As filed with the Securities and Exchange Commission on December 21, 1998
Registration No. 333-57357
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.20549
----------------------
AMENDMENT NO. 3
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------------
STRUCTURED PRODUCTS CORP.
(Exact name of Registrant as specified in its charter)
DELAWARE 13-3692801
(State or other jurisdiction (I.R.S. Employer
of Identification No.)
incorporation or
organization)
Seven World Trade Center
New York, New York 10048
(212) 783-6645
(Address, including zip code, and telephone number, including
area code,of Registrant's principal executive offices)
Andrew Alter, Secretary
Structured Products Corp.
Seven World Trade Center
New York, New York 10048
(212) 783-6645
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
----------------------
Copy to:
Al B. Sawyers
Orrick, Herrington & Sutcliffe LLP
666 Fifth Avenue
New York, New York 10103
----------------------
Approximate date of commencement of proposed sale to the public: From time to
time after this Registration Statement becomes effective 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, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box./X/
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, 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 executed to be made pursuant to Rule 434,
please check the following box./_/
CALCULATION OF REGISTRATION FEE
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TITLE OF AMOUNT TO BE PROPOSED PROPOSED AMOUNT OF
SECURITIES REGISTERED MAXIMUM MAXIMUM REGISTRATION
BEING (2) (3) (4) OFFERING AGGREGATE FEE (2)
REGISTERED PRICE PER OFFERING PRICE
(1) UNIT (5) (5)
Trust $1,000,000 100% $1,000,000 $295.00
Certificates
and Notes
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(1)This registration statement also registers an indeterminate amount of Trust
Certificates and Notes to be sold by Salomon Brothers Inc in connection with
market-making activity.
(2)$ 232,030,000 aggregate principal amount of Trust Certificates registered by
the Registrant under Registration Statement 33-55860 referred to below are
consolidated in this Registration Statement pursuant to Rule 429. All
registration fees in connection with such unsold amount of Trust Certificates
have been previously paid by the Registrant under the foregoing Registration
Statement. Accordingly, the total amount registered under the Registration
Statement as so consolidated as of the date of this filing is $ 233,030,000.
(3)In United States dollars or the equivalent thereof in one or more foreign or
composite currencies.
(4)Plus such additional principal amount as may be necessary such that, if one
or more classes of Trust Certificates or Notes are issued with original issue
discount, the aggregate initial offering price of all Trust Certificates and
Notes will equal $1,000,000.
(5) Estimated solely for the purpose of calculating the registration fee.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
Pursuant to Rule 429 of the Securities Act of 1933, the prospectus which is
part of this Registration Statement is a combined prospectus and includes all
the information currently required in a prospectus relating to the securities
covered by Registration Statement No. 33-55860.
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EXPLANATORY NOTE
This Registration Statement includes two different base prospectuses with
corresponding forms of prospectus supplements for offering series of either (i)
Certificates and Notes or (ii) Certificates, in each case representing the
entire beneficial 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 publicly issued 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); (2) a publicly issued debt
security or pool of such debt securities which represent obligations issued by
or guaranteed by a foreign government, political subdivision or agency or
instrumentality thereof; (3) a publicly issued obligation or obligations of one
or more foreign private issuers; or (4) a publicly issued debt security or 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 governmental
sponsored organization created pursuant to a federal statute. Each prospectus
and form of prospectus supplement contains bracketed provisions appropriate to
the various categories of trust assets; each set of alternate bracketed
language, when combined with the base prospectus and form of prospectus
supplement, constitutes a separate prospectus. Following such prospectuses and
forms of prospectus supplement are an alternate cover page, page 2 and method of
distribution section for each prospectus supplement to be used when required by
the Securities Act of 1933 in connection with market-making transactions in the
securities by affiliates of the Depositor, where the issuer of the applicable
trust assets is also an affiliate of the Depositor.
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED [ ], [ ])
STRUCTURED PRODUCTS SERIES [ ]-[ ] TRUST
$[ ][Notional Amount] [(Approximate)], Class [ ]Certificates.
[ %] [Variable] Pass Through Rate
[Include additional Classes as applicable]
STRUCTURED PRODUCTS CORP.
DEPOSITOR
Each Structured Products Trust Certificates Series [ ____ ]-[ ____ ]
offered hereby will consist of [ ____ ] class of Certificates, designated as
Class [ ____ ] Certificates(,) [and] Class [ ____ ] Certificates [and list
others] (collectively, the "Certificates") and will represent a fractional
undivided beneficial interest in the Structured Products Series [ ____ ]- [ ____
] Trust (the "Trust") to be formed pursuant to the Trust Agreement dated as of [
], [ ____ ] (the "Trust Agreement"), between Structured Products Corp. (the
"Company" and [ _____________ ], as trustee (the "Owner Trustee"). The
Certificates will be issued by the Trust. The property of the Trust will consist
[in part] of [SELECT ONE OF THE FOLLOWING BRACKETED SELECTIONS] [Alternative 1:
specify publicly issued 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)] [Alternative 2: specify publicly issued obligations of one or
more foreign private issuers] [Alternative 3: specify publicly issued debt
security or 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
governmental sponsored organization created pursuant to a federal statute]
[Alternative 4: specify publicly issued debt security or pool of such debt
securities which represent obligations issued by or guaranteed by a foreign
government, political subdivision or agency or instrumentality thereof]
[maturing in ___ years] issued by [specify issuers] (collectively, the "Term
Assets"), and having the characteristics described herein under "Description of
Term Assets". Terms used but not otherwise defined herein are defined in the
Prospectus attached hereto (the "Prospectus").
The Term Assets will be acquired by the Company and, pursuant to the Trust
Agreement, deposited into the Trust for the benefit of Certificateholders. [The
Term Assets were issued and sold as part of an underwritten public offering in [
].] [The Term Assets are obligations of the Term Assets Issuer[s] and] [explain
whether senior or subordinate, and whether subject to any redemption or put
rights]. [Describe any required principal payments or amortization or
accumulation of Term Assets.]
(cover continued on next page)
PROSPECTIVE INVESTORS SHOULD CONSIDER, AMONG OTHER THINGS, THE INFORMATION SET
FORTH UNDER "RISK FACTORS" HEREIN ON PAGES S-[ ] TO S-[ ] AND IN THE PROSPECTUS
ON PAGES [ ] TO [ ].
------------
THE CERTIFICATES REPRESENT INTERESTS IN OR OBLIGATIONS OF THE TRUST ONLY AND DO
NOT REPRESENT AN OBLIGATION OF OR INTEREST IN THE COMPANY OR ANY OF ITS
AFFILIATES. THE CERTIFICATES DO NOT REPRESENT A DIRECT OBLIGATION OF ANY TERM
ASSETS ISSUER OR ANY OF THEIR RESPECTIVE AFFILIATES.
THESE CERTIFICATES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-----------
The Underwriter has agreed to purchase the Certificates from the Company at [ ]%
of the Certificate Principal Balance thereof plus accrued interest, if any, at
the Pass Through Rate calculated from [ ], [ ____ ] (the "Expected Settlement
Date"), subject to the terms and conditions set forth in the Underwriting
Agreement referred to herein. See "Method of Distribution".
The Underwriter proposes to offer the Certificates from time to time for sale in
negotiated transactions or otherwise at prices determined at the time of sale.
For further information with respect to the plan of distribution and any
discounts, commissions or profits that may be deemed underwriting discounts or
commissions, see "Method of Distribution."
The Certificates are offered subject to receipt and acceptance by the
Underwriter, to prior sale and to the Underwriter's right to reject any order in
whole or in part and to withdraw, cancel or modify the offer without notice. It
is expected that delivery of the [specify applicable classes] Certificates will
be made in book-entry form through the facilities of The Depository Trust
Company on or about the Expected Settlement Date.
- -----------------
SALOMON SMITH BARNEY
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS [ _______ ], [ ____ ].
(cover page continued)
Distributions on the Certificates will be made[[monthly] [quarterly]
[semi-annually] or[[ ] of each year] [to be conformed to interest payment dates
for Term Assets], or, if any such date is not a business day, then on the
immediately following business day (each, a "Distribution Date") commencing [ ],
[ ____ ]. The last day on which distributions are scheduled to be made on the
Certificates is [ _______ ], [ ____ ] (the "Final Distribution Date"), by which
date the holders of the Certificates will receive a distribution of all amounts
allocable to principal of such Certificates or, to the extent specified herein,
a pro rata share of any remaining Term Assets.
As and to the extent described herein, collections received with respect to the
Deposited Assets will be distributed to Certificateholders [of each class] in
the manner and priority described herein. [The rights of the holders of the
Class Certificates [and specify other classes] to receive distributions of such
collections are subordinated to the rights of the holders of the Class [ ____ ]
Certificates [and specify other classes]. As and to the extent described herein,
losses realized on the Deposited Assets will be borne by the holders of the
Class [ ____ ] Certificates [and specify other classes] before such losses will
be borne by the holders of the other classes of Certificates [and the Class
Certificates ([and specify other classes)]. To the extent described herein, the
relative priorities of each class of Certificates with respect to collections
from and losses on the Deposited Assets may each change over time, either
permanently or temporarily, upon the occurrence of certain circumstances
specified herein. See "Description of Certificates-Allocation of Losses;
Subordination".
The Term Assets Issuer is not participating in, and will not receive any
proceeds in connection with, this offering.
There is currently no secondary market for the Certificates, and there can be no
assurance that a secondary market for the Certificates will develop or, if it
does develop, that it will continue. See "Risk Factors" herein and in the
Prospectus.
The [specify applicable classes] Certificates initially will be represented by
certificates registered in the name of CEDE & Co., as nominee of The Depository
Trust Company ("DTC"). The interest of beneficial owners of such Certificates
will be represented by book entries on the records of participating members of
DTC. Definitive certificates will be available for such Certificates only under
the limited circumstances described herein. See "Description of
Certificates-Definitive Certificates".
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVERALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CERTIFICATES AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
THE CERTIFICATES OFFERED BY THIS PROSPECTUS SUPPLEMENT WILL CONSTITUTE A
SEPARATE SERIES OF CERTIFICATES BEING OFFERED BY THE COMPANY PURSUANT TO ITS
PROSPECTUS DATED [ _______ ], [ ____ ], OF WHICH THIS PROSPECTUS SUPPLEMENT IS A
PART AND WHICH ACCOMPANIES THIS PROSPECTUS SUPPLEMENT. THE PROSPECTUS CONTAINS
IMPORTANT INFORMATION REGARDING THIS OFFERING WHICH IS NOT CONTAINED HEREIN, AND
PROSPECTIVE INVESTORS ARE URGED TO READ THE PROSPECTUS AND THIS PROSPECTUS
SUPPLEMENT IN FULL. IN PARTICULAR, INVESTORS SHOULD CAREFULLY CONSIDER THE
FACTORS SET FORTH UNDER "RISK FACTORS" IN THE PROSPECTUS AND IN THIS PROSPECTUS
SUPPLEMENT.
UNTIL [ ______ ], [ ____ ], ALL DEALERS EFFECTING TRANSACTIONS IN THE OFFERED
CERTIFICATES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS SUPPLEMENT AND THE PROSPECTUS TO WHICH IT RELATES. THIS
DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS SUPPLEMENT AND PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH
RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
S-3
SUMMARY OF PRINCIPAL ECONOMIC TERMS
The following summary of principal economic terms does not purport to be
complete and is qualified in its entirety by reference to the detailed
information appearing elsewhere herein and in the Prospectus, including under
the heading "Description of Certificates", "Description of Term Assets" and
"Description of Credit Support". Certain capitalized terms used herein are
defined elsewhere in the Prospectus Supplement on the pages indicated in the
"Index of Terms" appearing at page S-[ ] of this Prospectus Supplement or, to
the extent not defined herein, have the meanings assigned to such terms in the
Prospectus.
THE CERTIFICATES
The Trust........... Structured Products Series [ ]-[ ]
Trust. The Trust will be formed pursuant to
the Trust Agreement dated as of [ ],
[ ] (the "Trust Agreement"), between the
Company and the Owner Trustee, dated as of
the Expected Settlement Date.
Certificates Offered Structured Products Trust Certificates,
Series [ ____ ]-[ ____ ], consisting of Class [ ]
Certificates [,] [and] Class [ ] Certificates [and
specify others] (collectively, the "Certificates").
[Initial Certificate
Principal Balance or
Notional Amount].... Class [ ]: [$] [ ].
Class [ ]: [$] [ ].
Final Distribution
Date................ Class [ ]. [ ], [ ]
Class [ ]. [ ], [ ]
Pass-Through Rates.. [The Variable Pass-Through Rates applicable to the
calculation of the interest distributable on any
Distribution Date on the Certificates [(other than the
Class [ ] Certificates)] are equal to [describe method for
determining variable rates]. The initial Variable
Pass-Through Rates for the Class [ ] Certificates [,] [and]
the Class [ ] Certificates [and specify others] are
approximately [ ]% [,] [and] [ ]% [and [ ]%] per annum,
respectively.] [The Pass-Through Rate applicable
to the calculation of the interest distributable on any
Distribution Date on the [specify classes] Certificates is
fixed at [ ]% [and [ ]%, respectively,] per annum.]
Original Issue Date [ ], [ ].
Cut-off Date ....... [ ], [ ].
Distribution Dates . [ ], commencing [ ], [ ].
Record Dates........ The [ ] day immediately preceding each
Distribution Date.
Denominations;
Specified .......... Currency.. The Class [ ] Certificates [,] [and] Class [ ]
Certificates [and specify others] will be denominated and
payable in [U.S. dollars] [ ] [(the "Specified Currency")
and will be available for purchase in minimum denominations
of [$] [ ] and [integral multiples thereof] [multiples of
[$] [ ] in excess thereof].
Interest Accrual
Periods............. [Monthly] [Quarterly] [Semi-annually] (or, in
the case of the first interest Accrual
Period, from and including the Original Issue
Date to but excluding the first Distribution Date.)
S-4
Form of Security.... Book-entry securities with DTC, except in
certain limited circumstances. See
"Description of Certificates-Definitive
Certificates". Distributions thereon will be
settled in [immediately available (same-day)]
[clearinghouse(next-day)] funds.
Owner Trustee ...... [ ]
Ratings............. [ ] by [ ] [and [ ] by
[ ]]. [Specify specific ratings
requirements for particular classes,
including the extent to which the issuance of
the Certificates of a given class is
conditioned upon satisfaction of the ratings
of each other class of Certificates.] See
"Ratings".
THE TERM ASSETS
Term sets ........ [SELECT ONE OF THE FOLLOWING BRACKETED
SELECTIONS] [Alternative 1: specify publicly issued 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] [Alternative 2:
specify publicly issued obligations of one or more foreign
private issuers] [Alternative 3: specify publicly issued
debt security or 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 governmental sponsored organization created
pursuant to a federal statute] [Alternative 4: specify
publicly issued debt security or pool of such debt
securities which represent obligations issued by or
guaranteed by a foreign government, political subdivision
or agency or instrumentality thereof].
[TERM ASSETS
Issuer ............. [Specify issuer or pool]
Term Assets Original
Issue Date.......... [ ], [ ].
Term Asset Scheduled
Final payment
Date ............... [ ], [ ].
[Amortization]
[Accumulation]...... [Describe amortization or accumulation
schedule, if any].
Denominations; Term
Assets Currency..... The Term Assets are denominated and payable
in [U.S. dollars] [ ] (the "Term
Assets Currency") and are available in
minimum denominations of [$][ ] and
[integral multiples thereof] [multiples of
[$][ ] in excess thereof].
Term Assets
Payment Dates....... [ ], commencing [ ], [ ].
Term Assets Rate.... [ % per annum.] [A [weighted average]
rate per annum equal to [specify interest
rate formula for debt security].]
Term Assets Interest
Accrual Periods .... [Monthly] [Quarterly] [Semi-annually].
Priority............ [Describe senior or subordinated status of
Term Assets].
S-5
Redemption/Put/
Other Features...... [Describe existence of any redemption, put or
other material features applicable to the Term Assets].
Form of Security ... [Book-entry securities with DTC.]
Term Asset Trustee.. [ _________________ ]. The Term Assets have
been issued pursuant to [an indenture] [a pooling and
servicing agreement] [a master pooling and servicing
agreement] [as supplemented by a series supplement] [a
trust agreement] dated as of [ ], [ _____ ] (the "Term
Assets Agreement"), among the Term Asset Trustee, [the Term
Assets Issuer], [Seller] and [Servicer].
Ratings............. [ ] by [ ] [and [ ] by [ ]]. See "Description of Term
Assets - Ratings of Term Assets".
OTHER DEPOSITED ASSETS
[Provide similar tabular summary description of the principal economic terms of
any credit support or other ancillary or incidental asset]
S-6
SUMMARY OF PROSPECTUS SUPPLEMENT
The following summary does not purport to be complete and is qualified in
its entirety by reference to the detained information appearing elsewhere herein
and in the Prospectus.
Depositor .......... Structured Products Corp., an indirect
wholly-owned subsidiary of Salomon Smith
Barney Holdings, Inc. and an affiliate of
[an] [the] Underwriter (the "Company"). See
"The Company" in the Prospectus.
Certificates........ The Certificates, each of which represents a fractional
undivided beneficial interest in the Trust, will be issued
pursuant to the Trust Agreement. The Certificates will
consists of [ ] classes, designated as Class [ ]
Certificates [and] [,] Class [ ] Certificates [and [specify
other classes]], [all] of which [all but the Class [ ]
Certificates] are being offered hereby (collectively, the
"Certificates").
