount of the Outstanding Class owned by such Existing
Certificateholder over the sum of the aggregate principal
amount of such Certificates subject to Hold Orders referred
to in clause (A) of this paragraph (vi) and Bids referred to
in clause (B) of this paragraph (vi).
(vii) If more than one Bid for a Class is submitted
on behalf of any Potential Certificateholder, each Bid submitted
shall be a separate Bid with the Bid Spread Amounts and principal
amount therein specified.
(viii) An Existing Certificateholder that offers to
purchase additional Certificates of any Class is, for purposes of
such offer, treated as a Potential Certificateholder.
(ix) Any Bid or Sell Order submitted by an Existing
Certificateholder covering an aggregate principal amount of
Certificates not equal to an Authorized Denomination shall be
rejected and shall be deemed a Hold Order. Any Bid submitted by a
Potential Certificateholder covering an aggregate principal amount of
a Class not equal to an Authorized Denomination shall be rejected.
(x) Any Order submitted in an Auction by a
Broker-Dealer to the Auction Agent shall be irrevocable after the
Submission Deadline.
(b) (i) Not earlier than the Submission Deadline on each
Auction Date, the Auction Agent shall assemble all Orders submitted to it by
the Broker-Dealers (each such Order as submitted by a Broker-Dealer being
herein referred to individually as a "Submitted Hold Order," a "Submitted Bid"
or a "Submitted Sell Order," as the case may be, or as a "Submitted Order,"
and collectively as "Submitted Hold Orders," "Submitted Bids" or "Submitted
Sell Orders," as the case may be, or as "Submitted Orders") and:
(A) shall determine the excess of the
total principal amount of the Outstanding Class over the sum
of the aggregate principal amount of such Outstanding Class
subject to Submitted Hold Orders (such excess being herein
referred to as the "Available Certificates").
(B) from the Submitted Orders the Auction
Agent shall (i) select the Clearing Bids and (ii) establish
the Auction Rate.
(C) the Clearing Bids will be selected by
the Auction Agent as follows:
(1) the Auction Agent shall select
the "Clearing Bids" from the Submitted Orders, in
order of increasing Bid Spread Amounts (beginning
with the Submitted Order with the lowest Bid Spread
Amount), until the Auction Agent has cleared an
aggregate principal amount of Submitted Bids which
is at least equal to the aggregate principal amount
of the Available Certificates, and
(2) the highest Bid Spread Amount
in any Clearing Bid which, when added to [describe
Index] for the related Interest Accrual Period,
equals a rate which is less than or equal to the
Maximum Auction Rate shall be the Auction Spread
Amount used to calculate the Auction Rate for such
Auction Rate Certificates for the following
Interest Accrual Period;
(D) in the event the final Submitted Bid
(or Submitted Bids if more than one Submitted Bid has the
same Bid Spread Amount) to be cleared by the Auction Agent
in accordance with sub-clause 2.1.1(b)(i)(C) above results
in an aggregate principal amount of the Clearing Bids in
excess of the aggregate principal amount of the Available
Certificates, the Auction Agent shall reduce each of the
Clearing Bids pro rata.
(E) If the Auction Agent determines that
it has received Clearing Bids in an aggregate principal
amount equal to 100% of the aggregate principal amount of
the Available Certificates which have Bid Spread Amounts
which when added to [describe Index] will be equal to or
less than the Maximum Auction Rate ("Sufficient Bids"),
then, the Auction Agent shall deliver a notice to each
Bidder that submitted a Clearing Bid which notifies such
Bidder that its bid has been accepted and which sets forth
(a) the aggregate amount of Auction Rate Certificates to be
purchased by the Bidder, (b) the Bid Spread Amount and (c)
payment delivery instructions (such notice a "Funding
Notice") and shall send copies thereof to the Trustee, the
Depositor and each Broker-Dealer.
(F) Each Bidder will be required, pursuant
to the terms of each Funding Notice, to fund payment for its
portion of the Auction Rate Certificates to an account held
by the Trustee (the "Auction Rate Certificate Funding
Account") by the close of business on the first Business Day
of the related Interest Accrual Period; provided, however
that any Existing Certificateholder will not be required to
make a deposit in the Auction Rate Certificate Funding
Account, except to the extent such Existing
Certificateholder is purchasing Auction Rate Certificates in
an aggregate principal amount in excess of the aggregate
principal amount of the Auction Rate Certificates previously
owned by such Existing Certificateholder, in which case the
Existing Certificateholder shall be required to fund the
difference between the aggregate principal amount of Auction
Rate Certificates previously held by it and the aggregate
principal amount of Auction Rate Certificates to be
purchased by it.
(G) If the Trustee has not received a
notice from the Auction Agent by the close of business on
the Business Day following the Auction Date that the Auction
Agent received Sufficient Bids, the Trustee shall notify the
Auction Agent and the Depositor by no later than the first
Business Day of the Interest Accrual Period that it has not
received such notice.
(ii) if all the Outstanding Class is subject to
Submitted Hold Orders, the Auction Rate for such Class for the next
succeeding Interest Accrual Period shall be equal to the All Hold
Rate for such Class;
(iii) if Sufficient Bids for a Class do not exist
(other than because all of the Outstanding Certificates in such Class
is subject to Submitted Hold Orders) (a "Failed Auction"), the
Auction Rate for such Class for the next succeeding Interest Accrual
Period shall be equal to the Maximum Auction Rate for such Class;
(iv) if a scheduled Auction is not being held for
any reason with respect to a Class, the Auction Rate for such Class
for the next succeeding Interest Accrual Period shall be equal to the
Maximum Auction Rate for such Class; or
(v) promptly after the Auction Agent has made the
determinations pursuant to Sections 2.1.1(b)(i), (ii), (iii) and (iv)
hereof, the Auction Agent shall advise the Trustee of the applicable
Auction Rate for each Class, the All Hold Rate, if applicable, the
Maximum Auction Rate, and the components thereof on the Auction Date.
(c) Existing Certificateholders shall continue to own the
principal amount of Auction Rate Certificates that are subject to Submitted
Hold Orders.
(i) If all of the Outstanding Class are subject to
Submitted Hold Orders, all Submitted Bids shall be rejected.
(ii) If, as a result of the procedures described
herein, any Existing Certificateholder or Potential Certificateholder
would be entitled or required to purchase less than an Authorized
Denomination of any Class, the Auction Agent shall, in its sole
discretion, allocate such Certificates for purchase among such
Existing Certificateholders and Potential Certificateholders so that
only Certificates in Authorized Denominations or integral multiples
of [$25,000] in excess thereof are purchased by each Existing
Certificateholder or Potential Certificateholder, even if such
allocation results in one or more of such Existing Certificateholders
or Potential Certificateholders not purchasing any such Certificates.
SECTION 2.1.2 AUCTION AGENT FEES AND EXPENSES.
The Auction Agent Fee will be paid by the Depositor pursuant
to the Auction Agent Agreement.
SECTION 2.1.3 CALCULATION OF MAXIMUM AUCTION RATE, ALL HOLD
RATE [AND [DESCRIBE INDEX]].
The Auction Agent shall, to the extent necessary, for each
Class, calculate the Maximum Auction Rate, the All Hold Rate, [and [describe
index]], on each Auction Date (or on such other date as may be determined by
the Auction Agent), as provided in the Auction Agent Agreement. If the
ownership of a Class is no longer maintained in Book-Entry Form by the
Depository, the Trustee shall calculate the Maximum Auction Rate and the All
Hold Rate (if applicable) on the Business Day immediately preceding the first
day of each related Interest Accrual Period. The Auction Agent shall also
determine [describe index] for each related Interest Accrual Period (other
than the Initial Period) on the Auction Date (or on such other date as may be
determined by the Auction Agent); provided, that if the ownership of a Class
is no longer maintained in Book-Entry Form, then the Trustee shall determine
[describe Index] in accordance herewith for each such Interest Accrual Period.
The determination by the Trustee or the Auction Agent, as the case may be, of
[describe Index] shall (in the absence of manifest error) be final and binding
upon all parties.
SECTION 2.1.4 AUCTION AGENT.
(a) [BAS Affiliate] is hereby appointed as Initial Auction
Agent to serve as agent for the Trustee in connection with Auctions. The
Trustee will enter into the Auction Agent Agreement with [BAS Affiliate], as
the Initial Auction Agent. Any Substitute Auction Agent shall be (i) a bank,
national banking association or trust company duly organized under the laws of
the United States of America or any state or territory thereof having its
principal place of business in the Borough of Manhattan, New York, or such
other location as approved by the Trustee and the Auction Agent in writing and
having a combined capital stock or surplus of at least $50,000,000, or (ii) a
member of the National Association of Securities Dealers, Inc., having a
capitalization of at least $50,000,000, and, in either case, authorized by law
to perform all the duties imposed upon it hereunder and under the Auction
Agent Agreement. The Auction Agent may at any time resign and be discharged of
the duties and obligations created by these Auction Procedures by giving at
least 90 days' notice to the Trustee and the Depositor. The Auction Agent may
be removed at any time by the Trustee or the Certificateholders of [66-2/3%]
of the aggregate principal amount of the Auction Rate Certificates then
Outstanding, and if by such Certificateholders, by an instrument signed by
such Certificateholders or their attorneys and filed with the Auction Agent,
the Depositor, and the Trustee upon at least 90 days' notice. Neither
resignation nor removal of the Auction Agent pursuant to the preceding two
sentences shall be effective until and unless a Substitute Auction Agent has
been appointed and has accepted such appointment. If required by the
Certificateholders of [66-2/3%] of the aggregate principal amount of the
Auction Rate Certificates then outstanding or by the Auction Agent, a
Substitute Auction Agent Agreement shall be entered into with a Substitute
Auction Agent. Notwithstanding the foregoing, the Auction Agent may terminate
the Auction Agent Agreement if, within 25 days after notifying the Trustee,
the Depositor and the Auction Agent in writing that it has not received
payment of any Auction Agent Fee due it in accordance with the terms of the
Auction Agent Agreement, the Auction Agent does not receive such payment.
(b) If the Auction Agent shall resign or be removed or be
dissolved, or if the property or affairs of the Auction Agent shall be under
receivership or otherwise under the control of any state or federal court or
administrative body because of bankruptcy or insolvency, or for any other
reason, the Trustee (after receipt of a certificate from the Auction Agent
confirming that any proposed Substitute Auction Agent meets the requirements
described in the immediately preceding paragraph) shall use its best efforts
to appoint a Substitute Auction Agent.
(c) The Auction Agent is acting as agent for the Trustee in
connection with Auctions. In the absence of bad faith or negligence on its
part, the Auction Agent shall not be liable for any action taken, suffered or
omitted in good faith or for any error of judgment made by it in the
performance of its duties under the Auction Agent Agreement. The Auction Agent
shall not be liable for any error of judgment made in good faith unless the
Auction Agent shall have been negligent in ascertaining the pertinent facts.
SECTION 2.1.5 BROKER-DEALERS.
(a) The Auction Agent will enter into a Broker-Dealer
Agreement with [BAS Affiliate] ("[BAS Affiliate]") as the initial
Broker-Dealer. The Depositor may, from time to time, approve one or more
additional persons to serve as Broker-Dealers under Broker-Dealer Agreements
and shall be responsible for providing such Broker-Dealer Agreements to the
Trustee and the Auction Agent. The Auction Agent shall have entered into a
Broker-Dealer Agreement with each Broker-Dealer prior to the participation of
any such Broker-Dealer in any Auction.
(b) Any Broker-Dealer may be removed at any time, at the
request of the Depositor, but there shall, at all times, be at least one
Broker-Dealer appointed and acting as such.
SECTION 2.1.6 CHANGES IN THE AUCTION DATE.
The Auction Agent may specify an earlier or later Auction
Date for a Class of Auction Rate Certificates (but in no event more than five
Business Days earlier or later) than the Auction Date that would otherwise be
determined in accordance with the definition of "Auction Date" in Article 1 of
these Auction Procedures with respect to one or more specified Interest
Accrual Periods in order to conform with then current market practice with
respect to similar securities or to accommodate economic and financial factors
that may affect or be relevant to the day of the week constituting an Auction
Date or the determination of the Auction Rate. The Auction Agent shall provide
notice of its determination to specify an earlier or later Auction Date for
one or more Interest Accrual Periods by means of a written notice delivered at
least 10 days prior to the proposed changed Auction Date to the Trustee, the
Auction Agent, the Depositor and the Depository.
In connection with any change described in this Section
2.1.6, the Auction Agent shall provide such further notice to such parties as
is specified in the Auction Agent Agreement.
SECTION 2.2 ADDITIONAL PROVISIONS REGARDING THE AUCTION RATES ON
THE AUCTION RATE CERTIFICATES.
The determination of the Auction Rate for each Class by the
Auction Agent, the Trustee or any other Person pursuant to the provisions of
the applicable Section of this Article 2 shall be conclusive and binding on
the Certificateholders which hold Auction Rate Certificates, and the Trustee
may rely thereon for all purposes. In no event shall the cumulative amount of
interest paid or payable on the Auction Rate Certificates (including interest
calculated as provided herein, plus any other amounts that constitute interest
on the Auction Rate Certificates under applicable law, which are contracted
for, charged, reserved, taken or received pursuant to such Certificates or
related documents) calculated from the date of issuance of such Certificates
through any subsequent day during the term of the applicable Auction Rate or
otherwise prior to payment in full of such Certificates exceed the amount
permitted by applicable law.
Prospectus
Trust Certificates
(Issuable in series)
Bond Products Depositor LLC
Depositor
<s> <c>
- ---------------------------------- Each trust -
|Consider carefully the risk |
|factors beginning on page [2] | o may issue a series of asset backed certificates
|Certificates; and in this | consisting of one or more classes of
|prospectus. |
| | o will own -
|Unless otherwise specified in |
|the applicable prospectus | o a debt security or a pool of such debt
|supplement, neither the | securities;
|certificates nor any of the | o certain derivative products and/or credit
|securities deposited in any trust | support agreements;
|are obligations of or are insured | o payments due on those securities;
|or guaranteed by the U.S. | o securities of government-sponsored
|government or any U.S. | enterprises which, unless otherwise stated in
|government agency. | the prospectus supplement, are not
| | obligations of and are neither insured nor
|The certificates will represent | guaranteed by the U.S. government or any
|interests in the trust only and | U.S. government agency;
|will not represent interests in or| o treasury securities; and/or
|obligations of the Depositor, the | o other assets described in this prospectus and
|trustee, any administrative agent | in the accompanying prospectus supplement.
|of the trustee or any of their |
|affiliates. | The certificates -
| |
|This prospectus may be used to | o will represent undivided beneficial interests in the trust
|offer and sell any series of | and will be paid only from the trust's assets;
|certificates only if accompanied |
|by the prospectus supplement | o will be denominated and sold for U.S. dollars or for
|for that series. | one or more foreign or composite currencies and any
| | payments to certificateholders may be payable in U.S.
- ---------------------------------- dollars or in one or more foreign or composite
currencies;
o will be issued as part of a designated series which may
include one or more classes of certificates and one or
more forms of credit enhancement; and
o will not be obligations of and will neither be insured
nor guaranteed by the U.S. government or any U.S.
government agency.
The certificateholders -
o will receive interest and principal payments from the
assets deposited with each trust.
Neither the Securities and Exchange Commission (the "SEC") nor any
state securities commission has approved these certificates or determined that
this prospectus is accurate or complete. Any representation to the contrary is
a criminal offense.
BANC OF AMERICA SECURITIES LLC
[____________], 2003
OVERVIEW OF THE INFORMATION IN THIS
PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT
We provide information to you about the certificates in two separate
documents that progressively provide more detail: (a) this prospectus, which
provides general information, some of which may not apply to a particular
series of certificates, including your series, and (b) the accompanying
prospectus supplement, which will describe the specific terms of your series
of certificates, including:
o the currency or currencies in which the interest, principal, and
premium, if any, will be paid;
o the number of classes of such series and, with respect to each
class of such series, its designation, aggregate principal
amount or, if applicable, notional amount, and authorized
denominations;
o information concerning the type, characteristics and
specifications of the securities deposited with the relevant
trust (the "Underlying Securities") and any other assets
deposited with such trust including any credit support for such
series or class (together with the Underlying Securities, the
"Deposited Assets");
o the relative rights and priorities of payment of each such class
(including the method for allocating collections from the
Deposited Assets to the certificateholders of each class and the
relative ranking, if any, of the claims of the
certificateholders of each class to the Deposited Assets);
o the name of the trustee and the administrative agent, if any,
for the series;
o the Pass-Through Rate (as defined below) or the terms relating
to the applicable method of calculation thereof;
o the time and place of distribution (a "Distribution Date") of
any interest, principal and premium (if any) on the Deposited
Assets;
o the date of issue of the certificates;
o ratings of the certificates;
o the method for selling the certificates;
o the Final Scheduled Distribution Date (as defined in the related
prospectus supplement), if applicable;
o the offering price; and
o any exchange, whether mandatory or optional, the redemption
terms and any other specific terms of certificates of each
series or class.
See "Description of the Certificates--General" for a listing of other
items that may be specified in the applicable prospectus supplement.
Information set forth in the accompanying prospectus supplement will
provide additional detail with respect to the terms of the series of
certificates described in the Prospectus Supplement.
You should rely only on the information provided in this prospectus
and the accompanying prospectus supplement including any information
incorporated by reference. We have not authorized anyone to provide you with
different information. We are not offering the certificates in any state or
other jurisdiction where the offer is not permitted. We do not claim the
accuracy of the information in this prospectus or the accompanying prospectus
supplement as of any date other than the dates stated on their respective
covers.
We include cross-references in this prospectus and in the
accompanying prospectus supplement to captions in these materials where you
can find further related discussions. The following table of contents and the
table of contents included in the accompanying prospectus supplement provide
the pages on which these captions are located.
TABLE OF CONTENTS
OVERVIEW OF THE INFORMATION IN THIS PROSPECTUS AND THE
ACCOMPANYING PROSPECTUS SUPPLEMENT............................................i
WHERE YOU CAN FIND MORE INFORMATION...........................................1
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE...............................1
REPORTS TO CERTIFICATEHOLDERS.................................................1
IMPORTANT CURRENCY INFORMATION................................................1
RISK FACTORS..................................................................2
THE DEPOSITOR.................................................................6
USE OF PROCEEDS...............................................................7
FORMATION OF THE TRUSTS.......................................................7
MATURITY AND YIELD CONSIDERATIONS.............................................8
DESCRIPTION OF THE CERTIFICATES..............................................10
DESCRIPTION OF DEPOSITED ASSETS..............................................30
DESCRIPTION OF THE TRUST AGREEMENT...........................................49
LIMITATIONS ON ISSUANCE OF BEARER CERTIFICATES...............................60
CURRENCY RISKS...............................................................61
UNDERWRITING.................................................................64
IMPORTANT FEDERAL INCOME TAX CONSIDERATIONS..................................65
ERISA CONSIDERATIONS.........................................................66
LEGAL OPINIONS...............................................................68
WHERE YOU CAN FIND MORE INFORMATION
Each trust is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and we file on behalf of
each trust reports and other information with the SEC. You may read and copy
any reports, statements or other information we file at the SEC's public
reference room in Washington, D.C. You can request copies of these documents,
upon payment of a duplicating fee, by writing to the SEC. Please call the SEC
at (800) SEC-0330 for further information on the operation of the public
reference rooms. Our SEC filings are also available to the public on the SEC
Internet site (http://www.sec.gov). We do not intend to send any financial
reports to certificateholders.
We filed a registration statement relating to the certificates with the
SEC. This prospectus is part of the registration statement, but the
registration statement includes additional information.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" information we file with
it, which means that we can disclose important information to you by referring
you to those documents. We are incorporating by reference all documents that
we have filed with the SEC pursuant to the Exchange Act prior to the date of
this prospectus. The information incorporated by reference is considered to be
part of this prospectus. Information that we file later with the SEC will
automatically update the information in this prospectus. In all cases, you
should rely on the later information over different information included in
this prospectus or the accompanying prospectus supplement or any other prior
filing. We incorporate by reference any future SEC reports filed by or on
behalf of the trusts until we terminate our offering of the certificates.
As a recipient of this prospectus, you may request a copy of any document
we incorporate by reference, except exhibits to the documents (unless the
exhibits are specifically incorporated by reference), at no cost, by writing
or calling us at: Bond Products Depositor LLC, 100 North Tryon Street,
Charlotte, North Carolina 28255, telephone: (888) 583-8900.
REPORTS TO CERTIFICATEHOLDERS
Except as otherwise specified in the applicable prospectus supplement,
unless and until definitive certificates (as defined below) are issued, on
each Distribution Date unaudited reports containing information concerning
each trust will be prepared by the trustee and sent on behalf of each trust
only to Cede & Co., as nominee of DTC and registered holder of the
certificates. See "Description of the Certificates--Global Securities" and
"Description of the Trust Agreement--Reports to Certificateholders; Notices."
These reports will not constitute financial statements prepared in accordance
with generally accepted accounting principles. We will file with the SEC on
behalf of the trusts periodic reports required under the Exchange Act.
IMPORTANT CURRENCY INFORMATION
References herein to "U.S. dollars," "U.S.$," "USD," "dollar" or "$" are
to the lawful currency of the United States.
Purchasers are required to pay for each certificate in the global
currency in which the certificate is denominated. Currently, there are limited
facilities in the United States for conversion of U.S. dollars into foreign
currencies and vice versa, and banks do not currently offer non-U.S. dollar
checking or savings account facilities in the United States. However, if
requested by a prospective purchaser of a certificate denominated in a
currency other than U.S. dollars, [Banc of America Securities LLC ("BAS")]
will arrange for the exchange of U.S. dollars into such currency to enable the
purchaser to pay for the certificate. Requests must be made on or before the
fifth Business Day (as defined below) preceding the date of delivery of the
certificate or by a later date as determined by [BAS]. Each exchange will be
made by [BAS] on the terms and subject to the conditions, limitations and
charges that [BAS] may from time to time establish in accordance with its
regular foreign exchange practice. All costs of exchange will be borne by the
purchaser.
You can find a listing of pages where capitalized and other important
terms used in this prospectus and the accompanying prospectus supplement are
defined under the caption "Index of Terms for Prospectus" beginning on page
[71] in this document and under the caption "Index of Terms for Prospectus
Supplement" beginning on page S-[ ] in the accompanying prospectus supplement.
RISK FACTORS
Limited Liquidity. Prior to the issuance of any series (or class within
such series) of certificates there will not be a public market for those
securities. We cannot predict the extent to which a trading market will
develop or how liquid that market might become or for how long it may
continue.
Legal Aspects. A prospectus supplement may set forth legal considerations
that are applicable to a specific series (or class or classes within such
series) of certificates being offered in connection with that prospectus
supplement or the assets deposited in or assigned to the related trust.
No Recourse. The certificates will not represent a recourse obligation
of, or interest in, the Depositor or any of its affiliates. Unless otherwise
specified in the applicable prospectus supplement, the certificates of each
series will not be insured or guaranteed by any government agency or
instrumentality, the Depositor, any person affiliated with the Depositor or
any trust, or any other person. Any obligation of the Depositor with respect
to the certificates of any series will only be pursuant to limited
representations and warranties or for its failure to deliver to the trustee
certain documents with respect to the Underlying Securities as required in the
trust agreement. The Depositor does not have, and is not expected in the
future to have, any significant assets with which to satisfy any claims
arising from a breach of any representation or warranty. If the Depositor were
required to repurchase an Underlying Security, its only sources of funds to
make a repurchase would be from funds obtained from the enforcement of a
corresponding obligation, if any, on the part of the seller of the Underlying
Security to the Depositor, or from a reserve fund established to provide funds
for repurchases. The Depositor is not obligated to, and will not, establish or
maintain a reserve fund.
Credit Support; Limited Assets. The only material assets expected to be
in each trust are the Deposited Assets corresponding to the related series of
certificates as identified in the related prospectus supplement. The trust for
any series (or class of such series) of certificates will include assets which
will be used to make payments on the certificates, to ensure the servicing of
the Underlying Securities and/or provide credit enhancement. However, the
certificates do not represent obligations of the Depositor, any trustee, any
administrative agent or any of their affiliates and, unless otherwise
specified in the applicable prospectus supplement, are not insured or
guaranteed by any person or entity. Accordingly, certificateholders' receipt
of distributions will depend entirely on such trust's receipt of payments with
respect to the Deposited Assets identified in the related prospectus
supplement. See "Description of Deposited Assets."
Payments on the Underlying Securities may be Subordinate to other
Obligations of the Issuer of the Underlying Securities. Payments on the
Underlying Securities may be subordinate to other obligations of the issuer of
the Underlying Securities and such issuer may not be permitted to make
payments on the Underlying Securities unless it has paid amounts due on its
obligations which are senior to the Underlying Securities. In the event the
Underlying Securities issuer does not have sufficient funds to pay all amounts
due on its securities, such subordination may cause investors in the
certificates to suffer a greater loss than if payments on the Underlying
Securities were not subordinated.
Maturity and Redemption Considerations. The timing of any distribution
with respect to any series (or of any class within such series) of
certificates is affected by a number of factors, including:
o the performance of the related Deposited Assets;
o the extent of any early redemption, repayment or extension of maturity of
the related Underlying Securities (including acceleration resulting from
any default or rescheduling resulting from the bankruptcy or similar
proceeding with respect to the issuer of the Underlying Securities);
o the existence of any call option entitling the call holder to purchase
from the related trust the related Underlying Securities;
o the existence of any call option entitling the call holder to purchase
the certificates from you; and
o the manner and priority in which collections from the Underlying
Securities and any other Deposited Assets are allocated to each class of
such series.
These factors may be influenced by a variety of accounting, tax,
economic, social and other factors. The related prospectus supplement will
discuss any calls or other redemption options, any extension of maturity
provisions and other terms applicable to the certificates or to the Underlying
Securities and any other Deposited Assets. See "Maturity and Yield
Considerations."
Tax Considerations. Skadden, Arps, Slate, Meagher & Flom LLP has
delivered an opinion to the Depositor that the discussion of the federal
income tax consequences of the issuance of securities contained in this
prospectus under the caption "Important Federal Income Tax Considerations" is
accurate in all material respects. In addition, it is a condition to the
issuance of securities that Skadden, Arps, Slate, Meagher & Flom LLP also
deliver either an opinion to the effect that, for federal income tax purposes,
the trust will not be characterized as an association (or publicly traded
partnership) taxable as a corporation or an opinion to the effect that, for
federal income tax purposes, the trust will be classified as a financial asset
securitization investment trust under sections 860H through 860L of the
Internal Revenue Code of 1986, as amended. Prospective investors should be
aware that no rulings have been sought from the Internal Revenue Service
("IRS"), and that legal opinions are not binding on the IRS or the courts.
Accordingly, there can be no assurance that the IRS or the courts will agree
with Skadden, Arps, Slate, Meagher & Flom LLP's opinions. If, contrary to
Skadden, Arps, Slate, Meagher & Flom LLP's opinion, the trust is characterized
or treated as a corporation for federal income tax purposes, among other
consequences, the trust would be subject to federal income tax (and possibly
state income or franchise taxes) on its income and its ability to make
distributions to certificateholders would be impaired. The federal income tax
consequences of the purchase, ownership and disposition of the certificates
and the tax treatment of the trusts will depend on the specific terms of the
related certificates, trust, and Deposited Assets. See the description under
"Important Federal Income Tax Considerations" in the related prospectus
supplement. If the related Deposited Assets include securities issued by one
or more government agencies or instrumentalities, purchasers of the
certificates may also be affected by the tax treatment of such Underlying
Securities by the relevant issuing government.
Ratings of the Certificates. At the time of issue, the certificates of
any given series (or each class of such series that is offered hereby) will be
rated in one of the investment grade categories recognized by one or more
nationally recognized rating agencies. The rating of any series or class of
certificates is based primarily on the related Deposited Assets and the
relative priorities of the certificateholders of such series or class to
receive collections from, and to assert claims against, the related trust. The
rating is not a recommendation to purchase, hold or sell certificates and it
does not indicate market price or suitability for a particular investor. In
addition, the rating does not address the likelihood that the principal amount
of any series or class will be paid prior to any final legal maturity date. We
cannot be certain that the rating will remain for any given period of time or
that the rating will not be lowered or withdrawn entirely by the rating agency
in the future.