The Certificate Principal Balance of a Certificate
outstanding at any time represents the maximum
amount that the holder thereof is entitled to
receive as distributions allocable to principal. The
Certificate Principal Balance of a
Certificate will decline to the extent distributions
allocable to principal are made to such holder. [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 are
calculated [and determining the relative voting fights 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.]
[The Class [ ] Certificates, which are not being offered
hereby, have in the aggregate an initial Certificate
Principal balance of [$] [ ________ ] (approximate) and a
[Variable] Pass-Through Rate [of [ ____ ]%]. The Class [ ]
Certificates represent the right to receive distributions
in respect of their Certificate Principal Balance and
interest thereon at their applicable Pass-Through Rate.]
Shortfalls in collections with respect to the Deposited
Assets will be allocated solely to the Class [ ]
Certificates to the extent provided herein and, thereafter,
will be allocated among the Certificates and the Class [ ]
Certificates, as provided herein. [The Class [ ]
Certificates will be transferred by the Company to an
affiliate on or about [ ], [ ____ ] (the "Closing Date"),
and may be sold at any time in accordance with any
restrictions in the Trust Agreement.]]
Risk Factors........ There are material risks associated with any
investment in the Certificates. See "Risk
Factors" herein and in the Prospectus.
The Term Assets .... Interest on the Term Assets accrues at the
Term Assets Rate for each Term Assets Accrual Period and is
payable on each Term Assets Payment Date. The entire
principal amount of the Term Assets will be payable on the
Term Assets Final Payment Date. [The Term Assets have a
remaining term to maturity of approximately [ ] years.] [As
of the Cut-off Date, the pool of Term Assets have a
weighted average interest rate of [ _____ ]% and a weighted
average remaining term to maturity of approximately [ ]
years.]
[Other Deposited
Assets and Credit
Support]............ [The Deposited Assets will also
include [direct obligations of the United States] [describe
any assets which are ancillary or incidental to the Term
Assets, including hedging contracts such as puts, calls,
interest rate swaps, currency swaps, floors, caps and
collars) (such assets, together with the Term Assets, the
"Deposited Assets"). See "Description of Deposited Assets".
S-7
The [Certificateholders] of the [specify particular
classes] will have the benefit of [describe credit support]
to support or ensure the [servicing and]
[timely [ultimate]] distribution of amounts due with
respect to the Deposited Assets[, including providing
certain coverage with respect to losses thereon.]]
Distributions....... Holders of the Certificates will be entitled to receive on
each Distribution Date, to the extent of available
funds on such Distribution Date, after payment of the
expenses of the Trust, and its respective agents, (i)
distributions payable in respect of or allocable to
interest at the applicable Pass-Through Rate on the
applicable Certificate Principal Balance,
(ii) distributions payable in respect of or allocable to
principal and (iii) [in the case of [ _________ ],]
distributions allocable to premium (if any) in an amount
equal to all payments to premium (if any) received on the
Term Assets for the applicable Collection Period.
Distributions will be made on the Certificates only if, and
to the extent that, payments are made with respect to the
Deposited Assets or are otherwise covered by any Credit
Support. [The holders of the Class [ ] Certificates will 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 Certificates
-Distributions".
Special Distribution
Dates...............If a payment with respect to the Term Assets is made
after the Term Assets Payment Date on which such payment was
due, then such amount shall be distributed on the next
occurring Business Day (a "Special Distribution Date") as if
such funds had been available on the Distribution Date
immediately preceding such Special Distribution Date;
provided, however, that the Record Date for such Special
Distribution Date shall be [ ] Business Days prior to the
day on which the related payment was received from the Term
Assets Trustee.
Subordination....... As to the extent described herein, the rights of the
holders of the Class [ ] Certificates [and specify other
classes] to receive distributions of principal, premium (if
any), and interest with respect to the Deposited Assets
will be subordinated to the rights of the holders of the
Class [ ] Certificates with respect to losses attributable
to principal, premium (if any) and interest realized on a
Deposited Asset (such losses, "Realized Losses"). See
"Description of Certificates - Allocation of Losses;
Subordination".
Optional Termination At its option, the [Company] may
purchase all the Deposited Assets in the Trust, and thereby
cause the termination of the Trust and early retirement of
the Certificates, on any Distribution Date on which the
aggregate principal amount of the Deposited Assets
remaining in the Trust not more than [specify percentage no
greater than 10%] of the aggregate principal amount of the
Deposited Assets as of the Cut-off Date [Specify any other
purchase or repurchase option of the Company or any Holder
of Certificates.] See "Description of Trust Agreement -
Termination" herein.
Termination of the
Trust............... The Trust Agreement will terminate upon the final
distribution of Certificateholders of all amounts due in
respect of the Deposited Assets. [Describe any further
termination events].
Federal Income Tax
Consequences........ Orrick, Herrington & Sutcliffe LLP, Special Tax Counsel,
has delivered an opinion that the Trust will be a grantor
trust or a partnership for federal income tax purposes and
not an association taxable as a corporation (or publicly
traded partnership treated as a corporation). Although such
treatment is not certain, the Trustee intends for tax
reporting purposes to treat the Trust as a grantor trust
and the balance of this discussion assumes that the Trust
will be so classified.
S-8
For a discussion of the consequences of
recharacterization of the Trust as a partnership forfederal
income tax purposes, see "- Possible Recharacterization of
the Trust as a Partnership" in "Federal Income Tax
Consequences" in the Prospectus.
In general, each Certificate will be treated as a synthetic
debt instrument issued on the date it is acquired by the
holder thereof. Each Certificateholder will be subject to
the original issue discount ("OID") rules of the Code and
Treasury Regulations with respect to such Certificates.
See "Federal Income Tax Consequences" herein and in the
Prospectus.
Ratings.............It is a condition to the issuance of the Certificates
that the certificates have the ratings specified above under
"Summary of Principal Economic Terms - The Certificates -
Ratings". A security rating is not a recommendation to buy,
sell or hold securities and may be subject to revision or
withdrawal at anytime 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 Deposited Assets, the corresponding effect
on yield to investors [or whether investors in the Class [ ]
Certificates may fail to recover fully their initial
investment]. See "Ratings".
[Listing or Quotation
of Securities]...... The Company has filed an application to list
[specify listed Certificates] on the [specify
exchange] or expects [specify Certificates]
to be quoted on [specify automated quotation
system].]
ERISA Considerations [modify, as appropriate] The Class [
] Certificates [and specify others] may be eligible for
purchase by Plans (as defined herein). The Class [ ]
Certificates are not expected to be eligible for purchase
by Plans. See "ERISA Considerations".
S-9
RISK FACTORS
In connection with any investment in the any of the Certificates,
prospective investors should consider, among other things, the material risk
factors described below and any additional risk factors set forth in the
Prospectus.
LIMITED ASSETS; TRUST'S RELATIONSHIP TO THE COMPANY
Term Assets and Deposited Assets Are the Only Assets Available to Make
Payments on the Certificates. The Trust has no significant assets other than the
Term Assets and other Deposited Assets. If the Term Assets and such other
Deposited Assets are insufficient to make payments or distributions with respect
to the Certificates, no other assets will be available for payment of the
deficiency. The Company is not obligated to make any payments in respect of the
Certificates or the Term Assets. Accordingly, prospective investors should avail
themselves of the same information concerning each Term Assets Issuer and each
Term Asset as they would if they were purchasing the Term Assets directly. See
"Description of Term Assets - Available Information".
MATURITY AND YIELD CONSIDERATIONS; REINVESTMENT RISK
Repayment May Occur Earlier Than Expected Creating Reinvestment Risk. The
rate of payment of principal of the Certificates, the aggregate amount of each
distribution on, and the yield to maturity of, the Certificates will depend on
the rate of payment of principal of the Term Assets. [Describe particular risks
of particular Classes, if applicable.] The Term Assets are generally subject to
[redemption] [prepayment] [early amortization] upon the occurrence of any of the
[redemption] [prepayment] [amortization] events applicable to such Term Assets
as described herein and in the prospectus used in connection with the offering
of such Term Assets (the "Term Assets Prospectus"). The rate of payment of
principal of the Certificates may also be affected by the repurchase by a Term
Assets Issuer of the Term Assets issued by such Term Assets Issuer at a purchase
price equal to a percentage of the principal balance thereof plus accrued and
unpaid interest, which right is exercisable only after the aggregate principal
balance of the Term Assets is less than a specified percentage of their original
principal balance. In such event the repurchase price paid by the Term Assets
Issuer would be passed through to the Certificateholders.
In the event that the Term Assets are redeemed or prepaid or if the Term
Assets are sold and the proceeds thereof distributed prior to maturity as a
result of a default, an investor's investment in the Certificates and the Term
Assets will have a shorter average maturity than if such redemption, prepayment
or other distribution had not occurred. Prevailing interest rates at the time of
such early redemption, prepayment or distribution may be lower than the yield on
the Certificates. Therefore, an investor in the Certificates may be unable to
realize a comparable yield upon reinvestment of the funds from such redemption,
prepayment or distribution.
NO ASSURANCE OF LIQUIDITY
The Certificates May Not Be A Liquid Investment. There is no assurance that
any secondary market will develop or be maintained for any class of
Certificates. While the Underwriter intends to maintain a secondary market for
Certificates, it is not obligated to do so and any such market-making activity
may be discontinued at any time without notice. There can be no assurance that a
secondary market in the Certificates will develop or, if it does develop, that
it will remain in existence for any period of time. The absence of a secondary
market would adversely affect the liquidity of the Certificates.
[CERTIFICATES NOT LISTED ON EXCHANGE OR QUOTATION SYSTEM]
Sales of Certificates Cannot Be Made on an Exchange. [The Certificates are
not required or expected to be listed on any securities exchange or quoted on
any automated quotation system of a registered securities association. The
absence of such listing or quotation may adversely affect the liquidity of the
Certificates.]
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NO MANAGEMENT OF TERM ASSETS
The Term Assets Will Not Be Managed to Avoid Adverse Events. Except as
described herein, the Trust will not dispose of any Term Assets, regardless of
adverse events (financial or otherwise) which may affect the value of the Term
Asset or the Term Assets Issuer. If there is a payment default on any Term Asset
or any other default which may result in the acceleration of the Term Asset, the
Trust will only dispose of or otherwise deal with the defaulted Term Asset in
the manner provided in the Trust Agreement. [If a payment default on or
acceleration of the Term Assets occurs, the Trust Agreement will provide that
the Trust will sell or distribute the Term Assets notwithstanding market
conditions at the time and the Trustee will have no discretion to do otherwise.
Such sale or distribution may result in greater losses than might occur if the
Trust continued to hold the Term Assets.]
[CREDIT RISK OF SINGLE OBLIGOR]
The Certificates Represent Credit Risk to a Single Obligor. [The
Certificates represent interests in obligations of a single obligor. In
particular, the Certificates will be subject to all the risks associated with a
direct investment in [unsecured] obligations of the Term Assets Issuer.]
[TERM ASSETS ARE UNSECURED]
Payments to the Term Assets Are Unsecured. [In a liquidation, holders of
the Term Assets will be paid only after holders of secured obligations of the
Term Assets Issuer[s]. According to the Term Assets Prospectus[es] the Term
Assets are general unsecured obligations of the Term Assets Issuer[s], which
rank on a parity with all other unsecured and unsubordinated indebtedness of the
Term Assets Issuer, but which are effectively subordinated to the Term Assets
Issuer's existing and future senior secured indebtedness to the extent of
collateral therefor.]
[LIMITED REMEDIES AGAINST FOREIGN PRIVATE ISSUERS; REPORTING
PRACTICES MAY VARY]
Holders of the Term Assets May Have Limited Remedies Against Foreign
Issuers; Reporting Practices of Foreign Issuers May Vary from Reporting by
Domestic Issuers. [The Term Assets will be obligations of companies incorporated
or organized under the laws of a foreign country (each a "Foreign Issuer"). Some
or all of the officers, directors and controlling persons of such Foreign
Issuers may be residents of a foreign country, some or all of the experts named
in their related registration statements may be residents of a foreign country
and all or a substantial portion of the assets of the Foreign Issuers and such
persons may be located outside the United States. Consequently, it may be
difficult for the applicable Trust, as a holder of the Term Assets, to effect
service within the United States upon a Foreign Issuer's directors, controlling
persons, officers and experts who are not residents of the United States or to
obtain or realize upon judgments in the United States against such foreign
obligor predicated upon civil liability under the United States federal
securities laws. While a Foreign Issuer may make certain information available
by filing periodic reports and other information with the Commission, such
information (including financial information) may differ in timing, form and
substance from that normally available with respect to domestic issuers.]
[LIMITED REMEDIES AGAINST FOREIGN GOVERNMENT ISSUERS; SOVEREIGN
RISK; REPORTING PRACTICES]
Holders of the Term Assets May Have Limited Remedies Against Foreign
Issuers; Reporting Practices of Foreign Issuers May Vary from Reporting by
Domestic Issuers. [The Term Assets will include obligations of, or guaranteed
by, foreign governments, foreign political subdivisions, or agencies and
instrumentalities thereof (each such issuer and guarantor, if any, sometimes
referred to herein as a "Foreign Government Issuer" and a "Foreign Government
Guarantor", respectively; and collectively referred to as "Foreign
Governments"). Consequently, it may be difficult for the applicable Trust as a
holder of the Term Assets to obtain or realize upon judgments in the United
States against such obligor. In the absence of a waiver or immunity by a Foreign
Government, it would not be possible to obtain a United States judgment against
such Foreign Government unless a court were to determine that such issuer is not
entitled under the Sovereign Immunities Act of 1976 (the "Immunities Act") to
sovereign immunity with respect to such action. Even if such an issuer is
amenable to suit in the United States, the enforceability of any judgment
obtained may be limited by a lack of substantial assets which can be levied upon
in the United States or the inability to obtain recognition and enforcement of
the judgment in the issuer's country.
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Because the Term Assets represent director indirect obligations of foreign
governments, Certificateholders should consider the political, economic and
other risks attendant to holding the obligations of a foreign government which
are not typically associated with an investment in securities of a domestic
issuer. Such risks include future political and economic developments,
governmental repudiation, moratorium on payment or rescheduling of external
debts, confiscatory taxation, imposition of any withholding tax, exchange rate
fluctuations, political or social instability or diplomatic developments and the
imposition of additional governmental laws or restrictions. While a Foreign
Government Issuer may make certain information available by filing periodic
reports and other information with the Commission, such information (including
financial information) may differ in timing, form and substance from that
normally available with respect to domestic issuers.]
NO INVESTIGATION OF TERM ASSETS OR TERM ASSETS ISSUERS
No Investigation of the Term Assets or the Term Assets Issuers Has Been
Made by the Company, Underwriter or Trustee. None of the Company, the
Underwriter or the Trustee has made, or will make, any investigation of the
business condition, financial or otherwise, of the Term Assets Issuers, or
verify any reports or information filed by the Term Assets Issuers with the
Commission or otherwise made available to the public. It is strongly recommended
that prospective investors in the Certificates consider publicly available
financial and other information regarding the Term Assets Issuers. See
"Description of Term Assets - Available Information". The issuance of the
Certificates should not be construed as an endorsement by the Company, the
Underwriter or the Trustee of the financial condition or business prospects of
any of the Term Assets Issuers.
[Describe any other risk factors and special considerations applicable to
the specific Term Assets, other Deposited Assets and the particular structure of
the Certificates being offered, including factors relating to the yield of the
Certificates and risks associated with the Deposited Assets and the terms
thereof.]
FORMATION OF THE TRUST
The Trust will be formed pursuant to the Trust Agreement between the
Company and the Owner Trustee. Concurrently with the execution and delivery of
the Trust Agreement, the Company will deposit the Term Assets (or proceeds of
the offering sufficient to purchase the Term Assets) in the Trust. The Owner
Trustee, on behalf of the Trust, will accept (or purchase) such Term Assets and
will deliver the Certificates to or upon the order of the Company.
The Term Assets will be purchased by the Company in the secondary market
(either directly or through an affiliate of the Company). The Term Asset will
not be acquired from the Term Assets Issuer as part of any distribution by or
pursuant to any agreement with the Term Assets Issuer. The Term Assets Issuer is
not participating in this offering and will not receive any of the proceeds of
the sale of the Term Assets to the Company or the issuance of the Certificates.
DESCRIPTION OF DEPOSITED ASSETS
This Prospectus Supplement sets forth material terms with respect to the
Deposited Assets, including the Term Assets and Term Assets Agreements, but does
not provide detailed information with respect thereto. This Prospectus
Supplement relates only to the Certificates offered hereby and is not an
offering document for the Term Assets. All disclosure contained herein with
respect to the Term Assets is derived from publicly available documents.
[Describe publicly available documents] See "Description of Term Assets -
Available Information". [The] [Each] [describe portion that is subject] Term
Assets Issuer is subject to the information reporting requirements of the
Securities Exchange Act of 1934 (the "Exchange Act"). Accordingly, each such
Term Assets Issuer is obligated to file reports and other information with the
Securities and Exchange Commission (the "Commission"). Although the Company has
no reason to believe the information concerning the Term Assets, the Term Assets
Agreements or [the] [each] Term Assets Issuer set forth in any Term Assets
Prospectus or any report filed under the Exchange Act is not reliable, neither
the Company nor any of the Underwriters has participated in the preparation of
such documents, or made any due diligence inquiry with respect to the
information provided therein. Neither the Company nor [any of] the
Underwriter[s] has verified the accuracy or completeness of such documents
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or reports. Information contained in such documents and reports is as of the
date(s) stated therein, and comparable information, if given as of the date
hereof, may be different. There can be no assurance that events affecting the
Term Assets, the Term Assets Agreements or any Term Assets Issuer have not
occurred, which have not yet been publicly disclosed, which would affect the
accuracy or completeness of the publicly available documents described above.