Global Securities. The certificates of each series (or, if more than one
class exists, each class of such series) will initially be represented by one
or more global securities deposited with a Depositary (as defined below) and
purchasers will not receive individual certificates. Consequently, unless and
until individual definitive certificates of a particular series or class are
issued, purchasers will not be recognized as certificateholders under the
related trust agreement. Until such time, purchasers will only be able to
exercise the rights of certificateholders indirectly through the Depositary
and its respective participating organizations. The ability of any purchaser
to pledge a certificate to persons or entities that do not participate in the
Depositary's system, or to otherwise act with respect to a certificate, may be
limited. See "Description of the Certificates--Global Securities" and
"Limitations on Issuance of Bearer Certificates" and any further description
contained in the related prospectus supplement.
Foreign Issuers. The Underlying Securities may include obligations of
foreign issuers. Consequently, it may be difficult for the applicable trust as
a holder of the Underlying Securities to obtain or realize upon judgments in
the United States against the obligor. Even if an issuer is amenable to suit
in the United States, the enforceability of any judgment obtained may be
limited by a lack of substantial assets which can be levied upon in the United
States or the inability to obtain recognition and enforcement of the judgment
in the issuer's country. Because the Underlying Securities may represent
direct or indirect obligations of foreign issuers, certificateholders should
consider the political, economic and other risks attendant on holding the
obligations of a foreign issuer which are not typically associated with an
investment in securities of a domestic issuer. Such risks include:
o future political and economic developments;
o moratorium on payment or rescheduling of external debts;
o confiscatory taxation;
o imposition of any withholding tax;
o exchange rate fluctuations;
o political or social instability or diplomatic developments; and
o the imposition of additional governmental laws or restrictions.
Currency Risks. The certificates of any given series (or class within
such series) may be denominated in a currency other than U.S. dollars. An
investment in a certificate having a Specified Currency other than U.S.
dollars entails significant risks that are not associated with a similar
investment in a U.S. dollar-denominated security. Such risks include, without
limitation, the possibility of significant changes in rates of exchange
between the U.S. dollar and such Specified Currency and the possibility of the
imposition or modification of foreign exchange controls with respect to such
Specified Currency. Such risks generally depend on factors over which the
trust has no control, such as economic and political events and the supply of
and demand for the relevant currencies. In recent years, rates of exchange
between the U.S. dollar and certain currencies have been highly volatile, and
such volatility may be expected in the future. Past fluctuations in any
particular exchange rate do not necessarily indicate, however, fluctuations in
the rate that may occur during the term of any certificate. Depreciation of
the Specified Currency for a certificate against the U.S. dollar would
decrease the effective yield of such certificate below its Pass-Through Rate
and, in certain circumstances, could result in a loss to the investor on a
U.S. dollar basis. This prospectus does not describe all the risks of an
investment in such certificates, and the Depositor disclaims any
responsibility to advise prospective purchasers of such risks as they exist
from time to time. Prospective purchasers should consult their own financial
and legal advisors as to the risks entailed by an investment in certificates
denominated in a currency other than U.S. dollars. See "Currency Risks."
Passive Nature of the Trusts. The trustee with respect to any series of
certificates will hold the Deposited Assets for the benefit of the
certificateholders and certain other assets. Unless a trust has issued a call
option (or similar right) with respect to some or all of the related
Underlying Securities, or has the right to put some or all of the related
Underlying Securities to a third party, each trust will generally hold the
related Underlying Securities to maturity and not dispose of them, regardless
of adverse events, financial or otherwise, which may affect any issuer of
Underlying Securities or the value of the Underlying Securities. Under
specified circumstances the holders of the certificates may direct the trustee
to dispose of the Underlying Securities or take certain other actions in
respect of the Deposited Assets.
Trust May Include Derivative Products. A trust may include various
derivative instruments, including interest rate, currency, securities
(including synthetic securities), commodity swaps, caps, floors, collars and
options and structured securities having embedded derivatives (such as
structured notes). Swaps involve the exchange with another party of their
respective commitments to pay or receive amounts computed by reference to
specified fixed or floating interest rates, currency rates, securities prices,
yields or returns (including baskets of securities or securities indices) or
commodity prices and a notional principal amount (that is, the reference
amount with respect to which such obligations are determined, although no
actual exchange of principal occurs except for currency swaps), for example,
an exchange of floating rate payments for fixed rate payments. Interim
payments are generally netted, with the difference being paid by one party to
the other. The purchase of a cap entitles the purchaser, to the extent that a
specified rate, price, yield or return exceeds a predetermined level, to
receive payments computed by reference to a specified fixed or floating rate,
price, yield or return and a notional principal amount from the party selling
such cap. The purchase of a floor entitles the purchaser, to the extent that a
specified rate, price, yield or return declines below a predetermined level,
to receive payments computed by reference to a specified fixed or floating
rate, price, yield or return and a notional principal amount from the party
selling such floor. Options function in a manner similar to caps and floors,
and exist on various underlying securities, such as bonds, equities,
currencies and commodities. Options can also be structured as securities such
as warrants or can be embedded in securities such as certain commodity or
equity-linked bonds with option-like characteristics. Forward contracts
involve the purchase and sale of a specified security, commodity, currency or
other financial instrument at a specified price and date in the future, and
may be settled by physical delivery or cash payment.
Fluctuations in securities, currency and commodity rates, prices, yields
and returns may have a significant effect on the yield to maturity of
derivatives or the levels of support that derivatives can provide to a trust.
In addition, derivatives may be limited to covering only certain risks.
Continued payments on derivatives may be affected by the financial condition
of the counterparties thereto (or, in some instances, the guarantor
thereunder). There can be no assurance that counterparties will be able to
perform their obligations. Failure by a counterparty (or the related
guarantor, if any) to make required payments may result in the delay or
failure to make payments on the related securities and risks. In addition, the
notional amounts on which payments are made may vary under certain
circumstances and may not bear any correlation to principal amounts of the
related securities. The terms and risks of the relevant derivatives will be
described in the related prospectus supplement. Further, the relevant
prospectus supplement will identify the material terms, the material risks and
the counterparty for any derivative instrument in a trust which is the result
of an agreement with such counterparty to the extent that such agreement is
material.
Review of Available Information. Each prospective purchaser of
certificates may obtain and evaluate any publicly available information or
non-public information available from the trustee named in the applicable
prospectus supplement concerning each of the Underlying Securities and each
issuer of Underlying Securities (each, an "Underlying Securities Issuer") as
it might obtain and evaluate if it were investing directly in the Underlying
Securities or in other securities issued by the Underlying Securities Issuer.
In the case of publicly issued Underlying Securities, the publicly available
information concerning the Underlying Securities and the related Underlying
Securities Issuers is important in considering whether to invest in or sell
the certificates. The information in any prospectus supplement concerning any
publicly offered Underlying Securities and their issuers will be obtained from
publicly available documents. None of the Depositor, the trustee or any of
their affiliates has undertaken, or will undertake, any investigation of the
accuracy or completeness of such documents or the financial condition or
creditworthiness of any Underlying Securities Issuer in connection with the
acquisition of the Underlying Securities or otherwise. The issuance of the
certificates of any series should not be construed as an endorsement by the
Depositor or the trustee or any of their affiliates of the financial condition
or business prospects of any Underlying Securities Issuer.
THE DEPOSITOR
The Depositor was established as a limited liability company in the State
of Delaware on April 22, 2003 and is a wholly-owned, limited-purpose
subsidiary of NationsBanc Montgomery Holdings Corporation, which is a
wholly-owned subsidiary of Bank of America Corporation. The principal office
of the Depositor is located at Bank of America Corporate Center, 100 North
Tryon Street, Charlotte, North Carolina 28255. Its telephone number is (888)
583-8900.
The limited liability company agreement of the Depositor provides that it
may conduct any lawful activities necessary or incidental to acquiring,
owning, holding, pledging and transferring assets (including the Deposited
Assets) and serving as depositor of one or more trusts that may issue and sell
certificates. The limited liability company agreement also provides that any
securities, except for subordinated securities, issued by the Depositor (or a
trust formed by the Depositor) must be rated in one of the four highest
categories available by any one or more rating agencies. Pursuant to the terms
of the trust agreement, the Depositor (or a trust formed by the Depositor) may
not issue any securities which would result in the lowering of the then
current ratings of the outstanding certificates of any series.
USE OF PROCEEDS
Unless otherwise specified in the applicable prospectus supplement, the
net proceeds to be received from the sale of each series or class of
certificates (whether or not offered hereby) will be used by the Depositor to
purchase the related Underlying Securities and acquire any related Other
Deposited Assets and Credit Support (each as defined herein) including, if
specified in the related prospectus supplement, making required deposits into
any Reserve Account or the applicable Certificate Account (each, as defined
below) for the benefit of the certificateholders of such series or class. Any
remaining net proceeds, if any, will be used by the Depositor for general
corporate purposes.
FORMATION OF THE TRUSTS
A separate trust will be created for each series of certificates issued.
Each trust will be formed as either a Delaware statutory business trust or a
common law trust under the laws of the State of Delaware. The Depositor will
assign the Deposited Assets for each series of certificates to the trustee
named in the applicable prospectus supplement, in its capacity as trustee, for
the benefit of the certificateholders of such series. See "Description of the
Trust Agreement--Assignment of Deposited Assets." The trustee named in the
applicable prospectus supplement will administer the Deposited Assets pursuant
to the trust agreement and will receive a fee for these services. The trustee
or any administrative agent named in the applicable prospectus supplement will
perform the tasks as are specified therein and in the trust agreement and will
receive a fee for these services as specified in the prospectus supplement.
See "Description of the Trust Agreement--Collection and Other Administrative
Procedures" and "--Retained Interest; Administrative Agent Compensation and
Payment of Expenses." The trustee or an administrative agent, if applicable,
will either cause the assignment of the Deposited Assets to be recorded or
will obtain an opinion of counsel that no recordation is required to obtain a
first priority perfected security interest in the Deposited Assets.
Unless otherwise stated in the related prospectus supplement, the
Depositor's assignment of the Deposited Assets to the trustee will be without
recourse. To the extent provided in the applicable prospectus supplement, the
obligations of the trustee or administrative agent, if applicable, will
consist primarily of:
o contractual and administrative obligations, if any, under the trust
agreement; and
o an obligation, if any, to make cash advances in the event of
delinquencies in payments on or with respect to any Deposited Assets in
amounts described under "Description of the Trust Agreement--Advances in
Respect of Delinquencies."
The obligations of the trustee or the administrative agent, if any, named
in the applicable prospectus supplement to make advances will be limited to
amounts which the trustee or the administrative agent believes ultimately
would be recoverable under any credit support, insurance coverage, the
proceeds of liquidation of the Underlying Securities or from other sources
available for such purposes. See "Description of the Trust Agreement--Advances
in Respect of Delinquencies."
Unless otherwise provided in the related prospectus supplement, each
trust will consist of:
o the Underlying Securities, or interests therein, exclusive of any
interest in such assets retained by the Depositor or any previous owner
thereof (the "Retained Interest"), as are specified in the trust
agreement;
o any calls, interest rate swaps, currency swaps, floors, collars, caps or
other derivatives or similar arrangements as described therein and under
"Description of Deposited Assets--Other Deposited Assets";
o the credit support, if any, provided with respect to any class within
such series that are specified as being part of the related trust in the
applicable prospectus supplement, as described therein and under
"Description of Deposited Assets--Credit Support;"
o such assets as from time to time identified as deposited in the related
Certificate Account;
o property, if any, acquired on behalf of certificateholders by foreclosure
or repossession and any revenues received thereon;
o the Certificate Account and any Reserve Account;
o the rights of the Depositor relating to any breaches of representations
or warranties by the seller of any Underlying Security; and
o the rights of the trustee in any cash advances, reserve fund or surety
bond, if any, as described under "Description of the Trust
Agreement--Advances in Respect of Delinquencies."
MATURITY AND YIELD CONSIDERATIONS
Each prospectus supplement will contain any applicable information with
respect to the type and maturities of the related Underlying Securities and
the terms, if any, upon which such Underlying Securities may be subject to
early redemption (either by the applicable obligor or pursuant to a
third-party call option), repayment (at the option of the holders thereof) or
an extension of maturity. The provisions of the Underlying Securities with
respect to redemption, repayment or an extension of maturity will, unless
otherwise specified in the applicable prospectus supplement, affect the
weighted average life of the related series of certificates.
The effective yield to holders of the certificates of any series (and
class within such series) may be affected by aspects of the Deposited Assets
or the manner and priorities of allocations of collections with respect to the
Deposited Assets between the classes of a given series. With respect to any
series of certificates, the Underlying Securities of which consist of one or
more redeemable securities, extendable securities or securities subject to a
third-party call option or any series of certificates subject to a third-
party call option, the yield to maturity of such series (or class within such
series) may be affected by any optional or mandatory redemption or repayment
or an extension of maturity of the related Underlying Securities, or the
exercise of third-party call option prior to the stated maturity of the
related series of certificates. A variety of tax, accounting, economic, and
other factors will influence whether an issuer exercises any right of
redemption in respect of its securities or whether a third-party exercises its
rights under any call option. In certain cases, the rate of redemption may be
influenced by prepayments on the obligations a government sponsored entity
issuer holds for its own account. All else remaining equal, if prevailing
interest rates fall below the interest rates on the related Underlying
Securities, the likelihood of redemption would be expected to increase.
Similarly, the likelihood that a third party will exercise its call option
with respect to the certificates will increase if prevailing interest rates
fall below the weighted average interest rate of the Underlying Securities.
There can be no certainty as to whether any Underlying Security redeemable at
the option of its issuer or subject to a third-party call option will be
redeemed or called prior to its stated maturity.
Unless otherwise specified in the related prospectus supplement, each of
the Underlying Securities will be subject to acceleration upon the occurrence
of specified Underlying Security Events of Default (as defined below). The
maturity and yield on the certificates will be affected by any early repayment
of the Underlying Securities as a result of the acceleration of the
Outstanding Debt Securities (as defined below) by the holders thereof. See
"Description of Deposited Assets and--Private Sector Securities-Events of
Default" and "-Government Securities-Events of Default." If an issuer of
Underlying Securities becomes subject to a bankruptcy proceeding, the timing
and amount of payments with respect to both interest and principal may be
materially and adversely affected. A variety of factors influence the
performance of private debt issuers and correspondingly may affect the ability
of an issuer of Underlying Securities to satisfy its obligations under the
Underlying Securities, including the issuer's operating and financial
condition, leverage and various social, geographic, legal and economic
factors. In addition, if the Underlying Securities are issued by a foreign
government and the foreign government issuer or guarantor repudiates or places
any limitation or moratorium on the payment of external indebtedness or
imposes any confiscatory or withholding tax, the timing and amount of payments
on the certificates may be materially and adversely affected. A variety of
factors could influence a foreign government's willingness or ability to
satisfy its obligations under the related Underlying Securities. We cannot
predict the probability of a moratorium or other action affecting any
Underlying Security.
The extent to which the yield to maturity of any certificates may vary
from the anticipated yield due to the rate and timing of payments on the
Deposited Assets will depend upon the degree to which they are purchased at a
discount or premium and the degree to which the timing of payments thereon is
sensitive to the rate and timing of payments on the Deposited Assets.
The yield to maturity of any series (or class) of certificates will also
be affected by variations in the interest rates applicable to, and the
corresponding payments in respect of, such certificates, to the extent that
the Pass-Through Rate (as defined below) for such series (or class) is based
on variable or adjustable interest rates. With respect to any series of
certificates representing an interest in a pool of government, foreign
government or corporate debt securities, disproportionate principal payments
(whether resulting from differences in amortization schedules, payments due on
scheduled maturity or upon early redemption) on the related Underlying
Securities having interest rates higher or lower than the then applicable
Pass-Through Rates applicable to such certificates may affect the yield on the
certificates.
A variety of economic, social, political, tax, accounting and other
factors may affect the degree to which any of the Underlying Securities are
redeemed or called (whether by the applicable obligor or pursuant to a
third-party call option) or the maturity of such Underlying Securities is
extended, as specified in the related prospectus supplement. There can be no
assurance as to the rate or likelihood of redemption, third-party call or
extension of maturity of any Underlying Security. The applicable prospectus
supplement will, to the extent available, provide further information with
respect to any such experience applicable to the related Underlying
Securities. In addition, the applicable prospectus supplement for each series
of certificates will set forth additional information regarding yield and
maturity considerations applicable to such series (and each class within such
series) and the related Deposited Assets.
DESCRIPTION OF THE CERTIFICATES
Each series (or, if more than one class exists, the classes within such
series) of certificates will be issued pursuant to a trust agreement and a
separate series supplement thereto [between][among] the Depositor, [the
administrative agent, if any,] and the trustee named in the related prospectus
supplement, a form of which trust agreement is attached as an exhibit to the
registration statement. The provisions of the trust agreement (as so
supplemented) may vary depending upon the nature of the certificates to be
issued thereunder and the nature of the Deposited Assets. The following
summaries describe certain provisions of the trust agreement which may be
applicable to each series of certificates. The applicable prospectus
supplement for a series of certificates will describe any provision of the
trust agreement that materially differs from the description thereof contained
in this prospectus. The following summaries do not purport to be complete and
are subject to the detailed provisions of the form of trust agreement for a
full description of such provisions, including the definition of certain terms
used, and for other information regarding the certificates. As used herein
with respect to any series, the term "certificate" refers to all the
certificates of that series, whether or not offered hereby and by the related
prospectus supplement, unless the context otherwise requires.
A copy of the applicable series supplement to the trust agreement
relating to each series of certificates issued from time to time will be filed
by the Depositor as an exhibit to a Current Report on Form 8-K to be filed
with the SEC following the issuance of such series.
General
There is no limit on the amount of certificates that may be issued under
any trust agreement, and the trust agreement will provide that certificates of
the applicable series may be issued in multiple classes. The series (or
classes within such series) of certificates to be issued under the trust
agreement will represent the entire beneficial ownership interest in the trust
for the series created pursuant to the trust agreement and each class will be
allocated certain relative priorities to receive specified collections from
such trust, as identified and described in the applicable prospectus
supplement. See "Description of Deposited Assets--Collections."
Reference is made to the related prospectus supplement for a description
of the following terms of the series (and, if applicable, classes within such
series) of certificates in respect of which this prospectus and such
prospectus supplement are being delivered:
o the title of such certificates;
o the series of such certificates and, if applicable, the number and
designation of classes of such series;
o information concerning the type, characteristics and specifications of
the Deposited Assets being deposited into the related trust by the
Depositor (and, with respect to any Underlying Security which at the time
of such deposit represents a significant portion of the Deposited Assets,
information concerning the terms of each such Underlying Security, the
identity of the issuer thereof and where publicly available information
regarding such issuer may be obtained);
o the limit, if any, upon the aggregate principal amount or notional
amount, as applicable, of each class thereof;
o the dates on which or periods during which such series or classes within
such series may be issued (each, an "Original Issue Date"), the offering
price thereof and the applicable Distribution Dates on which the
principal, interest and premium, if any, on such series or classes within
such series will be distributable and the related Record Dates (as
defined in the related prospectus supplement), if any;
o if applicable, the relative rights and priorities of each class
(including the method for allocating collections from and defaults or
losses on the Underlying Securities to the certificateholders of each
class);
o whether the certificates of such series or each class within such series
are Fixed Rate Certificates, Floating Rate Certificates or Auction Rate
Certificates (each as defined below) and the applicable interest rate
(the "Pass-Through Rate") for each such class including, if fixed, the
applicable rate (the "Fixed Pass-Through Rate"), or, if variable, the
terms relating to the particular method of calculation thereof applicable
to such series or each class within such series (the "Variable
Pass-Through Rate") or, for Auction Rate Certificates, the Auction
Procedures used to establish the Auction Rate;
o the option, if any, of any certificateholder of such series or class to
withdraw a portion of the assets of the related trust in exchange for
surrendering such certificateholder's certificate or the option, if any,
of the Depositor or administrative agent, if any, or another third party
to purchase or repurchase any Underlying Securities (in each case to the
extent not inconsistent with the Depositor's continued satisfaction of
the applicable requirements for exemption under Rule 3a-7 under the
Investment Company Act of 1940, as amended, and all applicable rules,
regulations and interpretations thereunder) and the periods within which
or the dates on which, and the terms and conditions upon which any such
option may be exercised, in whole or in part;
o the terms of any call option relating to such series or class, including
the date or dates such call option may be exercised and the price payable
to holders of the certificates of such series or class upon exercise of
such call option;
o the rating of each series or each class within such series offered hereby
(provided, however, that one or more classes within such series not
offered hereunder may be unrated or may be rated below investment grade);
o if other than denominations of [$1,000] and any integral multiple
thereof, the denominations in which such series or class within such
series will be issuable;
o whether the certificates of any class within a given series are to be
entitled to (1) principal distributions, with disproportionate, nominal
or no interest distributions, or (2) interest distributions, with
disproportionate, nominal or no principal distributions ("Strip
Certificates"), and the applicable terms thereof;
o whether the certificates of such series or of any class within such
series are to be issued as registered certificates or bearer certificates
or both and, if bearer certificates are to be issued, whether coupons
will be attached thereto; whether bearer certificates of such series or
class may be exchanged for registered certificates of such series or
class and the circumstances under which and the place or places at which
any such exchanges, if permitted, may be made;
o whether the certificates of such series or of any class within such
series are to be issued in the form of one or more global securities and,
if so, the identity of the Depositary (as defined below), if other than
The Depository Trust Company, for such global security or securities;
o if a temporary certificate is to be issued with respect to such series or
any class within such series, whether any interest thereon distributable
on a Distribution Date prior to the issuance of a permanent certificate
of such series or class will be credited to the account of the persons
entitled thereto on such Distribution Date;
o if a temporary global security is to be issued with respect to such
series or class, the terms upon which beneficial interests in such
temporary global security may be exchanged in whole or in part for
beneficial interests in a permanent global security or for individual
definitive certificates of such series or class and the terms upon which
beneficial interests in a permanent global security, if any, may be
exchanged for individual definitive certificates of such series or class;
o if other than U.S. dollars, the currency applicable to the certificates
of such series or class for purposes of denominations and distributions
on such series or each class within such series (the "Specified
Currency") and the circumstances and conditions, if any, when such
currency may be changed, at the election of the Depositor or a
certificateholder, and the currency or currencies in which any principal
of or any premium or any interest on such series or class are to be
distributed pursuant to such election;
o all applicable Required Percentages and Voting Rights (each, as defined
below) relating to the manner and percentage of votes of
certificateholders of such series and each class within such series
required with respect to certain actions by the Depositor, the
administrative agent, if any, or trustee under the trust agreement or
with respect to the applicable trust; and
o any other terms of such series or class within such series of
certificates not inconsistent with the provisions of the trust agreement
relating to such series.
Unless otherwise indicated in the applicable prospectus supplement,
certificates of each series (including any class of certificates not offered
hereby) will be issued only as registered certificates in denominations of
[$1,000] and any integral multiple thereof and will be payable only in U.S.
dollars. The authorized denominations of registered certificates of a given
series or class within such series having a Specified Currency other than U.S.
dollars will be set forth in the applicable prospectus supplement.
The United States federal income tax consequences and the consequences of
the Employee Retirement Income Security Act of 1974, as amended, relating to
any series or any class within such series of certificates are described in
this prospectus and in the applicable prospectus supplement. Furthermore, an
election may be made to treat a trust as a "financial asset securitization
investment trust" ("FASIT"). To date, final Treasury regulations have not been
issued describing the federal income tax consequences of holders of interests
in FASITs of owning such interest. The prospectus supplement relating to any
class or series of certificates representing interests in a FASIT will
describe the federal income tax consequences of the purchase and ownership of
such certificates. In addition, any risk factors, the specific terms and other
information with respect to the issuance of any series or class within such
series of bearer certificates or certificates on which the principal of and
any premium and interest are distributable in a Specified Currency other than
U.S. dollars will be described in the applicable prospectus supplement
relating to such series or class. Unless otherwise specified in the applicable
prospectus supplement, the U.S. dollar equivalent of the public offering price
or purchase price of a certificate having a Specified Currency other than U.S.
dollars will be determined on the basis of the noon buying rate in New York
City for cable transfer in foreign currencies as certified for customs
purposes by the Federal Reserve Bank of New York (the "Market Exchange Rate")
for such Specified Currency on the applicable issue date. As specified in the
applicable prospectus supplement such determination will be made by the
Depositor, the trustee, the administrative agent, if any, or an agent thereof
as exchange rate agent for each series of certificates (the "Exchange Rate
Agent").
Unless otherwise provided in the applicable prospectus supplement,
registered certificates may be transferred or exchanged for like certificates
of the same series and class at the corporate trust office or agency of the
applicable trustee in the City and State of New York, subject to the
limitations provided in the trust agreement, without the payment of any
service charge, other than any tax or other governmental charge payable in
connection therewith. Bearer certificates will be transferable by delivery.
Provisions with respect to the exchange of bearer certificates will be
described in the applicable prospectus supplement. Unless otherwise specified
in the applicable prospectus supplement, registered certificates may not be
exchanged for bearer certificates. The Depositor may at any time purchase
certificates at any price in the open market or otherwise. Certificates so
purchased by the Depositor may, at the discretion of the Depositor, be held or
resold or surrendered to the trustee for cancellation of such certificates.
Distributions
Distributions allocable to interest, principal, and premium (if any) on
the certificates of each series (and class within such series) will be made in
the Specified Currency for such certificates by or on behalf of the trustee on
each Distribution Date as specified in the related prospectus supplement and
the amount of each distribution will be determined as of the close of business
on the date specified in the related prospectus supplement (the "Determination
Date"). If the Specified Currency for a given series or class within such
series is other than U.S. dollars, the administrative agent, if any, or
otherwise the trustee will (unless otherwise specified in the applicable
prospectus supplement) arrange to convert all payments in respect of each
certificate of such series or class to U.S. dollars in the manner described in
the following paragraph. The certificateholder of a registered certificate of
a given series or class within such series denominated in a Specified Currency
other than U.S. dollars may (if the applicable prospectus supplement and the
terms of such certificate so indicate) elect to receive all distributions in
respect of such certificate in the Specified Currency by delivery of a written
notice to the trustee and administrative agent, if any, for such series not
later than fifteen calendar days prior to the applicable Distribution Date,
except under the circumstances described under "Currency Risks--Payment
Currency" below. Any such election will remain in effect until revoked by
written notice to such trustee and administrative agent, if any, received by
each of them not later than fifteen calendar days prior to the applicable
Distribution Date.
Unless otherwise specified in the applicable prospectus supplement, in
the case of a registered certificate of a given series or class within such
series having a Specified Currency other than U.S. dollars, the amount of any
U.S. dollar distribution in respect of such registered certificate will be
determined by the Exchange Rate Agent based on the highest firm bid quotation
expressed in U.S. dollars received by the Exchange Rate Agent at approximately
11:00 a.m., New York City time, on the second Business Day preceding the
applicable Distribution Date (or, if no such rate is quoted on such date, the
last date on which such rate was quoted), from three (or, if three are not
available, then two) recognized foreign exchange dealers in The City of New
York (one of which may be the Offering Agent and another of which may be the
Exchange Rate Agent) selected by the Exchange Rate Agent, for the purchase by
the quoting dealer, for settlement on such Distribution Date, of the aggregate
amount payable in such Specified Currency on such payment date in respect of
all registered certificates. [In the event the Exchange Rate Agent receives
only one bid quotation by the time and date described in the preceding
sentence, the Exchange Rate Agent shall use such quote which may be from
either the Offering Agent or the Exchange Rate Agent.] All currency exchange
costs will be borne by the certificateholders of such registered certificates
by deductions from such distributions. If no such bid quotations are
available, such distributions will be made in such Specified Currency, unless
such Specified Currency is unavailable due to the imposition of exchange
controls or to other circumstances beyond the Depositor's control, in which
case such distributions will be made as described under "Currency
Risks--Payment Currency" below. The applicable prospectus supplement will
specify such information with respect to bearer certificates.
Unless otherwise provided in the applicable prospectus supplement and
except as provided in the succeeding paragraph, distributions with respect to
certificates will be made (in the case of registered certificates) at the
corporate trust office or agency of the trustee specified in the applicable
prospectus supplement in The City of New York or (in the case of bearer
certificates) at the principal London office of the applicable trustee;
provided, however, that any such amounts distributable on the Final
Distribution Date of a certificate will be distributed only upon surrender of
the related certificate at the applicable location set forth above. Except as
otherwise provided in the applicable prospectus supplement, distribution on a
bearer certificate will be made by mail to an address in the United States or
by wire transfer to an account maintained by the certificateholder thereof in
the United States.
Unless otherwise specified in the applicable prospectus supplement,
distributions on registered certificates in U.S. dollars will be made, except
as provided below, by check mailed to the registered certificateholders of
such certificates (which, in the case of global securities, will be a nominee
of the Depositary); provided, however, that, in the case of a series or class
of registered certificates issued between a Record Date and the related
Distribution Date, interest for the period beginning on the issue date for
such series or class and ending on the last day of the related interest
accrual period ending immediately prior to or coincident with the next
Distribution Date will, unless otherwise specified in the applicable
prospectus supplement, be distributed on the next succeeding Distribution Date
to the registered certificateholders of the registered certificates of such
series or class on the related Record Date. A certificateholder of $10,000,000
(or the equivalent thereof in a Specified Currency other than U.S. dollars) or
more in aggregate principal amount of registered certificates of a given
series shall be entitled to receive such U.S. dollar distributions by wire
transfer of immediately available funds, but only if appropriate wire transfer
instructions have been received in writing by the trustee for such series not
later than fifteen calendar days prior to the applicable Distribution Date.
Simultaneously with the election by any certificateholder to receive payments
in a Specified Currency other than U.S. dollars (as provided above), such
certificateholder shall provide appropriate wire transfer instructions to the
trustee for such series, and all such payments will be made by wire transfer
of immediately available funds to an account maintained by the payee with a
bank located outside the United States.
Except as otherwise specified in the applicable prospectus supplement,
"Business Day" with respect to any certificate means any day, other than a
Saturday or Sunday, that is:
o not a day on which banking institutions are authorized or required by
law or regulation to be closed in
(a) The City of New York or
(b) if the Specified Currency for such certificate is other than
U.S. dollars, the financial center of the country issuing such
Specified Currency (which, in the case of ECU, shall be
Brussels, Belgium) and
o if the Pass-Through Rate for such certificate is based on LIBOR, a London
Banking Day. "London Banking Day" with respect to any certificate means
any day on which dealings in deposits in the Specified Currency of such
certificate are transacted in the London interbank market. The Record
Date with respect to any Distribution Date for a series or class of
registered certificates shall be specified as such in the applicable
prospectus supplement.
Interest on the Certificates
General. Each class of certificates (other than certain classes of Strip
Certificates) of a given series may have a different Pass-Through Rate, which
may be a Fixed or Variable Pass-Through Rate or such certificates may have an
Auction Rate, in each case as described below. In the case of Strip
Certificates with no or, in certain cases, a nominal Certificate Principal
Balance, such distributions of interest will be in an amount (as to any
Distribution Date, "Stripped Interest") described in the related prospectus
supplement. For purposes hereof, "Notional Amount" means the notional
principal amount specified in the applicable prospectus supplement on which
interest on Strip Certificates will be calculated on each Distribution Date.
Reference to the Notional Amount of a class of Strip Certificates herein or in
a prospectus supplement does not indicate that such certificates represent the
right to receive any distribution in respect of principal in such amount, but
rather the term "Notional Amount" is used solely as a basis for calculating
the amount of required distributions and determining certain relative voting
rights, all as specified in the related prospectus supplement.
Fixed Rate Certificates. Each series (or, if more than one class exists,
each class within such series) of certificates with a Fixed Pass-Through Rate
("Fixed Rate Certificates") will bear interest, on the outstanding Certificate
Principal Balance (as defined below) (or Notional Amount, if applicable), from
its Original Issue Date, at the Fixed Pass-Through Rate stated on the face
thereof and in the applicable prospectus supplement until the earlier of (i)
the final scheduled distribution date with respect to such certificates and
(ii) the date on which the Certificate Principal Balance of such certificates
has been reduced to zero (or in the case of Strip Certificates with no or a
nominal principal amount, until the Notional Amount thereof is reduced to
zero), except that, if so specified in the applicable prospectus supplement,
the Pass-Through Rate for such series or any such class or classes may be
subject to adjustment from time to time in response to designated changes in
the rating assigned to such certificates by one or more rating agencies (or
other reasons, if any, as set forth in the applicable prospectus supplement),
in accordance with a schedule or otherwise, all as described in such
prospectus supplement. Unless otherwise set forth in the applicable prospectus
supplement, interest on each series or class of Fixed Rate Certificates will
be distributable in arrears on each Distribution Date as specified in such
prospectus supplement. Each such distribution of interest shall include
interest accrued through the day specified in the applicable prospectus
supplement. Unless otherwise specified in the applicable prospectus
supplement, interest on Fixed Rate Certificates will be computed on the basis
of a 360-day year comprised of twelve 30-day months.
Floating Rate Certificates. Each series (or, if more than one class
exists, each class within such series) of certificates with a Variable
Pass-Through Rate ("Floating Rate Certificates") will bear interest, on the
outstanding Certificate Principal Balance (or Notional Amount, if applicable),
from its Original Issue Date to but excluding the first Interest Reset Date
for such series or class at the initial Pass-Through Rate set forth on the
face thereof and in the applicable prospectus supplement ("Initial
Pass-Through Rate"). Thereafter, the Pass-Through Rate on such series or class
for each Interest Accrual Period (as defined below) will be determined by
reference to an interest rate index (the "Base Rate"), plus or minus the
Spread, if any, or multiplied by the Spread Multiplier, if any. The "Spread"
is the number of basis points (one basis point equals one one-hundredth of a
percentage point) that may be specified in the applicable prospectus
supplement as being applicable to such series or class, and the "Spread
Multiplier" is the percentage that may be specified in the applicable
prospectus supplement as being applicable to such series or class, except that
if so specified in the applicable prospectus supplement, the Spread or Spread
Multiplier on such series or any such class or classes of Floating Rate
Certificates may be subject to adjustment from time to time in response to
designated changes in the rating assigned to such certificates by one or more
rating agencies (or other reasons, if any, as set forth in the applicable
prospectus supplement), in accordance with a schedule or otherwise, all as
described in such prospectus supplement. The applicable prospectus supplement,
unless otherwise specified therein, will designate one of the following Base
Rates as applicable to a Floating Rate Certificate:
o LIBOR (a "LIBOR Certificate");
o the Commercial Paper Rate (a "Commercial Paper Rate Certificate");
o the Treasury Rate (a "Treasury Rate Certificate");
o the Federal Funds Rate (a "Federal Funds Rate Certificate");
o the CD Rate (a "CD Rate Certificate"); or
o such other Base Rate which may be based on, among other things, one or
more market indices or the interest and/or other payments (whether
scheduled or otherwise) paid, accrued or available with respect to a
designated asset, pool of assets or type of asset as is set forth in such
prospectus supplement and in such certificate.
The "Index Maturity" for any series or class of Floating Rate Certificates is
the period of maturity of the instrument or obligation from which the Base
Rate is calculated. "H.15(519)" means the publication entitled "Statistical
Release H.15(519), Selected Interest Rates," or any successor publications,
published by the Board of Governors of the Federal Reserve System. "Composite
Quotations" means the daily statistical release entitled "Composite 3:30 p.m.
Quotations for U.S. Government Securities" published by the Federal Reserve
Bank of New York.
As specified in the applicable prospectus supplement, Floating Rate
Certificates of a given series or class may also have either or both of the
following (in each case expressed as a rate per annum on a simple interest
basis): (i) a maximum limitation, or ceiling, on the rate at which interest
may accrue during any Interest Accrual Period specified in the applicable
prospectus supplement ("Maximum Pass-Through Rate") and (ii) a minimum
limitation, or floor, on the rate at which interest may accrue during any such
Interest Accrual Period ("Minimum Pass-Through Rate"). In addition to any
Maximum Pass-Through Rate that may be applicable to any series or class of
Floating Rate Certificates, the Pass-Through Rate applicable to any series or
class of Floating Rate Certificates will in no event be higher than the
maximum rate permitted by applicable law, if any, as the same may be modified
by United States law of general application.
The Depositor will appoint, and enter into agreements with, agents (each,
a "Calculation Agent") to calculate Pass-Through Rates on each series or class
of Floating Rate Certificates. The applicable prospectus supplement will set
forth the identity of the Calculation Agent for each series or class of
Floating Rate Certificates. All determinations of interest by the Calculation
Agent shall, in the absence of manifest error, be conclusive for all purposes
and binding on the holders of Floating Rate Certificates of a given series or
class.
The Pass-Through Rate on each class of Floating Rate Certificates will be
reset daily, weekly, monthly, quarterly, semiannually or annually (such period
being the "Interest Accrual Period" for such class, and the first day of each
Interest Accrual Period will be the "Interest Reset Date"), as specified in
the applicable prospectus supplement. Interest Reset Dates with respect to
each series, and any class within such series of Floating Rate Certificates,
will be specified in the applicable prospectus supplement; [provided, however,
that unless otherwise specified in such prospectus supplement, the
Pass-Through Rate in effect for the ten days immediately prior to the Final
Scheduled Distribution Date (as defined in the prospectus supplement) will be
that in effect on the tenth day preceding such Final Scheduled Distribution
Date.]
Unless otherwise specified in the applicable prospectus supplement,
interest payable in respect of Floating Rate Certificates shall be the accrued
interest from and including the Original Issue Date of such series or class or
the last Interest Reset Date to which interest has accrued and been
distributed, as the case may be, to but excluding the immediately following
Distribution Date.
With respect to a Floating Rate Certificate, accrued interest shall be
calculated by multiplying the Certificate Principal Balance of such
certificate [(or, in the case of a Strip Certificate with no or a nominal
Certificate Principal Balance, the Notional Amount specified in the applicable
prospectus supplement)] by an accrued interest factor. Such accrued interest
factor will be computed by adding the interest factors calculated for each day
in the period for which accrued interest is being calculated. Unless otherwise
specified in the applicable prospectus supplement, the interest factor
(expressed as a decimal calculated to seven decimal places without rounding)
for each such day is computed by dividing the Pass-Through Rate in effect on
such day by 360, in the case of LIBOR Certificates, Commercial Paper Rate
Certificates, Federal Funds Rate Certificates and CD Rate Certificates or by
the actual number of days in the year, in the case of Treasury Rate
Certificates. For purposes of making the foregoing calculation, the variable
Pass-Through Rate in effect on any Interest Reset Date will be the applicable
rate as reset on such date.
Unless otherwise specified in the applicable prospectus supplement, all
percentages resulting from any calculation of the Pass-Through Rate on a
Floating Rate Certificate will be rounded, if necessary, to the nearest
1/100,000 of 1% (.0000001), with five one-millionths of a percentage point
rounded upward, and all currency amounts used in or resulting from such
calculation on Floating Rate Certificates will be rounded to the nearest
one-hundredth of a unit (with .005 of a unit being rounded upward).
Interest on any series (or class within such series) of Floating Rate
Certificates will be distributable on the Distribution Dates and for the
Interest Accrual Periods as and to the extent set forth in the applicable
prospectus supplement.
Upon the request of the holder of any Floating Rate Certificate of a
given series or class, the Calculation Agent for such series or class will
provide the Pass-Through Rate then in effect and, if determined, the
Pass-Through Rate that will become effective on the next Interest Reset Date
with respect to such Floating Rate Certificate.
(1) CD Rate Certificates. Each CD Rate Certificate will bear interest for
each Interest Accrual Period at the Pass-Through Rate calculated with
reference to the CD Rate, the Spread and/or the Spread Multiplier, if any,
specified in such certificate and in the applicable prospectus supplement.
Unless otherwise specified in the applicable prospectus supplement, the
"CD Rate" for each Interest Accrual Period shall be the rate as of the second
Business Day prior to the Interest Reset Date for such Interest Accrual Period
(a "CD Rate Determination Date") and will be the rate for negotiable
certificates of deposit having the Index Maturity designated in the applicable
prospectus supplement as published in H.15(519) under the heading "CDs
(Secondary Market)." In the event that such rate is not published prior to
3:00 p.m., New York City time, on the CD Rate Calculation Date (as defined
below) pertaining to such CD Rate Determination Date, then the "CD Rate" for
such Interest Accrual Period will be the rate on such CD Rate Determination
Date for negotiable certificates of deposit of the Index Maturity designated
in the applicable prospectus supplement as published in Composite Quotations
under the heading "Certificates of Deposit." If by 3:00 p.m., New York City
time, on such CD Rate Calculation Date such rate is not yet published in
either H.15(519) or Composite Quotations, then the "CD Rate" for such Interest
Accrual Period will be calculated by the Calculation Agent for such CD Rate
Certificate and will be the arithmetic mean of the secondary market offered
rates as of 10:00 a.m., New York City time, on such CD Rate Determination
Date, of three leading nonbank dealers in negotiable U.S. dollar certificates
of deposit in The City of New York selected by the Calculation Agent for such
CD Rate Certificate for negotiable certificates of deposit of major United
States money center banks of the highest credit standing (in the market for
negotiable certificates of deposit) with a remaining maturity closest to the
Index Maturity designated in the related prospectus supplement in a
denomination of $5,000,000; provided, however, that if the dealers selected as
aforesaid by such Calculation Agent are not quoting offered rates as mentioned
in this sentence, the "CD Rate" for such Interest Accrual Period will be the
same as the CD Rate for the immediately preceding Interest Accrual Period (or,
if there was no such Interest Accrual Period, the Initial Pass-Through Rate).
The "CD Rate Calculation Date" pertaining to any CD Rate Determination
Date shall be the first to occur of (a) the tenth calendar day after such CD
Rate Determination Date or, if such day is not a Business Day, the next
succeeding Business Day and (b) the second Business Day preceding the date any
distribution of interest is required to be made following the applicable
Interest Reset Date.
(2) Commercial Paper Rate Certificates. Each Commercial Paper Rate
Certificate will bear interest for each Interest Accrual Period at the
Pass-Through Rate calculated with reference to the Commercial Paper Rate and
the Spread or Spread Multiplier, if any, specified in such certificate and in
the applicable prospectus supplement.
Unless otherwise specified in the applicable prospectus supplement, the
"Commercial Paper Rate" for each Interest Accrual Period will be determined by
the Calculation Agent for such Commercial Paper Rate Certificate as of the
second Business Day prior to the Interest Reset Date for such Interest Accrual
Period (a "Commercial Paper Rate Determination Date") and shall be the Money
Market Yield (as defined below) on such Commercial Paper Rate Determination
Date of the rate for commercial paper having the Index Maturity specified in
the applicable prospectus supplement, as such rate shall be published in
H.15(519) under the heading "Commercial Paper." In the event that such rate is
not published prior to 3:00 p.m., New York City time, on the Commercial Paper
Rate Calculation Date (as defined below) pertaining to such Commercial Paper
Rate Determination Date, then the "Commercial Paper Rate" for such Interest
Accrual Period shall be the Money Market Yield on such Commercial Paper Rate
Determination Date of the rate for commercial paper of the specified Index
Maturity as published in Composite Quotations under the heading "Commercial
Paper." If by 3:00 p.m., New York City time, on such Commercial Paper Rate
Calculation Date such rate is not yet published in either H.15(519) or
Composite Quotations, then the "Commercial Paper Rate" for such Interest
Accrual Period shall be the Money Market Yield of the arithmetic mean of the
offered rates, as of 11:00 a.m., New York City time, on such Commercial Paper
Rate Determination Date of three leading dealers of commercial paper in The
City of New York selected by the Calculation Agent for such Commercial Paper
Rate Certificate for commercial paper of the specified Index Maturity placed
for an industrial issuer whose bonds are rated "AA" or the equivalent by a
nationally recognized rating agency; provided, however, that if the dealers
selected as aforesaid by such Calculation Agent are not quoting offered rates
as mentioned in this sentence, the "Commercial Paper Rate" for such Interest
Accrual Period will be the same as the Commercial Paper Rate for the
immediately preceding Interest Accrual Period (or, if there was no such
Interest Accrual Period, the Initial Pass-Through Rate).
"Money Market Yield" shall be a yield calculated in accordance with the
following formula:
Money Market Yield = D X 360 X 100
-------------
360 - (D X M)
where "D" refers to the applicable per annum rate for commercial paper quoted
on a bank discount basis and expressed as a decimal, and "M" refers to the
actual number of days in the specified Index Maturity.
The "Commercial Paper Rate Calculation Date" pertaining to any Commercial
Paper Rate Determination Date shall be the first to occur of (a) the tenth
calendar day after such Commercial Paper Rate Determination Date or, if such
day is not a Business Day, the next succeeding Business Day or (b) the second
Business Day preceding the date any distribution of interest is required to be
made following the applicable Interest Reset Date.
(3) Federal Funds Rate Certificates. Each Federal Funds Rate Certificate
will bear interest for each Interest Accrual Period at the Pass-Through Rate
calculated with reference to the Federal Funds Rate and the Spread or Spread
Multiplier, if any, specified in such certificate and in the applicable
prospectus supplement.
Unless otherwise specified in the applicable prospectus supplement, the
"Federal Funds Rate" for each Interest Accrual Period shall be the effective
rate on the Interest Reset Date for such Interest Accrual Period (a "Federal
Funds Rate Determination Date") for Federal Funds as published in H.15(519)
under the heading "Federal Funds (Effective)." In the event that such rate is
not published prior to 3:00 p.m., New York City time, on the Federal Funds
Rate Calculation Date (as defined below) pertaining to such Federal Funds Rate
Determination Date, the "Federal Funds Rate" for such Interest Accrual Period
shall be the rate on such Federal Funds Rate Determination Date as published
in Composite Quotations under the heading "Federal Funds/Effective Rate." If
by 3:00 p.m., New York City time, on such Federal Funds Rate Calculation Date
such rate is not yet published in either H.15(519) or Composite Quotations,
then the "Federal Funds Rate" for such Interest Accrual Period shall be the
rate on such Federal Funds Rate Determination Date made publicly available by
the Federal Reserve Bank of New York which is equivalent to the rate which
appears in H.15(519) under the heading "Federal Funds (Effective)"; provided,
however, that if such rate is not made publicly available by the Federal
Reserve Bank of New York by 3:00 p.m., New York City time, on such Federal
Funds Rate Calculation Date, the "Federal Funds Rate" for such Interest
Accrual Period will be the same as the Federal Funds Rate in effect for the
immediately preceding Interest Accrual Period (or, if there was no such
Interest Accrual Period, the Initial Pass-Through Rate). Unless otherwise
specified in the applicable prospectus supplement, in the case of a Federal
Funds Rate Certificate that resets daily, the Pass-Through Rate on such
Certificate for the period from and including a Monday to but excluding the
succeeding Monday will be reset by the Calculation Agent for such certificate
on such second Monday (or, if not a Business Day, on the next succeeding
Business Day) to a rate equal to the average of the Federal Funds Rate in
effect with respect to each such day in such week.
The "Federal Funds Rate Calculation Date" pertaining to any Federal Funds
Rate Determination Date shall be the next succeeding Business Day.
(4) LIBOR Certificates. Each LIBOR Certificate will bear interest for
each Interest Accrual Period at the Pass-Through Rate calculated with
reference to LIBOR and the Spread or Spread Multiplier, if any, specified in
such certificate and in the applicable prospectus supplement.
With respect to LIBOR indexed to the offered rate for U.S. dollar
deposits, unless otherwise specified in the applicable prospectus supplement,
"LIBOR" for each Interest Accrual Period will be determined by the Calculation
Agent for any LIBOR Certificate as follows:
(i) On the second London Banking Day prior to the Interest Reset Date for
such Interest Accrual Period (a "LIBOR Determination Date"), the Calculation
Agent for such LIBOR Certificate will determine the arithmetic mean of the
offered rates for deposits in U.S. dollars for the period of the Index
Maturity specified in the applicable prospectus supplement, commencing on
such Interest Reset Date, which appear on the Reuters Screen LIBO Page at
approximately 11:00 a.m., London time, on such LIBOR Determination Date.
"Reuters Screen LIBO Page" means the display designated as page "LIBOR" on
the Reuters Monitor Money Rates Service (or such other page as may replace
the LIBO page on that service for the purpose of displaying London interbank
offered rates of major banks). If at least two such offered rates appear on
the Reuters Screen LIBO Page, "LIBOR" for such Interest Accrual Period will
be the arithmetic mean of such offered rates as determined by the
Calculation Agent for such LIBOR Certificate.
(ii) If fewer than two offered rates appear on the Reuters Screen LIBO Page
on such LIBOR Determination Date, the Calculation Agent for such LIBOR
Certificate will request the principal London offices of each of four major
banks in the London interbank market selected by such Calculation Agent to
provide such Calculation Agent with its offered quotations for deposits in
U.S. dollars for the period of the specified Index Maturity, commencing on
such Interest Reset Date, to prime banks in the London interbank market at
approximately 11:00 a.m., London time, on such LIBOR Determination Date and
in a principal amount equal to an amount of not less than $1,000,000 that is
representative of a single transaction in such market at such time. If at
least two such quotations are provided, "LIBOR" for such Interest Accrual
Period will be the arithmetic mean of such quotations. If fewer than two
such quotations are provided, "LIBOR" for such Interest Accrual Period will
be the arithmetic mean of rates quoted by three major banks in The City of
New York selected by the Calculation Agent for such LIBOR Certificate at
approximately 11:00 a.m., New York City time, on such LIBOR Determination
Date for loans in U.S. dollars to leading European banks, for the period of
the specified Index Maturity, commencing on such Interest Reset Date, and in
a principal amount equal to an amount of not less than $1,000,000 that is
representative of a single transaction in such market at such time;
provided, however, that if fewer than three banks selected as aforesaid by
such Calculation Agent are quoting rates as specified in this sentence,
"LIBOR" for such Interest Accrual Period will be the same as LIBOR for the
immediately preceding Interest Accrual Period (or, if there was no such
Interest Accrual Period, the Initial Pass-Through Rate).
If LIBOR with respect to any LIBOR Certificate is indexed to the offered
rates for deposits in a currency other than U.S. dollars, the applicable
prospectus supplement will set forth the method for determining such rate.
(5) Treasury Rate Certificates. Each Treasury Rate Certificate will bear
interest for each Interest Accrual Period at the Pass-Through Rate calculated
with reference to the Treasury Rate and the Spread or Spread Multiplier, if
any, specified in such certificate and in the applicable prospectus
supplement.
Unless otherwise specified in the applicable prospectus supplement, the
"Treasury Rate" for each Interest Accrual Period will be the rate for the
auction held on the Treasury Rate Determination Date (as defined below) for
such Interest Accrual Period of direct obligations of the United States
("Treasury bills") having the Index Maturity specified in the applicable
prospectus supplement, as such rate shall be published in H.15(519) under the
heading "U.S. Government Certificates-Treasury bills-auction average
(investment)" or, in the event that such rate is not published prior to 3:00
p.m., New York City time, on the Treasury Rate Calculation Date (as defined
below) pertaining to such Treasury Rate Determination Date, the auction
average rate (expressed as a bond equivalent on the basis of a year of 365 or
366 days, as applicable, and applied on a daily basis) on such Treasury Rate
Determination Date as otherwise announced by the United States Department of
the Treasury. In the event that the results of the auction of Treasury bills
having the specified Index Maturity are not published or reported as provided
above by 3:00 p.m., New York City time, on such Treasury Rate Calculation
Date, or if no such auction is held on such Treasury Rate Determination Date,
then the "Treasury Rate" for such Interest Accrual Period shall be calculated
by the Calculation Agent for such Treasury Rate Certificate and shall be a
yield to maturity (expressed as a bond equivalent on the basis of a year of
365 or 366 days, as applicable, and applied on a daily basis) of the
arithmetic mean of the secondary market bid rates, as of approximately 3:30
p.m., New York City time, on such Treasury Rate Determination Date, of three
leading primary United States government securities dealers selected by such
Calculation Agent for the issue of Treasury bills with a remaining maturity
closest to the specified Index Maturity; provided, however, that if the
dealers selected as aforesaid by such Calculation Agent are not quoting bid
rates as mentioned in this sentence, then the "Treasury Rate" for such
Interest Accrual Period will be the same as the Treasury Rate for the
immediately preceding Interest Accrual Period (or, if there was no such
Interest Accrual Period, the Initial Pass-Through Rate).
The "Treasury Rate Determination Date" for such Interest Accrual Period
will be the day of the week in which the Interest Reset Date for such Interest
Accrual Period falls on which Treasury bills would normally be auctioned.
Treasury bills are normally sold at auction on Monday of each week, unless
that day is a legal holiday, in which case the auction is normally held on the
following Tuesday, except that such auction may be held on the preceding
Friday. If, as the result of a legal holiday, an auction is so held on the
preceding Friday, such Friday will be the Treasury Rate Determination Date
pertaining to the Interest Accrual Period commencing in the next succeeding
week. Unless otherwise specified in the applicable prospectus supplement, if
an auction date shall fall on any day that would otherwise be an Interest
Reset Date for a Treasury Rate Certificate, then such Interest Reset Date
shall instead be the Business Day immediately following such auction date.
The "Treasury Rate Calculation Date" pertaining to any Treasury Rate
Determination Date shall be the first to occur of (a) the tenth calendar day
after such Treasury Rate Determination Date or, if such a day is not a
Business Day, the next succeeding Business Day or (b) the second Business Day
preceding the date any distribution of interest is required to be made
following the applicable Interest Reset Date.
Auction Rate Certificates. Certain series (or if more than one class
exists, each class within such series) of certificates may have interest rates
that are established through periodic auctions using auction procedures to be
set forth in an annex to the related prospectus supplement (the "Auction Rate
Certificates"). The Auction Rate Certificates will have a stated maturity set
forth in the applicable prospectus supplement and will bear interest at the
rate per annum specified in the prospectus supplement through the end of the
first Interest Accrual Period. The Interest Accrual Period for Auction Rate
Certificates will initially consist of the number of days set forth in the
applicable prospectus supplement. The interest rate for the Auction Rate
Certificates will be reset on auction dates specified in the applicable
prospectus supplement at the interest rate determined pursuant to the auction
procedures, however, the rate will not exceed the maximum auction rate per
annum set forth in the applicable prospectus supplement. Interest on the
Auction Rate Certificates will accrue daily and will be computed for the
actual number of days elapsed during the related Interest Accrual Period on
the basis of a year consisting of 360 days or 365 days, as specified in the
prospectus supplement.
Determination of auction rate. The auction rate for each class of Auction
Rate Certificates will be determined periodically on auction dates specified
in the applicable prospectus supplement by means of a "Dutch Auction." In a
Dutch Auction, investors and potential investors will submit orders through an
eligible broker-dealer as to the principal amount of Auction Rate Certificates
they wish to buy, hold or sell at various interest rates. The broker-dealers
submit their clients' orders to the auction agent. The auction agent processes
all orders submitted by eligible broker-dealers and determines the auction
rate for the upcoming Interest Accrual Period. The broker-dealers are notified
by the auction agent of the interest rate for the upcoming Interest Accrual
Period and are provided with settlement instructions relating to purchases and
sales of Auction Rate Certificates. Auction Rate Certificates will be
purchased and sold between investors and potential investors at a price equal
to their then-outstanding principal balance plus any accrued interest.
In the auction, the following types of orders may be submitted:
o "hold orders" - an order by a current investor to maintain all or a
portion of the principal amount of auction rate certificates held by
such investor during the next interest accrual period at the
interest rate established on the related auction date;
o "sell orders" - an order by a current investor to sell a specified
principal amount of auction rate certificates (either subject to a
particular rate or not);
o "bid orders" - specify the minimum interest rate that a potential
investor, or a current investor wishing to purchase additional
auction rate certificates, is willing to accept in order to buy a
specified principal amount of auction rate certificates.
If an existing investor does not submit orders with respect to all its
auction rate certificates, the investor will be deemed to have submitted a
hold order at the new interest rate for that portion of the auction rate
certificates for which no order was received.
The following example helps illustrate how the auction procedures are
used in determining the interest rate on a class of auction rate certificates.
(a) Assumptions:
1. Denominations (Units) = $50,000
2. Interest period = 28 days
3. Principal amount outstanding = $50 Million (1000 Units)
4. No "hold" orders are submitted
(b) Summary of all orders received for the auction
Bid Orders Bid Orders Sell Orders
---------- ---------- -----------
(from Existing Holders) (from Potential Holders) (from Existing Holders)
20 Units at 2.90% 40 Units at 2.95% 100 Units Sell
60 Units at 3.02% 60 Units at 3.00% 100 Units Sell
120 Units at 3.05% 100 Units at 3.05% 200 Units Sell
==============
200 Units at 3.10% 100 Units at 3.10% Total: 400 Units
200 Units at 3.12% 100 Units at 3.11%
==================
Total: 600 Units 100 Units at 3.14%
200 Units at 3.15%
==================
Total: 700 Units
The total units under bid orders, hold orders and sell orders from
existing holders will always equal the issue size (in this example 1000
units), less any units held by investors not submitting a bid (in this case 0
units).