[SELECT ONE OF THE FOLLOWING BRACKETED SELECTIONS] The Deposited Assets
will consist primarily of the Term Assets, which are [Alternative 1: specify
publicly issued 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)] [Alternative 2: specify publicly issued obligations of one or
more foreign private issuers] [Alternative 3: specify publicly issued debt
security or 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
governmental sponsored organization created pursuant to a federal statute]
[Alternative 4: specify publicly issued debt security or pool of such debt
securities which represent obligations issued by or guaranteed by a foreign
government, political subdivision or agency or instrumentality thereof].
DESCRIPTION OF TERM ASSETS
[USE THE FOLLOWING (I) WHERE THE TERM ASSETS CONSIST OF A SINGLE PUBLIC SECURITY
AND (II) FOR EACH TERM ASSET WHICH COMPRISES MORE THAN TEN PERCENT (10%) OF A
POOL OF SECURITIES]
[The table below sets forth certain of the characteristics of the Term
Assets. The table does not purport to be complete and is subject to, and
qualified in its entirety by reference to, the relevant Term Assets
Prospectuses.
Terms of Term Assets
Term Assets Issuer:
Term Assets: _______, due _______
Dated:
Original Principal Maturity Date:
Original Par Value Amount Issued:
CUSIP Number:
Stated Interest Rate:
Interest Payment Dates:
Mode of Payment of Term Assets:
Par Value Amount of Term Assets
Deposited Under Trust Agreement:]
AVAILABLE INFORMATION
[The] [Each] [specify which] Term Assets Issuer is subject to the
information requirements of the Exchange Act and in accordance therewith files
reports and other information with the Commission. Such reports, proxy and
information statements and other information filed by the Term Assets Issuers
with the Commission can be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's regional offices at 500 West Madison Street,
14th Floor, Chicago, Illinois 60661 and 75 Park Place, New York, New York 10007.
Copies of such material can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The Commission maintains a Web site at http://www.sec.gov containing
reports, proxy statements and other information regarding registrants that file
electronically with the Commission. [In addition, certain
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material described above and other information will also be available for
inspection at the offices of the New York Stock Exchange at 20 Broad Street, New
York, New York.]]
[INSERT BRACKETED LANGUAGE IF APPLICABLE]
[Federal National Mortgage Association. The Federal National Mortgage
Association ("Fannie Mae") is a federally chartered and stockholder-owned
corporation organized and existing under the Federal National Mortgage
Association Charter Act, 12 U.S.C. ss. 1716 et seq. It is the largest investor
in home mortgage loans in the United States. Fannie Mae originally was
established in 1938, as a United States government agency to provide
supplemental liquidity to the mortgage market and was transformed into a
stockholder-owned and privately managed corporation by legislation enacted in
1968. Fannie Mae provides funds to the mortgage market by
purchasing mortgage loans from lenders, thereby replenishing their funds
for additional lending. Fannie Mae acquires funds to purchase loans from many
capital market investors that ordinarily may not invest in mortgage loans,
thereby expanding the total amount of funds available for housing. Operating
nationwide, Fannie Mae helps to redistribute mortgage funds from capital-surplus
to capital-short areas. Fannie Mae also issues mortgaged-backed securities
("MBS"). Fannie Mae receives guaranty fees for its guaranty of timely payment of
principal of and interest on MBS. Fannie Mae issues MBS primarily in exchange
for pools of mortgage loans from lenders. The issuance of MBS enables Fannie Mae
to further its statutory purpose of increasing the liquidity of residential
mortgage loans.
Fannie Mae prepares an Information Statement annually which describes
Fannie Mae, its business and operations and contains Fannie Mae's audited
financial statements. From time to time Fannie Mae prepares supplements to its
Information Statement which include certain unaudited financial data and other
information concerning the business and operations of Fannie Mae. These
documents can be obtained without charge from Paul Paquin, Senior Vice President
- -- Investor Relations, Fannie Mae, 3900 Wisconsin Avenue, N.W., Washington, D.C.
20016 (telephone: (202) 752-7115). Obligations issued by Fannie Mae are not
subject to the registration requirements of the Securities Act and Fannie Mae is
not subject to the periodic reporting requirements of the Exchange Act.]
[Federal Home Loan Mortgage Corporation. The Federal Home Loan Mortgage
Corporation ("Freddie Mac") is a publicly held government-sponsored enterprise
created on July 24, 1970 pursuant to the Federal Home Loan Mortgage Corporation
Act, Title III of the Emergency Home Finance Act of 1970, as amended (the "FHLMC
Act"). Freddie Mac's statutory mission is to provide stability in the secondary
market for home mortgages, to respond appropriately to the private capital
market and to provide ongoing assistance to the secondary market for home
mortgages (including mortgages secured by housing for low-and moderate-income
families involving a reasonable economic return to Freddie Mac) by increasing
the liquidity of mortgage investments and improving the distribution of
investment capital available for home mortgage financing. The principal activity
of Freddie Mac consists of the purchase of first lien, conventional, residential
mortgages and participation interests in such mortgages from mortgage lending
institutions and the resale of the mortgages so purchased in the form of
guaranteed mortgage securities. Freddie Mac generally matches and finances its
purchases or mortgages with sales of guaranteed securities which are exempt from
the registration requirements of the Securities Act. 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, calling or emailing
Freddie Mac's Investor Inquiry Department at 8200 Jones Branch Drive, McLean,
Virginia 22102 (telephone (800) 336-3672; e-mail:
Investor_Inquiry@freddiemac.com). Freddie Mac is not subject to the periodic
reporting requirements of the Exchange Act.]
[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
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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.
Pursuant to the Student Loan Marketing Association Reorganization Act of
1996 (the "Privatization Act"), the existing Sallie Mae, which is a GSE, became
a subsidiary of SLM Holding Corporation, a Delaware corporation. SLM Holding
Corporation is not a GSE. The Privatization Act provides that Sallie Mae may
continue to issue debt obligations maturing on or before September 30, 2008 and
further provides that the legal status of Sallie Mae's debt obligations will be
fully preserved until their respective maturities. Such debt obligations will
remain GSE obligations. Pursuant to the Privatization Act, Sallie Mae will wind
down its operations and dissolve on or before September 30, 2008, with any
outstanding Sallie Mae obligations being defeased on such date with United
States government or agency obligations.
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 Investor
Relations Department of Sallie Mae at 11600 Sallie Mae Drive, Reston, Virginia
20193, telephone (703) 810-7600. Sallie Mae is not subject to the periodic
reporting requirements of the Exchange Act.]
[Resolution Funding Corporation. The Resolution Funding Corporation
("REFCORP") 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 REFCORP was to provide financing for the
Resolution Trust Corporation (the "RTC"), which was established by the FIRRE Act
to manage and resolve cases involving failed savings and loan institutions and
terminated in 1996. REFCORP 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 REFCORP are under the management of a three-member
Directorate comprised of the Director of the Office of Finance of the FHLBs and
two members selected by the Oversight Board from among the presidents of twelve
FHLBs. The FIRRE Act limits the aggregate principal amount of interest bearing
obligations which may be issued by REFCORP to $30 billion, which amount of
obligations was issued in 1989. Pursuant to the FIRRE Act, the net proceeds of
these obligations may be used to purchase nonvoting capital certificates issued
by the RTC or to retire previously issued REFCORP obligations. REFCORP is to be
dissolved, as soon as practicable, after the maturity and full payment of all
obligations issued by it.
REFCORP obligations are not obligations of, or guaranteed as to principal
by, the Federal Home Loan Bank System, the Federal Home Loan Banks, the RTC or
the United States of America. However, the principal of REFCORP obligations is
fully payable from non-interest bearing obligations of the United States of
America issued by the Secretary of the Treasury and deposited in a separate
account at the Federal Reserve Bank of New York. Interest on REFCORP obligations
is payable from earnings on assets of REFCORP, the net proceeds of
receiverships, Federal Home Loan Bank contributions (to a maximum of $300
million annually) and the net proceeds of the sale of assets of the FSLIC
Resolution Fund. To the extent not paid from these sources, any interest on
REFCORP obligations is payable by the Secretary of the Treasury pursuant to an
existing appropriation. Obligations issued by REFCORP are exempt from
registration under the Securities Act.
Information concerning REFCORP may be obtained from the Resolution Funding
Corporation, Suite 850, 655 Fifteenth Street, N.W., Washington, D.C. 20005.
REFCORP is not subject to the periodic reporting requirements of the Exchange
Act.]
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[Federal Home Loan Banks. The Federal Home Loan Banks constitute a system
of twelve federally chartered corporations (collectively, the "FHLBs"). The
mission of each FHLB 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 FHLBs 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 FHLBs. The
FHLBs 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 FHLBs 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 FHLBs.
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, (202) 406-2901. 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 (the "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 securities are "exempted securities" within the meaning of
the Exchange Act. 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,
or by calling (423) 632-3366.]
[Federal Farm Credit Banks. The Farm Credit System is a nationwide system
of lending institutions and affiliated service and other entities (the
"System"). Through its Banks ("FCBs") and related associations, the 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 (the "Farm Credit Act"), and are subject to regulation by a Federal
agency, the Farm Credit Administration (the "FCA"). The FCBs 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 System institutions are
restricted solely to making loans to qualified borrowers in the agricultural
sector and to certain related businesses. Moreover, the 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 System maintains lending units in all
50 states and the Commonwealth of Puerto Rico.
The 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 FCBs are jointly and severally liable on all
Systemwide Debt Securities. Systemwide Debt Securities are issued by the FCBs
through the Federal Farm Credit Banks Funding Corporation, as agent for the FCBs
(the "Funding Corporation"). Each FCB 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
Funding Corporation as to conditions of participation and terms of each
issuance, and to FCA approval.
Important information regarding the FCBs and the Farm Credit System,
including combined financial information, is contained in disclosure information
made available by the Funding Corporation. This information consists of the most
recent Farm Credit System Annual Information Statement and any Quarterly
Information Statements issued subsequent thereto (collectively, "Information
Statements") and certain press releases issued from time to time by the 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
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Corporation, Investment Banking Services Department, 10 Exchange Place, Suite
1401, Jersey City, New Jersey 07302; Telephone: (201) 200-8000. Upon request,
the Funding Corporation will furnish, without charge, copies of the above
information. Additional information regarding the FCBs can be obtained on the
Internet at www://farmcredit-ffcb.com.]
[Government Trust Certificates. Government Trust Certificates ("GTCs")
consist of 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 (the "DSAA"), 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 or agencies
thereof, sufficient to pay the remaining 10% of all payments of principal and
interest due on the GTC Notes. Many issuances of GTCs were undertaken pursuant
to Title III of the Foreign Operations, Export Financing and Related Programs
Appropriations Acts (the "Appropriations Acts"), which permit borrowers to
prepay certain eligible high-interest loans made by the Federal Financing Bank
(the "FFB") under the Foreign Military Sales ("FMS") Credit Program. The
Appropriations Acts permit prepayment of the FMS loans with the proceeds of new
loans and authorize the issuance of a United States government guaranty covering
no more and no less than ninety percent (90%) of the payments due on each such
new loan, in accordance with the requirements of the Arms Export Control Act, as
amended (the "AECA"). It is a condition to the issuance of Certificates under
such program that the DSAA approve the refinancing of any such FMS loan.
Although 90% of all payments of principal and interest on the GTC Notes are
guaranteed by the United States government or agencies thereof, and 10% of such
payments are secured by securities of the United States government or agencies
thereof, the GTCs themselves are not so guaranteed. In the event of a default on
the GTC Notes, the Trustee of the Trust would be required by the operative
documents to make a claim against the United States government or an agency
thereof or would be required to liquidate the collateral securing the GTC Notes.
If the borrower under the GTC Notes fails to deposit with the related
trustee all amounts due on the GTC Notes on any GTC Note payment date (each, a
"GTC Note Payment Date"), the trustee will first notify the borrower and, one
business day thereafter, will send a notice to the Director of the DSAA and to
the related depositary setting forth the amounts due on the GTC Notes on such
GTC Note Payment Date and the amounts, if any, received from the borrower. On
the [11th calendar day] following the GTC Note Payment Date, if any amounts due
on a GTC Note remain unpaid, the trustee will demand payment from DSAA on the
applicable guaranty in accordance with its terms. On the day the trustee
receives such payment, it will instruct the depositary immediately to deliver
sufficient funds to pay the amounts remaining unpaid on the GTC Note.
On the occurrence of an event of default (as defined in the related loan
agreement), the trustee in its discretion may proceed to protect and enforce the
rights of the GTC holders under the declaration of trust by a suit, action or
other proceeding. As provided in the loan agreement, the guaranty and the
depositary agreement, the trustee has the legal power to exercise all the
rights, powers and privileges of a holder of the GTC Note.
The trustee is required to take all necessary action, as permitted by the
declaration of trust and applicable law (i) to enforce payments due from DSAA
under the guaranty and (ii) to take possession of collateral maturing or paying
interest on or prior to the GTC Note Payment Date on which default occurred, and
to apply such funds in accordance with the declaration of trust for the benefit
of holders of GTCs. The trustee is required to notify the borrower upon taking
the foregoing actions. Neither the Trust holding a GTC Note nor DSAA has the
right to accelerate payment of the GTC Note, notwithstanding any failure of the
borrower to make payment on the GTC Note or other event of default with respect
to the GTC Note. [The applicable Prospectus Supplement will specify, to the
extent GTCs are included as Term Assets, the waiting period that must elapse
before reimbursement for a default on the GTC Notes, and the delay between
payment on the GTC Notes and payment on the GTCs that is built into the GTCs to
protect against a delay in reimbursement. In addition, the related Prospectus
Supplement will specify, to the extent applicable: (i) the aggregate principal
amount of such GTCs; (ii) the coupon, if any, borne by such GTCs; (iii) the
stated maturity of each GTC; (iv) the identity of each underlying obligor; and
(v) the conditions under which, and the terms on which, any underlying
obligation may be prepaid or redeemed prior to the stated maturity of the
obligation.]]
S-17
[AID-Guaranteed Securities. Obligations guaranteed by the United States
Agency for International Development ("AID-Guaranteed Securities") consist of
notes, bonds, credit facilities and other debt instruments issued by the United
States Agency for International Development ("AID") which are issued or arranged
by intermediary financial institutions ("IFIs") and guaranteed in whole or in
part by AID.
Most AID guarantees are established under the auspices of the Private
Sector Investment Program (the "Investment Program"), created in 1983 under
Section 108 of the Foreign Assistance Act of 1961 and administered by AID. The
Investment Program seeks to promote sustainable economic development by
strengthening the private sector in developing countries, primarily through the
facilitation of small business financing needs. In 1988 Congress provided the
Investment Program with loan guarantee authority, and guarantees have become the
Investment Program's principal financing instrument. AID guarantees are backed
by the full faith and credit of the United States government.
The Housing Guaranty Program (the "Housing Program") is administered by
the AID Office of Housing and Urban Programs. The Housing Program facilitates
collaboration between AID and host-country housing institution borrowers in both
the public and private sectors. Under the Housing Program AID participates in
the planning, structuring and execution of a housing or shelter finance program.
Through the conclusion of "implementation agreements")the Housing Program aids
developing countries in securing favorable terms in U.S. capital markets for a
U.S.government-guaranteed loan.
Pursuant to the fiscal agency agreement, if the borrower does not deposit
with the fiscal agent at or before 12:00 noon, New York City time, on any date
on which a payment of principal, interest or maturity amount on the
AID-Guaranteed Securities is due (each, an "AID-Guaranteed Security Payment
Date"), immediately available funds in an amount sufficient to pay in full any
interest and principal, and any maturity amount, due on such AID-Guaranteed
Security Payment Date with respect to the AID-Guaranteed Securities, the fiscal
agent, acting on behalf of the holders of the AID-Guaranteed Securities, is
obligated to make a demand upon AID, not later than 2:00 p.m., New York City
time, on such AID-Guaranteed Security Payment Date for payment pursuant to the
guarantees.
Pursuant to the guarantees, AID is required, not later than three (3)
business days following receipt of such demand, to pay to the demanding
AID-Guaranteed Securityholders the applicable guaranteed amount. Upon receipt by
the fiscal agent of payments from AID pursuant to the guarantees, the fiscal
agent will be required, if such payments are received at or prior to 12:00 noon,
New York City time, on any business day, to remit such payments to the
registered holders of the AID-Guaranteed Securities entitled thereto on such
business day and, if such payments are received after such time, to remit such
payments to such registered holders on the next such business day.
Each AID-Guaranteed Securityholder is deemed by the acceptance of a
AID-Guaranteed Security to have irrevocably appointed the fiscal agent as its
agent for the purpose of making a demand for payment upon AID pursuant to the
guarantees and receiving any payment to an AID-Guaranteed Securityholder by AID
pursuant to the guarantees. The Regulations also provide that any AID-Guaranteed
Securityholder may make demand for payment on AID under a guarantee on its own
behalf immediately upon the failure of the borrower to make any payment when due
under the applicable AID-Guaranteed Security. All payments made by AID to the
fiscal agent pursuant to the guarantees will be held in trust by the fiscal
agent solely for the benefit of the registered holders of the AID-Guaranteed
Securities until remitted to such holders. AID will be discharged from its
obligations to make a payment pursuant to the guarantees upon the making of such
payment to the fiscal agent on behalf of the AID-Guaranteed Securityholders,
provided that such discharge will be effective only as to such payment and to
the extent of the amount of such payment.