(c) Auction Agent organizes submitted orders in ascending order
Order Number Cumulative Order Number Cumulative
Number of Units Total (Units) Percent Number of Units Total (Units) Percent
- -------- --------- ------------- --------- ---------- ---------- ------------- ---------
1. 20(W) 20 2.90% 7. 200(W) 600 3.10%
2. 40(W) 60 2.95% 8. 100(W) 700 3.10%
3. 60(W) 120 3.00% 9. 100(W) 800 3.11%
4 60(W) 180 3.02% 10. 200(W) 1000 3.12%
5. 100(W) 280 3.05% 11. 100(L) 3.14%
6 120(W) 400 3.05% 12. 200(L) 3.15%
__________________
(W) Winning Order (L) Losing Order
Order #10 is the order that clears the market of all available units.
All winning orders are awarded the winning rate (in this case, 3.12%, as the
interest rate for the next interest accrual period, at the end of which
another auction will be held. Multiple orders at the winning rate are
allocated units on a pro rata basis. Regardless of the results of the auction,
the interest rate will not exceed the maximum auction rate specified in the
applicable prospectus supplement.
The example assumes that a successful auction has occurred, that is,
that all sell orders and all bid orders below the new interest rate were
fulfilled. However, there may be insufficient potential bid orders to purchase
all the auction rate certificates offered for sale. In these circumstances,
the interest rate for the upcoming interest accrual period will equal the
maximum auction rate. Also, if all the Auction Rate Certificates are subject
to hold orders (i.e., each holder of Auction Rate Certificates wishes to
continue holding its auction rate certificates, regardless of the interest
rate), the interest rate for the upcoming accrual period will equal the all
hold rate, which is [ ].
[Maximum Auction Rate. If the auction rate for a class of Auction
Rate Certificates is greater than the maximum auction rate, then the interest
rate applicable to those Auction Rate Certificates will be the maximum auction
rate.]
Changes in auction period. The Auction Agent may, from time to time,
change the length of the auction period for a class of Auction Rate
Certificates in order to conform with then current market practice with
respect to the length of the auction period and the interest rate borne by the
Auction Rate Certificates.
Changes in the auction date. The Auction Agent, with the consent of
the Depositor, may specify a different auction date for a class of Auction
Rate Certificates in order to conform with then current market practice with
respect to similar securities or to accommodate economic and financial factors
that may affect or be relevant to the day of the week constituting an auction
date for the Auction Rate Certificates.
Principal of the Certificates
Unless the related prospectus supplement provides otherwise, each
certificate (other than certain classes of Strip Certificates) will have a
"Certificate Principal Balance" which, at any time, will equal the maximum
amount that the holder thereof will be entitled to receive in respect of
principal from the future cash flow on the Deposited Assets and any other
assets included in the related trust. Unless otherwise specified in the
related prospectus supplement, amounts collected on the Deposited Assets
generally will be applied to accrued interest on, then to principal of, and
then to premium (if any) on, each such certificate of the class or classes
entitled thereto (in the manner and priority specified in such prospectus
supplement) until the aggregate Certificate Principal Balance of such class or
classes has been reduced to zero. The outstanding Certificate Principal
Balance of a certificate will be reduced to the extent of (x) distributions of
principal thereon, (y) if applicable pursuant to the terms of the related
series, by the amount of any net losses realized on any Deposited Assets
("Realized Losses") allocated thereto and (z) if applicable pursuant to the
terms of the related series, any Extraordinary Trust Expenses consented to
by the Certificateholders. Unless the related prospectus supplement provides
otherwise, the initial aggregate Certificate Principal Balance of all classes
of certificates of a series will equal the outstanding aggregate principal
balance of the related Underlying Securities as of the applicable Cut-off
Date. The initial aggregate Certificate Principal Balance of a series and each
class thereof will be specified in the related prospectus supplement.
Distributions of principal to any class of certificates will be made on a pro
rata basis among all the certificates of such class. Strip Certificates with
no Certificate Principal Balance will not receive distributions of principal.
Foreign Currency Certificates
If the specified currency of any certificate is not U.S. dollars (a
"Foreign Currency Certificate"), certain provisions with respect thereto will
be set forth in the related prospectus supplement which will specify the
denominations, the currency or currencies in which the principal and interest
with respect to such certificate are to be paid and any other terms and
conditions relating to the non-U.S. dollar denominations or otherwise
applicable to the certificates.
Indexed Certificates
A trust may offer a series of certificates ("Indexed Certificates"),
the principal amount payable at the stated maturity date of which (the
"Indexed Principal Amount") and/or interest with respect to which is
determined by reference to:
o the rate of exchange between the specified currency for such
certificate and the other currency or composite currency (the
"Indexed Currency") specified therein;
o the difference in the price of a specified commodity (the
"Indexed Commodity") on specified dates; or
o such other objective price or economic measure as described in
the related prospectus supplement.
The manner of determining the Indexed Principal Amount of an Indexed
Certificate and historical and other information concerning the Indexed
Currency, Indexed Commodity or other price or economic measure used in such
determination, will be set forth in the related prospectus supplement,
together with any information concerning tax consequences to the holders of
such Indexed Certificates.
Except as otherwise specified in the related prospectus supplement,
interest on an Indexed Certificate will be payable based on the amount
designated in the related prospectus supplement as the "Face Amount" of such
Indexed Certificate. The related prospectus supplement will describe whether
the principal amount of the related Indexed Certificate that would be payable
upon redemption or repayment prior to the stated maturity date will be the
Face Amount of such Indexed Certificate, the Indexed Principal Amount of such
Indexed Certificate at the time of redemption or repayment, or another amount
described in such prospectus supplement.
Dual Currency Certificates
Certificates may be issued as dual currency certificates ("Dual
Currency Certificates"), in which case payments of principal and/or interest
in respect of Dual Currency Certificates will be made in such currencies, and
rates of exchange will be calculated upon such bases, as indicated in the
certificates and described in the related prospectus supplement. Other
material terms and conditions relating to Dual Currency Certificates will be
set forth in the certificates and the related prospectus supplement.
Optional Exchange
If specified in the applicable prospectus supplement, a holder may
exchange certificates of such series for a pro rata portion of the Underlying
Securities (an "Exchangeable Series"). The terms upon which a holder may
exchange certificates of any Exchangeable Series for a pro rata portion of the
Underlying Securities of the related trust will be specified in the related
prospectus supplement and the related trust agreement; provided that any right
of exchange shall be exercisable only to the extent that such exchange would
not be inconsistent with the Depositor and such trust's continued satisfaction
of the applicable requirements for an exemption under Rule 3a-7 under the
Investment Company Act of 1940, as amended, and all applicable rules,
regulations and interpretations thereunder. Such terms may relate to the
following:
o a requirement that the exchanging holder tender to the trustee
certificates of each class within such Exchangeable Series;
o a minimum Certificate Principal Balance or Notional Amount, as
applicable, with respect to each certificate being tendered for
exchange;
o a requirement that the Certificate Principal Balance or Notional
Amount, as applicable, of each certificate tendered for exchange
be an integral multiple of an amount specified in the prospectus
supplement;
o specified dates during which a holder may effect such an
exchange (each, an "Optional Exchange Date");
o limitations on the right of an exchanging holder to receive any
benefit upon such exchange from any other deposited assets or
any credit support deposited in the applicable trust;
o adjustments to the value of the proceeds of any exchange based
upon the required prepayment of future expense allocations and
the establishment of a reserve for any anticipated extraordinary
trust expenses as set forth in the applicable prospectus
supplement, if applicable;
o a requirement that the exchanging holder provide to the trustee
an opinion of counsel stating that the exchange would not cause
the trust to be treated as an association or publicly traded
partnership, taxable as a corporation for federal income tax
purposes; and
o a requirement that the exchanging holder pay any due and unpaid
fees and expenses owed to the trustee and/or to the
administrative agent, if any.
Unless otherwise specified in the related prospectus supplement, in
order for a certificate of a given Exchangeable Series (or class within such
Exchangeable Series) to be exchanged by the applicable certificateholder, the
trustee for such series must receive, at least 5 (or such shorter period
acceptable to the trustee) but not more than 30 days prior to an Optional
Exchange Date (i) such certificate with the form entitled "Option to Elect
Exchange" on the reverse thereof duly completed, or (ii) in the case of
registered certificates, facsimile or electronic transmission or letter from a
member of a national securities exchange or the National Association of
Securities Dealers, Inc., the Depositary (in accordance with its normal
procedures) or a commercial bank or trust company in the United States setting
forth the name of the holder of such registered certificate, the Certificate
Principal Balance or Notional Amount of the registered certificate to be
exchanged, the certificate number or a description of the tenor and terms of
the registered certificate, a statement that the option to elect exchange is
being exercised thereby and a guarantee that the registered certificate to be
exchanged with the form entitled "Option to Elect Exchange" on the reverse of
the registered certificate duly completed will be received by such trustee not
later than five Business Days after the date of such telegram, telex,
facsimile or electronic transmission or letter. If the procedure described in
clause (ii) of the preceding sentence is followed, then such registered
certificate and form duly completed must be received by such trustee by such
fifth Business Day. Any tender of a certificate by the holder for exchange
shall be irrevocable. The exchange option may be exercised by the holder of a
certificate for less than the entire Certificate Principal Balance of such
certificate provided that the Certificate Principal Balance or Notional
Amount, as applicable, of such certificate remaining outstanding after
redemption is an authorized denomination and all other exchange requirements
set forth in the related prospectus supplement are satisfied. Upon such
partial exchange, such certificate shall be cancelled and a new certificate or
certificates for the remaining Certificate Principal Balance thereof shall be
issued (which, in the case of any registered certificate, shall be in the name
of the holder of such exchanged certificate).
Unless otherwise specified in the applicable prospectus supplement,
until definitive certificates are issued each certificate will be represented
by a global security, the Depositary's nominee will be the certificateholder
of such certificate and therefore will be the only entity that can exercise a
right of exchange. In order to ensure that the Depositary's nominee will
timely exercise a right of exchange with respect to a particular certificate,
the beneficial owner of such certificate must instruct the broker or other
direct or indirect participant through which it holds an interest in such
certificate to notify the Depositary of its desire to exercise a right of
exchange. Different firms have different cut-off times for accepting
instructions from their customers and, accordingly, each beneficial owner
should consult the broker or other direct or indirect participant through
which it holds an interest in a certificate in order to ascertain the cut-off
time by which such an instruction must be given in order for timely notice to
be delivered to the Depositary.
Unless otherwise provided in the applicable prospectus supplement,
upon the satisfaction of the foregoing conditions and any applicable
conditions with respect to the related Underlying Securities, as described in
such prospectus supplement, the applicable certificateholder will be entitled
to receive a distribution of a pro rata share of the Underlying Securities
related to the Exchangeable Series (and class within such Exchangeable Series)
of the certificate being exchanged, in the manner and to the extent described
in such prospectus supplement. Alternatively, to the extent so specified in
the applicable prospectus supplement, the applicable certificateholder, upon
satisfaction of such conditions, may direct the related trustee to sell, on
behalf of the certificateholder, such pro rata share of the Underlying
Securities. In such event, the certificateholder will be entitled to receive
the net proceeds of such sale, less any costs and expenses incurred by the
trustee in facilitating the sale, subject to any additional adjustments set
forth in the applicable prospectus supplement.
Global Securities
Unless otherwise specified in the applicable prospectus supplement,
all certificates of a given series (or, if more than one class exists, any
given class within that series) will, upon issuance, be represented by one or
more global securities. The global securities will be deposited with, or on
behalf of, The Depository Trust Company, New York, New York (for registered
certificates denominated and payable in U.S. dollars), or such other
depositary identified in the related prospectus supplement (the "Depositary"),
and registered in the name of a nominee of the Depositary. Global securities
may be issued in either registered or bearer form and in either temporary or
permanent form. See "Limitations on Issuance of Bearer Certificates" for
provisions applicable to certificates issued in bearer form. Unless and until
it is exchanged in whole or in part for the individual certificates
represented thereby (each, a "definitive certificate"), a global security may
not be transferred except as a whole by the Depositary for such global
security to a nominee of such Depositary or by a nominee of such Depositary to
such Depositary or another nominee of such Depositary or by such Depositary or
any such nominee to a successor of such Depositary or a nominee of such
successor.
The Depository Trust Company is a limited-purpose trust company
organized under the laws of the State of New York, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the New York
Uniform Commercial Code, and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. The Depository Trust Company
was created to hold securities of its participating organizations and to
facilitate the clearance and settlement of securities transactions among the
institutions that have accounts with the Depositary ("participants") in such
securities through electronic book-entry changes in the accounts of the
Depositary participants, thereby eliminating the need for physical movement of
securities certificates. The Depositary's participants include securities
brokers and dealers (including Banc of America Securities LLC), banks, trust
companies, clearing corporations, and certain other organizations, some of
whom (and/or their representatives) own the Depositary. Access to the
Depositary's book-entry system is also available to others, such as banks,
brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly.
Upon the issuance of a global security, the Depositary for the global
security will credit, on its book-entry registration and transfer system, the
respective principal amounts or notional amounts, if applicable, of the
individual certificates represented by such global security to the accounts of
its participants. The accounts to be credited shall be designated by the
underwriters of such certificates, or, if such certificates are offered and
sold directly through one or more agents, by the Depositor or its agent or
agents. Ownership of beneficial interests in a global security will be limited
to participants or persons that may hold beneficial interests through
participants. Ownership of beneficial interests in a global security will be
shown on, and the transfer of that ownership will be effected only through,
records maintained by the Depositary for such global security or by
participants or persons that hold through participants. The laws of some
states require that certain purchasers of securities take physical delivery of
such securities. Such limits and such laws may limit the market for beneficial
interests in a global security.
So long as the Depositary for a global security, or its nominee, is
the owner of the global security, the Depositary or the nominee, as the case
may be, will be considered the sole certificateholder of the individual
certificates represented by such global security for all purposes under the
trust agreement governing the certificates. Except as set forth below, owners
of beneficial interests in a global security will not be entitled to have any
of the individual certificates represented by the global security registered
in their names, will not receive or be entitled to receive physical delivery
of any certificates and will not be considered the certificateholder thereof
under the trust agreement governing the certificates. Because the Depositary
can only act on behalf of its participants, the ability of a holder of any
certificate to pledge that certificate to persons or entities that do not
participate in the Depositary's system, or to otherwise act with respect to
the certificate, may be limited due to the lack of a physical certificate for
the certificate.
Subject to the restrictions discussed under "Limitations on Issuance
of Bearer Certificates" below, distributions of interest, principal of (and
premium, if any) on individual certificates represented by a global security
will be made to the Depositary or its nominee, as the case may be, as the
certificateholder of the global security. None of the Depositor, the
administrative agent, if any, the trustee for the certificates, any paying
agent or the certificate registrar for the certificates will have
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial interests in a global security or for
maintaining, supervising or reviewing any records relating to such beneficial
interests.
The Depositor expects that the Depositary for certificates of a given
class and series, upon receipt of any distribution of interest, principal, or
premium in respect of a definitive global security representing any
certificates, will credit immediately participants' accounts with payments in
amounts proportionate to their respective beneficial interests in the
principal amount of the global security as shown on the records of such
Depositary. The Depositor also expects that payments by participants to owners
of beneficial interests in a global security held through such participants
will be governed by standing instructions and customary practices, as is now
the case with securities held for the accounts of customers in bearer form or
registered in "street name," and will be the responsibility of such
participants. Receipt by owners of beneficial interests in a temporary global
security of payments of interest, principal, or premium in respect thereof
will be subject to the restrictions discussed below under "Limitations on
Issuance of Bearer Certificates" below.
If the Depositary for certificates of a given class of any series is
at any time unwilling or unable to continue as depositary and a successor
depositary is not appointed by the Depositor within ninety days, the Depositor
will issue individual definitive certificates in exchange for the global
security or securities representing such certificates. In addition, the
Depositor may at any time and in its sole discretion determine not to have any
certificates of a given class represented by one or more global securities
and, in such event, will issue individual definitive certificates of such
class in exchange for the global security or securities representing such
certificates. Further, if the Depositor so specifies with respect to the
certificates of a given class, an owner of a beneficial interest in a global
security representing certificates of such class may, on terms acceptable to
the Depositor and the Depositary of the global security, receive individual
definitive certificates in exchange for such beneficial interest. In any such
instance, an owner of a beneficial interest in a global security will be
entitled to physical delivery of individual definitive certificates of the
class represented by the global security equal in principal amount or notional
amount, if applicable, to such beneficial interest and to have definitive
certificates registered in its name (if the certificates of such class are
issuable as registered certificates). Individual definitive certificates of
such class so issued will be issued:
o as registered certificates in denominations, unless otherwise
specified by the Depositor or in the related prospectus
supplement, of $1,000 and integral multiples thereof if the
certificates of such class are issuable as registered
certificates;
o as bearer certificates in the denomination or denominations
specified by the Depositor or as specified in the related
prospectus supplement if the certificates of such class are
issuable as bearer certificates; or
o as either registered or bearer certificates, if the certificates
of such class are issuable in either form.
See, however, "Limitations on Issuance of Bearer Certificates" below for a
description of certain restrictions on the issuance of individual bearer
certificates in exchange for beneficial interests in a global security.
The applicable prospectus supplement will set forth any specific
terms of the depositary arrangement with respect to any class or series of
certificates being offered thereby to the extent not set forth or different
from the description set forth above.
DESCRIPTION OF DEPOSITED ASSETS
General
Each certificate of each series (or if more than one class exists,
each class (whether or not each such class is offered hereby) within such
series) will represent an undivided ownership interest specified for such
series (or class) of certificates, in a designated, security or a pool of
securities each of which satisfies the criteria set forth in one or more of
the categories listed under "-Description of Underlying Securities" below (the
"Underlying Securities"), purchased by the Depositor (or an affiliate thereof)
in the secondary market (except in cases where the Depositor (or an affiliate
thereof) purchases securities directly from certain GSEs or purchases Treasury
Securities (as defined below) directly from the issuer thereof as described
below) and any other deposited assets or credit support applicable to such
series (or if more than one class exists, each class) assigned to a trust as
described in the applicable prospectus supplement. No trust will contain
privately issued securities (whether issued by domestic or foreign issuers) in
an amount sufficient for such privately issued securities to constitute
Concentrated Underlying Securities.
Description of the Underlying Securities
Each Underlying Security must fall within one of the following
categories:
o debt obligations of one or more corporations, limited liability
companies, banking organizations or insurance companies
organized under the laws of the United States or any state, the
District of Columbia or the Commonwealth of Puerto Rico, which
in each case is subject to the informational requirements of the
Exchange Act and which, in accordance therewith, file reports
and other information with the SEC or (for certain depository
institutions) with a federal bank or thrift regulatory agency
(provided that in the case of a security guaranteed by a parent
company, (i) the guarantee is of the kind described in Rule 3-10
of SEC Regulation S-X, (ii) the relationship between the parent
and the issuer satisfies the requirements set forth in Rule 3-10
of SEC Regulation S-X, (iii) the guarantor files the reports and
(iv) in accordance with Rule 3-10 of SEC Regulation S-X the
issuer is exempt from such filing requirements) ("Domestic
Corporate Securities") and if the Depositor reasonably believes
(based on publicly available information) that such security or
securities are Concentrated Underlying Securities (as defined
below), such securities have been registered in a public
offering and the issuer thereof meets the requirements set forth
in Form S-3 for a primary offering of common stock or for a
primary offering of non-convertible investment grade securities,
as applicable at the time of the offering of the trust
certificates (or in the case of a guaranteed security, the
Depositor reasonably believes the guarantor meets the
requirements set forth in Form S-3 for a primary offering of
common stock or for a primary offering of non-convertible
investment grade securities);
o (i) preferred securities of one or more trusts that hold
obligations of issuers that are subject, or are wholly-owned
subsidiaries of companies that are subject to the informational
requirements of the Exchange Act (in which case such parent
companies have fully and unconditionally guaranteed such
obligations) and which, in accordance therewith, file reports
and other information with the SEC ("Trust Preferred
Securities") and, if the Depositor reasonably believes (based on
publicly available information) that such trust preferred
securities are Concentrated Underlying Securities, such
securities have been registered in a public offering and the
issuer or its parent meets the requirements set forth in Form
S-3 for a primary offering of common stock or for a primary
offering of non-convertible investment grade securities at the
time of the offering of the trust certificates; (ii) equipment
trust certificates, including enhanced equipment trust
certificates and pass-through equipment trust certificates,
issued by, or supported by obligations of, issuers that are
subject, or are wholly-owned subsidiaries of parent companies
that are subject to the informational requirements of the
Exchange Act (provided that to the extent such parent has fully
and unconditionally guaranteed the related issuers obligations
(i) the guarantee is of the kind described in Rule 3-10 of SEC
Regulation S-X, (ii) the relationship between the parent and
such issuers satisfies the requirements set forth in Rule 3-10
of SEC Regulation S-X, (iii) the guarantor files the reports and
(iv) in accordance with Rule 3-10 of SEC Regulation S-X such
issuers are exempt from such filing requirements), in accordance
therewith, file reports and other information with the SEC (all
such certificates, "Equipment Trust Certificates") and, if the
Depositor reasonably believes (based on publicly available
information) that, such Equipment Trust Certificates are
Concentrated Underlying Securities, such securities have been
registered in a public offering and the issuer or its parent
satisfies the requirements set forth in Form S-3 for a primary
offering of common stock or for a primary offering of
non-convertible investment grade securities at the time of the
offering of the trust certificates; or (iii) asset-backed
securities of one or more trusts or other special purpose legal
entities (issued as part of a series which has an outstanding
balance of at least $75,000,000 in securities which are held by
non-affiliates) (provided that in the case of a trust or other
special purpose legal entity the obligations of which are
guaranteed by a parent company, (i) the guarantee is of the kind
described in Rule 3-10 of SEC Regulation S-X, (ii) the
relationship between the parent and the trust or other special
purpose legal entity satisfies the requirements set forth in
Rule 3-10 of SEC Regulation S-X, (iii) the guarantor files the
reports and (iv) in accordance with Rule 3-10 of SEC Regulation
S-X the trust or other special purpose legal entity is exempt
from such filing requirements) which (unless the depositor is a
GSE described below) are subject at the time of issuance of the
asset-backed securities to the informational requirements of the
Exchange Act and which in accordance therewith, file reports and
other information with the SEC ("Asset-Backed Securities" and
together with Domestic Corporate Securities, Trust Preferred
Securities, Equipment Trust Certificates and Foreign Private
Securities (defined herein), the "Private Sector Securities")
and, if the Depositor reasonably believes (based on publicly
available information) that such Asset-Backed Securities are
Concentrated Underlying Securities, such securities have been
registered in a public offering and the issuer or its parent
meets the requirements set forth in Form S-3 for a primary
offering of common stock or for a primary offering of
non-convertible investment grade securities at the time of the
offering of the trust certificates;
o obligations issued or guaranteed by a foreign government or any
political subdivision or agency or instrumentality thereof
("Foreign Government Securities");
o debt securities of one or more foreign private issuers (as such
term is defined in rule 405 under the Securities Act) subject to
the informational requirements of the Exchange Act and which in
accordance therewith file reports and other information with the
SEC (provided that in the case of a security guaranteed by a
parent company, (i) the guarantee is of the kind described in
Rule 3-10 of SEC Regulation S-X, (ii) the relationship between
the parent and the issuer satisfies the requirements set forth
in Rule 3-10 of SEC Regulation S-X, (iii) the guarantor files
the reports and (iv) in accordance with Rule 3-10 of SEC
Regulation S-X the issuer is exempt from such filing
requirements) ("Foreign Private Securities" and together with
Domestic Corporate Securities, the "Corporate Securities"); or
o (i) an obligation issued or guaranteed by the United States of
America or any agency thereof for the payment of which the full
faith and credit of the United States of America is pledged
("Treasury Securities"), (ii) an obligation of one or more U.S.
government sponsored entities ("GSEs") described below for the
payment of which the full faith and credit of the United States
of America is not pledged; or (iii) Government Trust
Certificates ("GTCs" and together with Treasury Securities and
GSEs, "Domestic Government Securities" and together with Foreign
Government Securities, "Government Securities") as described
below.
The Depositor (or an affiliate thereof) may purchase securities
directly from certain GSEs that (i) have outstanding securities held by
non-affiliates with an aggregate market value of at least $75,000,000 at the
time of the offering of the trust certificates hereunder and (ii) make
information publicly available comparable to that required of Exchange Act
reporting entities. The Depositor (or an affiliate thereof) may also purchase
Treasury Securities directly from the issuer thereof.
Notwithstanding any requirement stated or incorporated herein
relating to reporting under the Exchange Act, it should be noted that the
issuers of the Underlying Securities are not participating in any offering of
trust certificates and that neither the Depositor nor Banc of America
Securities LLC will perform the analysis and review of such issuers that an
underwriter of the Underlying Securities would perform. With respect to any
Underlying Securities purchased by the Depositor which were originally
underwritten or placed by Banc of America Securities or an affiliate thereof,
no additional review of such Underlying Securities will be conducted by the
Depositor or Banc of America prior to such purchase by the Depositor. The
reasonableness of the Depositor's belief as to an Underlying Security Issuer's
eligibility to issue investment grade asset backed securities or common stock
on Form S-3 or Form F-3, as applicable, should be evaluated in light of these
limitations.
The Underlying Securities (other than Underlying Securities which are
issued by GSEs or the United States of America) will not be acquired directly
from any Underlying Securities Issuer as part of an initial distribution by,
or pursuant to, any agreement with such issuer. Moreover, no Underlying
Security may be acquired from any unsold allotment held by any issuer or
underwriter. The Depositor will not purchase any publicly issued security
within 90 days of the date of initial issuance and will not purchase any
privately issued security (some of which may include securities which were
initially offered in exempt transactions) until the two year restrictive
holding period described in Rule 144(k) under the Securities Act has expired.
No Underlying Securities Issuer is participating in this offering and none
will receive any proceeds from the sale of the Underlying Securities to the
Depositor or any proceeds from the issuance of the Certificates. The
Underlying Securities Issuers will have no direct obligations under the
Certificates. [Banc of America Securities LLC, an affiliate of the Depositor,
participated in the initial [public] offering of certain of the Underlying
Securities as a [placement agent][underwriter]].
This prospectus relates only to the certificates offered hereby and
does not relate to the Underlying Securities. The following description of the
Underlying Securities is intended only to summarize certain characteristics of
the Underlying Securities the Depositor is permitted to deposit in a trust and
is not a complete description of the terms of any specific Underlying
Security, or any related Underlying Securities Indenture (as defined below).
Private Sector Securities
Private Sector Securities will be either:
o Domestic Corporate Securities;
o Trust Preferred Securities;
o Equipment Trust Certificates;
o Asset-Backed Securities; or
o Foreign Private Securities.
Private Sector Securities. Private Sector Securities may consist of
senior or subordinated debt obligations issued by domestic or foreign issuers
as described above. Debt obligations may be issued with a wide variety of
terms and conditions. Set forth below is a description of certain features
that may be associated with one or more Underlying Securities consisting of
debt obligations.
Indentures. With respect to senior or subordinated debt
obligations, the related prospectus supplement will specify whether each
Underlying Security will have been issued pursuant to an indenture (each, an
"Underlying Securities Indenture") between the issuer of the Underlying
Securities and a trustee (the "Underlying Securities Trustee"). Unless
otherwise set forth in the related prospectus supplement,
the Underlying Securities Indenture, if any, will be qualified under the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act") and the
Underlying Securities Indenture will contain certain provisions required by
the Trust Indenture Act.
Certain Covenants. Indentures generally contain covenants intended
to protect security holders against the occurrence or effects of certain
specified events, including restrictions limiting the ability of any
Underlying Securities Issuer and in some cases limiting the ability of any
subsidiaries of any Underlying Securities Issuer to:
o consolidate, merge, or transfer or lease assets;
o incur or suffer to exist any lien, charge, or encumbrance upon
any of its property or assets;
o incur, assume, guarantee or suffer to exist any indebtedness for
borrowed money if the payment of such indebtedness will be
secured by the grant of a lien on the assets which are subject
to the lien of the indenture; or
o declare or pay any cash dividends, or make any distributions on
or in respect of, or purchase, redeem, exchange or otherwise
acquire or retire for value any capital stock or subordinated
indebtedness of the issuer or its subsidiaries, if any.
An indenture may also contain financial covenants which, among other things,
require the maintenance of certain financial ratios or the creation or
maintenance of Reserve Accounts. Subject to specified exceptions, indentures
typically may be amended or supplemented and past defaults may be waived with
the consent of the indenture trustee, the consent of the holders of not less
than a specified percentage of the outstanding securities, or both.
The Underlying Securities Indenture related to one or more
Underlying Securities included in a trust may include some, all or none of the
foregoing provisions or variations thereof or additional covenants not
discussed herein. To the extent that the Underlying Securities are investment
grade debt they are unlikely to contain significant restrictive covenants
although certain non-investment grade debt may not be subject to restrictive
covenants either. There can be no assurance that any such provision will
protect the trust as a holder of the Underlying Securities against losses.
Events of Default. Indentures generally provide that any one of a
number of specified events will constitute an event of default with respect to
the securities issued thereunder. Such events of default may typically include
any of the following events or variations thereof:
o failure by the issuer to make a scheduled interest or principal
payment on the securities at the time required (subject to any
specified grace period) or to redeem any of the securities when
required (subject to any specified grace period);
o a breach by the issuer of any representation or warranty or its
failure to observe or perform any covenant, agreement or
condition contained in the indenture, which breach or failure is
materially adverse to security holders and continues for a
specified period after notice thereof is given to the issuer by
the indenture trustee or the holders of not less than a
specified percentage of the outstanding securities; or
o certain events of bankruptcy, insolvency or reorganization of
the issuer.
Remedies. Indentures for Corporate Securities generally provide that
upon the occurrence of an event of default, the indenture trustee may, and
upon the written request of the holders of not less than a specified
percentage of the outstanding securities must, take such action to protect and
enforce the rights of the security holders. Certain indentures provide that
the indenture trustee has or a specified percentage of the holders of the
outstanding securities have the right to declare all or a portion of the
principal and accrued interest on the outstanding securities immediately due
and payable upon the occurrence of certain events of default, subject to the
issuer's right to cure, if applicable. An indenture may also contain a
provision entitling the indenture trustee to be indemnified by the security
holders prior to proceeding to exercise any right or power under such
indenture with respect to such securities at the request of such security
holders. An indenture is also likely to limit a security holder's right to
institute certain actions or proceedings to pursue remedies under the
indenture unless certain conditions are satisfied, including (i) the security
holder shall have given notice to the indenture trustee of the occurrence of
an event of default; (ii) the holders of a specified percentage of the
securities shall have requested that the indenture trustee institute
proceedings; (iii) the indenture trustee shall have refused or neglected to
comply with such request within a reasonable time; and (iv) no conflicting
instruction shall have been given to the indenture trustee.
Each Underlying Securities Indenture or Underlying Security may
include some, all or none of the foregoing provisions or variations thereof or
additional events of default or remedies not discussed herein. The prospectus
supplement with respect to any series of certificates will summarize the
events of default ("Underlying Security Events of Default") relevant to any
Underlying Security that represents ten percent (10%) or more of the total
Deposited Assets with respect to any series of certificates (any such
security, a "Concentrated Underlying Security") and applicable remedies with
respect thereto. With respect to any trust comprised of a pool of securities,
the applicable prospectus supplement will describe certain common Underlying
Security Events of Default with respect to such pool. There can be no
assurance that any such provisions will protect the trust, as a holder of the
Underlying Securities, against losses. If an Underlying Security Event of
Default occurs, the indenture trustee as a holder of the Underlying Securities
is entitled to vote or take such other action to declare the principal amount
of an Underlying Security and any accrued and unpaid interest thereon to be
due and payable, and the certificateholders' objectives may differ from those
of holders of other securities of the same series and class as any Underlying
Security ("Outstanding Debt Securities") in determining whether to declare the
acceleration of the Underlying Securities.
Subordination. As set forth in the applicable prospectus supplement,
certain of the Underlying Securities with respect to any trust may be either
senior ("Senior Underlying Securities") or subordinated ("Subordinated
Underlying Securities") in right to payment to other existing or future
indebtedness of the Underlying Securities Issuer. With respect to Subordinated
Underlying Securities, to the extent of the subordination provisions of such
securities, and after the occurrence of certain events, security holders and
direct creditors whose claims are senior to Subordinated Underlying
Securities, if any, may be entitled to receive payment of the full amount due
thereon before holders of the Subordinated Underlying Securities are entitled
to receive payment on account of the principal (and premium, if any) or any
interest on such securities. Consequently, a trust which holds Subordinated
Underlying Securities may suffer greater losses than if it held Senior
Underlying Securities. There can be no assurance, however, that in the event
of a bankruptcy or similar proceeding, a trust, as a holder of Senior
Underlying Securities, would receive all payments in respect of such
securities even if holders of subordinated securities receive amounts in
respect of such securities. Reference is made to the prospectus supplement
used to offer any series of certificates for a description of any
subordination provisions with respect to any Concentrated Underlying
Securities and the percentage of Senior Underlying Securities and Subordinated
Underlying Securities, if any, in a trust comprised of a pool of securities.
Secured Obligations. Certain of the Underlying Securities with
respect to any trust may represent secured obligations of the issuer of the
Underlying Securities ("Secured Underlying Securities"). Generally, unless an
event of default shall have occurred and is continuing, with respect to any
Secured Underlying Security, or as otherwise set forth in the indenture
pursuant to which such Secured Underlying Securities were offered and sold, an
issuer of secured obligations generally has the right to remain in possession
and retain exclusive control of the collateral securing a Secured Underlying
Security and to collect, invest and dispose of any income related to the
collateral. The indenture pursuant to which any Secured Underlying Security is
issued may also contain provisions for release, substitution or disposition of
collateral under specified circumstances with or without the consent of the
indenture trustee or upon the direction of not less than a specified
percentage of the security holders. The indenture pursuant to which any
Secured Underlying Security is issued will also provide for the disposition of
the collateral upon the occurrence of specified events of default with respect
thereto. In the event of a default in respect of any secured obligation,
security holders may experience a delay in payments on account of principal
(and premium, if any) or any interest on such securities pending the sale of
any pledged collateral and prior to or during such period the related
collateral may decline in value. In general, if proceeds of the sale of
pledged collateral following an indenture event of default are insufficient to
repay all amounts due in respect of any secured obligations, the holders of
such Secured Underlying Securities (to the extent not repaid from the proceeds
of the sale of the collateral) would have only an unsecured claim ranking pari
passu with the claims of all other general unsecured creditors for the amount
of any shortfall.
The Underlying Securities Indenture with respect to any Secured
Underlying Security may include, some, all or none of the foregoing provisions
or variations thereof. The prospectus supplement used to offer any series of
certificates which includes Concentrated Underlying Securities which are
Secured Underlying Securities, will describe the security provisions of the
Underlying Securities and the related collateral. With respect to any trust
comprised of a pool of securities, a substantial portion of which are Secured
Underlying Securities, the applicable prospectus supplement will disclose
general information with respect to such security provisions and describe the
pledged collateral.
Trust Preferred Securities. As specified in the related prospectus
supplement, a trust may include one or more Trust Preferred Securities. Trust
Preferred Securities are preferred equity securities issued by a trust,
established for the purpose of issuing common and preferred equity securities
and investing the proceeds in certain subordinated debt obligations. The
subordinated debt obligations are issued by the parent of the trust (i.e., the
company to whom the trust issues its common equity securities), or by an
affiliate of such parent. Trust Preferred Securities generally have economic
characteristics that mirror those of the subordinated debt obligations that
are the trust's principal assets. Specifically, the Trust Preferred Securities
generally have a liquidation preference equal to the aggregate principal
balance of the subordinated debt obligations and are subject to mandatory
redemption on the maturity date of the subordinated debt obligations, or such
earlier date on which the issuer may prepay the subordinated debt. The Trust
Preferred Securities generally pay dividends at a rate approximately equal to
the interest rate on the subordinated debt obligations, and such dividends and
interest payments generally are due on or about the same date.
The trusts that issue Trust Preferred Securities generally have no
assets other than the subordinated debt obligations issued by such trusts'
affiliates. Such subordinated debt obligations are subordinated to all other
unsubordinated debt of such affiliates, including such debt issued subsequent
to issuance of such subordinated debt obligations.
The trusts that issue Trust Preferred Securities in each case will
not file reports under the Exchange Act so long as their parent companies file
reports under the Exchange Act.
Equipment Trust Certificates. As specified in the related prospectus
supplement, a trust may include one or more Equipment Trust Certificates.
Equipment Trust Certificates are generally issued, in one or more classes, by
a trust or other special purpose legal entity that owns equipment or by an
owner/operator of the equipment, including airlines (an "ETC Issuer"). Such
obligations of ETC Issuers are secured by mortgages of the equipment and, in
the case of special purpose ETC Issuers, typically are supported by
assignments of lease payments on equipment under leases to operators of the
equipment. Pass-through Equipment Trust Certificates are issued by a trust or
other special purpose legal entity that holds Equipment Trust Certificates of
other ETC Issuers.
The ETC Issuer which is an owner/operator of the equipment or the
lessee of the equipment from the ETC Issuer which is a special purpose legal
entity is referred to as the "ETC Credit Entity." In view of the relationship
of special purpose ETC Issuers to ETC Credit Entities, ETC Issuers generally
will not file reports under the Exchange Act.
Asset-Backed Securities. As specified in the related prospectus
supplement, a trust may include one or more Asset-Backed Securities.
Asset-Backed Securities may be asset-backed notes or pass-through
certificates, in each case issued by a trust or other special-purpose entity.
Asset-backed notes are secured by, and pass-through certificates represent an
undivided interest in, a fixed or revolving pool of financial assets. Such
financial assets may consist of secured or unsecured consumer debt or other
receivables, such as automobile loans or contracts, automobile leases, credit
card receivables, home equity or other mortgage loans, trade receivables,
floor plan (inventory) loans, automobile leases, equipment leases, and other
assets that produce streams of payments. Asset-backed notes generally are
issued pursuant to indentures and pass-through certificates generally are
issued pursuant to trust or pooling and servicing agreements. A separate
servicing agreement typically is executed in connection with asset-backed
notes (such servicing agreements, indentures, trust agreements and pooling and
servicing agreements, the "Asset-Backed Agreements").
The Asset-Backed Agreements provide for the appointment of a trustee
and the segregation of the transferred pool of assets from the other assets of
the transferor. Such segregation generally is only required to the extent
necessary to perfect the interest of the trustee in the assets against claims
of unsecured creditors of the transferor of the assets. Where so required by
the Uniform Commercial Code (the "UCC") (for instance, home equity loan notes)
certain of the documents evidencing the underlying receivables are delivered
to the possession of the trustee or other custodian for the holders of the
Asset-Backed Securities. In the case of most assets, either no documents
evidence the receivables (for instance, credit card receivables) or documents
exist, but the UCC does not require their possession to perfect a transfer
(for instance, automobile installment sales contracts). In these cases, the
transferor segregates the assets only on its own books and records, such as by
marking its computer files, and perfects the trustee's interest by filing a
financing statement under the UCC. This method of segregation and perfection
presents the risk that the trustee's interest in the assets could be lost as a
result of negligence or fraud, such that the trustee and the Asset-Backed
Security holders become unsecured creditors of the transferor of the assets.
Government Securities
Government Securities will be either:
o GSE Securities;
o GTCs;
o Treasury Securities; or
o Foreign Government Securities.
GSE Securities. As specified in the applicable prospectus supplement,
the obligations of one or more of the following GSEs may be included in a
trust: Federal National Mortgage Association ("Fannie Mae"), Federal Home Loan
Mortgage Corporation ("FHLMC"), Student Loan Marketing Association ("Sallie
Mae"), Resolution Funding Corporation, Federal Home Loan Banks (to the extent
such obligations represent the joint and several obligations of the twelve
Federal Home Loan Banks) ("Freddie Mac"), Tennessee Valley Authority and
Federal Farm Credit Banks. While most issuers of GSE debt securities generally
are exempt from registration under the Securities Act pursuant to Section
3(a)(2) of the Securities Act (or are deemed by statute to be so exempt) and
are not required to be registered under the Exchange Act, Fannie Mae and FHLMC
have recently agreed to voluntarily provide to investors the same information
as is provided by issuers of mortgage-backed securities who register their
securities under the Securities Act. The securities of any GSE will be
included in a trust only to the extent (A) its obligations are supported by
the full faith and credit of the U.S. government or (B) the organization makes
publicly available its annual report, which shall include financial statements
or similar financial information with respect to the organization. Based on
information contained in the offering document pursuant to which any GSE
issuer's securities were originally offered, the applicable prospectus
supplement will set forth information with respect to the public availability
of information with respect to any GSE issuer the debt securities of which
constitute ten percent or more of the Deposited Assets for any series of
certificates as of the date of the prospectus supplement. The specific terms
and conditions of the Underlying Securities will be set forth in the related
prospectus supplement.
In the case of a GSE issuer there will generally be a fiscal agent
with respect to any related Underlying Security whose actions will be governed
by a fiscal agency agreement. A fiscal agent is not a trustee for the holders
of the Underlying Securities and does not have the same responsibilities or
duties to act for the holders of a GSE's securities as would a trustee. Unless
otherwise specified in the related prospectus supplement, the Underlying
Securities with respect to any GSE issuer will not be guaranteed by the United
States and do not constitute a debt or obligation of the United States or of
any agency or instrumentality thereof other than the related GSE.
GSE Issuers. The following is a brief description of the business of
each potential GSE issuer whose securities may be purchased by the Depositor
for inclusion in one or more trusts:
Fannie Mae
Fannie Mae is a federally chartered and stockholder-owned corporation
organized and existing under the Federal National Mortgage Association Charter
Act, 12 U.S.C. Sections 1716 et seq. It is the largest investor in home
mortgage loans in the United States. Fannie Mae originally was established in
1938, as a United States government agency to provide supplemental liquidity
to the mortgage market and was transformed into a stockholder-owned and
privately managed corporation by legislation enacted in 1968. Fannie Mae
provides funds to the mortgage market by purchasing mortgage loans from
lenders, thereby replenishing their funds for additional lending. Fannie Mae
acquires funds to purchase loans from many capital market investors that
ordinarily may not invest in mortgage loans, thereby expanding the total
amount of funds available for housing. Operating nationwide, Fannie Mae helps
to redistribute mortgage funds from capital-surplus to capital-short areas.
Fannie Mae also issues mortgage-backed securities. Fannie Mae receives
guaranty fees for its guaranty of timely payment of principal of and interest
on mortgage-backed securities. Fannie Mae issues mortgage-backed securities
primarily in exchange for pools of mortgage loans from lenders. The issuance
of mortgage-backed securities enables Fannie Mae to further its statutory
purpose of increasing the liquidity of residential mortgage loans.
Fannie Mae prepares an information statement annually which describes
Fannie Mae, its business and operations and contains Fannie Mae's audited
financial statements. From time to time Fannie Mae prepares supplements to its
information statement which include certain unaudited financial data and other
information concerning the business and operations of Fannie Mae. These
documents can be obtained without charge from Investor Relations, Fannie Mae,
3900 Wisconsin Avenue, N.W., Washington, D.C. 20016. Fannie Mae is not subject
to the periodic reporting requirements of the Exchange Act.
The Federal Home Loan Mortgage Corporation
The FHLMC is a publicly held government-sponsored enterprise created
on July 24, 1970 pursuant to the Federal Home Loan Mortgage Corporation Act,
Title III of the Emergency Home Finance Act of 1970, as amended. Freddie Mac's
statutory mission is to provide stability in the secondary market for home
mortgages, to respond appropriately to the private capital market and to
provide ongoing assistance to the secondary market for home mortgages
(including mortgages secured by housing for low- and moderate-income families
involving a reasonable economic return to Freddie Mac) by increasing the
liquidity of mortgage investments and improving the distribution of investment
capital available for home mortgage financing. The principal activity of
Freddie Mac consists of the purchase of first lien, conventional, residential
mortgages and participation interests in such mortgages from mortgage lending
institutions and the resale of the mortgages so purchased in the form of
guaranteed mortgage securities. Freddie Mac generally matches and finances its
purchases of mortgages with sales of guaranteed securities. Mortgages retained
by Freddie Mac are financed with short-and long-term debt, cash temporarily
held pending disbursement to security holders, and equity capital.
Freddie Mac prepares an information statement annually which
describes Freddie Mac, its business and operations and contains Freddie Mac's
audited financial statements. From time to time Freddie Mac prepares
supplements to its information statement which include certain unaudited
financial data and other information concerning the business and operations of
Freddie Mac. These documents can be obtained from Freddie Mac by writing or
calling Freddie Mac's Investor Inquiry Department at 8200 Jones Branch Drive,
McLean, Virginia 22102. Freddie Mac recently announced that it will comply
with the periodic reporting requirements of the Exchange Act.
The Student Loan Marketing Association
The Student Loan Marketing Association ("Sallie Mae") is a
stockholder-owned corporation established by the 1972 amendments to the Higher
Education Act of 1965, as amended, to provide liquidity, primarily through
secondary market and warehousing activities, for lenders participating in the
Federal Family Education Loan (FFEL) program and the Health Education
Assistance Loan Program. Under the Higher Education Act, Sallie Mae is
authorized to purchase, warehouse, sell and offer participations or pooled
interests in, or otherwise deal in, student loans, including, but not limited
to, loans insured under the FFEL program, and to make commitments for any of
the foregoing. Sallie Mae is also authorized to buy, sell, hold, underwrite
and otherwise deal in obligations of eligible lenders, if such obligations are
issued by such eligible lender for the purpose of making or purchasing
federally guaranteed student loans under the Higher Education Act. As a
federally chartered corporation, Sallie Mae's structure and operational
authorities are subject to revision by amendments to the Higher Education Act
of other federal enactments.
Sallie Mae prepares an information statement annually which describes
Sallie Mae, its business and operations and contains Sallie Mae's audited
financial statements. From time to time Sallie Mae prepares supplements to its
information statement which include certain unaudited financial data and other
information concerning the business and operations of Sallie Mae. These
documents can be obtained without charge upon written request to the Corporate
and Investor Relations Division of Sallie Mae at 1050 Thomas Jefferson Street,
N.W., Washington, D.C. 20007. Sallie Mae is not subject to the periodic
reporting requirements of the Exchange Act.
The Resolution Funding Corporation
The Resolution Funding Corporation is a mixed-ownership government
corporation established by Title V of the Financial Institutions Reform,
Recovery, and Enforcement Act of 1989 (the "FIRRE Act"). The sole purpose of
the Resolution Funding Corporation is to provide financing for the Resolution
Trust Corporation. The Resolution Funding Corporation is to be dissolved, as
soon as practicable, after the maturity and full payment of all obligations
issued by it. The Resolution Funding Corporation is subject to the general
oversight and direction of the Oversight Board, which is comprised of the
Secretary of the Treasury, the Chairman of the Federal Reserve Board of
Governors, the Secretary of Housing and Urban Development and two independent
members from different political parties to be appointed by the President with
the advice and consent of the Senate. The day-to-day operations of the
Resolution Funding Corporation are under the management of a three-member
Directorate comprised of the Director of the Office of Finance of the Federal
Home Loan Banks and two members selected by the Oversight Board from among the
presidents of twelve Federal Home Loan Banks.
The Resolution Trust Corporation was established by the FIRRE Act to
manage and resolve cases involving failed savings and loan institutions
pursuant to policies established by the Oversight Board. The Resolution Trust
Corporation manages and resolves cases for which a receiver or conservator was
appointed between January 1, 1989 through August 9, 1992. The Resolution Trust
Corporation is authorized to issue nonvoting capital certificates to the
Resolution Funding Corporation in exchange for the funds transferred from the
Resolution Funding Corporation to the Resolution Trust Corporation. The
Resolution Trust Corporation will terminate on or before December 31, 1996.
The FIRRE Act limits the aggregate principal amount of interest bearing
obligations which may be issued by the Resolution Funding Corporation to $30
billion, which amount of obligations was issued in 1989. Pursuant to the FIRRE
Act, the net proceeds of these obligations are used to purchase nonvoting
capital certificates issued by the Resolution Trust Corporation or to retire
previously issued Resolution Funding Corporation obligations.
Information concerning the Resolution Funding Corporation may be
obtained from the Resolution Funding Corporation, Suite 850, 655 Fifteenth
Street, N.W., Washington, D.C. 20005. The Resolution Funding Corporation is
not subject to the periodic reporting requirements of the Exchange Act.
The Federal Home Loan Banks
The Federal Home Loan Banks constitute a system of twelve federally
chartered corporations. The mission of each Federal Home Loan Bank is to
enhance the availability of residential mortgage credit by providing a readily
available, low-cost source of funds to its member institutions. A primary
source of funds for the Federal Home Loan Banks is the proceeds from the sale
to the public of debt instruments issued by the Federal Housing Finance Board,
which are the joint and several obligations of all of the Federal Home Loan
Banks. The Federal Home Loan Banks are supervised and regulated by the Federal
Housing Finance Board, which is an independent federal agency in the executive
branch of the United States government, but obligations of the Federal Home
Loan Banks are not obligations of the United States government.
The Federal Home Loan Bank System produces annual and quarterly
financial reports in connection with the original offering and issuance by the
Federal Housing Finance Board of consolidated bonds and consolidated notes of
the Federal Home Loan Banks. Questions regarding the Federal Home Loan Banks
Combined Financial Statement should be directed to the Deputy Director,
Financial Reporting and Operations Divisions, Federal Housing Finance Board,
1777 F Street, N.W., Washington, D.C. 20006. Copies of the financial reports
will be furnished upon request to the Capital Markets Divisions, Office of
Finance.
Tennessee Valley Authority
TVA is a wholly owned corporate agency and instrumentality of the
United States of America established pursuant to the Tennessee Valley
Authority Act of 1933, as amended, or TVA Act. TVA's objective is to develop
the resources of the Tennessee Valley region in order to strengthen the
regional and national economy and the national defense. The programs of TVA
consist of power and nonpower programs. The power program is required to be
self-supporting from revenues it produces. The TVA Act authorizes TVA to issue
evidences of indebtedness that may only be used to finance its power program.
TVA prepares an information statement annually which describes TVA,
its business and operations and contains TVA's audited financial statements.
From time to time TVA prepares supplements to its information statement which
include certain unaudited financial data and other information concerning the
business and operations of TVA. These documents can be obtained upon written
request directed to Tennessee Valley Authority, 400 West Summit Hill Drive,
Knoxville, Tennessee 37902, Attention: Vice President and Treasurer.
Federal Farm Credit Banks
The Farm Credit System is a nationwide system of lending institutions
and affiliated service and other entities. Through its banks and related
associations, the Farm Credit System provides credit and related services to
farmers, ranchers, producers and harvesters of aquatic products, rural
homeowners, certain farm-related businesses, agricultural and aquatic
cooperatives and rural utilities. System institutions are federally chartered
under the Farm Credit Act of 1971, as amended, and are subject to regulation
by a Federal agency, the Farm Credit Administration. The Farm Credit Banks and
associations are not commonly owned or controlled. They are cooperatively
owned, directly or indirectly, by their respective borrowers. Unlike
commercial banks and other financial institutions that lead to the
agricultural sector in addition to other sectors of the economy, under the
Farm Credit Act the Farm Credit System institutions are restricted solely to
making loans to qualified borrowers in the agricultural sector and to certain
related businesses. Moreover, the Farm Credit System is required to make
credit and other services available in all areas of the nation. In order to
fulfill its broad statutory mandate, the Farm Credit System maintains lending
units in all 50 states and the Commonwealth of Puerto Rico.
The Farm Credit System obtains funds for its lending operations
primarily from the sale of debt securities issued under Section 4.2(d) of the
Farm Credit Act ("Systemwide Debt Securities"). The Farm Credit Banks are
jointly and severally liable on all Systemwide Debt Securities. Systemwide
Debt Securities are issued by the Farm Credit Banks through the Federal Farm
Credit Banks Funding Corporation, as agent for the Farm Credit Banks. Each
Farm Credit Bank determines its participation in each issue of Systemwide Debt
Securities based on its funding and operating requirements, subject to the
availability of eligible collateral, to determinations by the Farm Credit
Banks Funding Corporation as to conditions of participation and terms of each
issuance, and to Farm Credit Administration approval.
Important information regarding the Farm Credit Banks and the Farm
Credit System, including combined financial information, is contained in
disclosure information made available by the Farm Credit Banks Funding
Corporation. This information consists of the most recent Farm Credit System
annual information statement and any quarterly information statements issued
subsequent thereto and certain press releases issued from time to time by the
Farm Credit Banks Funding Corporation. Such information and the Farm Credit
System Annual Report to Investors for the current and two preceding fiscal
years are available for inspection at the Federal Farm Credit Banks Funding
Corporation, Investment Banking Services Department, 10 Exchange Place, Suite
1401, Jersey City, New Jersey 07302. Upon request, the Farm Credit Banks
Funding Corporation will furnish, without charge, copies of the above
information.
Contractual and Statutory Restrictions. A GSE issuer and the related
Underlying Securities may be subject to contractual and statutory restrictions
which may provide some protection to securityholders against the occurrence or
effects of specified events. Unless otherwise specified in the related
prospectus supplement, each GSE is limited to the activities as will promote
its statutory purposes as set forth in the publicly available information with
respect to the issuer. See "Description of the Deposited Assets--Publicly
Available Information" in the related prospectus supplement.
Neither the United States nor any agency thereof is obligated to
finance any GSE issuer's operations or to assist a GSE issuer in any manner.
Prospective purchasers should consult the publicly available information with
respect to each GSE issuer for a more detailed description of the regulatory
and statutory restrictions on the related GSE's activities.
Events of Default. The Indenture or other document or instrument
pursuant to which Underlying Securities are issued by a GSE issuer may provide
that any one of a number of specified events will constitute an event of
default with respect to the securities issued thereunder. Events of default
typically include the following or variations thereof:
o failure by the issuer to make a scheduled payment of interest
or principal on the securities at the time required (subject to
any specified grace period) or to redeem any of the securities
when required (subject to any specified grace period);
o breach by the issuer of a representation or warranty or failure
by the issuer to observe or perform any covenant, agreement or
condition contained in the indenture or authorizing legislation
or regulation, as the case may be, which breach or failure is
materially adverse to security holders and continues for a
specified period after notice thereof is given to the issuer by
the fiscal agent or the holders of not less than a specified
percentage of the outstanding securities; or
o the occurrence of certain events of insolvency or bankruptcy
with respect to the GSE issuer.
GTCs. As specified in the related prospectus supplement, a trust may
include one or more GTCs. GTCs are certificates evidencing undivided
fractional interests in a trust, the assets of which consist of promissory
notes (the "GTC Notes"), payable in U.S. dollars, of a certain foreign
government, backed by a full faith and credit guaranty issued by the United
States of America, acting through the Defense Security Assistance Agency of
the Department of Defense, of the due and punctual payment of 90% of all
payments of principal and interest due on the GTC Notes and a security
interest in collateral, consisting of non-callable securities issued or
guaranteed by the United States government, sufficient to pay the remaining
10% of all payments of principal and interest due on the GTC Notes.
Treasury Securities. Treasury Securities are securities issued or
guaranteed by the United States of America or by any of its agencies if the
full faith and credit of the United States of America is pledged for their
payment.
Foreign Government Securities. As specified in the applicable
prospectus supplement, Foreign Government Securities are obligations
guaranteed or issued by one or more foreign governments or any political
subdivision or agency or instrumentality thereof which has offered debt
securities in the United States pursuant to a registration statement filed
with the SEC containing information required by Schedule B of the Securities
Act ("Schedule B"), which qualifies as a "seasoned" issuer under SEC practice
and which issuer or guarantor the Depositor reasonably believes (based on
publicly available information) is eligible to use Schedule B as of the time
of any offering of certificates hereunder. The Foreign Government Securities
may include, but shall not be limited to obligations of any or all of the
following foreign governments (which may include, but shall not be limited to,
obligations guaranteed by the following): Austria, Australia, Canada, Canadian
Provinces, Denmark, Finland, France, Germany, Ireland, Japan, Norway, Italy,
Spain, Sweden and the United Kingdom.