As provided by the terms of each AID-Guaranteed Security, an event of
default will be deemed to have occurred if the borrower fails to make any
payment on such AID-Guaranteed Security on the applicable Payment Date. On the
occurrence of an event of default, the trustee of such AID-Guaranteed Security
or the Trustee may make demand on AID under the guarantees. However, none of the
fiscal agent, the Trustee or AID may accelerate payment of any AID-Guaranteed
Security, notwithstanding any failure of the borrower to make payment on the
AID-Guaranteed Securities.
[USE THE FOLLOWING WHERE THE TERM ASSETS CONSIST OF A POOL OF
PUBLIC SECURITIES]
S-18
[The Deposited Assets will consist primarily of the Term Assets, which are
a pool of [Alternative 1: specify debt securities issued by one or more
corporations, banking organizations or insurance companies] [Alternative 2:
specify obligations of one or more foreign private issuers] [Alternative 3:
specify 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 governmental
sponsored organization created pursuant to a federal statute] [Alternative 4:
specify debt securities which represent obligations issued by or guaranteed by a
foreign government, political subdivision or agency or instrumentality thereof].
The Term Assets will be purchased by the Depositor in the secondary market
(either directly or through an affiliate of the Depositor) and will be deposited
into the Trust. The Term Assets will not be acquired either from the respective
obligors on the Term Assets or pursuant to any distribution by or agreement with
such obligors.
The composition of the Term Assets pool and the distribution by ratings,
remaining term to maturity and interest rate of the Term Assets as of [ _______
], [ ____ ] (the "Cut-off Date"), as derived from the relevant Term Assets
Prospectuses, is as set forth below:
Composition of the Term Assets Pool
as of the Cut-off Date
Number of Term Assets:
Aggregate Principal Balance: [$]
Average Principal Balance: [$]
Largest Balance: [$]
Weighted Average Interest Rate: [%]
Weighted Average Original Term
to Maturity: years
Weighted Average Remaining Term
to Maturity: years
Longest Remaining Term
to Maturity: years
Distribution by Rating
of the Term Assets Pool as of the Cut-off Date
Rating Aggregate Percentage of
Principal Aggregate
Number Balance Principal
Balance
Total ============ ============ ===============
Distribution by Remaining Term to Maturity
of the Term Assets Pool as of the Cut-off Date
Remaining Term Aggregate Percentage of
to Maturity Principal Aggregate
Number Balance Principal
Balance
============ ============ ===============
Total
Distribution by Interest Rate of the
Term Assets Pool as of the Cut-off Date
Interest Rate Aggregate Percentage of
Range Principal Aggregate
Number Balance Principal
Balance
============ ============ ===============
Total
S-19
[USE THE FOLLOWING WHERE THE TERM ASSETS CONSIST OF A POOL OF
ASSET BACKED SECURITIES OF MULTIPLE ISSUERS]
[The Deposited Assets will consist primarily of the Term Assets, which are
a pool of publicly issued asset backed securities. [Describe applicable type(s)
of asset backed securities]. The Term Assets will be purchased by the Company or
the Trust in the secondary market (either directly or through an affiliate of
the Company)and will
be deposited into the Trust. The Term Assets will not be acquired either
from the respective issuers of the Term Assets or pursuant to any distribution
by or agreement with such issuers. The composition of the Term Assets pool as of
[ ______ ], [ ____ ] (the "Cut-off Date"), as derived from the relevant Term
Assets Prospectuses, is as set forth below:
Terms of Term Assets
Issuer .............
Servicer............
Trustee ............
Designation.........
Percentage of total Term Assets Pool
Investor Amount.....
Series Termination Date (1)
Certificate Rate....
Monthly payment Date (2)
Commencement of Controlled
Amortization/Accumulation Period (3)
Minimum Seller's Percentage
Cash Collateral Guaranty (4) Amount
Percentage of Subordinated
Class ___ Certificates
Optional Repurchase Percentage
Ratings (5).........
- -------------
(1) Includes defined terms: Series Termination Date and Stated
Series Termination Date.
(2) Includes defined terms: Payment Date and Distribution Date.
(3) Includes defined terms: Controlled Amortization Period,
Controlled Accumulation Period and Controlled Liquidation
Period.
(4) A "Cash Collateral Guaranty" generally provides, that in the event that a
deficiency exists with respect to a payment of interest and/or principal,
an amount equal to such deficiency may be withdrawn from the case
collateral account and applied to such deficiency up to the amount
provided in the Term Assets Agreement.
(5) As of [ ________ ], [ ____ ].
-------------
As of the Cut-off Date, [all of] [approximately [ ]% of] such Term Assets
were rated [investment grade] [specify particular rating] by at least one
nationally recognized rating agency, and no obligor of any Term Asset was in
default in the payment of any installments of principal, interest or premium (if
any) with respect thereto. Any such rating of any of the Term Assets is not a
recommendation to purchase, hold or sell such Term Asset or the Certificates,
and there can be no assurance that a rating will remain for any given period of
time or that a rating will not be lowered or withdrawn entirely by a rating
agency if in its judgment circumstances in the future so warrant.
S-20
See "Ratings" herein and "Risk Factors--Limited Nature of Rating; Reduction or
Withdrawal of Rating" in the accompanying Prospectus regarding certain
considerations applicable to the ratings of the Certificates.]
[The Term Assets will be held by the Trustee as book-entry
credits to an account of the Trustee at DTC.]
TERMS OF TERM ASSETS [REPEAT FOR EACH TERM ASSET WHICH COMPRISES MORE
THAN TEN PERCENT (10%) OF A POOL OF SECURITIES]
[Include information as applicable][The Term Assets of the Trust will
consist solely of initially [$] [ ____________ ] aggregate principal amount of [
_____ ] [ _____ ]% [specify applicable type/designation of assets], due [
_______ ], [ ] issued by [identify Term Assets Issuer[s]], having the
characteristics described in the applicable Term Assets Prospectus. The Term
Assets were originally issued by the applicable Term Assets Issuer as part of an
underwritten public offering of [$] [ ____________ ] aggregate principal amount
of such securities, pursuant to a registration statement on [Form S-3][Insert
applicable form/schedule] (together with all amendments and exhibits thereto,
the "Term Assets Registration Statement"), filed by the Term Assets Issuer with
the Commission under the Securities Act . Distributions are required to be made
on the Term Assets semiannually on the [ _____ ] day of each [ ] and [ _____ ],
commencing [ ____________ ] (each, a "Term Assets Payment Date"), or if such day
is not a Business Day, on the next succeeding Business Day.
The Term Assets, together with any other Deposited Assets described below
and any Credit Support, represent the sole assets of the Trust that are
available to make distributions in respect of the Certificates. Consequently,
the ability of Certificateholders to receive distributions in respect of the
Certificates will depend on the Trust's receipt of payments on, or in respect
of, the Term Assets.
This Prospectus Supplement, the Prospectus, each Term Assets Prospectus
and each Term Assets Registration Statement describes the material terms of the
Term Assets and the Term Assets Agreements. This Prospectus Supplement is
qualified in its entirety by, and should be read in conjunction with, (i) the
Prospectus, (ii) each Term Assets Prospectus, and (iii) the Term Assets
Registration Statement of which such Term Assets Prospectus is a part. No
representation is made by the Trust, the Trustee or the Company as to the
accuracy or completeness of the information contained in any Term Assets
Prospectus or Term Assets Registration Statement.
INTEREST PAYMENTS
Interest accrues on the Term Assets at the certificate rate for each class
and series of such securities, from the date of the initial issuance thereof.
Interest at the applicable rate will be paid to the Certificateholders [ ]
[monthly] [quarterly] [semiannually] on the [ ] day of each [ ] (or, if such day
is not a business day, the next succeeding business day).
[Interest on the Term Assets is calculated on the basis of
the actual number of days in the related interest period and a
360-day year.]
The Term Assets bear interest [in the aggregate] at a [weighted average]
rate per annum equal to [ %] [describe rate or method of calculation].
PRINCIPAL PAYMENTS
[Identify principal payment dates of Term Assets]
[Include if applicable, with definitions of relevant terms] [Generally,
principal payments due to the holders of the Term Assets are scheduled to
commence on the first payment date with respect to a Controlled Amortization
Period for a series of Term Assets (a "Term Asset Controlled Amortization
Period") or will be provided for by accumulating collections on the Receivables
for a specified period (a "Term Asset Accumulation Period") and paid on the
schedule final payment date, but in either case may be paid earlier or later
than such date. However, if an [Early Amortization Event, Payout Event,
Liquidation Event or Economic Amortization Event] (as such terms are defined in
Term Assets Agreements) (each such event, a "Term Asset Early Amortization
Event") occurs, [monthly]
S-21
distributions of principal to the holders of the Term Assets will begin on the
first payment date following the occurrence of such Term Asset Amortization
Event. See "Term Asset Amortization Events" below.
If a Term Asset Early Amortization Event does not occur, principal will be
distributed to the holder of the Term Assets on the first payments date during
the applicable Term Asset Controlled Amortization Period or at the end of the
Term Asset Accumulation Period") If, however, the amount of principal
distributed on the scheduled final payment date is not sufficient to pay the
holders of the Terms Assets in full, then monthly distributions of principal to
the holders of Term Assets will occur on each Payment Date after the scheduled
final payment date.]
[INCLUDE IF APPLICABLE] [REDEMPTION OR CONVERSION FEATURES]
[Describe any redemption, put, call or other conversion
features of the Term Assets].
[INCLUDE IF APPLICABLE] [SECURED] [UNSECURED] [OBLIGATIONS]
[Describe the security, including any collateral, for the Term Assets and
the priority (senior, subordinated) thereof with respect to other indebtedness
of the applicable Term Assets Issuer.]
[INCLUDE IF APPLICABLE][INVESTOR PERCENTAGE AND SELLER'S PERCENTAGE]
[Pursuant to the Term Assets Agreements, all amounts collected on
Receivables will be allocated between the Investor Interest of the holders of
the Term Assets, the Investor Interest of any other series and the Seller's
Interest by reference to the Investor Percentage of the holders of the Term
Assets, the Investor Percentage of any other series and the Seller's Percentage.
The Seller's Percentage generally means the excess of 100% over the
aggregate Investor Percentage of all series issued by such Term Assets Issuer
then outstanding.]
[INCLUDE IF APPLICABLE][ALLOCATION OF COLLECTIONS]
[The Term Asset Servicer will deposit any payments collected by the Term
Asset Servicer with respect to the Receivables and will generally allocate such
amounts as follows:
[(a) an amount equal to the applicable Seller's Percentage of the
aggregate amount of deposits in respect of Principal Receivables and Finance
Charge Receivables, respectively, will be paid to the holder of the Seller's
Certificate;
(b) an amount equal to the applicable Investor Percentage of the aggregate
amount of such deposits in respect of Finance Charge Receivables will be
deposited into an account for the benefit of the holders of the Term Assets;
(c) during the Revolving Period, an amount generally equal to the
applicable Investor Percentage of the aggregate amount of such collections in
respect of Principal Receivables will be paid to the holder of the Seller's
Certificate, provided, however, that such amount may not exceed the amount equal
to the Seller's Interest. The term "Seller's Certificate" also encompasses the
terms Exchangeable Seller's Certificate and Exchangeable Transferor's
Certificate. "Principal Receivables"generally consist of amount charged by
cardholders for merchandise and services, amounts advanced as cash advances and
the interest portion of any participation interests. "Finance Charge
Receivables")generally consist of monthly periodic charges, annual fees, cash
advance fees, late charges, over-the-limit fees and all other fees billed to
cardholders, including administrative fees;
(d) during the Controlled Amortization Period, Rapid Amortization Period
or Accumulation Period, collections of Principal Receivables will be allocated
to the holders of Term Assets based on the Investor Percentage, subject, during
a Controlled Amortization Period, to a cap.]]
S-22
[TERM ASSETS EVENTS OF DEFAULT][TERM ASSET EARLY AMORTIZATION EVENTS]
The following is a summary of the typical Term Assets [Events of
Default][Early Amortization Events] for each series of Term Assets. [Any
additional Term Asset Early Amortization Events, unique to a particular series
of Term Asset, will be described following the summary];
[(a) failure to make payments to holders of Term Assets with the time
periods given in the Term Assets Agreements;]
[(b) material breaches of certain ____ representations, warranties or
covenants or failure to observe or perform in a material respect any covenant or
agreement under any Term Assets Agreement;]
[(c) occurrence of a material default by a Term Asset
Servicer;]
[(d) failure to maintain the minimum Seller's Percentage;]
[(e) failure to maintain a certain minimum level of Receivables or
accounts, or the Seller being unable to transfer Receivables or accounts to Term
Assets Issuer;]
[(f) certain events of bankruptcy or insolvency relating to
the Seller;]
[(g) Term Assets Issuer becomes an "investment company" within the meaning
of the Investment Company Act of 1940, as amended;]
[(h) any reduction of the portfolio yield or excess spread (averaged over
any three consecutive months) to a rate below a certain rate provided in the
Term Assets Agreement for such a period;]
[(i) the available amount of the cash collateral guaranty is less than [
____ ]% of the amount of the Investor Interest for the underlying series of Term
Assets.]
[Describe Additional Term Asset Events of Default or Specific
Amortization Events]
[The pool of Term Assets, together with any other assets described below
any Credit Support described under "Description of Credit Support", represents
the sole assets of the Trust that are available to make distributions in respect
of the Certificates.]
The Deposited Assets will also include [describe any assets which are
ancillary or incidental to the Term Assets, including hedging contracts such as
puts, calls, interest rate swaps, currency swaps, floors, caps, and collars, and
any cash or other security pledged to support the Term Assets].
[DESCRIPTION OF CREDIT SUPPORT]
For the benefit [solely] of [Class [ ] Certificates [and the Class [ ]
Certificates]], Credit Support will be obtained [and will constitute part of the
Trust to the extent provided below] to support or ensure the [servicing and
[timely] [ultimate]] distribution of amounts due with respect to the Deposited
Assets, in the form and amount described below.
[THE LETTER OF CREDIT]
Simultaneously with the Company's assignment of the Deposited Assets to
the Trust, the Company will obtain the Letter of Credit from [ ] (the "Letter of
Credit Bank") in favor of the Owner Trustee. The Letter of Credit will be
irrevocable and will [support the [timely] [ultimate] remittance of amounts due
with respect to the Deposited Assets]. [The maximum amount that may be drawn
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
S-23
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 Deposited
Assets] [describe other methods]. The Letter of Credit expires on [ __________
], [ ____ ]. The Owner Trustee will be obligated, in the event of a drawing on
the Letter of Credit, to pursue appropriate remedies against the Deposited
Assets and other collateral, and any realization thereon shall be paid to the
Letter of Credit Bank to the extent of any amounts owing, in the manner and
priority specified herein.]
[Add 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 cashflow to
the applicable Series, provide (or incorporate by reference) the audited
financial statements of the Letter of Credit Bank. To the extent that the Letter
of Credit will cover payment of between 10 and 20% of the cashflow to the
applicable Series, provide (or incorporate by reference) information required by
Item 301 of Regulation S-K with respect to the Letter of Credit Bank.]
[THE SURETY BOND]
Simultaneously with the Company's assignment of the Deposited Assets to
the Trust, the Company will obtain the Surety Bond from [ ] (the "Surety") in
favor of the Owner Trustee. 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 [ __________ ], [
____ ]. The Owner Trustee will be obligated, in the event of a drawing on the
Surety Bond, to pursue appropriate remedies against the Deposited Assets and
other Assets and other collateral, and any realization thereon shall be paid to
the Surety to the extent of any owing, in the manner and priority specified
herein.
[Add language regarding the issuer of the Surety Bond with respect to its
debt ratings, activities in 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 and
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 cashflow to
the applicable Series, provide (or incorporate by reference) the audited
financial statements of the Surety. To the extent that the Surety Bond will
cover payment of between 10 and 20% of the cashflow to the applicable Series,
provide (or incorporate by reference) information required by Item 301 of
Regulation S-K with respect to the Surety.]
[RESERVE ACCOUNT]
The Company will deposit with the Owner Trustee on the Closing Date cash,
letters of credit and short-term investments acceptable to the Rating Agency
initially rating the Certificates in the amount of [$] [ ________ ].
[Collections with respect to the Deposited Assets not distributed with respect
to the Certificates shall be deposited in the Reserve Account.] Amounts so
deposited in such Reserve Account will be used to make payments of principal of
and premium (if any) and interest on the Certificates to the extent that funds
are not otherwise available. Immediately after any Distribution Date, amounts in
the Reserve Account in excess of [indicate formula] [may be paid to the
Company.]
[OTHER FORMS OF CREDIT ENHANCEMENT]
[Describe the material terms of any other form of credit enhancement which
is included in the Trust, including any interest rate, currency, securities,
commodity or credit swaps, caps, floors, collars or options, and identify each
counterparty thereto. To the extent the credit exposure pursuant to such credit
enhancement will equal or exceed 20% of the cashflow to the applicable Series,
provide (or incorporate by reference) the audited financial statements of the
applicable counterparty. To the extent that such exposure is between 10 and 20%
of cashflow to the applicable Series, provide (or incorporate by reference)
summarized financial information with respect to the counterparty.]
S-24
YIELD ON THE CERTIFICATES
[Describe factors relating to the Deposited Assets, the terms thereof and
the manner and priority in which collections thereon are paid or allocated to
each class of the Certificates, as described elsewhere herein.] See "Maturity
and Yield Considerations" in the Prospectus.