General. Generally, Foreign Government Securities are not issued
pursuant to an indenture, and no trustee is provided with respect to Foreign
Government Securities. Generally, there will be a fiscal agent (each, a
"Foreign Fiscal Agent") for the Foreign Government Issuer with respect to the
Foreign Government Security whose actions will be governed by a fiscal agency
agreement. A Foreign Fiscal Agent does not have the same responsibilities or
duties to act on behalf of the holders of a foreign government's debt
securities as would a trustee.
Contractual Restrictions. There will generally be few, if any,
contractual restrictions on the foreign government issuers or foreign
government guarantors in respect of the Foreign Government Securities. The
foreign government Securities by their terms and provisions may, however,
restrict certain actions of the related Foreign Governments and may also
require, among other things, the creation or maintenance of reserves or a
sinking fund or contain an undertaking or pledge of the Foreign Government not
to encumber its assets to secure any other external indebtedness without
providing like security for the related Foreign Government Securities. Certain
actions in respect of the debt securities of foreign governments may also be
subject to proper executive, legislative or administrative approval.
The applicable prospectus supplement used to offer any series of
certificates will describe material covenants or undertakings in relation to
any Concentrated Underlying Security and, as applicable, will describe
material covenants or undertakings which are common to any pool of Underlying
Securities. There can be no assurance that any such provision will protect the
trust as a holder of the Underlying Securities against losses. In the event of
a breach of any such covenant or undertaking it may not be possible to force
any action in respect of the Underlying Securities or to obtain an enforceable
judgment against a foreign government.
Events of Default. Debt securities issued by foreign governments
generally provide that any one of a number of specified events will constitute
an event of default with respect to such securities. Such events of default
typically include the following or variations thereof:
o failure by the issuer to pay an installment of interest or
principal on the securities at the time required (subject to
any specified grace period) or to redeem any of the securities
when required (subject to any specified grace period);
o failure by the issuer to observe or perform any covenant,
agreement, or condition contained in the securities which
failure is materially adverse to security holders and continues
for a specified period after notice thereof; and
o the declaration by such government of a moratorium on the
payment of interest or principal in respect of external
indebtedness.
Principal Economic Terms of Underlying Securities
Reference is made in this prospectus to the applicable prospectus
supplement for a description of the following terms, as applicable, with
respect to any Concentrated Underlying Security: (i) the title and series of
such Underlying Securities, the aggregate principal amount, denomination and
form thereof; (ii) whether such securities are senior or subordinated to any
other obligations of the issuer of the Underlying Securities; (iii) whether
any of the obligations are secured or unsecured and the nature of any
collateral; (iv) the limit, if any, upon the aggregate principal amount of
such debt securities; (v) the dates on which, or the range of dates within
which, the principal of (and premium, if any, on) such debt securities will be
payable; (vi) the rate or rates or the method of determination thereof, at
which such Underlying Securities will bear interest, if any ("Underlying
Securities Rate"); (vii) the date or dates between which such interest will
accrue ("Underlying Securities Interest Accrual Periods"); (viii) the dates on
which such interest will be payable ("Underlying Securities Payment Dates");
(ix) the obligation, if any, of the issuer of the Underlying Securities to
redeem the Outstanding Debt Securities pursuant to any sinking fund or
analogous provisions, or at the option of a holder thereof, and the periods
within which or the dates on which, the prices at which and the terms and
conditions upon which such debt securities may be redeemed or repurchased, in
whole or in part, pursuant to such obligation; (x) the periods within which or
the dates on which, the prices at which and the terms and conditions upon
which such debt securities may be redeemed, if any, in whole or in part, at
the option of the issuer of the Underlying Securities; (xi) whether the
Underlying Securities were issued at a price lower than the principal amount
thereof; (xii) if other than United States dollars, the foreign or composite
currency in which such debt securities are denominated, or in which payment of
the principal of (and premium, if any) or any interest on such Underlying
Securities will be made (the "Underlying Securities Currency"), and the
circumstances, if any, when such currency of payment may be changed; (xiii)
material events of default or restrictive covenants provided for with respect
to such Underlying Securities; (xiv) the rating thereof, if any; and (xv) any
other material terms of such Underlying Securities.
With respect to a trust comprised of a pool of Underlying Securities
in which there are no Concentrated Underlying Securities, the related
prospectus supplement will describe the composition of the Underlying
Securities pool as of the Cut-off Date, certain material events of default or
restrictive covenants common to the Underlying Securities, and, on an
aggregate, percentage or weighted average basis, as applicable, the
characteristics of the pool with respect to the terms set forth in (i), (ii),
(iii), (v), (vi), (vii), (viii), (ix), (x), (xi), (xiii) and (xv) of the
preceding paragraph and any other material terms regarding such pool of
securities.
Publicly Available Information
With respect to each Concentrated Underlying Security the applicable
prospectus supplement will disclose the identity of the applicable obligor and
the Underlying Securities Trustee, if applicable, and will describe the
existence and type of certain information that is made publicly available by
each obligor regarding such Underlying Security or Underlying Securities and
will disclose where and how prospective purchasers of the certificates may
obtain publicly available information with respect to each obligor. Except in
the case of most GSE issuers, publicly available information will consist of
the quarterly and annual reports filed under the Exchange Act by the issuer
with, and which are available from, the SEC. Such information will typically
consist of the obligor's annual report, which contains financial statements or
similar financial information, and can be obtained from the SEC, if so
specified in the applicable prospectus supplement, or from the office of the
obligor identified in the related prospectus supplement.
In the case of a GSE issuer whose obligations are not supported by
the full faith and credit of the U.S. government, publicly available
information will typically consist of information comparable to that required
of Exchange Act reporting entities. The precise nature of such publicly
available information and where and how it may be obtained with respect to any
given GSE issuer will vary, and, as described above, will be set forth in the
applicable prospectus supplement.
In the event that an issuer of a Concentrated Underlying Security
underlying a series of trust certificates ceases to file periodic reports
required under the Exchange Act, or make available comparable reports in the
case of a GSE issuer, the Depositor shall within 30 days instruct the trustee
to either (a) distribute within 30 days such Underlying Security or Securities
to the certificateholders or (b) sell within 30 days the Underlying Securities
and distribute the proceeds to the certificateholders, pursuant to the
procedures set forth in the related prospectus supplement applicable to sales
or "in-kind" distributions of Underlying Securities. For the purpose of this
subsection, with respect to Equipment Trust Certificates, the applicable
obligor and issuer refer, as applicable, to the ETC Credit Entity, and
Underlying Securities and Concentrated Underlying Securities refer, as
applicable, to the obligations of the ETC Credit Entity.
Other Deposited Assets
Generally. The Depositor may also deposit into a given trust, or the
trustee on behalf of the certificateholders of a trust may enter into an
agreement constituting or providing for the purchase of, to the extent
described in the related prospectus supplement, certain assets related or
incidental to one or more of such Underlying Securities or to some other asset
deposited in the related trust, including hedging contracts and other similar
arrangements (such as puts, calls, interest rate swaps, currency swaps,
floors, caps and collars), cash and assets ancillary or incidental to the
foregoing or to the Underlying Securities (including assets obtained through
foreclosure or in settlement of claims with respect thereto) and direct
obligations of the United States (all such assets for any given series, the
"Other Deposited Assets"). The applicable prospectus supplement will, to the
extent appropriate, contain market standard disclosure with respect to the
foregoing assets.
The Deposited Assets for a given series of certificates and the
related trust will not constitute Deposited Assets for any other series of
certificates and the related trust and the certificates of each class of a
given series possess an equal and ratable undivided ownership interest in such
Deposited Assets. The applicable prospectus supplement may, however, specify
that certain assets constituting a part of the Deposited Assets relating to
any given series may be beneficially owned solely by or deposited solely for
the benefit of one class or a group of classes within such series. In such
event, the other classes of such series will not possess any beneficial
ownership interest in those specified assets constituting a part of the
Deposited Assets.
Credit Support
As specified in the prospectus supplement for a given series of
certificates, the trust for any series of certificates may include, or the
certificateholders of such series (or any class or group of classes within
such series) may have the benefit of, credit support for any class or group of
classes within such series ("Credit Support"). Credit Support may be provided
by any combination of the following means described below or any other means
described in the applicable prospectus supplement. The applicable prospectus
supplement will set forth whether the trust for any class or group of classes
of certificates contains, or the certificateholders of such certificates have
the benefit of, any Credit Support and, if so, the amount, type and other
relevant terms of such arrangement with respect to any such class or classes
and certain information with respect to the obligors of each such transaction,
including financial information with respect to any obligor providing Credit
Support for 10% or more of the aggregate principal amount of such class or
classes unless such obligor is otherwise subject to the informational
requirements of the Exchange Act.
Subordination. As discussed below under "--Collections," the rights
of the certificateholders of any given class within a series of certificates
to receive collections from the trust for such series and any Credit Support
obtained for the benefit of the certificateholders of such series (or classes
within such series) may be subordinated to the rights of the
certificateholders of one or more other classes of such series to the extent
described in the related prospectus supplement. Such subordination accordingly
provides some additional Credit Support to certificateholders of those other
classes. For example, if losses are realized during a given period on the
Underlying Securities relating to a series of certificates and collections
received on such Underlying Securities, together with amounts collected under
any related Other Deposited Assets or Credit Support, are insufficient to make
all required distributions on the certificates of such series on the next
Distribution Date, those realized losses would be allocated to the
certificateholders of any class of any such series that is subordinated to
another class, to the extent and in the manner provided in the related
prospectus supplement. In addition, if so provided in the applicable
prospectus supplement, certain amounts otherwise payable to certificateholders
of any class that is subordinated to another class may be required to be
deposited into a Reserve Account. Amounts held in any Reserve Account may be
applied as described below under "--Reserve Accounts" and in the related
prospectus supplement.
If so provided in the related prospectus supplement, the Credit
Support for any series or class of certificates may include, in addition to
the subordination of certain classes of such series and the establishment of a
Reserve Account, any of the other forms of Credit Support described below. Any
such other forms of Credit Support that are solely for the benefit of a given
class will be limited to the extent necessary to make required distributions
to the certificateholders of such class or as otherwise specified in the
related prospectus supplement. In addition, if so provided in the applicable
prospectus supplement, the obligor of any other forms of Credit Support may be
reimbursed for amounts paid pursuant to such Credit Support out of amounts
otherwise payable to one or more of the classes of the certificates of such
series.
Letter of Credit; Surety Bond. The certificateholders of any series
(or class or group of classes of certificates within such series) may, if
specified in the applicable prospectus supplement, have the benefit of a
letter or letters of credit issued by a bank or a surety bond or bonds issued
by a surety company. In either case, the trustee or such other person
specified in the applicable prospectus supplement will use its reasonable
efforts to cause the letter of credit or the surety bond, as the case may be,
to be obtained, to be kept in full force and effect (unless coverage
thereunder has been exhausted through payment of claims) and to pay timely the
fees or premiums therefor unless, as described in the related prospectus
supplement, the payment of such fees or premiums is otherwise provided for.
The trustee or such other person specified in the applicable prospectus
supplement will make or cause to be made draws under the letter of credit or
the surety bond, as the case may be, under the circumstances and to cover the
amounts specified in the applicable prospectus supplement. Any amounts
otherwise available under the letter of credit or the surety bond will be
reduced to the extent of any prior unreimbursed draws thereunder. The
applicable prospectus supplement will provide the manner, priority and source
of funds by which any such draws are to be repaid.
Unless otherwise specified in the applicable prospectus supplement,
in the event that the letter of credit bank or the surety company, as
applicable, ceases to satisfy any credit rating or other applicable
requirements specified in the related prospectus supplement, the trustee or
such other person specified in the applicable prospectus supplement will use
its reasonable efforts to obtain or cause to be obtained a substitute letter
of credit or surety bond, as applicable, or other form of credit enhancement
providing similar protection, that meets such requirements and provides the
same coverage to the extent available for the same cost. There can be no
assurance that any letter of credit bank or any surety company, as applicable,
will continue to satisfy such requirements or that any such substitute letter
of credit, surety bond or similar credit enhancement will be available
providing equivalent coverage for the same cost. To the extent not so
available, Credit Support otherwise provided by the letter of credit or the
surety bond (or similar credit enhancement) may be reduced to the level
otherwise available for the same cost as the original letter of credit or
surety bond.
Reserve Accounts. If so provided in the related prospectus
supplement, the Depositor, the Trustee or such other person specified in the
prospectus supplement (such as an affiliate of the Depositor acting at the
instruction of the Depositor or an administrative agent, if any, acting at the
instruction of the Trustee) will deposit or cause to be deposited into an
account maintained with an eligible institution (which may be the trustee) (a
"Reserve Account") any combination of cash or Eligible Investments (as defined
in the related prospectus supplement) in specified amounts, which will be
applied and maintained in the manner and under the conditions specified in
such prospectus supplement. In the alternative or in addition to such deposit,
a Reserve Account may be funded through application of a portion of
collections received on the Underlying Securities for a given series of
certificates, in the manner and priority specified in the applicable
prospectus supplement. Amounts deposited in such Reserve Account may be
distributed to certificateholders of such class or group of classes within
such series, or may be used for other purposes, i.e. to settle a derivative
with cash or to satisfy any other shortfalls in amounts due to a Credit
Support provider or Other Deposited Assets provider, in the manner and to the
extent provided in the related prospectus supplement. Amounts deposited in any
Reserve Account will be invested in Eligible Investments by, or at the
direction of, the Depositor.
Collections
The trust agreement will establish procedures by which the trustee or
such other person specified in the prospectus supplement is obligated to
administer the related Deposited Assets. This will include making collections
of all payments made on the Deposited Assets and depositing the collections
from time to time prior to any applicable Distribution Date into a segregated
account maintained or controlled by the trustee for the benefit of such series
(each, a "Certificate Account"). An administrative agent, if any is appointed
pursuant to the applicable prospectus supplement, will direct the trustee, and
otherwise the trustee will make all determinations, as to the appropriate
application of such collections and other amounts available for distribution
to the payment of any administrative or collection expenses (such as
the administrative fee) and Credit Support-related ongoing fees (such as
insurance premiums, letter of credit fees or any required account deposits)
and to the payment of amounts then due and owing on the certificates of such
series (and classes within such series), all in the manner and priorities
described in the related prospectus supplement. The applicable prospectus
supplement will specify the collection periods, if applicable, and
Distribution Dates for a given series of certificates and the particular
requirements relating to the segregation and investment of collections
received on the Deposited Assets during a given collection period or on or by
certain specified dates. Amounts received from the Deposited Assets obtained
for the benefit of certificateholders for a particular series or class of
certificates over a specified period may not be sufficient, after payment of
all prior expenses and fees for such period, to pay amounts then due and owing
to holders of such certificates. The applicable prospectus supplement will
also set forth the manner and priority by which any Realized Losses will be
allocated among the classes of any series of certificates, if applicable.
The relative priorities of distributions with respect to collections
from the assets of the trust assigned to classes of a given series of
certificates may permanently or temporarily change over time upon the
occurrence of certain circumstances specified in the applicable prospectus
supplement. Moreover, the applicable prospectus supplement may specify that
the relative distribution priority assigned to each class of a given series
for purposes of payments of certain amounts, such as principal, may be
different from the relative distribution priority assigned to each such class
for payments of other amounts, such as interest or premium.
DESCRIPTION OF THE TRUST AGREEMENT
General
The following summary of certain provisions of the trust agreement
and the certificates is not complete and is qualified in its entirety by
reference to the detailed provisions of the form of trust agreement filed as
an exhibit to the registration statement.
Assignment of Deposited Assets
At the time of issuance of any series of certificates, the Depositor
will cause (x) the Underlying Securities, (y) any Credit Support specified in
the prospectus supplement, and (z) any Other Deposited Assets specified in the
prospectus supplement (each, a "Deposited Asset" and collectively, the
"Deposited Assets"), to be contributed to the related trustee, together with
all principal, premium (if any) and interest received by or on behalf of the
Depositor on or with respect to such Deposited Assets on and after the Cut-off
Date specified in the prospectus supplement (the "Cut-off Date"), other than
any Retained Interest. The trustee will, in consideration for the contribution
of the Deposited Assets to the trust, and concurrently with such assignment,
deliver the certificates to the Depositor. Each Underlying Security will be
identified in a schedule appearing as an exhibit to the trust agreement. The
schedule will include certain statistical information with respect to the
Underlying Securities as of the Cut-off Date, and in the event any Underlying
Security is a Concentrated Underlying Security, the schedule will include, to
the extent applicable, information regarding the payment terms thereof, the
Retained Interest, if any, with respect thereto, the maturity or terms
thereof, the rating, if any, thereof and certain other information.
In addition, the Depositor will, with respect to each Deposited
Asset, deliver or cause to be delivered to the trustee (or to the custodian
hereinafter referred to) all documents necessary to transfer
ownership of such Deposited Asset to the trustee. The trustee (or such
custodian) will review the documents within such period as is permitted in the
prospectus supplement, and the trustee (or such custodian) will hold the
documents in trust for the benefit of the certificateholders.
With respect to the Underlying Securities specified in the applicable
prospectus supplement if and to the extent provided therein, if any document
is found to be missing or defective in any material respect, the trustee (or
such custodian) will immediately notify the administrative agent, if any, and
the Depositor, and the administrative agent, if any, and the trustee will
immediately notify the relevant Underlying Securities Issuer. If and to the
extent specified in the applicable prospectus supplement, the Underlying
Securities Issuer cannot cure such omission or defect within 60 days after
receipt of notice, the Underlying Securities Issuer will be obligated, within
90 days of receipt of notice, to repurchase the related Underlying Securities
from the trustee at the Purchase Price (as defined below) or provide a
substitute for the Underlying Security. There can be no assurance that an
Underlying Securities Issuer will fulfill this repurchase or substitution
obligation. Although the administrative agent, if any, or otherwise the
trustee is obligated to use its best efforts to enforce this obligation,
neither such administrative agent nor the Depositor will be obligated to
repurchase or substitute such Underlying Security if the Underlying Securities
Issuer defaults on its obligation to do so. Unless otherwise specified in the
related prospectus supplement, when applicable, this repurchase or
substitution obligation constitutes the sole remedy available to the
certificateholders or the trustee for omission of, or a material defect in, or
failure to provide, a constituent document.
Each of the Depositor and the administrative agent, if any, will make
certain representations and warranties regarding its authority to enter into,
and its ability to perform its obligations under, the trust agreement. Upon a
breach of any such representation of the Depositor or any such administrative
agent, as the case may be, which materially and adversely affects the
interests of the certificateholders, the Depositor or any such administrative
agent, respectively, will be obligated to cure the breach in all material
respects.
Collection and Other Administrative Procedures
General. With respect to any series of certificates the trustee or
such other person specified in the prospectus supplement directly or through
sub-administrative agents, will make reasonable efforts to collect all
scheduled payments under the Deposited Assets. The trustee will follow the
collection procedures, as it would follow with respect to comparable financial
assets that it held for its own account, provided that such procedures are
consistent with the trust agreement and any related instrument governing the
Deposited Assets (collectively, the "Deposited Assets Instruments") and
provided that, except as otherwise expressly set forth in the applicable
prospectus supplement, it shall not be required to expend or risk its own
funds or otherwise incur personal financial liability.
Sub-Administration. Any trustee or administrative agent may delegate
its obligations in respect of the Deposited Assets to third parties they deem
qualified to perform such obligations (each, a "Sub-Administrative Agent").
However, the trustee or administrative agent will remain obligated with
respect to such obligations under the trust agreement. Each Sub-Administrative
Agent will be required to perform the customary functions of an administrator
of comparable financial assets, including, if applicable, collecting payments
from obligors and remitting such collections to the trustee; maintaining
accounting records relating to the Deposited Assets; attempting to cure
defaults and delinquencies; and enforcing any other remedies with respect
thereto all as and to the extent provided in the applicable sub-administration
agreement.
The agreement between any administrative agent or trustee and a
Sub-Administrative Agent will be consistent with the terms of the trust
agreement and the assignment to the sub-Administrative Agent by itself will
not result in a withdrawal or downgrading of the rating of any class of
certificates issued pursuant to the trust agreement. Although each such
sub-administration agreement will be a contract solely between such
administrative agent and the Sub-Administrative Agent, the trust agreement
pursuant to which a series of certificates is issued will provide that, if for
any reason the administrative agent for the series of certificates is no
longer acting in such capacity, the trustee or any successor administrative
agent must recognize the Sub-Administrative Agent's rights and obligations
under the sub-administration agreement.
The administrative agent or trustee will be solely liable for all
fees owed by it to any Sub-Administrative Agent, irrespective of whether the
compensation of the administrative agent or trustee, as applicable, pursuant
to the trust agreement with respect to the particular series of certificates
is sufficient to pay such fees. However, a Sub-Administrative Agent may be
entitled to a Retained Interest in certain Deposited Assets to the extent
provided in the related prospectus supplement. Each Sub-Administrative Agent
will be reimbursed by the administrative agent, if any, or otherwise the
trustee for certain expenditures which it makes, generally to the same extent
the administrative agent or trustee, as applicable, would be reimbursed under
the terms of the trust agreement relating to such series. See "--Retained
Interest; Administrative Agent Compensation and Payment of Expenses."
The administrative agent or trustee may require any
Sub-Administrative Agent to agree to indemnify the administrative agent or
trustee, as applicable, for any liability or obligation sustained in
connection with any act or failure to act by the Sub-Administrative Agent.
Realization upon Defaulted Deposited Assets or Exchanged Securities.
Unless otherwise specified in the applicable prospectus supplement, (A) in the
event of the occurrence of (i) an Event of Default with respect to any
Underlying Security or (ii) an acceleration of the date of maturity of any
Underlying Security in connection with a default thereon, or (B) upon the
exchange by an Underlying Securities Issuer of an Underlying Security for a
new security, the Depositor shall take such action as is set forth in the
prospectus supplement with respect to such defaulted security or exchanged
security, which steps may include, without limitation, (i) instructing the
trustee to make a distribution "in-kind" of the related security to the
certificateholders on a pro rata basis in proportion to their outstanding
Certificate Principal Balances, (ii) instructing the trustee to direct the
Market Agent to sell such security and distribute the proceeds of such sale to
the certificateholders pro rata in accordance with their respective
Certificate Principal Balances, [or (iii) such other action as may be set
forth in the applicable prospectus supplement.]
Unless otherwise provided in the applicable prospectus supplement, if
recovery on a defaulted Deposited Asset under any related Deposited Assets
Instrument (or, on an exchanged security, under its governing instruments) is
not available, the trustee will be obligated to follow or cause to be followed
normal practices and procedures as it deems necessary or advisable to realize
upon the asset. However, except as otherwise expressly provided in the
applicable prospectus supplement, it shall not be required to expend or risk
its own funds or otherwise incur personal financial liability. If the proceeds
of any liquidation of a defaulted Deposited Assets (or exchanged security) are
less than [the amount of the termination payment due with respect to such
Deposited Asset] [the sum of (i) the outstanding principal balance of the
defaulted Deposited Asset (or, with respect to an exchanged security, the
related Underlying Security), (ii) interest accrued but unpaid thereon at the
applicable interest rate and (iii) the aggregate amount of expenses incurred
by the administrative agent and the trustee in connection with such
proceedings to the extent reimbursable from the assets of the related trust
under the related trust agreement,] [the amount scheduled to be paid but not
received under the terms of any Deposited Asset (or exchanged security)] such
trust will realize a loss. Only if and to the extent provided in the
applicable prospectus supplement, the administrative agent or trustee, as so
provided, will be entitled to withdraw or cause to be withdrawn from the
related Certificate Account out of the net proceeds recovered on any defaulted
Underlying Security (or exchanged security), prior to the distribution of such
proceeds to certificateholders, amounts representing its normal administrative
compensation on the Underlying Security (or exchanged security), unreimbursed
administrative expenses incurred with respect to the Underlying Security (or
exchanged security) and any unreimbursed advances of delinquent payments made
with respect to the Underlying Security (or exchanged security).
Underlying Securities Reporting Failure. Unless otherwise provided in
the applicable prospectus supplement, in the event an issuer of an Underlying
Security, the outstanding principal balance of which equals or exceeds ten
percent (10%) of the aggregate principal balance of the Deposited Assets
ceases to file periodic reports (to the extent such periodic reports are
required to be filed by such Underlying Securities Issuer under the Exchange
Act), the Depositor may instruct the Trustee to make a distribution "in-kind"
of the related Underlying Security or to take such other action as may be set
forth in the prospectus statement.
Other "In Kind" Distributions. In addition to "in kind" distributions
to holders of defaulted Underlying Securities, Underlying Securities with
respect to which the Underlying Securities Issuer has failed to file required
reports or securities substituted to the Trust by the Underlying Securities
Issuers in exchange for Underlying Securities, the Depositor may determine to
make in kind distributions to certificateholders under other circumstances as
may be described in the related series supplement to the trust agreement.
Retained Interest
The prospectus supplement for a series of certificates will specify
whether there will be any Retained Interest in the Underlying Securities, and,
if so, the owner thereof. A Retained Interest will be established on an
asset-by-asset basis and will be specified in an exhibit to the applicable
series supplement to the trust agreement. A Retained Interest in an Underlying
Security represents a specified interest therein. Payments in respect of the
Retained Interest will be deducted from payments on the Underlying Securities
as received and, in general, will not be deposited in the applicable
Certificate Account or become a part of the related trust. Unless otherwise
provided in the applicable prospectus supplement, any partial recovery of
interest on an Underlying Security, after deduction of all applicable
administration fees, will be allocated between the Retained Interest (if any)
and interest distributions to certificateholders on a pari passu basis.
Trustee and Administrative Agent Compensation and Expenses
The applicable prospectus supplement will specify compensation
payable to the trustee (the "Trustee Fee"), and compensation payable to the
administrative agent, if any, and the source, manner and priority of payment
thereof, with respect to a given series of certificates.
As compensation for its services performed pursuant to the applicable
trust agreement, the Trustee shall be entitled to the Trustee Fee. [The
Trustee Fee shall be paid by the Depositor and not from the Deposited Assets.
On each Distribution Date the Trustee shall be paid by the Depositor
[one-twelfth], [one-quarter], [one half] of the annual Trustee's Fee. [The
Trustee Fee shall be payable by the Trust in equal [monthly] [quarterly]
[semi-annual] installments from the Deposited Assets on each Distribution
Date.] [The Trustee shall bear all Ordinary Expenses]. [Failure by the Trust
to pay such amount shall not entitle the Trustee to any payment or
reimbursement from the Depositor], [nor shall such failure release the Trustee
from its duties under the Trust Agreement.
If, and to the extent specified in the applicable prospectus
supplement, in addition to amounts payable to any Sub-Administrative Agent
and the administrative agent, if any, and otherwise, the trustee will pay from
its compensation certain expenses incurred in connection with its
administration of the Deposited Assets, including, without limitation, payment
of the fees and disbursements of the trustee, if applicable, and independent
accountants, payment of expenses incurred in connection with distributions and
reports to certificateholders, and payment of any other expenses described in
the related prospectus supplement.
Advances in Respect of Delinquencies
Unless otherwise specified in the applicable prospectus supplement,
the administrative agent or the trustee will have no obligation to make any
advances with respect to collections on the Underlying Securities or in favor
of the certificateholders of the related series of certificates. However, to
the extent provided in the applicable prospectus supplement, the
administrative agent or the trustee will advance on or before each
Distribution Date its own funds or funds held in the Certificate Account or
the Reserve Account for such series that are not part of the funds available
for distribution for such Distribution Date. The amount of funds advanced will
equal the aggregate payments of principal, premium (if any) and interest (net
of related administration fees and any Retained Interest) with respect to the
Underlying Securities that were due during the related Collection Period (as
defined in the related prospectus supplement) and were delinquent on the
related Determination Date, subject to (i) any such administrative agent's or
trustee's good faith determination that such advances will be reimbursable
from Related Proceeds (as defined below) and (ii) such other conditions as may
be specified in the related prospectus supplement.
Advances are intended to maintain a regular flow of scheduled
interest, premium (if any) and principal payments to holders of the class or
classes of certificates entitled thereto, rather than to guarantee or insure
against losses. Unless otherwise provided in the related prospectus
supplement, advances of an administrative agent's or trustee's funds will be
reimbursable only out of related recoveries on the Deposited Assets for such
series with respect to which such advances were made ("Related Proceeds");
provided, however, that any advance will be reimbursable from any amounts in
the Certificate Account for the series to the extent that the administrative
agent or trustee shall determine, in its sole judgment, that the advance (a
"Nonrecoverable Advance") is not ultimately recoverable from Related Proceeds.
If advances have been made by the administrative agent or trustee from excess
funds in the Certificate Account for any series, the administrative agent or
trustee will replace the funds in such Certificate Account on any future
Distribution Date to the extent that funds in the certificate account on the
Distribution Date are less than payments required to be made to
certificateholders on such date. If so specified in the related prospectus
supplement, the obligations, if any, of an administrative agent or trustee to
make advances may be secured by a cash advance reserve fund or a surety bond.
If applicable, information regarding the characteristics of, and the identity
of any obligor on, any such surety bond, will be set forth in the related
prospectus supplement.
Certain Matters Regarding the Administrative Agent and the Depositor
An administrative agent, if any, for each series of certificates
under the trust agreement will be named in the related prospectus supplement.
The entity serving as administrative agent for any such series may be the
trustee, the Depositor, an affiliate of either thereof, the Underlying
Securities Issuer, any provider of Credit Support or any Other Deposited Asset
or any third party and may have other normal business relationships with the
trustee, the Depositor, their affiliates or the Underlying Securities Issuer.
The trust agreement will provide that an administrative agent may
resign from its obligations and duties under the trust agreement with respect
to any series of certificates only if such resignation, and the appointment of
a successor, will not result in a withdrawal or downgrading of the rating of
any class of certificates of such series, or upon a determination that its
duties under the trust agreement with respect to such series are no longer
permissible under applicable law. No resignation will become effective until
the trustee or a successor has assumed the administrative agent's obligations
and duties under the trust agreement with respect to such series.
The trust agreement will further provide that neither an
administrative agent, the Depositor nor any member, director, officer,
employee, or agent of the administrative agent or the Depositor will incur any
liability to the related trust or certificateholders for any action taken, or
for refraining from taking any action, in good faith pursuant to the trust
agreement or for errors in judgment; provided, however, that none of the
administrative agent, the Depositor nor any such person will be protected
against any liability that would otherwise be imposed by reason of willful
misfeasance, bad faith or gross negligence in the performance of duties
thereunder or by reason of reckless disregard of obligations and duties
thereunder. The trust agreement will further provide that, unless otherwise
provided in the applicable series supplement thereto, an administrative agent,
the Depositor and any member, director, officer, employee or agent of the
administrative agent or the Depositor will be entitled to indemnification by
the related trust and will be held harmless against any loss, liability or
expense incurred in connection with any legal action relating to the trust
agreement or the certificates, other than any loss, liability or expense
incurred by reason of willful misfeasance, bad faith or gross negligence in
the performance of duties thereunder or by reason of reckless disregard of
obligations and duties thereunder. In addition, the trust agreement will
provide that neither an administrative agent nor the Depositor will be under
any obligation to appear in, prosecute or defend any legal action which is not
incidental to their respective responsibilities under the trust agreement or
which in its opinion may cause it to incur any expense or liability. Each of
the administrative agent or the Depositor may, however, in its discretion
undertake any action which it may deem necessary or desirable with respect to
the trust agreement and the rights and duties of the parties thereto and the
interests of the certificateholders thereunder. The applicable prospectus
supplement will describe how the legal expenses and costs of such action and
any liability resulting therefrom will be allocated.
Any person into or with which an administrative agent may be merged
or consolidated, or any person resulting from any merger or consolidation to
which an administrative agent is a part, or any person succeeding to the
business of an administrative agent, will be the successor of the
administrative agent under the trust agreement with respect to the
certificates of any given series.
Administrative Agent Termination Events; Rights Upon Administrative Agent
Termination Event
Unless otherwise provided in the related prospectus supplement,
"Administrative Agent Termination Events" under the trust agreement with
respect to any given series of certificates will consist of the following:
o any failure by an administrative agent to remit to the
trustee any funds in respect of collections on the Deposited
Assets as required under the trust agreement, that continues
unremedied for five days after the giving of written notice
of such failure to the administrative agent by the trustee
or the Depositor, or to the administrative agent, the
Depositor and the trustee by the holders of such
certificates evidencing not less than 25% of the Voting
Rights (as defined below);
o any failure by an administrative agent duly to observe or
perform in any material respect any of its other covenants
or obligations under the trust agreement with respect to
such series which continues unremedied for thirty days after
the giving of written notice of such failure to the
administrative agent by the trustee or the Depositor,
or to the administrative agent, the Depositor and the
trustee by the holders of such certificates evidencing not
less than 25% of the Voting Rights; and
o specified events of insolvency, readjustment of debt,
marshaling of assets and liabilities or similar proceedings
and certain actions by or on behalf of an administrative
agent indicating its insolvency or inability to pay its
obligations.
Any additional Administrative Agent Termination Events with respect to any
given series of certificates will be set forth in the applicable prospectus
supplement. In addition, the applicable prospectus supplement and the related
series supplement to the trust agreement will specify as to each matter
requiring the vote of holders of certificates of a class or group of classes
within a given series, the circumstances and manner in which the Required
Percentage (as defined below) applicable to each matter is calculated.
"Required Percentage" means with respect to any matter requiring a vote of
holders of certificates of a given series, the specified percentage (computed
on the basis of outstanding Certificate Principal Balance or Notional Amount,
as applicable) of certificates of a designated class or group of classes
within such series (either voting as separate classes or as a single class)
applicable to such matter, all as specified in the applicable prospectus
supplement and the related series supplement to the trust agreement. "Voting
Rights" evidenced by any certificate will be the portion of the voting rights
of all the certificates in the related series allocated in the manner
described in the related prospectus supplement.
Unless otherwise specified in the applicable prospectus supplement,
so long as an Administrative Agent Termination Event under the trust agreement
with respect to a given series of certificates remains unremedied, the
Depositor or the trustee may, and at the direction of holders of such
certificates evidencing not less than the "Required Percentage-Administrative
Agent Termination" (as defined in the prospectus supplement, if applicable) of
the Voting Rights, the trustee will, terminate all the rights and obligations
of the administrative agent under the trust agreement relating to the
applicable trust and in and to the related Deposited Assets (other than any
Retained Interest of such administrative agent). The trustee will then succeed
to all the responsibilities, duties and liabilities of the administrative
agent under the trust agreement with respect to such series (except that if
the trustee is prohibited by law from obligating itself to make advances
regarding delinquent Underlying Securities, then the trustee will not be so
obligated) and will be entitled to similar compensation arrangements. In the
event that the trustee is unwilling or unable to act, it may or, at the
written request of the holders of such certificates evidencing not less than
the "Required Percentage-Administrative Agent Termination" of the Voting
Rights, it will appoint, or petition a court of competent jurisdiction for the
appointment of, an administration agent acceptable to the rating agency with a
net worth at the time of such appointment of at least $15,000,000 to act as
successor to such administrative agent under the trust agreement with respect
to such series. Pending such appointment, the trustee is obligated to act in
such capacity (except that if the trustee is prohibited by law from obligating
itself to make advances regarding delinquent Underlying Securities, then the
trustee will not be so obligated). The trustee and any such successor may
agree upon the compensation to be paid to such successor, which in no event
may be greater than the compensation payable to such administrative agent
under the trust agreement with respect to such series.
No certificateholder will have the right under the trust agreement to
institute any proceeding with respect thereto unless the holder previously has
given to the trustee written notice of breach and unless the holders of
certificates evidencing not less than the "Required Percentage-Remedies" (as
defined in the prospectus supplement) of the Voting Rights have made written
request upon the trustee to institute such proceeding in its own name as
trustee thereunder and have offered to the trustee reasonable indemnity,
and the trustee for fifteen days has neglected or refused to institute any
such proceeding. The trustee, however, is under no obligation to exercise any
of the trusts or powers vested in it by the trust agreement or to make any
investigation of matters arising thereunder or to institute, conduct or defend
any litigation thereunder or in relation thereto at the request, order or
direction of any of the holders of certificates covered by the trust
agreement, unless the certificateholders have offered to the trustee
reasonable security or indemnity against the costs, expenses and liabilities
which may be incurred therein or thereby.
Modification and Waiver
Unless otherwise specified in the applicable prospectus supplement,
the trust agreement for each series of certificates may be amended by the
Depositor and the trustee with respect to such series, without notice to or
consent of the certificateholders, for specified purposes including:
o to cure any ambiguity or to correct or supplement any
provision therein which may be defective or inconsistent
with any other provision therein;
o to add covenants, restrictions or obligations of the
Depositor or to modify any provisions of the Trust Agreement
provided that such addition or modification shall not
adversely affect the interests of the Certificateholders in
any material respect;
o to add or supplement any Credit Support for the benefit of any
certificateholders;
o to evidence and provide for the acceptance of appointment under
such trust agreement of a successor trustee; and
o to comply with any requirements imposed by the Code.
Without limiting the generality of the foregoing, unless otherwise
specified in the applicable prospectus supplement, the trust agreement may
also be modified or amended from time to time by the Depositor and the
Trustee with the consent of the certificateholders representing the "Required
Percentage-Amendment" (as defined in the prospectus supplement) of the
aggregate Voting Rights of those certificates to which such modification or
amendment relates for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of the trust agreement or of
modifying in any manner the rights of the certificateholders; provided,
however, that, unless otherwise specified in the related trust agreement, no
such amendment shall (i) reduce in any manner the amount of, or delay
the timing of, payments received on Underlying Securities which are required
to be distributed on any certificate without the consent of all of the holders
of such certificates, (ii) adversely affect in any material respect the
interests of the holders of any series (or class within such series) (other
than as described in (i)) of certificates in a manner other than as described
in (i), without the consent of the Certificateholders of such series or class
evidencing not less than the Required Percentage--Amendment of the aggregate
Voting Rights of such series or class or (iii) reduce the percentage of
aggregate Voting Rights required by (ii), as described in (ii), without the
consent of all Certificateholders of such series or class then outstanding.
The Trustee will not enter into any amendment or modification of
the trust agreement which would adversely affect in any material respect the
interests of the holders of any class of certificates without the consent of
the holders of [100%] of such class of certificates; provided, however, that
no such amendment or modification will be permitted which would alter the
status of the trust as a grantor trust for federal income tax purposes or
cause the trust to be required to register as an Investment Company under the
Investment Company Act of 1940, as amended. Further, no amendment will be
permitted which would adversely affect in any material respect the interests
of any class of certificateholders without confirmation by each Rating Agency
that such amendment would not result in a downgrading or withdrawal of its
rating of such certificates.
Notwithstanding any other provision of the trust agreement, in
the event the Rating Agency Condition is not satisfied with respect to such
modification or amendment, the Required Percentage--Amendment will be
increased to require an aggregate percentage of the aggregate Voting Rights in
the amount specified in the applicable Prospectus Supplement. Notwithstanding
any other provision of the trust agreement, the amendment provisions of the
trust agreement will not be amended without the unanimous consent of the
certificateholders.
Reports to Certificateholders; Notices
Reports to Certificateholders. Unless otherwise provided in the
applicable prospectus supplement, with each distribution to certificateholders
of any class of certificates of a given series, the administrative agent or
the trustee, as provided in the related prospectus supplement, will forward or
cause to be forwarded to each such certificateholder, to the Depositor and to
such other parties as may be specified in the trust agreement, a statement
setting forth:
o the amount of such distribution to certificateholders of
such class allocable to principal of or interest or premium,
if any, on the certificates of such class; and the amount of
aggregate unpaid interest as of such Distribution Date;
o in the case of certificates with a variable Pass-Through
Rate, the Pass-Through Rate applicable to such Distribution
Date, as calculated in accordance with the method specified
herein and in the related prospectus supplement;
o the amount of compensation received by the administrative
agent, if any, and the trustee for the period relating to
such Distribution Date, as well as any extraordinary trust
expenses incurred during such period, and such other
customary information as the administrative agent, if any,
or otherwise the trustee deems necessary or desirable to
enable certificateholders to prepare their tax returns;
o if the prospectus supplement provides for advances, the
aggregate amount of advances included in such distribution,
and the aggregate amount of unreimbursed advances at the
close of business on such Distribution Date;
o the aggregate stated principal amount or, if applicable,
notional principal amount of the Underlying Securities and
the current interest rate thereon at the close of business
on such Distribution Date;
o the aggregate Certificate Principal Balance or aggregate
Notional Amount, if applicable, of each class of
certificates (including any class of certificates not
offered hereby) at the close of business on such
Distribution Date, separately identifying any reduction in
such aggregate Certificate Principal Balance or aggregate
Notional Amount due to the allocation of any Realized Losses
or otherwise; and
o as to any series (or class within such series) for which
Credit Support has been obtained, the amount of coverage of
each element of credit support included therein as of the
close of business on such Distribution Date.
In the case of information furnished with respect to the amounts of
distributions or the amounts of compensation of the administrative agent and
the trustee, the amounts shall be expressed as a U.S. dollar amount (or
equivalent thereof in any other Specified Currency) per minimum denomination
of certificates or for such other specified portion thereof. Within a
reasonable period of time after the end of each calendar year, the
administrative agent or the trustee, as provided in the related prospectus
supplement, shall furnish to each person who at any time during the calendar
year was a certificateholder a statement containing the information set forth
above with respect to the amounts of distributions or the amounts of
compensation of the administrative agent and the trustee, aggregated for such
calendar year or the applicable portion thereof during which such person was a
certificateholder. Such obligation of the administrative agent or the trustee,
as applicable, will be deemed to have been satisfied to the extent that
substantially comparable information shall be provided by the administrative
agent or the trustee, as applicable, pursuant to any requirements of the Code
as are from time to time in effect.
Notices. Unless otherwise provided in the applicable prospectus
supplement, any notice required to be given to a holder of a registered
certificate will be mailed to the last address of such holder set forth in the
applicable certificate register. Any notice required to be given to a holder
of a bearer certificate will be published in a daily morning newspaper of
general circulation in the city or cities specified in the prospectus
supplement relating to such bearer certificate.
Evidence as to Compliance
The trust agreement will provide that commencing on a certain date
and on or before a specified date in each year thereafter, a firm of
independent public accountants will furnish a statement to the trustee to the
effect that such firm has examined certain documents and records relating to
the administration of the Deposited Assets during the related 12-month period
(or, in the case of the first such report, the period ending on or before the
date specified in the prospectus supplement, which date shall not be more than
one year after the related Original Issue Date) and that, on the basis of
certain agreed upon procedures considered appropriate under the circumstances,
such firm is of the opinion that such administration was conducted in
compliance with the terms of the trust agreement, except for such exceptions
as such firm shall believe to be immaterial and such other exceptions and
qualifications as shall be set forth in such report.
The trust agreement will also provide for delivery to the Depositor,
the administrative agent, if any, and the trustee on behalf of the
certificateholders, on or before a specified date in each year, of an annual
statement signed by two officers of the trustee to the effect that the trustee
has fulfilled its obligations under the trust agreement throughout the
preceding year with respect to any series of certificates.
Copies of the annual accountants' statement and the statement of
officers of the trustee may be obtained by certificateholders without charge
upon written request to either the administrative agent or the trustee, as
applicable, at the address set forth in the related prospectus supplement.
In addition, the trust agreement will provide that the Depositor must
file with the Trustee (within thirty (30) days after the Depositor is required
to file the same with the Commission), copies of the annual reports and all
information, documents and other reports (or copies of such portions of any of
the foregoing as the Commission may from time to time by rules and regulations
prescribe) which the Depositor is required to file with the Commission
pursuant to Section 13 or Section 15(d) of the Exchange Act; or, if the
Depositor is not required to file information, documents or reports pursuant
to either section, then to file with the Trustee and the Commission, in
accordance with rules and regulations prescribed by the Commission, such
supplementary and periodic information, documents and reports, if any, which
may be required pursuant to Section 13 of the Exchange Act in respect of a
security listed and registered on a national securities exchange as may be
prescribed in such rules and regulations. The Trustee will also file periodic
reports pursuant to the Exchange Act in accordance with the customary
practices of the Depositor.
Replacement Certificates
Unless otherwise provided in the applicable prospectus supplement, if
a certificate is mutilated, destroyed, lost or stolen, it may be replaced at
the corporate trust office or agency of the applicable trustee in the City and
State of New York (in the case of registered certificates) or at the principal
London office of the applicable trustee (in the case of bearer certificates),
or such other location as may be specified in the applicable prospectus
supplement, upon payment by the holder of such expenses as may be incurred by
the applicable trustee in connection therewith and the furnishing of such
evidence and indemnity as such trustee may require. Mutilated certificates
must be surrendered before new certificates will be issued.
Termination
The obligations created by the trust agreement for each series of
certificates will terminate upon the payment to certificateholders of that
series of all amounts held in the related Certificate Account or by an
administrative agent, if any, and required to be paid to them pursuant to the
trust agreement following the earlier of (i) the final payment or other
liquidation of the last Deposited Assets subject thereto or the disposition of
all property acquired upon foreclosure or liquidation of any such Deposited
Assets and (ii) the purchase of all the assets of the trust by a party
entitled to effect such purchase, under the circumstances and in the manner
set forth in the related prospectus supplement. In no event, however, will any
trust created by the trust agreement continue beyond the respective date
specified in the related prospectus supplement. Written notice of termination
of the obligations with respect to the related series of certificates under
the trust agreement will be provided as set forth above under "--Reports to
Certificateholders; Notices--Notices," and the final distribution will be made
only upon surrender and cancellation of the certificates at an office or
agency appointed by the trustee which will be specified in the notice of
termination.
Any purchase of Deposited Assets and property acquired in respect of
Deposited Assets evidenced by a series of certificates will be made at a price
approximately equal to the aggregate fair market value of all the assets in
the trust (as determined by the trustee, the administrative agent, if any,
and, if different than both such persons, the person entitled to effect such
termination), in each case taking into account accrued interest at the
applicable interest rate to the first day of the month following such
purchase or, to the extent specified in the applicable prospectus supplement,
a specified price as determined therein (such price, a "Purchase Price"). The
exercise of such right will effect early retirement of the certificates of
that series, but the right of the person entitled to effect such termination
is subject to the aggregate principal balance of the outstanding Deposited
Assets for such series at the time of purchase being less than the percentage
of the aggregate principal balance of the Deposited Assets at the Cut-off Date
for that series specified in the related prospectus supplement.
Duties of the Trustee
The trustee makes no representations as to the validity or
sufficiency of the trust agreement, the certificates of any series or any
Deposited Assets or related document. The trustee is not accountable for the
use or application by or on behalf of any administrative agent of any funds
paid to the administrative agent or its designee in respect of such
certificates or the Deposited Assets, or deposited into or withdrawn from the
related Certificate Account or any other account by or on behalf of the
administrative agent. If no Administrative Agent Termination Event has
occurred and is continuing with respect to any given series, the trustee is
required to perform only those duties specifically required under the trust
agreement with respect to such series. However, upon receipt of the various
certificates, reports or other instruments required to be furnished to it, the
trustee is required to examine such documents and to determine whether they
conform to the applicable requirements of the trust agreement.
The Trustee
The trustee for any given series of certificates under the trust
agreement will be named in the related prospectus supplement. The commercial
bank, national banking association or trust company serving as trustee will be
unaffiliated with, but may have normal banking relationships with, the
Depositor, any administrative agent and their respective affiliates.
LIMITATIONS ON ISSUANCE OF BEARER CERTIFICATES
In compliance with United States Federal income tax laws and
regulations, the Depositor and any underwriter, agent or dealer participating
in the offering of any bearer certificate will agree that, in connection with
the original issuance of such bearer certificate and during the period ending
40 days after the issue of such bearer certificate, they will not offer, sell
or deliver such bearer certificate, directly or indirectly, to a U.S. Person
(as defined below) or to any person within the United States, except to the
extent permitted under U.S. Treasury regulations.
Bearer certificates will bear a legend to the following effect: "Any
United States Person who holds this obligation will be subject to limitations
under the United States income tax laws, including the limitations provided in
Sections 165(j) and 1287(a) of the Internal Revenue Code." The sections
referred to in the legend provide that, with certain exceptions, a United
States taxpayer who holds bearer certificates will not be allowed to deduct
any loss with respect to, and will not be eligible for capital gain treatment
with respect to any gain realized on a sale, exchange, redemption or other
disposition of, such bearer certificates.
As used herein, "United States" means the United States of America
and its possessions, and "U.S. Person" means a citizen or resident of the
United States, a corporation, partnership or other entity
created or organized in or under the laws of the United States, or an estate
or trust the income of which is subject to United States Federal income
taxation regardless of its source.
Pending the availability of a definitive global security or
individual bearer certificates, as the case may be, certificates that are
issuable as bearer certificates may initially be represented by a single
temporary global security, without interest coupons, to be deposited with a
common depositary in London for Euroclear Bank S.A./N.V., as operator of the
Euroclear System ("Euroclear"), and Clearstream Banking, a societe anonyme
("Clearstream Luxembourg"), for credit to the accounts designated by or on
behalf of the purchasers thereof. Following the availability of a definitive
global security in bearer form, without coupons attached, or individual bearer
certificates and subject to any further limitations described in the
applicable prospectus supplement, the temporary global security will be
exchangeable for interests in such definitive global security or for such
individual bearer certificates, respectively, only upon receipt of a
"Certificate of Non-U.S. Beneficial Ownership." A "Certificate of Non-U.S.
Beneficial Ownership" is a certificate to the effect that a beneficial
interest in a temporary global security is owned by a person that is not a
U.S. Person or is owned by or through a financial institution in compliance
with applicable U.S. Treasury regulations. No bearer certificate will be
delivered in or to the United States. If so specified in the applicable
prospectus supplement, interest on a temporary global security will be
distributed to each of Euroclear and Clearstream Luxembourg with respect to
that portion of such temporary global security held for its account, but only
upon receipt as of the relevant Distribution Date of a Certificate of Non-U.S.
Beneficial Ownership.
CURRENCY RISKS
Exchange Rates and Exchange Controls
An investment in a certificate having a Specified Currency other than
U.S. dollars entails significant risks that are not associated with a similar
investment in a security denominated in U.S. dollars. Such risks include,
without limitation, the possibility of significant changes in rates of
exchange between the U.S. dollar and such Specified Currency and the
possibility of the imposition or modification of foreign exchange controls
with respect to such Specified Currency. Such risks generally depend on
factors over which the Depositor has no control, such as economic and
political events and the supply of and demand for the relevant currencies. In
recent years, rates of exchange between the U.S. dollar and certain currencies
have been highly volatile, and such volatility may be expected in the future.
Fluctuations in any particular exchange rate that have occurred in the past
are not necessarily indicative, however, of fluctuations in the rate that may
occur during the term of any certificate. Depreciation of the Specified
Currency for a certificate against the U.S. dollar would result in a decrease
in the effective yield of such certificate below its Pass-Through Rate and, in
certain circumstances, could result in a loss to the investor on a U.S. dollar
basis.
Governments have from time to time imposed, and may in the future
impose, exchange controls that could affect exchange rates as well as the
availability of a Specified Currency for making distributions in respect of
certificates denominated in such currency. At present, the Depositor has
identified the following currencies in which distributions of principal,
premium and interest on certificates may be made: Australian dollars, Canadian
dollars, pounds sterling, Danish kroner, Italian lire, Japanese yen, New
Zealand dollars, U.S. dollars and ECU. However, certificates distributable
with Specified Currencies other than those listed may be issued at any time.
There can be no assurance that exchange controls will not restrict or prohibit
distributions of principal, premium or interest in any Specified Currency.
Even if there are no actual exchange controls, it is possible that, on a
Distribution Date with respect to any particular certificate, the currency in
which amounts then due to be distributed in respect of such certificate are
distributable would not be available. In that event, such payments will be
made in the manner set forth above under "Description of the
Certificates--General" or as otherwise specified in the applicable prospectus
supplement.
As set forth in the applicable prospectus supplement, certain of the
Underlying Securities may be denominated in a currency other than the
Specified Currency. Although payments in respect of principal and interest on
the certificates will be made in the Specified Currency, such payments may be
based in whole or in part upon receipt by the related trust of payments in the
Underlying Securities Currency. An investment in certificates supported by
Underlying Securities denominated in a currency other than the Specified
Currency entails significant risks not associated with an investment in
securities supported by obligations denominated in the same currency as the
currency of payment on such securities. Such risks include, without
limitation, the possibility of significant changes in rates of exchange
between the Specified Currency and the Underlying Securities Currency and the
possibility of the imposition or modification of foreign exchange controls
with respect to either the Specified Currency or the Underlying Securities
Currency.
Prospective purchasers should consult their own financial and legal
advisors as to the risks entailed by an investment in certificates denominated
in a currency other than U.S. dollars. Such certificates are not an
appropriate investment for persons who are unsophisticated with respect to
foreign currency transactions.
The information set forth in this prospectus is directed to
prospective purchasers of certificates who are United States residents. The
applicable prospectus supplement for certain issuances of certificates may set
forth certain information applicable to prospective purchasers who are
residents of countries other than the United States with respect to matters
that may affect the purchase or holding of, or receipt of distributions of
principal, premium or interest in respect of, such certificates.
Any prospectus supplement relating to certificates having a Specified
Currency other than U.S. dollars will contain information concerning
historical exchange rates for such currency against the U.S. dollar, a
description of such currency, any exchange controls affecting such currency
and any other required information concerning such currency.
Payment Currency
Except as set forth below or unless otherwise provided in the
applicable prospectus supplement, if distributions in respect of a certificate
are required to be made in a Specified Currency other than U.S. dollars and
such currency is unavailable due to the imposition of exchange controls or
other circumstances beyond the Depositor's control or is no longer used by the
government of the country issuing such currency or for the settlement of
transactions by public institutions of or within the international banking
community, then all distributions in respect of such certificate shall be made
in U.S. dollars until such currency is again available or so used. The amounts
so payable on any date in such currency shall be converted into U.S. dollars
on the basis of the most recently available Market Exchange Rate for such
currency or as otherwise indicated in the applicable prospectus supplement.
If distribution in respect of a certificate is required to be made in
ECU and ECU is no longer used in the European Monetary System, then all
distributions in respect of such certificate shall be made in U.S. dollars
until ECU is again so used. The amount of each distribution in U.S. dollars
shall be computed on the basis of the equivalent of the ECU in U.S. dollars,
determined as described below, as of the second Business Day prior to the date
on which such distribution is to be made.
The equivalent of the ECU in U.S. dollars as of any date (the "Day of
Valuation") shall be determined for the certificates of any series and class
by the applicable trustee on the following basis. The component currencies of
the ECU for this purpose (the "Components") shall be the currency amounts that
were components of the ECU as of the last date on which the ECU was used in
the European Monetary System. The equivalent of the ECU in U.S. dollars shall
be calculated by aggregating the U.S. dollar equivalents of the Components.
The U.S. dollar equivalent of each of the Components shall be determined by
such trustee on the basis of the most recently available Market Exchange Rates
for such Components or as otherwise indicated in the applicable prospectus
supplement.
If the official unit of any component currency is altered by way of
combination or subdivision, the number of units of that currency as a
Component shall be divided or multiplied in the same proportion. If two or
more component currencies are consolidated into a single currency, the amounts
of those currencies as Components shall be replaced by an amount in such
single currency equal to the sum of the amounts of the consolidated component
currencies expressed in such single currency. If any component currency is
divided into two or more currencies, the amount of that currency as a
Component shall be replaced by amounts of such two or more currencies, each of
which shall be equal to the amount of the former component currency divided by
the number of currencies into which that currency was divided.
All determinations referred to above made by the applicable trustee
shall be at its sole discretion and shall, in the absence of manifest error,
be conclusive for all purposes and binding on the related certificateholders
of such series.
Foreign Currency Judgments
Unless otherwise specified in the applicable prospectus supplement,
the certificates will be governed by and construed in accordance with the law
of the State of New York. Courts in the United States customarily have not
rendered judgments for money damages denominated in any currency other than
the U.S. dollar. A 1987 amendment to the Judiciary Law of the State of New
York provides, however, that an action based upon an obligation denominated in
a currency other than U.S. dollars will be rendered in the foreign currency of
the underlying obligation and converted into U.S. dollars at the rate of
exchange prevailing on the date of the entry of the judgment or decree.