DESCRIPTION OF CERTIFICATES
GENERAL
The Certificates will consist of [ ] class of Certificates, designated as
Class[ ] [ ,] [and] Class [ ] [and Class____] Certificates. 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 related Trust. The Class [ ] Certificates
have in the aggregate an initial [Certificate Principal Balance] [Notional
Amount] of [$] [ _______ ] (approximate) and a [ %] [Variable] Pass-Through
Rate. The Class [ ] Certificates have in the aggregate an initial [Certificate
Principal Balance] [Notional Amount] of [$] [ _____ ] (approximate) and a [ %]
[Variable] Pass-Through Rate. The Class [ ] Certificates have in the aggregate
an initial [Certificate Principal Balance] [Notional Amount] of [$] [ ________ ]
(approximate) and a [ %] [Variable] Pass-Through Rate. [The Class [ ]
Certificates, which are not being offered hereby, will be transferred by the
Company to an affiliate on the Closing Date, and may be sold at any time by the
Company in accordance with the terms of the Trust Agreement.]
The Certificates [other than the Class [ ] Certificates [and specify
others] (the "Definitive Classes"))] will be issued, maintained and transferred
on the book-entry records of DTC and it Participants in minimum denominations of
[$ ] and [integral multiplies thereof] [multiplies of [$ ] in excess thereof].
[The Class [ ] Certificates [and specify any others] will be offered in
registered, certificated form, in minimum percentage interests corresponding to
the initial Notional Amounts or Certificate Principal Balance, as applicable, of
[$ ] and integral multiples thereof, except that one Certificate of each such
class may be issued with an initial Notional Amount or Certificate Principal
Balance, as applicable, equal to an integral multiple of [$ _______ ] plus the
excess of the initial aggregate Notional Amount or Certificate Principal
Balance, as applicable, of such class over the greatest integral multiple of [$
] that is not more than such initial aggregate Notional Amount or Certificate
Principal Balance, as applicable.]
The Certificates [(other than the Definitive Classes of Certificates)] will
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 Company, the "Clearing Agency"), except as provided below. The Company
has been informed by DTC that DTC's nominee will be Cede & Co. ("Cede"). No
holder of any such Certificate (a "Security Owner") will be entitled to receive
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
holders 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 Certificates - Global Certificates" in the Prospectus.
Under the rules, regulations and procedures creating and affecting DTC and
its operations, DTC will take action permitted to be taken by a Security Owner
only at the direction of one or more Participants to whose DTC account such
Certificates are credited. Additionally, DTC will take such actions with respect
to specified Voting Rights only at the direction and on behalf of Participants
whose holdings of such 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 divergent action.
DEFINITIVE CERTIFICATES
Definitive Certificates will be issued to Security Owners or their
nominees respectively, rather than to DTC or its nominee, only if (i) the
Company advises the Owner Trustee in writing that DTC is no longer willing or
able to discharge properly its responsibilities as Clearing Agency with respect
to a class of Certificates [(other than the
S-25
Definitive Classes)] and the Company is unable to locate a qualified successor
or (ii) the Company, 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 Participants 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 Owner Trustee will reissue such Certificates as Definitive
Certificates issued in the respective principal amounts owned by the individual
owners of such Certificates, and thereafter the Owner Trustee will recognize the
holders of such Definitive Certificates as holders under the Trust Agreement.
DISTRIBUTION
Collections on the Deposited Assets that are received for a given
Collection Period pursuant to the collection procedures described herein and in
the Prospectus will be applied by on each applicable Distribution Date to the
following distributions in the following order of priority, solely to the extent
of Available Funds (as defined below) on such Distribution Date:
(i) to the Owner Trustee, all unpaid fees and expenses owed thereto and
its respective agents, up to the Allowable Expense Amount (as defined
below) for the related Collection Period;
(ii) [to the providers of Credit Support ("Credit Support Providers"), any
amount required to be paid or reimbursed to, or deposited with, any
such person (collectively, "Credit Support Payments");]
(iii)to the Certificateholders of each Class of such Series,
first, to the payment of Required Interest [and on a pro rata basis to
the Credit Support Providers for the payment of any Credit Support
Payments], second, to the payment of Required Principal and third, to
the payment of Required Premium, in each case applicable to such
Class, commencing with the most highly ranked Class and, to the extent
Available Funds remain available, to each other Class in accordance
with the ranking specified herein under "--Allocation of Losses;
Subordination";
(iv) [to the Credit Support Providers, any Credit Support
Payments;]
(v) to the Owner Trustee, all its remaining unpaid fees and expenses and
those of its respective agents not otherwise paid pursuant to clause
(i) above;
(vi) [all remaining amounts, if any, to the Company.]
There can be no assurance that collections received from the Deposited
Assets and any applicable Credit Support relating to the Certificates over a
specified period will be sufficient, after payment of all Allowable Expense
Amounts [and payments of all amounts required to be paid to the Credit Support
Providers] for such period, to make all required distributions on the
Certificates. 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 distributed on the next Distribution Date on which sufficient
funds exist to pay such shortfalls.
For purposes hereof, the following terms have the following meanings:
"Allowable Expense Amount" means, for any given Collection Period,
the sum of (x) [$] [ ____ ]and (y) amounts in respect of the Allowable
Expense Amount from the preceding Collection Period that have not been
applied on the Distribution Date for such preceding Collection Period.
"Available Funds" for any Distribution Date means the sum of (a) all
amount received on or with respect to the Deposited Assets (including
investment income on Eligible Investment) received during the preceding
Collection Period[,] [and] (b) amounts available as such Distribution Date
pursuant to the Credit Support described herein [and (c) any additional
amount that the [Company] may remit to the Owner
S-26
Trustee from time to time according to the terms of the Trust Agreement for
application as Available Funds].
"Call Premium Percentage" for any given Distribution Date means [a
fixed percentage] [a percentage that varies depending on [describe basis
for variable formula, such as the applicable date or other factors or
indices.]].
"Eligible Investments" means, with respect to the Certificates, those
investments acceptable to the Ratings Agency as being consistent with the
rating of such Certificates. Generally, Eligible Investments must be
limited to obligations or securities that mature no later than the
business day prior to the next succeeding Distribution Date.
"Required Interest" for the Certificates or any Class thereof on any
given Distribution Date means the accrued and unpaid interest on the
outstanding Certificate Principal Balance [or Notional Amount] of such
Certificates, computed at the applicable Pass-Through Rate.
"Required Premium" for the Certificates or any Class thereof for any
Distribution Date means an amount equal to the product of (a) the Required
Principal for such Certificates on such Distribution Date and (b) the Call
Premium Percentage for such Distribution Date.
"Required Principal" for the Certificates or any Class thereof for
any Distribution Date means the amount received on the Deposited Assets
attributable to principal payments thereon during the related Collection
Period, to the extent payable or allocable to such Certificates. The
Certificate Principal Balance of a Certificate outstanding at an time
presents the maximum amount that the holder thereof is entitled to receive
as distribution payable in respect of or allocate to principal from the
cash flow on the Term Assets, the other assets in the Trust and any Credit
Support obtained for the benefit of such holder. The Certificate Principal
balance of any class of Certificates [(other than the Class [ ]
Certificates)] as of any date of determination is 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
Certificate and (b) any reductions in the Certificate Principal Balance
there deemed to have occurred in connection with allocations of (i)
Realized Losses allocable to principal on the Deposited Assets and (ii)
Extraordinary Trust Expenses, as described herein. [The Notional Amount of
the Class [ ] Certificates as of any date of determination is equal to
[specify amount].] [Holders of the Class [ ] Certificates are not entitled
to receive any distributions allocable to principal
[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] in reduction of 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]
[Subject to the following limitations, the [Trustee] will be obligated to
advance or advance or cause to be advanced on or before each Distribution Date
its own funds, or other available funds, in an amount equal to the aggregate of
payments of principal, premium (if any) and interest, net of that portion of the
Administrative Fee (as defined herein) attributable to fees and expenses of the
Owner Trustee, that were due during the related Collection Period and that were
delinquent on the related Determination Date (any such advance, an "Advance").
Advances are required to be made only to the extent they are deemed by the
[Trustee] to be recoverable from related late collections, insurance proceeds,
if any, or Liquidation Proceeds. The purpose of making such Advance is to
maintain a regular cash flow, rather than to guarantee or insure against losses.
The [Trustee] will not be required to make any Advances with respect to
reductions in the amount of the payments on the Deposited Assets due to
bankruptcy proceedings with respect to the Deposited Assets.
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All Advances will be reimbursable from late collections, insurance
proceeds, if any, and any proceeds from the liquidation of the Deposited Asset
("Liquidation Proceeds") as to which such unreimbursed Advance was made. In
addition, any Advance previously made in respect of any Deposited Asset that are
deemed to be nonrecoverable from related late collections, insurance proceeds,
if any, or Liquidation Proceeds may be reimbursed to the [Trustee] out of any
funds allocable to any of the Deposited Assets prior to the distributions on the
Certificates. [In the event that the Servicer fails in its obligation to make
any such Advance, the Owner Trustee may be obligated to make any such Advance,
to the extent provided in the Trust Agreement.]]
ALLOCATION OF LOSSES; SUBORDINATION
The subordination described herein provided by the Class [ ] Certificates
[and the Class [ ] Certificates] is designed to protect holders of the remaining
classes of 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 remaining classes of Certificates, to
the extent described below, only if such losses and other shortfalls are not so
covered, or the coverage in respect thereof has been exhausted.
[Realized Losses and Extraordinary Trust Expenses will be
allocated on any Distribution Date as follows: [describe
allocation among the various classes].]
[An "Extraordinary Trust Expense" is an expense of a given
Trust is excess of the Allowable Expense Amount.]
[RESTRICTION ON TRANSFER OF THE CLASS [ ] CERTIFICATES
Because the Class [ ] Certificates are subordinate to the
Class [ ] Certificates and 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 TRUST AGREEMENT
GENERAL
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 containing a copy of the Trust Agreement
as executed will be filed by the Company with the Commission following the
issuance and sale of the Certificates. The Trust created under the Trust
Agreement will consist of (i) the Deposited Assets (exclusive of any Retained
Interest, which is not part of the Trust), (ii) all payments on or collections
in respect of the Deposited Assets due after the Cut-off Date, together with any
proceeds thereof[,] [and] [(iii) any Credit Support in respect of any class or
classes of Certificates] [and (iv) the rights of the Company under the purchase
agreement for the Deposited Asset between the Company and the seller of the
Deposited Asset]. [In addition, the Certificateholders of the Certificates may
also have the benefit of certain Credit Support discussed above. See
"Description of Credit Support".] Reference is made to the Prospectus for
important information in addition to that set forth herein regarding the Trust,
the terms and conditions of the Trust Agreement and the Certificates. The
material terms of the Trust Agreement are summarized below and in the
Prospectus. Such summaries 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.
THE OWNER TRUSTEE
[ _________ ], a [ ___________ ], will act as trustee for the Certificates
and the Trust pursuant to the Trust Agreement. The Owner Trustee's offices are
located at [ ] and its telephone number is [ ________________________ ].
The Trust Agreement will provide that the Owner Trustee and any director,
officer, employee or agent of the Owner 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
S-28
of the Owner Trustee's duties under the Trust Agreement, other than any loss,
liability or expense (i) that constitutes a specific liability of the Owner
Trustee under the Trust Agreement or (ii) incurred by reason of willful
misfeasance, bad faith or negligence in the performance of the Owner Trustee's
duties under the Trust Agreement or as a result of a breach, or by reason of
reckless disregard of the Owner Trustee's obligations and duties under the Trust
Agreement.
DISTRIBUTION OF TERM ASSETS
In the event the Term Assets Issuer were to cease reporting as required
under the Securities and Exchange Act of 1934 at a time when the Depositor is
subject to such a reporting requirement, then the Term Assets will be
distributed to holders of the Certificates pursuant to the following formula
[describe formula], and the Certificates would be cancelled.
VOTING RIGHTS
[At all times,] [Subject to the succeeding paragraph,] [ ]% of all Voting
Rights will be allocated among all holders of the Class [ ] Certificates[,]
[and] the Class [ ] Certificates [and specify other classes] in proportion to
the outstanding Certificate Principal Balances [or Notional Amounts] of their
respective Certificates and [ ]% of all Voting Rights will be allocated among
all holders of the Class [ ] Certificates in proportion to the then outstanding
[Certificate Principal Balances] [Notional Amounts] of their respective
Certificates. [Specify whether and what circumstances voting will be
class-by-class.]
[Specify conditions, if any, under which allocation of Voting Rights might
change from the foregoing percentages].
VOTING OF TERM ASSETS, MODIFICATION OF TERM ASSETS AGREEMENT
The Owner Trustee, as holder of the Term Assets, has the right to vote and
give consents and waivers in respect of such Term Assets as permitted by [DTC]
and except as otherwise limited by the Trust Agreement. In the event that the
Owner Trustee receives a request from [DTC], the Term Asset Trustee or the Term
Assets Issuer for it consent to any amendment, modification or waiver of the
Term Assets, the Term Assets Agreement or any other documents thereunder or
relating thereto, or receives any other solicitation for any action with respect
to the Terms Assets, the Owner Trustee shall mail notice of such proposed
amendment, modification, waiver or solicitation to each Certificateholders of
record as such date. The Owner Trustee shall request instructions from the
Certificateholders as to whether or not to consent to or vote to accept such
amendment, modification, waiver, or solicitation. The Owner Trustee shall
consent or vote, or refrain from consenting or voting, in the same proportion
(based on the relative Certificate Principal Balance and Notional Amounts of the
Certificates) as the Certificates of the Trust were actually voted or not by the
Certificateholders thereof as of date determined by the Owner Trustee prior to
the date on which such consent or vote is required; provided, however, that,
notwithstanding anything to the contrary, the Owner 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 for Federal income tax
purpose, (ii) which would alter the timing or amount of any payment on the Term
Assets, except in the event of a [Term Assets Event of Default] [Term Asset
Early Amortization Event or an event which with the passage of time would become
a [Term Assets Event of Default][Term Asset Early Amortization Event] and with
the unanimous consent of all Outstanding Certificates or (iii) which would
result in the exchange or substitution of any of the outstanding Term Assets
pursuant to a plan for the refunding or refinancing of such Term Assets, but
only with the consent of Certificateholders representing 100% of the aggregate
voting rights of each outstanding Class of the Certificates. The Owner Trustee
shall have no liability for any failure to act resulting from
Certificateholders' late return, directions requested by the Owner Trustee from
the Certificateholders.
In the event that an offer is made by the Term Assets Issuer to issue new
obligations in exchange and substitution for any of the Term Assets, pursuant to
a plan for the refunding or refinancing of the Term Assets or any other offer is
made for the Term Assets, the Owner Trustee shall notify the Certificateholders
of such offer as promptly as practicable. The Owner Trustee must reject any such
offer unless an event of default under the Term Assets Agreement has occurred,
the Owner Trustee is directed by the affirmative vote of all of the
Certificateholders to accept such offer and the Owner Trustee has received the
tax opinion described above. Accordingly, a
S-29
Certificateholder generally would be required to effect a withdrawal of
Requested Term Assets from the Trust in order to accept such offer. See
"--Optional Exchange of Certificates".
If an event of default under the Term Assets Agreement 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 Owner Trustee
shall vote the Term Assets in favor of directing, or take such other action as
may be appropriate to direct, the Term Asset Trustee to declare the unpaid
principal amount of the Term Assets 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 Term Assets, the Certificateholders' interests of each
Class may differ and the interests of either Class may differ from holders of
other securities of the same series or class.
TERMINATION
The Company will have the right to purchase all remaining Deposited Assets
in the Trust and thereby effect early retirement of the Certificates on any
Distribution Date, [(a)] once the aggregate principal amount of the Deposited
Assets at the time of any such purchase is not more than [specify percentage not
greater than 10%] of the aggregate principal amount of the Deposited Assets as
of the Cut-off Date [and (b) at the option of the Company at [specify when and
on what terms any such option may be exercised]; provided, however, that the
right to exercise any such option is contingent on such exercise being
consistent with the Company's continued satisfaction of the applicable
requirements for exemption under Rule 3a-7 under the Investment Company Act of
1940 and all applicable rules, regulations and interpretations thereunder. In
the event the Company exercises any such option, the portion of the purchase
price allocable to the Certificates of each class will be, to the extent of
available funds, [100% of their then aggregate outstanding Certificate Principal
Balance or Notional Amount, as applicable, plus with respect to the Certificates
[one month's] [three month's] [specify other period] interest thereon at the
Fixed Pass-Through Rate or the then applicable Variable Pass-Through Rate, as
the case may be plus, with respect to each class of Certificates, any previously
accrued but unpaid interest thereon.] [Specify alternative allocations method if
different from above
CERTAIN LEGAL ASPECTS OF THE DEPOSITED ASSETS
[Describe any applicable legal aspects of the Deposited Assets or relating
to the enforceability by the Certificateholders of the security interest, if
any, securing such Deposited Assets.]
YEAR 2000
Certain information technology ("IT") and non-IT systems (i.e. embedded
technology such as microcontrollers) may utilize older computer programs that
were written using two digits rather than four to define the applicable year.
Consequently, such computer programs may recognize a date using "00" as the year
1900 rather than the year 2000. These computer programs may fail to operate
properly in the year 2000 and after if they are not modified or replaced to
comply with year 2000 requirements.
Various Term Assets Issuers may not timely conduct or complete a year 2000
assessment and there can be no assurance that any Term Assets Issuers will make
any necessary modifications or replacements of their IT or non-IT systems in
time, if at all. Failure to do so could result in a disruption of operations of
various Term Assets Issuers, including, among other things, a temporary
inability to process funds or engage in similar normal business practices. As a
result, payments to Certificateholders may be interrupted or impaired.
[Summarize year 2000 disclosure from Term Assets Prospectus(es) concerning
readiness, costs, material risks and contingency plans, as applicable].
S-30
FEDERAL INCOME TAX CONSEQUENCES
Orrick, Herrington & Sutcliffe LLP, Special Tax Counsel, has delivered an
opinion that the Trust will be a grantor trust or a partnership for federal
income tax purposes and not an association taxable as a corporation (or publicly
traded partnership treated as a corporation). Although such treatment is not
certain, the Trustee intends for tax reporting purposes to treat the Trust as a
grantor trust and the balance of this discussion assumes that the Trust will be
so classified. For a discussion of the consequences of recharacterization of the
Trust as a partnership for federal income tax purposes, see "--Possible
Recharacterization of the Trust as a Partnership" in "Federal Income Tax
Consequences" in the Prospectus.
[INSERT DISCUSSION OF TAX CHARACTERIZATION OF TERM ASSETS AS
APPROPRIATE]
In general, each Certificate will be treated as a synthetic debt instrument
issued on the date it is acquired by the holder thereof. Each Certificateholder
will be subject to the original issue discount ("OID") rules of the Code and
Treasury Regulations with respect to such Certificates. Under those rules, the
Certificateholder (whether on the cash or accrual method of accounting) will be
required to include in income the OID on its Certificate as it accrues on a
daily basis, on a constant yield method regardless of when cash payments are
received. The amount of OID on the generally will be equal to the excess of all
amounts payable on the Certificate over the amount paid to acquire the
Certificate and the constant yield used in accruing OID generally will be the
yield to maturity of the Certificate as determined by such holder based on that
holder's purchase price for the Certificate. The amount of OID that is reported
in income in any particular year will not necessarily bear any relationship to
the amount of distributions, if any, paid to a holder in that year.
Payments made on a Certificate to a person that is not a U.S. Person and
has no connection with the United States other than holding its Certificate
generally will be made free of United States federal withholding tax, provided
that (i) the holder is not related (directly or indirectly) to certain other
specified persons and (ii) the holder complies with certain identification and
certification requirements imposed by the IRS.
See "Federal Income Tax Consequences" in the Prospectus.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and Section 4975 of the Code impose certain requirements on (a) an employee
benefit plan (as defined in Section 3(3) of ERISA), (b) a plan described in
Section 4975(e)(1) of the Code, including an individual retirement account
("IRA") or Keogh plan, or (c) any entity whose underlying assets include plan
assets by reason of a plan's investment in the entity (each, a "Plan").
ERISA and Section 4975 of the Code prohibit certain transactions involving
the assets of a Plan and persons who have specified relationships to the Plan,
i.e., "parties in interest" within the meaning of ERISA or "disqualified
persons" within the meaning of the Code (collectively, "Parties in Interest").
Thus, a Plan fiduciary considering an investment in Certificates should consider
whether such an investment might constitute or give rise to a prohibited
transaction under ERISA or Section 4975 of the Code. The Term Assets Issuer, the
Underwriter, the Trustee and their respective affiliates may be Parties in
Interest with respect to any Plans.
If an investment in Certificates by a Plan were to result in the assets of
the Trust being deemed to constitute "plan assets" of such Plan, certain aspects
of such investment, including the operations of the Trust and the deemed
extension of credit between the Term Assets Issuer and the holder of a
Certificate (as a result of the Term Assets being deemed to be plan assets), as
well as subsequent transactions involving the Trust or its assets, might
constitute or result in prohibited transactions under Section 406 of ERISA and
Section 4975 of the Code unless exemptive relief were available under an
applicable exemption issued by the United States Department of Labor (the
"DOL"). Neither ERISA nor the Code defines the term "plan assets." Under Section
2510.3-101 of the DOL regulations (the "Regulation"), a Plan's assets may
include the assets of an entity if the Plan acquires an "equity interest" in
such entity unless an exception applies under the Regulation. Thus, if a Plan
acquires a Certificate, for certain purposes (including the prohibited
transaction provisions of Section 406 of ERISA and Section 4975 of the Code),
S-31
the Plan would be considered to own an undivided interest in the underlying
assets of the Trust unless such Certificate is a "publicly-offered security" or
another exception applies under the Regulation.
[The Underwriter expects that the Certificates will satisfy the criteria
for treatment as publicly-offered securities under the Regulation.] A
publicly-offered security is a security that is (i) freely transferable, (ii)
part of a class of securities that is owned by 100 or more investors independent
of the issuer and of one another at the conclusion of the initial offering, and
(iii) either is (A) part of a class of securities registered under Section 12(b)
or 12(g) of the Exchange Act, or (B) sold to the Plan as part of an offering of
securities to the public pursuant to an effective registration statement under
the Securities Act and the class of securities of which such security is a part
is registered under the Exchange Act within 120 days (or such later time as may
be allowed by the Commission) after the end of the fiscal year of the issuer
during which the offering of such securities to the public occurred.
[The Underwriter will verify that there will be at least 100 separate
purchasers (whom the Underwriter has no reason to believe are not independent of
the Company or of one another) at the conclusion of the initial offering.] There
is no assurance that the 100 independent investor requirement of the
"public-offered security" exception will, in fact, be satisfied.
NOTHING HEREIN SHALL BE CONSTRUED AS A REPRESENTATION THAT AN INVESTMENT
IN THE CERTIFICATES WOULD MEET ANY OR ALL OF THE RELEVANT LEGAL REQUIREMENTS
WITH RESPECT TO INVESTMENTS BY, OR IS APPROPRIATE FOR, PLANS GENERALLY OR ANY
PARTICULAR PLAN. ANY PLAN OR ANY OTHER ENTITY THE ASSETS OF WHICH ARE DEEMED TO
BE "PLAN ASSETS," SUCH AS AN INSURANCE COMPANY INVESTING ASSETS OF ITS GENERAL
ACCOUNT, PROPOSING TO ACQUIRE CERTIFICATES SHOULD CONSULT WITH ITS COUNSEL.
METHOD OF DISTRIBUTION
Subject to the terms and conditions set forth in the Underwriting
Agreement, dated as of [ ], 199[ ] (the "Underwriting Agreement"), the Company
has agreed to sell and [Salomon Brothers Inc. (an affiliate of the Company)]
(each of the Underwriters named below, including Salomon Brothers Inc (an
affiliate of the Company)] (the "Underwriter[s]")[,] has [severally] agreed to
purchase, and the [Certificates] [principal amount of each class of Certificates
set forth below opposite its name].
CLASS [ ] CLASS [ ] CLASS [ ]
CERTIFICATES CERTIFICATE CERTIFICATES
Salomon Brothers $ $ $
Inc..............
Total.....
[Salomon Brothers Inc has] [The several Underwriters have] agreed, subject
to the terms and conditions set forth in the Underwriting Agreement, to purchase
all Certificates offered hereby if any of such Certificates are purchased. [In
the event of default by any Underwriter, the Underwriting Agreement provides
that, in certain circumstances, the purchase commitments of non-defaulting
Underwriters may be increased or the Underwriting Agreement may be terminated.]
The Company has been advised by the Underwriter[s] that [it] [they]
propose[s] to offer the Certificates from time to time in negotiated
transactions or otherwise at varying prices to be determined at the time of
sale. The Underwriter[s] may effect such transactions by selling Certificates to
or through dealers and such dealers may receive compensation in the form of
underwriting discounts, concessions or commissions from the Underwriter[s] and
any purchasers of Certificates for whom they may act as agents. The
Underwriter[s] and any dealers that participate with the Underwriter[s] in the
distribution of Certificates may be deemed to be underwriters, and any profit on
the resale of Certificates by them may be deemed to be underwriting discounts or
commissions under the Securities Act.
S-32
The Underwriting Agreement provides that the Company will indemnify the
Underwriter[s against certain civil liabilities, including liabilities under the
Securities Act, or will contribute to payments the Underwriter[s] may be
required to make in respect thereof.
Salomon Brothers Inc is an affiliate of the Company, and the participation
by Salomon Brothers Inc is the offering of the Certificates complies with
Schedule E of the By-Laws 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 Services ("Standard & Poor's")] [ Moody's Investors Service,
Inc. ("Moody's")] [Fitch's Investors Service, L.P. ("Fitch's")] [and] [Duff &
Phelps Credit Rating Company ("Duff & Phelps")] (the "Rating [Agency]
[Agencies]"). The ratings address the likelihood of the receipt by
Certificateholders of payments required under the Trust Agreement, and are based
primarily on the credit quality of the Deposited Assets and any providers of
Credit Support, as well as on the relative priorities of each class of the
Certificates with respect to collections and losses with respect to the
Deposited Assets. 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 Deposited Assets, 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 Company 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].
S-33
INDEX OF TERMS
Advance..........................................................27
AECA.............................................................16
AID..............................................................17
AID-Guaranteed Securities........................................17
AID-Guaranteed Security Payment Date.............................17
Allocation of Losses; Subordination..............................26
Allowable Expense Amount.........................................26
Appropriations Acts..............................................16
Available Funds..................................................26
Call Premium Percentage..........................................27
Cash Collateral Guaranty.........................................20
Cede.............................................................25
Certificates......................................................1
Clearing Agency..................................................25
Closing Date......................................................7
Commission.......................................................12
Company...........................................................1
Credit Support Payments..........................................26
Credit Support Providers.........................................26
Cut-off Date.................................................18, 19
Definitive Classes...............................................25
Deposited Assets..................................................1
Distribution Date.................................................3
DOL..............................................................31
DSAA.............................................................16
DTC...............................................................3
Duff & Phelps....................................................32
Eligible Investments.............................................27
ERISA............................................................31
Exchange Act.....................................................10
Expected Settlement Date..........................................1
Extraordinary Trust Expense......................................28
Fannie Mae.......................................................13
Farm Credit Act..................................................15
FCA..............................................................15
FCBs.............................................................15
FFB..............................................................16
FFEL.............................................................14
FHLBs............................................................15
FHLMC Act........................................................13
Final Distribution Date...........................................3
Finance Charge Receivables.......................................22
FIRRE Act........................................................14
Fitch's..........................................................32
FMS..............................................................16
Freddie Mac......................................................13
Funding Corporation..............................................16
GTC Note Payment Date............................................16
GTCs.............................................................16
Housing Program..................................................17
IFIs.............................................................17
implementation agreements........................................17
Information Statements...........................................16
investment company...............................................23
Investment Program...............................................17
S-34
IRA..............................................................31
Letter of Credit Bank............................................23
Liquidation Proceeds.............................................28
MBS..............................................................13
Moody's..........................................................32
Owner Trustee.....................................................1
Parties in Interest..............................................31
Plan.............................................................31
plan assets......................................................31
Principal Receivables............................................22
Privatization Act................................................14
Prospectus........................................................1
publicly-offered security........................................31
Rating [Agency] [Agencies].......................................32
Realized Losses...................................................8
REFCORP..........................................................14
Regulation.......................................................31
Required Interest................................................27
Required Premium.................................................27
Required Principal...............................................27
RTC..............................................................14
Sallie Mae.......................................................14
Security Owner...................................................25
Special Distribution Date.........................................8
Specified Currency................................................4
Standard & Poor's................................................32
Surety...........................................................24
System...........................................................15
Systemwide Debt Securities.......................................15
Term Asset Accumulation Period...............................21, 22
Term Assets Agreement.............................................6
Term Asset Controlled Amortization Period........................21
Term Asset Early Amortization Event..............................21
Term Assets Prospectus...........................................10
Term Assets.......................................................1
Term Assets Currency..............................................5
Term Assets Payment Date.........................................21
Term Assets Registration Statement...............................21
Trust.............................................................1
Trust Agreement...................................................1
TVA Act..........................................................15
Underwriter[s]...................................................32
Underwriting Agreement...........................................32
S-35
PROSPECTUS
Trust Certificates
(Issuable in Series)
Structured Products Corp.
Depositor
The Trust Certificates (the "Certificates") offered hereby and by supplements
(each a "Prospectus Supplement") to this Prospectus will be offered from time to
time in one or more series (each a "Series") and in one or more classes within
each such Series (each a "Class") with an aggregate initial public offering
price or purchase price of up to [$1,000,000] or the equivalent thereof in one
or more foreign or composite currencies, including the European Currency Unit
("ECU"). Certificates of each respective Series and Class will be offered on
terms to be determined at the time of sale as described in the related
Prospectus Supplement accompanying the delivery of this Prospectus. Certificates
may be sold for United States dollars or for one or more foreign or composite
currencies, and the principal of, premium, if any, and any interest to be
distributed in respect of Certificates may be payable in United States dollars
or in one or more foreign or composite currencies. Each Series and Class of
Certificates may be issuable as individual securities in registered form without
coupons ("Registered Certificates") or in bearer form with or without coupons
attached ("Bearer Certificates") or as one or more global securities in
registered or bearer form (each a "Global Security").
Each Series of Certificates will represent in the aggregate the entire
beneficial ownership interest in securities (the "Term Assets"), issued by one
or more issuers (the "Term Assets Issuers"), together with certain other assets
described herein and in the related Prospectus Supplement (such assets, together
with the Term Assets, the "Deposited Assets"), to be deposited in a trust (the
"Trust") for the benefit of holders of Certificates of such Series
("Certificateholders") by Structured Products Corp. (the "Company") pursuant to
a trust agreement and a series supplement thereto with respect to a given Series
(collectively, the "Trust Agreement") among the Company, as depositor or
transferor, the administrative agent, if any (the "Administrative Agent"), and
the trustee (the "Trustee") named in the related Prospectus Supplement. The Term
Assets consist of [SELECT ONE OF THE FOLLOWING BRACKETED SELECTIONS]
[Alternative 1: a publicly issued, fixed income 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), organized under the laws of the United States
of America or any state, which are subject to the informational requirements of
the Securities Exchange Act of 1934 and which in accordance therewith file
reports and other information with the Securities and Exchange Commission]
[Alternative 2: a publicly issued, fixed income debt security or a pool of such
debt securities which represent obligations of one or more foreign private
issuers (as such term is defined in Rule 405 of the Securities Act) subject to
the informational requirements of the Securities Exchange Act of 1934 and which
in accordance therewith file reports and other information with the Securities
and Exchange Commission] [Alternative 3: a publicly issued, fixed income debt
security or 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
governmental sponsored organization created pursuant to a federal statute] or
[Alternative 4: a publicly issued, fixed income debt security or pool of such
debt securities which represent obligations issued by or guaranteed by a foreign
government, political subdivision or agency or instrumentality thereof]. If so
specified in the related Prospectus Supplement, the Trust for a Series of
Certificates may also include, or the Certificateholders of such Certificates
may have the benefit of, any combination of insurance policies, letters of
credit, reserve accounts and other types of rights or assets designed to support
or ensure the servicing and distribution of amounts due in respect of the
Deposited Assets (collectively, "Credit Support"). See "Description of
Certificates" and "Description of Deposited Assets and Credit Support".
PROSPECTIVE INVESTORS SHOULD CONSIDER, AMONG OTHER THINGS, THE INFORMATION SET
FORTH UNDER "RISK FACTORS" COMMENCING ON PAGE [ ] OF THIS PROSPECTUS AND IN THE
RELATED PROSPECTUS SUPPLEMENT.
Each Class of Certificates of any Series will represent the right, which may be
senior to those of one or more of the other Classes of such Series, to receive
specified portions of payments of principal, interest and certain other amounts
on the Deposited Assets in the manner described herein and in the related
Prospectus Supplement. A Series may include two or more Classes differing as to
the timing, sequential order or amount of distributions of principal, interest
or premium and one or more Classes within such Series may be subordinated in
certain respects to other Classes of such Series. The Certificates of each
Series (or Class within such Series) offered hereby will be rated at the time of
issuance in one of the recognized investment grade rating categories by one or
more nationally recognized rating agencies.
To the extent provided herein and in the applicable Prospectus Supplement, the
Company's only obligations with respect to each Series of Certificates will be,
pursuant to certain representations and warranties concerning the Deposited
Assets, to assign and deliver the Deposited Assets and certain related documents
to the applicable Trustee and, in certain cases, to provide for the Credit
Support, if any. The principal obligations of an Administrative Agent, if any is
named in the applicable Prospectus Supplement, with respect to a Series of
Certificates will be pursuant to its contractual administrative obligations and,
only as and to the extent provided in the related Prospectus Supplement, its
obligation to make certain cash advances in the event of payment delinquencies
on the Deposited Assets. See "Description of Trust Agreement--Advances in
Respect of Delinquencies".
The Certificates of each Series will not represent an obligation of or interest
in the Company, any Administrative Agent or any of their respective affiliates,
except to the limited extent described herein and in the related Prospectus
Supplement. The Certificates will not be guaranteed or insured by any
governmental agency or instrumentality, or by the Company, any Administrative
Agent or their respective affiliates.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Certificates may be offered and sold to or through underwriters, through
dealers or agents or directly to purchasers, as more fully described under "Plan
of Distribution" herein and "Method of Distribution" in the related Prospectus
Supplement. This Prospectus may not be used to consummate sales of Certificates
offered hereby unless accompanied by a Prospectus Supplement.
The date of this Prospectus is [ ________ ], [ ____ ].