UNDERWRITING
Certificates may be offered in any of three ways: (i) through
underwriters or dealers; (ii) directly to one or more purchasers; or (iii)
through agents. The applicable prospectus supplement will set forth the terms
of the offering of any series of certificates, which may include the names of
any underwriters, or initial purchasers, the purchase price of the
certificates and the proceeds to the Depositor from the sale, any underwriting
discounts and other items constituting underwriters' compensation, any initial
public offering price, any discounts or concessions allowed or reallowed or
paid to dealers, any securities exchanges on which the certificates may be
listed, any restrictions on the sale and delivery of certificates in bearer
form and the place and time of delivery of the certificates to be offered
thereby.
If underwriters are used in the sale, certificates will be acquired
by the underwriters for their own account and may be resold from time to time
in one or more transactions, including negotiated transactions, at a fixed
public offering price or at varying prices determined at the time of sale.
Certificates may be offered to the public either through underwriting
syndicates represented by managing underwriters or by underwriters without a
syndicate. The managing underwriters or underwriters in the United States will
include BAS, an affiliate of the Depositor. Unless otherwise set forth in the
applicable prospectus supplement, the obligations of the underwriters to
purchase the certificates will be subject to certain conditions precedent, and
the underwriters will be obligated to purchase all of the certificates if any
certificates are purchased. Any initial public offering price and any
discounts or concessions allowed or reallowed or paid to dealers may be
changed from time to time.
Certificates may also be sold through agents designated by the
Depositor. Any agent involved in the offer or sale of certificates will be
named, and any commissions payable by the Depositor to such agent will be set
forth, in the applicable prospectus supplement. Unless otherwise indicated in
the applicable prospectus supplement, any agent will act on a best efforts
basis for the period of its appointment.
If so indicated in the applicable prospectus supplement, the
Depositor will authorize agents, underwriters or dealers to solicit offers by
certain specified institutions to purchase certificates at the public offering
price described in such prospectus supplement pursuant to delayed delivery
contracts providing for payment and delivery on a future date specified in
such prospectus supplement. Such contracts will be subject only to those
conditions set forth in the applicable prospectus supplement and such
prospectus supplement will set forth the commissions payable for solicitation
of such contracts.
Any underwriters, dealers or agents participating in the distribution
of certificates may be deemed to be underwriters and any discounts or
commissions received by them on the sale or resale of certificates may be
deemed to be underwriting discounts and commissions under the Securities Act.
Agents and underwriters may be entitled under agreements entered into with the
Depositor to indemnification by the Depositor against certain civil
liabilities, including liabilities under the Securities Act, or to
contribution with respect to payments that the agents or underwriters may be
required to make in respect thereof. Agents and underwriters may be customers
of, engage in transactions with, or perform services for, the Depositor or its
affiliates in the ordinary course of business.
BAS is an affiliate of the Depositor. BAS's participation in the
offer and sale of certificates complies with the requirements of Section 2720
of the Conduct Rules of the National Association of Securities Dealers, Inc.
regarding underwriting securities of an affiliate.
As to each series of certificates, only those classes rated in one of
the investment grade rating categories by a rating agency will be offered
hereby. Any unrated classes or classes rated below investment grade may be
retained by the Depositor or sold at any time to one or more purchasers.
Affiliates of the underwriters may act as agents or underwriters in
connection with the sale of the certificates. Any affiliate of the
underwriters so acting will be named, and its affiliation with the
underwriters described, in the related prospectus supplement. Also, affiliates
of the underwriters may act as principals or agents in connection with
market-making transactions relating to the certificates.
IMPORTANT FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of material United States federal income
tax consequences of the purchase, ownership and disposition of the
certificates. It should be considered only in connection with the discussion
in the related prospectus supplement with respect to U.S. federal income tax
considerations. This summary will be based on the Internal Revenue Code of
1986, as well as Treasury regulations and administrative and judicial rulings
and practice, all of which are subject to change, possibly with retroactive
effect. This summary is intended as an explanatory discussion of the
consequences of holding the certificates generally and does not purport to
furnish information in the level of detail or with the investor's specific tax
circumstances that would be provided by an investor's own tax advisor.
Accordingly, it is strongly recommended that each prospective investor consult
with its own tax advisor regarding the application of United States federal
income tax laws, as well as any state, local, foreign or other tax laws, to
their particular situations. Prior to the issuance of any series of
securities, Special Tax Counsel will provide an opinion relating to the
classification of the trust for federal income tax purposes as described
below.
It is a condition to the issuance of securities that Special Tax
Counsel deliver either an opinion to the effect that, for federal income tax
purposes, the trust will not be characterized as an association (or publicly
traded partnership) taxable as a corporation or an opinion to the effect that,
for federal income tax purposes, the trust will be classified as a financial
asset securitization investment trust under sections 860H through 860L of the
Internal Revenue Code of 1986, as amended. Special Tax Counsel has not
delivered (and unless otherwise indicated in the related prospectus supplement
does not intend to deliver) any other opinions regarding the trust or the
certificates. Prospective investors should be aware that no rulings have been
sought from the Internal Revenue Service (the "IRS"), and that legal opinions
are not binding on the IRS or the courts. Accordingly, there can be no
assurance that the IRS or the courts will agree with Special Tax Counsel's
opinions. If, contrary to Special Tax Counsel's opinion, the trust is
characterized or treated as a corporation for federal income tax purposes,
among other consequences, the trust would be subject to federal income tax
(and possibly state income or franchise taxes) on its income and distributions
to certificateholders would be impaired.
State and Other Tax Consequences
In addition to the federal income tax consequences described above
and in the related prospectus supplement, potential investors should consider
the state, local and foreign tax consequences of the acquisition, ownership
and disposition of the certificates. State, local and foreign tax law may
differ substantially from federal tax law, and this discussion and the
discussion in the related prospectus supplement do not purport to describe any
aspect of the tax law of a state or other jurisdiction (including whether the
trust, if treated as a partnership for federal income tax purposes, would be
treated as a partnership under any state or local jurisdiction). Therefore, it
is strongly recommended that prospective purchasers consult their own tax
advisers with respect to such matters.
ERISA CONSIDERATIONS
General
The Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and the Internal Revenue Code of 1986, as amended (the "Code"),
impose certain restrictions on (a) employee benefit plans (as defined in
Section 3(3) of ERISA), (b) plans described in section 4975(e)(1) of the Code,
including individual retirement accounts or Keogh plans, (c) any entities
whose underlying assets include plan assets by reason of a plan's investment
in such entities (each a "Plan") and (d) persons who have certain specified
relationships to such Plans ("Parties-in-Interest" under ERISA and
"Disqualified Persons" under the Code). Moreover, based on the reasoning of
the United States Supreme Court in John Hancock Life Ins. Co. v. Harris Trust
and Sav. Bank, 114 S. Ct. 517 (1993), an insurance company's general account
may be deemed to include assets of the Plans investing in the general account
(e.g., through the purchase of an annuity contract), and the insurance company
might be treated as a Party-in-Interest with respect to a Plan by virtue of
such investment. ERISA also imposes certain duties on persons who are
fiduciaries of Plans subject to ERISA and prohibits certain transactions
between a Plan and Parties-in-Interest or Disqualified Persons with respect to
such Plans.
The United States Department of Labor (the "DOL") has promulgated a
regulation, 29 C.F.R. ss.2510.3-101 (the "Plan Asset Regulation") describing
what constitutes the assets of a Plan with respect to the Plan's investment in
an entity for purposes of the fiduciary responsibility provisions of Title I
of ERISA and Section 4975 of the Code. Under the Plan Asset Regulation, if a
Plan invests in an "equity interest" of an entity that is neither a "publicly
offered security" nor a security issued by an investment company registered
under the Investment Company Act of 1940, as amended, the Plan's assets are
deemed to include both the equity interest itself and an undivided interest in
each of the entity's underlying assets, unless it is established that the
entity is an "operating company" or that equity participation by "benefit plan
investors" is not "significant." The Plan Asset Regulation defines an "equity
interest" as any interest in an entity other than an instrument that is
treated as indebtedness under applicable local law and which has no
substantial equity features. Although it is not free from doubt, the
certificates offered hereby should be treated as "equity interests" for
purposes of the Plan Asset Regulation.
Publicly Held Securities Exception
One exception under the Plan Asset Regulation provides that an
investing Plan's assets will not include any of the underlying assets of an
entity if the class of "equity" interests in question are (i) widely held
(i.e., held by 100 or more investors who are independent of the issuer and
each other), (ii) freely transferable, and (iii) either (a) part of a class of
securities registered under Section 12(b) or 12(g) of the Exchange Act, or (b)
sold as part of an offering of securities to the public pursuant to an
effective registration statement under the Securities Act and such class is
registered under the Exchange Act within 120 days after the end of the fiscal
year of the issuer during which the offering of such securities to the public
occurred (the "Publicly Offered Securities Exception").
25% Limitation
Another exception under the Plan Asset Regulation is available if
equity participation in an entity by Benefit Plan Investors is not
"significant." The Plan Asset Regulation provides that equity participation in
an entity by Benefit Plan Investors is "significant" on any date if,
immediately after the most recent acquisition of any equity interest in the
entity, 25% or more of the value of any class of equity interest in the entity
is held by Benefit Plan Investors (the "25% Limitation"). The term "Benefit
Plan Investor" is defined to include any (i) "employee benefit plan" (as
defined in Section 3(3) of ERISA), whether or not subject to Title I of ERISA,
including without limitation governmental plans, foreign pension plans and
church plans, (ii) "plan" (as defined in Section 4975(e)(1) of the Code),
whether or not subject to Section 4975 of the Code, including without
limitation individual retirement accounts and Keogh plans, or (iii) entity
whose underlying assets include plan assets by reason of such an employee
benefit plan's or plan's investment in such entity, including without
limitation, as applicable, an insurance company general account. For purposes
of making determinations under the 25% Limitation, (i) the value of any equity
interests held by a person (other than a Benefit Plan Investor) that has
discretionary authority or control with respect to the assets of the entity or
that provides investment advice for a fee (direct or indirect) with respect to
such assets, or any affiliate of such a person (each such person or affiliate,
a "Controlling Person"), is disregarded, and (ii) only the proportion of an
insurance company general account's equity investment in the entity that
represents plan assets is taken into account.
If any class of certificates offered hereby does not meet the
Publicly Offered Securities Exception, the [Underwriter] may limit equity
participation in the trust by Benefit Plan Investors to less than 25% of a
particular class of certificates or prohibit investors using assets of Plans
subject to Title I of ERISA or Section 4975 of the Code (including assets of
an insurance company general account) from acquiring such class of
certificates. In such case, each purchaser of such class of certificates will
be required to represent and warrant (A) whether or not it is a Benefit Plan
Investor and whether or not it is a Controlling Person or (B) whether or not
it using assets of Plans subject to Title I of ERISA or Section 4975 of the
Code, as applicable. Any purported purchase or transfer of such class of
Certificate by a purchaser or to a transferee that does not comply with the
foregoing shall be null and void ab initio. [For a discussion of transfer
restrictions with respect to the Certificates, see "Transferability of
Units."]
If any class of certificates offered hereby does not meet the
Publicly Offered Securities Exception and equity participation in the
certificates by Benefit Plan Investors as defined above is "significant"
within the meaning of the Plan Asset Regulation, the assets of the trust could
be deemed to be the assets of Plans investing in the Certificates, as
applicable. If the assets of the trust were deemed to constitute the assets of
an investing Plan, (i) transactions involving the assets of the trust could be
subject to the fiduciary responsibility and prohibited transaction provisions
of ERISA and Section 4975 of the Code for which no exemption may be available,
(ii) the assets of the trust could be subject to ERISA's reporting and
disclosure requirements, and (iii) the fiduciary causing the Plan to make an
investment in the Certificates could be deemed to have delegated its
responsibility to manage the assets of the Plan.
Insurance Company General Accounts
Any purchaser that is an insurance company using the assets of an
insurance company general account should note that under Section 401(c) of
ERISA (relating to the status of the assets of insurance company general
accounts under ERISA and Section 4975 of the Code), the Department of Labor
issued final regulations effective January 5, 2000 (the "General Account
Regulations"), with respect to insurance policies issued on or before December
31, 1998 that are supported by an insurer's general account. As a result of
these regulations, assets of an insurance company general account will not be
treated as "plan assets" for purposes of the fiduciary responsibility
provisions of ERISA and Section 4975 of the Code to the extent such assets
relate to contracts issued to employee benefit plans on or before December 31,
1998 and the insurer satisfies various conditions. The plan asset status of
insurance company separate accounts is unaffected by new Section 401(c) of
ERISA, and separate account assets continue to be treated as the plan assets
of any such plan invested in a separate account.
Governmental and Church Plans
Certain employee benefit plans, such as governmental plans (as
defined in Section 3(32) of ERISA), certain church plans (as defined in
Section 3(33) of ERISA) and certain foreign plans are not subject to the
requirements of Title I of ERISA or Section 4975 of the Code. Such plans,
however, may be treated as Benefit Plan Investors for purposes of the 25%
Limitation, and for any such plan that is qualified and exempt from taxation
under Sections 401(a) and 501(a) of the Code is subject to the prohibited
transaction rules set forth in Section 503 of the Code.
General Investment Considerations
Any Plan fiduciary that proposes to cause a Plan to purchase
certificates should consult with its counsel with respect to the potential
applicability of ERISA and the Code to such investment and determine on its
own whether any exceptions or exemptions are applicable (including the
Publicly Offered Securities Exception) and whether all conditions of any such
exceptions or exemptions have been satisfied.
Moreover each Plan fiduciary should determine whether, under the
general fiduciary standards of investment prudence and diversification, an
investment in the certificates is appropriate for the Plan, taking into
account the overall investment policy of the Plan and the composition of the
Plan's investment portfolio.
The sale of the certificates is in no respect a representation by the
[Underwriter], the Trustee or any other person that such an investment meets
all relevant legal requirements with respect to investments by Plans generally
or that such an investment is appropriate for any particular Plan. See "ERISA
Considerations" in the prospectus supplement.
LEGAL OPINIONS
Certain legal matters with respect to the certificates will be passed
upon for the Depositor and the underwriters by Skadden, Arps, Slate, Meagher &
Flom LLP, New York, New York, or other counsel identified in the applicable
prospectus supplement.
INDEX OF TERMS FOR PROSPECTUS
Page
----
$ ..................................................................................................1
25% Limitation ...................................................................................67
Administrative Agent Termination Events............................................................54
Asset-Backed Agreements............................................................................37
Asset-Backed Securities............................................................................32
BAS ................................................................................................2
Base Rate .........................................................................................16
Benefit Plan Investor..............................................................................67
Business Day .....................................................................................15
Calculation Agent .................................................................................17
CD Rate ..........................................................................................18
CD Rate Calculation Date...........................................................................19
CD Rate Certificate................................................................................16
CD Rate Determination Date.........................................................................18
certificate .......................................................................................10
certificate account................................................................................48
Certificate of Non-U.S. Beneficial Ownership.......................................................61
Certificate Principal Balance......................................................................25
Clearstream Luxembourg.............................................................................61
Code ..............................................................................................66
Commercial Paper Rate..............................................................................19
Commercial Paper Rate Calculation Date.............................................................19
Commercial Paper Rate Certificate..................................................................16
Commercial Paper Rate Determination Date...........................................................19
Components .......................................................................................63
Composite Quotations...............................................................................17
Concentrated Underlying Security...................................................................35
Controlling Person.................................................................................67
Corporate Securities...............................................................................32
Credit Support ....................................................................................46
Cut-off Date .....................................................................................49
Day of Valuation .................................................................................63
definitive certificate.............................................................................28
Depositary .......................................................................................28
Deposited Asset .................................................................................49
Deposited Assets ..............................................................................i, 49
Deposited Assets Instruments.......................................................................50
Determination Date.................................................................................13
Disqualified Persons...............................................................................66
Distribution Date ..................................................................................i
DOL ..............................................................................................66
dollar..............................................................................................1
Domestic Corporate Securities......................................................................31
Domestic Government Securities.....................................................................32
Dual Currency Certificates.........................................................................26
Dutch Auction ....................................................................................22
Equipment Trust Certificates.......................................................................31
ERISA ............................................................................................66
ETC Credit Entity .................................................................................37
ETC Issuer .......................................................................................37
Euroclear ........................................................................................61
Exchange Act .......................................................................................1
Exchange Rate Agent................................................................................13
Exchangeable Series................................................................................26
Face Amount .......................................................................................26
Fannie Mae ........................................................................................38
FASIT ............................................................................................13
Federal Funds Rate.................................................................................20
Federal Funds Rate Calculation Date................................................................20
Federal Funds Rate Certificate.....................................................................16
Federal Funds Rate Determination Date..............................................................20
FHLMC ...........................................................................................38
FIRRE Act ........................................................................................40
Fixed Pass-Through Rate............................................................................11
Fixed Rate Certificates............................................................................15
Floating Rate Certificates.....................................................................16, 17
Foreign Currency Certificate.......................................................................25
Foreign Fiscal Agent...............................................................................44
Foreign Government Securities......................................................................32
Foreign Private Securities.........................................................................32
Freddie Mac .......................................................................................38
General Account Regulations........................................................................67
Government Securities..............................................................................32
GSEs .............................................................................................32
GTC Notes .........................................................................................43
GTCs ..............................................................................................32
H.15(519) .........................................................................................17
incorporate by reference............................................................................1
Index Maturity ...................................................................................17
Indexed Certificates...............................................................................25
Indexed Commodity .................................................................................25
Indexed Currency .................................................................................25
Indexed Principal Amount...........................................................................25
Initial Pass-Through Rate..........................................................................16
Interest Accrual Period............................................................................17
Interest Reset Date................................................................................17
IRS ..............................................................................3, 65
LIBOR .............................................................................20, 21
LIBOR Certificate .................................................................................16
LIBOR Determination Date...........................................................................20
London Banking Day.................................................................................15
Market Exchange Rate...............................................................................13
Maximum Pass-Through Rate..........................................................................17
Minimum Pass-Through Rate..........................................................................17
Money Market Yield.................................................................................19
Nonrecoverable Advance.............................................................................53
Notional Amount .................................................................................15
Optional Exchange Date.............................................................................26
Original Issue Date................................................................................11
Other Deposited Assets.............................................................................46
Outstanding Debt Securities........................................................................35
participants ......................................................................................28
Parties-in-Interest................................................................................66
Pass-Through Rate .................................................................................11
Plan ..............................................................................................66
Plan Asset Regulation..............................................................................66
Private Sector Securities..........................................................................32
Publicly Offered Securities Exception..............................................................66
Purchase Price ...................................................................................60
Realized Losses ..................................................................................25
Related Proceeds .................................................................................53
Required Percentage................................................................................55
Required Percentage-Administrative Agent Termination...............................................55
Required Percentage-Amendment......................................................................56
Required Percentage-Remedies.......................................................................55
reserve account . .................................................................................48
Retained Interest ..................................................................................8
Reuters Screen LIBO Page...........................................................................20
Sallie Mae ...................................................................................38, 40
Schedule B .......................................................................................43
Secured Underlying Securities......................................................................36
Senior Underlying Securities.......................................................................36
Specified Currency.................................................................................12
Spread ............................................................................................16
Spread Multiplier .................................................................................16
Strip Certificates.................................................................................12
Stripped Interest .................................................................................15
Sub-Administrative Agent...........................................................................50
Subordinated Underlying Securities.................................................................36
Systemwide Debt Securities.........................................................................42
Treasury bills ....................................................................................21
Treasury Rate ................................................................................21, 22
Treasury Rate Calculation Date.....................................................................22
Treasury Rate Certificate..........................................................................16
Treasury Rate Determination Date...................................................................22
Treasury Securities................................................................................32
Trust Indenture Act................................................................................34
Trust Preferred Securities.........................................................................31
U.S. dollars .......................................................................................1
U.S. Person .......................................................................................61
U.S.$ ..............................................................................................1
UCC ..............................................................................................38
Underlying Securities...........................................................................i, 30
Underlying Securities Currency.....................................................................45
Underlying Securities Indenture....................................................................34
Underlying Securities Interest Accrual Periods.....................................................45
Underlying Securities Issuer........................................................................6
Underlying Securities Payment Dates................................................................45
Underlying Securities Rate.........................................................................45
Underlying Securities Trustee......................................................................34
Underlying Security Events of Default..............................................................35
United States ....................................................................................61
USD ................................................................................................1
Variable Pass-Through Rate.........................................................................11
Voting Rights .....................................................................................55
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION (ITEM 14 OF FORM S-3)
The expenses estimated to be incurred in connection with the issuance
and distribution of the securities being registered, other than underwriting
compensation, are as set forth below.
SEC Filing Fee for Registration Statement $ 80.90 *
Accounting Fees and Expenses $ [ ]*
Trustee's Fees and Expenses
(including counsel fees) $ [ ]*
Blue Sky Fees and Expenses $ [ ]*
Listing Fees $ [ ]*
Printing and Engraving Fees $ [ ]*
Rating Agency Fees $ [ ]*
Miscellaneous $ [ ]*
=============
Total $ [ ]*
* All amounts, except the SEC Filing Fee, are estimates for expenses
incurred or to be incurred in accordance with Item 511 of Regulation S-K.
INDEMNIFICATION OF DIRECTORS AND OFFICERS (ITEM 15 OF FORM S-3)
Section 18-108 of the Delaware Limited Liability Company Act, as
amended (the "Delaware Act"), grants a Delaware limited liability company the
power, subject to such standards and restrictions, if any, as are set forth in
its limited liability company agreement to indemnify and hold harmless any
member or manager or other person from and against any and all claims and
demands whatsoever. Section 3.13(a) of the Limited Liability Company Agreement
of the Depositor (the "Agreement") provides that no manager (or affiliate
thereof), member or officer of the Depositor shall have any liability to the
Depositor for any act or failure to act on behalf of the Depositor unless such
act or failure to act resulted from the gross negligence or intentional
misconduct of such person or entity. Section 3.13(e) of the Agreement provides
that the managers (any affiliate of the managers), any officers, directors,
stockholders or employees of any affiliate of the managers and the members,
officers and employees of the Depositor shall be "Covered Persons" under the
Agreement. In addition, Section 3.13(b) of the Agreement provides that to the
fullest extent permitted by applicable law, the Depositor shall indemnify and
hold harmless each of Covered Person from and against any and all losses,
claims, demands, liabilities, expenses, judgments, fines, settlements and
other amounts arising from any and all claims, demands, actions, suits or
proceedings, civil, criminal, administrative or investigative, in which the
Covered Person may be involved, or is threatened to be involved, as a party or
otherwise, by reason of its management of the affairs of the Depositor or
which relates to or arises out of the Depositor or its property, business or
affairs. A Covered Person shall not be entitled to indemnification with
respect to any claim, issue or matter in which it has engaged in fraud,
willful misconduct, bad faith or gross negligence. Section 18-303 of the
Delaware Act provides that except as otherwise provided therein the debts,
obligations and liabilities of a limited liability company, whether arising in
contract, tort or otherwise, shall be solely the debts, obligations and
liabilities of the limited liability company, and no member or manager of a
limited liability company shall be obligated personally for any such debt,
obligation or liability of the limited liability company solely by reason of
being a member or acting as a manager of the limited liability company.
Section 1.5 of the Agreement provides that except as otherwise provided by the
Delaware Act, the debts, obligations and liabilities of the Depositor, whether
existing in contract, tort, or otherwise shall be obligations and liabilities
of the Depositor and no member or manager shall be obligated personally for
such debt, obligation or liability of the Depositor solely by means of being a
member or manager of the Depositor. Section 3.13(a) provides that any Covered
Person shall be fully protected from any action or inaction based upon or in
accordance with the advice or opinions received from counsel or accountants or
other professionals consulted in respect of the affairs of the Depositor. In
addition, no manager shall be liable for the gross negligence, dishonesty or
bad faith of any officer, employee, or other agent selected by the board of
managers of the Depositor with reasonable care. Notwithstanding any of the
foregoing to the contrary, the provisions of Section 3.13 of the Agreement
shall not relieve any Covered Person of any liability, to the extent that such
liability may not be waived, modified or limited under applicable law.
EXHIBITS (ITEM 16 OF FORM S-3)
Exhibits Description of Exhibit
1.1 -- Form of Underwriting Agreement.**
3.1 -- Certificate of Formation of the Depositor.**
3.2 -- Limited Liability Company Agreement of the Depositor.**
4.1.1 -- Form of Standard Terms for Trust Agreement.**
4.1.2 -- Form of Series Supplement.**
4.2 -- Market Agent Agreement.**
4.3 -- Call Option Agreement.**
4.4 -- Administration Agreement.**
5.1 -- Opinion of Skadden, Arps, Slate, Meagher & Flom LLP
with respect to legality (including consent of
such firm).**
8.1 -- Opinion of Skadden, Arps, Slate, Meagher & Flom
LLP with respect to material tax matters (including
consent of such firm).**
23.1 -- Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included as part of Exhibit 5.1 and Exhibit 8.1).**
24.1 -- Power of Attorney (included on Signature Page to
Registration Statement).**
25.1 -- Statement of Eligibility of Trustee.*
* To be filed by amendment.
** Previously filed.
UNDERTAKINGS (ITEM 17 OF FORM S-3)
A. Undertakings Pursuant to Rule 415
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, as
amended (the "Securities Act") (ii) to reflect in the prospectus any facts or
events arising after the effective date of this Registration Statement (or the
most recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in this
Registration Statement (notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range may
be reflected in the form of prospectus filed with the Securities and Exchange
Commission pursuant to Rule 424(b) under the Securities Act if, in the
aggregate, the changes in volume and price represent no more than a 20% change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement), and (iii) to
include any material information with respect to the plan of distribution not
previously disclosed in this Registration Statement or any material change to
such information in this Registration Statement; provided, however, that
paragraphs (1)(i) and (1)(ii) do not apply if the information required to be
included in a post-effective amendment by those paragraphs is contained in
periodic reports filed with of furnished to the Securities and Exchange
Commission by the Registrant pursuant to Section 13 of 15(d) of the Exchange
Act that are incorporated by reference in this Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
B. Undertakings in Respect of Filings Incorporating Subsequent
Exchange Act Documents by Reference
The undersigned Registrant hereby undertakes, that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Exchange Act) that is incorporated by
reference in the Registration Statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
C. Undertakings in Respect of Requests for Acceleration of Effective
Date Pursuant to Rule 461
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
certifies on behalf of the Bond Products Depositor LLC (the "Company") that he
has reasonable grounds to believe that the Company meets all of the
requirements for filing on Form S-3, it believes that the securities rating
requirement for use of Form S-3 will be met by the time of sale of the
securities and it has duly caused this Amendment Number 3 to the Registration
Statement on Form S-3 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of New York, State of New York on the 5th day of
September, 2003.
Bond Products Depositor LLC
By: /s/ Corey B. Pinkston
------------------------------------------
Corey B. Pinkston
President and Principal Executive Officer
Pursuant to the requirements of the Securities Act, this Form S-3
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
SIGNATURE DATE TITLE
* September 5, 2003 Chairman of the Board
- ----------------------------------- and Manager
James R. Stenson
* September 5, 2003 President, Principal Executive
- ----------------------------------- Officer and Manager
Corey B. Pinkston
* September 5, 2003 Senior Vice President,
- ----------------------------------- Principal Accounting Officer
Stephen K. Stegemeyer and Manager
* September 5, 2003 Principal Financial Officer
- ----------------------------------- and Manager
George C. Carp
* September 5, 2003 Manager
- -----------------------------------
David J. Walker
* By: /s/ Stephen K. Stegemeyer
------------------------------
Stephen K. Stegemeyer
EXHIBIT INDEX
Page Number Description of Exhibit
1.1 -- Form of Underwriting Agreement.**
3.1 -- Certificate of Formation of the Depositor.**
3.2 -- Limited Liability Company Agreement of the Depositor.**
4.1.1 -- Form of Standard Terms for Trust Agreement.**
4.1.2 -- Form of Series Supplement.**
4.2 -- Market Agent Agreement.**
4.3 -- Call Option Agreement.**
4.4 -- Administration Agreement.**
5.1 -- Opinion of Skadden, Arps, Slate, Meagher & Flom LLP
with respect to legality (including consent of
such firm).**
8.1 -- Opinion of Skadden, Arps, Slate, Meagher & Flom
LLP with respect to material tax matters (including
consent of such firm).**
23.1 -- Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included as part of Exhibit 5.1 and Exhibit 8.1).**
24.1 -- Power of Attorney (included on Signature Page to
Registration Statement).**
25.1 -- Statement of Eligibility of Trustee.*
* To be filed by amendment.
** Previously filed.