2
PROSPECTUS SUPPLEMENT
The Prospectus Supplement relating to a Series of Certificates to be
offered thereby and hereby will set forth, among other things, the following
with respect to such Series: (a) the specific designation and aggregate
principal amount, (b) the currency or currencies in which the principal (the
"Specified Principal Currency"), premium, if any (the "Specified Premium
Currency"), and any interest (the "Specified Interest Currency") are
distributable (the Specified Principal Currency, the Specified Premium Currency
and the Specified Interest Currency being collectively referred to as the
"Specified Currency"), (c) 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, (d)
certain information concerning the type, characteristics and specifications of
the Deposited Assets and any Credit Support for such Series or Class, (e) the
relative rights and priorities of each such Class (including the method for
allocating collections from the Deposited Assets to the Certificateholders of
each Class and the relative ranking of the claims of the Certificateholders of
each Class to such Deposited Assets), (f) the name of the Trustee and the
Administrative Agent, if any, for such Series, (g) the Pass Through Rate (as
defined herein) or the terms relating to the applicable method of calculation
thereof, (h) the time and place of distribution (each such date, a "Distribution
Date") of any interest, premium (if any) and/or principal, (i) the date of
issue, (j) the scheduled final Distribution Date, if applicable, (k) the
offering price, (l) any exchange, whether mandatory or optional, the redemption
terms and any other specific terms of Certificates of each such Series or Class.
See "Description of Certificates--General" for a listing of other items that may
be specified in the applicable Prospectus Supplement.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). Reports and other information concerning the
Company can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's Regional Offices at Seven World Trade
Center, New York, New York 10048, and Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can
be obtained upon written request addressed to the Commission, Public Reference
Section, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
The Commission maintains a Web site at http://www.sec.gov containing reports,
proxy statements and other information regarding registrants that file
electronically with the Commission. The Company does not intend to send any
financial reports to Certificateholders.
The Company has filed with the Commission a registration statement on Form
S-3 (together with all amendments and exhibits, the "Registration Statement")
under the Securities Act of 1933, as amended (the "Securities Act"), relating to
the Certificates. This Prospectus does not contain all the information set forth
in the Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission. For further information,
reference is hereby made to the Registration Statement.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Certificates shall be deemed to be
incorporated by reference in this Prospectus. Any statement contained herein or
in a document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained herein or in any subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, on the written or oral request of any such person,
a copy of any or all of the documents incorporated herein by reference, except
the exhibits to such documents (unless such exhibits are specifically
incorporated by reference in such documents). Written requests for such copies
should be directed to the Secretary of Structured Products Corp.,
3
32nd Floor, Room 33-126, Seven World Trade Center, New York, New York
10048. Telephone requests for such copies should be directed to the Secretary of
Structured Products Corp. at (212) 783-6645.
REPORTS TO CERTIFICATEHOLDERS
Unless and until Definitive Certificates are issued, on each Distribution
Date unaudited reports containing information concerning the related Trust will
be prepared by the related Trustee and sent on behalf of each Trust only to Cede
& Co. ("Cede"), as nominee of DTC and registered holder of the Certificates. See
"Description of Certificates--Global Securities" and "Description of Trust
Agreement--Reports to Certificateholders; Notice". Such reports will not
constitute financial statements prepared in accordance with generally accepted
accounting principles. The Company, on behalf of each Trust, will cause to be
filed with the Commission such periodic reports as are required under the
Exchange Act.
IMPORTANT CURRENCY INFORMATION
Purchasers are required to pay for each Certificate in the Specified
Principal Currency for such Certificate. 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 having a Specified Principal Currency other than U.S.
dollars, Salomon Brothers Inc (the "Offering Agent") will arrange for the
exchange of U.S. dollars into such Specified Principal Currency to enable the
purchaser to pay for such Certificate. Such request must be made on or before
the fifth Business Day (as defined herein) preceding the date of delivery of
such Certificate or by such later date as is determined by the Offering Agent.
Each such exchange will be made by the Offering Agent on such terms and subject
to such conditions, limitations and charges as the Offering Agent may from time
to time establish in accordance with its regular foreign exchange practice. All
costs of exchange will be borne by the purchaser.
References herein to "U.S. dollars", "U.S.$", "USD",
"dollar" or "$" are to the lawful currency of the United States.
RISK FACTORS
In connection with an investment in the Securities of any Series,
prospective investors should consider, among other things, the material risk
factors set forth below and any additional material risk factors set forth in
the applicable Prospectus Supplement.
The Certificates May Not Be A Liquid Investment. There will be no market
for any Series (or Class within such Series) of Certificates prior to the
issuance thereof, and there can be no assurance that a secondary market will
develop or, if it does develop, that it will provide Certificateholders with
liquidity of investment or will continue for the life of such Certificates.
Certificates Are Limited Obligations And Are Not Recourse Obligations Of
The Company Or Its Affiliates. The Certificates will not represent a recourse
obligation of or interest in the Company or any of its affiliates. The
Certificates of each Series will not be insured or guaranteed by any government
agency or instrumentality, the Company, any Person affiliated with the Company
or the Issuer, or any other Person. The obligations, if any, of the Company with
respect to the Certificates of any Series will only be pursuant to certain
limited representations and warranties with respect to the Term Assets or other
Deposited Assets. The Company 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, for example, the Company were
required to repurchase a Term Asset with respect to which the Company has
breached a representation or warranty, its only sources of funds to make such
repurchase would be from funds obtained from the enforcement of a corresponding
obligation, if any, on the part of the seller of such Term Asset to the Company,
or from a reserve fund established to provide funds for such repurchases. The
Company has no obligation to establish or maintain any such reserve fund.
4
Trust Consists Of Limited Assets And Payments On The Certificates Will Be
Made Solely From Deposited Assets. The only material assets expected to be in a
Trust are the Deposited Assets corresponding to the related Series (or Class) of
Certificates being offered. The Certificates are not insured or guaranteed by
the Company, any Administrative Agent or any of their affiliates. Accordingly,
Certificateholders' receipt of distributions in respect of the Certificates will
depend entirely on the performance of and the Trust's receipt of payments with
respect to the Deposited Assets and any Credit Support identified in the related
Prospectus Supplement. See "Description of Deposited Assets and Credit Support".
Average Life and Yield of Certificates May Vary Thus Creating Reinvestment
Risk. The timing of distributions of interest, premium (if any) and principal of
any Series (or of any Class within such Series) of Certificates is affected by a
number of factors, including the performance of the related Deposited Assets,
the extent of any early redemption, repayment, amortization, acceleration of
payment rate, slow down of payment rate or extension of maturity or amortization
with respect to the related Term Assets (or portion thereof) and the manner and
priority in which collections from such Term Assets and any other Deposited
Assets are allocated to each Class of such Series. Certain of these factors may
be influenced by a variety of accounting, tax, economic, social and other
factors. The related Prospectus Supplement will discuss any calls, puts or other
redemption options, any extension of maturity provisions and certain other terms
applicable to such Term Assets and any other Deposited Assets. See "Maturity and
Yield Considerations".
Tax Considerations Should Be Reviewed. Special Tax Counsel has delivered an
opinion to the Company that the discussion contained herein under the caption
"Federal Income Tax Consequences", to the extent it constitutes matters of law
or legal conclusions thereto, is true and correct in all material respects.
Special Tax Counsel has also delivered an opinion that the Trust will not be
characterized as an association taxable as a corporation (or publicly traded
partnership treated as an association) for federal income tax purposes. Special
Tax Counsel has not delivered (and unless otherwise indicated in the 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 ("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 consequences, among other consequences,
the Trust would be subject to federal income tax (and similar state income or
franchise taxes) on its income and distributions to Certificateholders would be
impaired. See "Federal Income Tax Considerations" herein and in the related
Prospectus Supplement.
Limited Nature Of Rating; Reduction Or Withdrawal Of Rating Could Occur
Which May Adversely Affect The Value 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 by one
or more nationally recognized rating agencies (a "Rating Agency"). Unless
otherwise specified in the applicable Prospectus Supplement, the rating of any
Series or Class of Certificates is based primarily on the related Deposited
Assets and any Credit Support and the relative priorities of the
Certificateholders of such Series or Class to receive collections from, and to
assert claims against, the Trust with respect to such Deposited Assets and any
Credit Support. The rating is not a recommendation to purchase, hold or sell
Certificates, inasmuch as such rating does not comment as to 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. There can be no assurance that the
rating will remain for any given period of time or that the rating will not be
lowered or withdrawn entirely by the Rating Agency if in its judgment
circumstances in the future so warrant. Any Class or Classes of a given Series
of Certificates may not be offered pursuant to this Prospectus, in which case
such Class or Classes may or may not be rated in an investment grade category by
a Rating Agency.
Global Securities Limit Direct Voting; And Ability To Pledge Certificates.
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, or on behalf of, a Depositary (as defined herein) and will not
be issued as individual definitive Certificates to the purchasers of such
Certificates. Consequently, unless and until such individual definitive
Certificates of a particular Series or Class are issued, such purchasers will
not be recognized as Certificateholders under the Trust Agreement. Hence, until
such time, such purchasers will only be able to exercise the rights of
Certificateholders indirectly through the Depositary and its respective
participating organizations and, as a result, the ability of any such purchaser
to pledge that Certificate to persons or entities that do not participate in the
Depositary's system, or to otherwise act with respect to such Certificate, may
be limited. See "Description of
5
Certificates--Global Securities" and "Limitations on Issuance of Bearer
Certificates" and any further description contained in the related Prospectus
Supplement.
Risks With Respect To Currency, Exchange Rates And Exchange Controls May
Exit. The Certificates of any given Series (or Class within such Series) may be
denominated in a currency other than U.S. dollars to the extent specified in the
applicable Prospectus Supplement. 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 Company 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.
Governments have from time to time imposed, and may in the future impose,
exchange controls that could affect exchange rates and the availability of a
Specified Currency for making distributions in respect of Certificates
denominated in such currency. 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 would not be available.
IT IS STRONGLY RECOMMENDED THAT PROSPECTIVE PURCHASERS 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. See "Currency
Risks".
Trust May Include Derivatives. A Trust may include various derivative
instruments, including interest rate, currency, securities, commodity and credit
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 (i.e.,
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. Credit derivatives involve swap and option contracts
designed to assume or lay off credit risk on loans, debt securities or other
assets, or in relation to a particular reference entity or country, in return
for either swap payments or payment of premium. Credit derivatives may also be
embedded in other instruments such as notes or warrants. Credit derivatives give
one party to a transaction the right to dispose of or acquire an asset (or group
of assets), or the right to receive or make a payment from the other party, upon
the occurrence of specified credit events.
6
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.
Publicly Available Information Concerning Term Assets Issuers Should Be
Revewed; Risk of Loss if Public Information Not Available. It is strongly
recommended that each prospective purchaser of Certificates obtain and evaluate
the same information concerning each Term Assets Issuer (as defined herein) as
it would obtain and evaluate if it were investing directly in the Term Assets or
in other securities issued by the Term Assets Issuer. The publicly-available
information concerning a Term Assets Issuer is important in considering whether
to invest in or sell Certificates. To the extent such information ceases to be
available, an investor's ability to make an informed decision to purchase or
sell Certificates could be impeded. The information in this Prospectus and any
Prospectus Supplement concerning the Term Assets and the Term Assets Issuers has
been obtained from publicly available documents, and none of the Company, the
Trustee or any of their affiliates has undertaken, or will undertake, any
investigation of the accuracy or completeness of such documents (whether or not
filed with the Commission) or the financial condition or creditworthiness of any
Term Assets Issuer. The issuance of Certificates of any Series should not be
construed as an endorsement by the Company or the Trustee or any of their
affiliates of the financial condition or business prospects of any Term Assets
Issuer.
Remedies Available to Certificateholders Are Limited Due to Passive Nature
of the Trust. The remedies available to a Trustee of a relevant Trust are
predetermined and therefore an investor in the Certificates has less discretion
over the exercise of remedies than if such investor directly invested in the
Term Assets. Each Trust will generally hold the related Deposited Assets to
maturity and not dispose of them, regardless of adverse events, financial or
otherwise, which may affect any Term Assets Issuer or the value of the Deposited
Assets. Except as indicated below, a holder will not be able to dispose of or
take other actions with respect to any Deposited Assets. Under certain
circumstances described in the applicable Prospectus Supplement, the Trustee
will (or will at the direction of a specified percentage of Certificateholders
of the relevant Series) dispose of, or take certain other actions in respect of,
the Deposited Assets. In certain limited circumstances, such as a mandatory
redemption of Term Assets or the exercise by a third party of the right to
purchase Term Assets (as described below under "Description of Trust Agreement -
Termination"), the Trustee may dispose of the Deposited Assets prior to
maturity. The applicable Prospectus Supplement will describe the particular
circumstances, if any, under which a Deposited Asset may be disposed of prior to
maturity.
Optional Exchange for Deposited Assets Will Generally Be Unavailable.
Although the Prospectus Supplement for a Series of Certificates may designate
such Series as an Exchangeable Series (as defined herein) and may provide that a
Certificateholder may exchange Certificates of the Exchangeable Series for a pro
rata portion of Deposited Assets of the related Trust, any such Optional
Exchange Right will be exercisable only to the extent that the exercise of such
right would not be inconsistent with the Company's or Trust'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. See "Description of Certificates -
Optional Exchange.". Accordingly, the optional exchange right described in this
Prospectus under the heading "Description of Certificates Optional Exchange" and
further described in the relevant Prospectus Supplement may be available only to
the Company and its affiliates and designees. Other Certificateholders will
generally not be able to exchange their Certificates of an Exchangeable Series
for a pro rata portion of the Deposited Assets of the related Trust. In
addition, the exercise of an optional exchange right will decrease the
outstanding aggregate amount of Certificates of the applicable Exchangeable
Series.
---------------------------------
The Prospectus Supplement for each Series of Certificates will set forth
information regarding any additional material risk factors applicable to such
Series (and each Class within such Series).
7
THE COMPANY
The Company was incorporated in the State of Delaware on November 23,
1992, as an indirect, wholly-owned, limited-purpose finance subsidiary of
Salomon Inc. The Company will not engage in any business or other activities
other than issuing and selling securities from time to time and acquiring,
owning, holding, pledging and transferring assets (including Deposited Assets
and Credit Support) in connection therewith or with the creation of a Trust and
in activities related or incidental thereto. The Company does not have, nor is
it expected to have, any significant unencumbered assets. The Company's
principal executive offices are located at Room 33-126, 32nd Floor, Seven World
Trade Center, New York, New York 10048 (telephone (212) 783-6645).
USE OF PROCEEDS
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 Company for
such purposes as may be specified in the applicable Prospectus Supplement. Such
purposes may include, without limitation, purchasing the related Deposited
Assets (or providing a Trust with funds to purchase such Deposited Assets) and
arranging certain Credit Support including, if specified in the related
Prospectus Supplement, making required deposits into any reserve account or
other account for the benefit of the Certificateholders of such Series or Class.
Any remaining net proceeds will be used by the Company for general corporate
purposes.
FORMATION OF THE TRUST
The Company will assign the Deposited Assets (or cash to purchase such
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 Trust
Agreement--Assignment of Deposited Assets". The Deposited Assets will consist of
[SELECT ONE OF THE BRACKETED SECTIONS][Alternative 1: a publicly issued, fixed
income debt security or asset backed security or 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) organized under the laws of the United States of America or any state,
which are subject to the informational requirements of the Exchange Act and
which in accordance therewith file reports and other information with the
Commission] [Alternative 2: a publicly issued, fixed income debt security or
pool of such debt securities which represent obligations of one or more foreign
private issuers (as such term is defined in Rule 405 of the Securities Act)
subject to the informational requirements of the Exchange Act and which in
accordance therewith file reports and other information with the Commission]
[Alternative 3: a publicly issued, fixed income debt security or pool of such
debt securities which represent obligations of 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, or a United States governmental sponsored
organization created pursuant to a federal statute] [Alternative 4: a publicly
issued, fixed income debt security or pool of such debt securities which
represent obligations issued by or guaranteed by a foreign government, political
subdivision or agency or instrumentality thereof]. See "Description of Deposited
Assets and Credit Support." The Trustee named in the applicable Prospectus
Supplement will administer the Deposited Assets pursuant to the Trust Agreement
and will receive a fee for such services (the "Trustee's Fee"). Any
Administrative Agent named in the applicable Prospectus Supplement will perform
such tasks as are specified therein and in the Trust Agreement and will receive
a fee for such services (the "Administration Fee") as specified in the
Prospectus Supplement. See "Description of 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 such Deposited Assets.
The Company'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 an Administrative Agent, if any, so named therein
with respect to the Deposited Assets will consist primarily of its contractual
administrative obligations, if
8
any, under the Trust Agreement, its obligation, if any, to make certain cash
advances in the event of delinquencies in payments on or with respect to any
Deposited Assets in amounts described under "Description of Trust
Agreement--Advances in Respect of Delinquencies", and its obligations, if any,
to purchase Deposited Assets as to which there has been a breach of certain
representations and warranties or as to which the documentation is materially
defective. The obligations of an Administrative Agent, if any, named in the
applicable Prospectus Supplement to make advances will be limited to amounts
which any such Administrative Agent believes ultimately would be recoverable
under any Credit Support, insurance coverage, the proceeds of liquidation of the
Deposited Assets or from other sources available for such purposes. See
"Description of Trust Agreement--Advances in Respect of Delinquencies".
To the extent provided in the related Prospectus Supplement, each Trust
will consist of (i) the applicable Deposited Assets, or interests therein,
exclusive of any interest in such assets (the "Retained Interest") retained by
the Company or any previous owner thereof, as from time to time are specified in
the Trust Agreement; (ii) such collections as from time to time are identified
as deposited in the related Certificate Account; (iii) property, if any,
acquired on behalf of Certificateholders by foreclosure or repossession and any
revenues received thereon; (iv) those elements of 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 and Credit
Support--Credit Support"; (v) the rights of the Company under the agreement or
agreements entered into by the Trustee on behalf of the Certificateholders which
constitute, or pursuant to which the Trustee has acquired, such Deposited
Assets; and (vi) the rights of the Trustee in any cash advance, reserve fund or
surety bond.
In addition, to the extent provided in the applicable Prospectus
Supplement, the Company will obtain Credit Support for the benefit of the
Certificateholders of any related Series (or Class within such Series) of
Certificates.
MATURITY AND YIELD CONSIDERATIONS
Each Prospectus Supplement will, to the extent applicable, contain
information with respect to the type and maturities of the related Term Assets
and the terms, if any, upon which such Term Assets may be subject to early
redemption (either by the applicable obligor or pursuant to a third-party call
option), repayment (at the option of the holders thereof) or extension of
maturity. The provisions of the Term Assets with respect to the foregoing may
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 certain aspects of the Deposited
Assets or any Credit Support or the manner and priorities of allocations of
collections with respect to such Deposited Assets between the Classes of a given
Series. The yield to maturity of any Series (or Class within such Series) may be
affected by any optional or mandatory redemption, repayment, amortization or
extension of maturity of the related Term Assets. A variety of tax, accounting,
economic, and other factors will influence whether any applicable party
exercises any right of redemption, repurchase or extension in respect of its
securities. The rate of redemption may also be influenced by prepayments on the
obligations a Term Assets Issuer holds for its own account. All else remaining
equal, if prevailing interest rates fall significantly below the interest rates
on the related Term Assets, the likelihood of redemption would be expected to
increase. There can be no certainty as to whether any Term Asset redeemable at
the option of a Term Assets Issuer will be repaid prior to its stated maturity.
To the extent specified in the related Prospectus Supplement, each of the
Term Assets will be subject to acceleration upon the occurrence of certain Term
Asset Events of Default (as defined herein). The maturity and yield on the
Certificates will be affected by any early repayment of the Term Assets as a
result of the acceleration of the Term Assets. See "Description of Deposited
Assets".
9
The extent to which the yield to maturity of such 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 for such Series (or Class) is based on variable or adjustable
interest rates. With respect to any Series of Certificates, disproportionate
principal payments (whether resulting from differences in amortization
schedules, payments due on scheduled maturity or upon early redemption) on the
related Term Assets having interest rates higher or lower than the then
applicable Pass-Through Rates applicable to such Certificates may affect the
yield thereon.
The 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, including the applicable Term Assets.
DESCRIPTION OF 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 among the Company, 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, Credit Support and related Trust.
The following summaries describe material 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 material
provision of the Trust Agreement or the applicable Certificates that is not
described 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 to which reference is hereby made 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.
GENERAL
There is no limit on the amount of Certificates that may be issued under
the 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 such Series
created pursuant to the Trust Agreement and each such Class will be allocated
certain relative priorities to receive specified collections from, and a certain
percentage ownership interest of the assets deposited in, such Trust, all as
identified and described in the applicable Prospectus Supplement. See
"Description of Deposited Assets and Credit Support--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: (i) the title of such Certificates; (ii) the
Series of such Certificates and, if applicable, the number and designation of
Classes of such Series; (iii) certain information concerning the type,
characteristics and specifications of the Deposited Assets being deposited into
the related Trust by the Company (and, with respect to any Term Asset which at
the time of such deposit represents a significant portion of all such Deposited
Assets and any related Credit Support, certain information concerning the terms
of each such Term Asset, the identity of the issuer thereof and where publicly
available information regarding such issuer may be obtained); (iv) the limit, if
any, upon the aggregate principal amount or notional amount, as applicable, of
each Class thereof; (v) the dates on which or periods during which such Series
or Classes within such Series may be issued (each, an "Original Issue Date"),
the offering price thereof and the applicable Distribution Dates on which the
principal, if any, of (and premium, if any, on) such Series or Classes within
such Series will be distributable; (vi) if applicable, the relative rights and
priorities of each such Class (including the method for allocating collections
from and defaults or losses on the Deposited Assets to the Certificateholders of
each such Class); (vii) whether the Certificates of such Series or each Class
within such Series are Fixed Rate Certificates or Floating Rate Certificates
(each as defined below) and the applicable interest rate (the "Pass-Through
Rate") for each such Class, including the applicable rate,
10
if fixed (a "Fixed Pass-Through Rate"), or the terms relating to the particular
method of calculation thereof applicable to such Series or each Class within
such Series, if variable (a "Variable Pass-Through Rate"); the date or dates
from which such interest will accrue; the applicable Distribution Dates on which
interest, principal and premium, in each case as applicable, on such Series or
Class will be distributable and the related Record Dates, if any; (viii) the
option, if any, of any Certificateholder of such Series or Class to withdraw a
portion of the assets of the Trust in exchange for surrendering such
Certificateholder's Certificate or to put the Certificate to the Company or a
third party or of the Company or Administrative Agent, if any, or another third
party to purchase or repurchase any Deposited Assets (in each case to the extent
not inconsistent with the Company's or Trust's continued satisfaction of the
applicable requirements for exemption under Rule 3a-7 under the Investment
Company Act of 1940 and all applicable rules, regulations and interpretations
thereunder) 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;
(ix) the rating of such Series or each Class within such Series offered hereby
(provided, however, that one or more Classes within such Series not offered
hereunder may be unrated or may be rated below investment grade); (x) if other
than denominations of $1,000 and any integral multiple thereof, the
denominations in which such Series or Class within such Series will be issuable;
(xi) whether the 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; (xii) whether the Certificates of such Series or of any Class
within such Series are to be issued as Registered Securities or Bearer
Certificates or both and, if Bearer Certificates are to be issued, whether
coupons ("Coupons") will be attached thereto; whether Bearer Certificates of
such Series or Class may be exchanged for Registered Securities of such Series
or Class and the circumstances under which and the place or places at which any
such exchanges, if permitted, may be made; (xiii) whether the 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 herein), if other than The Depository Trust Company, for such Global
Security or Securities; (xiv) 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
definitive Certificate of such Series or Class will be credited to the account
of the Persons entitled thereto on such Distribution Date; (xv) if a temporary
Global Security is to be issued with respect to such Series or Class, the terms
upon which beneficial interests in such temporary Global Security may be
exchanged in whole or in part for beneficial interests in a definitive Global
Security or for individual Definitive Certificates (as defined herein) of such
Series or Class and the terms upon which beneficial interests in a definitive
Global Security, if any, may be exchanged for individual Definitive Certificates
of such Series or Class; (xvi) if other than U.S. dollars, the Specified
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
and the circumstances and conditions, if any, when such Specified Currency may
be changed, at the election of the Company 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; (xvii)
any additional Administrative Agent Termination Events (as defined herein), if
applicable, provided for with respect to such Class; (xviii) 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 Company
or the applicable Administrative Agent, if any, or the Trustee; and (xix) 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.
The United States federal income tax consequences and ERISA consequences
relating to any Series or any Class within such Series of Certificates will be
described in this Prospectus and in the applicable Prospectus Supplement. 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
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. The
U.S. dollar equivalent of the public offering price or purchase price of a
Certificate having a Specified Principal 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
Principal Currency on the applicable issue date. As specified in the applicable
Prospectus Supplement such determination will be made by the Company, the
Trustee, the Administrative Agent, if any, or an agent thereof as exchange rate
agent for each Series of Certificates (the "Exchange Rate Agent").
11
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 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. Registered Securities may not be exchanged for
Bearer Certificates. The Company may at any time purchase Certificates at any
price in the open market or otherwise. Certificates so purchased by the Company
may, at the discretion of the Company, be held or resold or surrendered to the
Trustee for cancellation of such Certificates.
DISTRIBUTIONS
Distributions allocable to principal, premium (if any) and interest 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
of Registered Certificates 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 into 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 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. 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.
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. 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 Company'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.
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; provided, however, that any such amounts distributable on
the final Distribution Date of a Certificate will be distributed only upon
surrender of such Certificate at the applicable location set forth above. No
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.
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 (as defined herein) and the
related Distribution Dates, interest for the period beginning on the issue date
for such Series or Class and ending on the last day of the interest accrual
period ending
12
immediately prior to or coincident with such Distribution Date will 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 Principal 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.
"Business Day" with respect to any Certificate means any day, other than a
Saturday or Sunday, that is (i) not a day on which banking institutions are
authorized or required by law or regulation to be closed in (a) The City of New
York 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 (ii) 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, 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 with no or, in certain cases, a nominal Certificate Principal
Balance will be made 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 distributions
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 (or Notional Amount, if applicable), from its Original Issue
Date, or from the last date to which interest has been paid, at the fixed
Pass-Through Rate stated on the face thereof and in the applicable Prospectus
Supplement until the principal amount thereof is distributed or made available
for payment (or in the case of Fixed Rate 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, in accordance with a schedule
or otherwise, all as described in such Prospectus Supplement. Interest on each
Series or Class of Fixed Rate Certificates will be distributable in arrears on
each Distribution Date specified in such Prospectus Supplement. Each such
distribution of interest shall include interest accrued through the day
specified in the applicable Prospectus Supplement. Interest on Fixed Rate
Certificates will be computed on the basis of a 360-day year 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 the first Interest Reset Date (as defined
herein) for such Series or Class at the Initial Pass-Through Rate set forth on
the face thereof and in the applicable Prospectus Supplement. Thereafter, the
Pass-Through Rate on such Series or Class for each Interest Reset Period (as
defined herein) will be determined by reference to an interest rate basis (the
"Base Rate"), plus or minus the Spread, if any, or multiplied by the Spread
Multiplier, if any. The "Spread" is the number of basis points (one basis point
equals one one-hundredth of a percentage point) that may be specified in the
applicable Prospectus Supplement as being applicable to such Series or Class,
and the "Spread Multiplier" is the percentage that may be specified in the
applicable
13
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, 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: (i) LIBOR (a "LIBOR Reference Rate
Certificate"), (ii) the Commercial Paper Rate (a "Commercial Paper Reference
Rate Certificate"), (iii) the Treasury Rate (a "Treasury Reference Rate
Certificate"), (iv) the Federal Funds Rate (a "Federal Funds Reference Rate
Certificate"), (v) the CD Rate (a "CD Reference Rate Certificate") or (vi) such
other Base Rate (which may be based on, among other things, one or more market
indices or the interest and/or other payments (whether scheduled or otherwise)
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
publication, published by the Board of Governors of the Federal Reserve System.
"Composite Quotations" means the daily statistical release entitled "Composite
3:30 p.m. Quotations for U.S. Government Securities" published by the Federal
Reserve Bank of New York.
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, as the same may be modified by United States law of
general application. The Floating Rate Certificates will be governed by the law
of the State of New York and, under such law as of the date of this Prospectus,
the maximum rate of interest, with certain exceptions, is 25% per annum on a
simple interest basis.
The Company 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 Reset Period" for such Class, and the first day of each
Interest Reset Period being an "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 Scheduled Final Distribution
Date will be that in effect on the tenth day preceding such Scheduled Final
Distribution Date. If an Interest Reset Date for any Class of Floating Rate
Certificates would otherwise be a day that is not a Business Day, such Interest
Reset Date will occur on a prior or succeeding Business Day, specified in the
applicable Prospectus Supplement.
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
14
each day in the period for which accrued interest is being calculated. 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 Reference Rate
Certificates, Commercial Paper Reference Rate Certificates, Federal Funds
Reference Rate Certificates and CD Reference Rate Certificates or by the actual
number of days in the year, in the case of Treasury Reference 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.
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 Reference Rate Certificates. Each CD Reference Rate Certificate
will bear interest for each Interest Reset Period at the Pass-Through Rate
calculated with reference to the CD Rate and the Spread or Spread Multiplier, if
any, specified in such Certificate and in the applicable Prospectus Supplement.
The "CD Rate" for each Interest Reset Period shall be the rate as of the
second Business Day prior to the Interest Reset Date for such Interest Reset
Period (a "CD Rate Determination Date") for negotiable certificates of deposit
having the Index Maturity designated in the applicable Prospectus Supplement as
published in H.15(519) under the heading "CDs (Secondary Market)". In the event
that such rate is not published prior to 3:00 p.m., New York City time, on the
Calculation Date (as defined herein) pertaining to such CD Rate Determination
Date, then the "CD Rate" for such Interest Reset Period will be the rate on such
CD Rate Determination Date for negotiable certificates of deposit of the Index
Maturity designated in the applicable Prospectus Supplement as published in
Composite Quotations under the heading "Certificates of Deposit". If by 3:00
p.m., New York City time, on such Calculation Date such rate is not yet
published in either H.15(519) or Composite Quotations, then the "CD Rate" for
such Interest Reset Period will be calculated by the Calculation Agent for such
CD Reference 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 Reference 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 Reset Period will be the same
as the CD Rate for the immediately preceding Interest Reset Period (or, if there
was no such Interest Reset Period, the Initial Pass-Through Rate).
The "Calculation Date" pertaining to any CD Rate Determination Date shall
be the first to occur of (a) the tenth calendar day after such CD Rate
Determination Date or, if such day is not a Business Day, the next succeeding
Business Day or (b) the second Business Day preceding the date any distribution
of interest is required to be made following the applicable Interest Reset Date.
(2) Commercial Paper Reference Rate Certificates. Each Commercial Paper
Reference Rate Certificate will bear interest for each Interest Reset 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.
15
The "Commercial Paper Rate" for each Interest Reset Period will be
determined by the Calculation Agent for such Commercial Paper Reference Rate
Certificate as of the second Business Day prior to the Interest Reset Date for
such Interest Reset Period (a "Commercial Paper Rate Determination Date") and
shall be the Money Market Yield (as defined herein) 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
Calculation Date (as defined herein) pertaining to such Commercial Paper Rate
Determination Date, then the "Commercial Paper Rate" for such Interest Reset
Period shall be the Money Market Yield on such Commercial Paper Rate
Determination Date of the rate for commercial paper of the specified Index
Maturity as published in Composite Quotations under the heading "Commercial
Paper". If by 3:00 p.m., New York City time, on such Calculation Date such rate
is not yet published in either H.15(519) or Composite Quotations, then the
"Commercial Paper Rate" for such Interest Reset Period shall be the Money Market
Yield of the arithmetic mean of the offered rates, as of 11:00 a.m., New York
City time, on such Commercial Paper Rate Determination Date of three leading
dealers of commercial paper in The City of New York selected by the Calculation
Agent for such Commercial Paper Reference Rate Certificate for commercial paper
of the specified Index Maturity placed for an industrial issuer whose bonds are
rated "AA" or the equipment by a nationally recognized rating agency; provided,
however, that if the dealers selected as aforesaid by such Calculation Agent are
not quoting offered rates as mentioned in this sentence, the "Commercial Paper
Rate" for such Interest Reset Period will be the same as the Commercial Paper
Rate for the immediately preceding Interest Reset Period (or, if there was no
such Interest Reset Period, the Initial Pass-Through Rate).
"Money Market Yield" shall be a yield calculated in accordance with the
following formula:
Money Market Yield = D x 360 x 100
-------
360 - (D x M)
where "D" refers to the applicable per annum rate for commercial paper quoted on
a bank discount basis and expressed as a decimal, and "M" refers to the actual
number of days in the specified Index Maturity.
The "Calculation Date" pertaining to any Commercial Paper Rate
Determination Date shall be the first to occur of (a) the tenth calendar day
after such Commercial Paper Rate Determination Date or, if such day is not a
Business Day, the next succeeding Business Day or (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 Reference Rate Certificates. Each Federal Funds
Reference Rate Certificate will bear interest for each Interest Resort Period at
the Pass-Through Rate calculated with name to the Federal Funds Rate and the
Spread or Spread Multiplier, if any, specified in such Certificate and in the
applicable Prospectus Supplement.
The "Federal Funds Rate" for each Interest Reset Period shall be the
effective rate on the Interest Reset Date for such Interest Reset Period (a
"Federal Funds Rate Determination Date") for Federal Funds as published in
H.15(519) under the heading "Federal Funds (Effective)". In the event that such
rate is not published prior to 3:00 p.m., New York City time on the Calculation
Date (as defined herein) pertaining to such Federal Funds Rate Determination
Date, the "Federal Funds Rate" for such Interest Reset Period shall be the rate
on such Federal Funds Rate Determination Date as published in Composite
Quotations under the heading "Federal Funds/Effective Rate". If by 3:00 p.m.,
New York City time, on such Calculation Date such rate is not yet published in
either H.15(519) or Composite Quotations, then the "Federal Funds Rate" for such
Interest Reset Period shall be the rate on such Federal Funds Rate Determination
Date made publicly available by, the Federal Reserve Bank of New York which is
equivalent to the rate which appears in H.15(519) under the heading "Federal
Funds (Effective)", provided, however, that if such rate is not made publicly
available by the Federal Reserve Bank of New York by 3:00 p.m., New York City
time, on such Calculation Date, the "Federal Funds Rate" for such Interest Reset
Period will be the same as the Federal Funds Rate in effect for the immediately
preceding Interest Reset Period (or, if there was no such Interest Reset Period,
the Initial Pass-Through Rate). Unless otherwise specified in the applicable
Prospectus Supplement, in the case of a Federal Funds Reference 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
16
succeeding Business Day) to a rate equal to the average of the Federal Funds
Rates in effect with respect to each such day in such week.
The "Calculation Date" pertaining to any Federal Funds Rate Determination
Date shall be the next succeeding Business Day.
(4) LIBOR Reference Rate Certificates. Each LIBOR Reference Rate
Certificate will bear interest for each Interest Reset 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 rates for U.S. dollar
deposits, "LIBOR" for each Interest Reset Period will be determined by the
Calculation Agent for any LIBOR Reference Rate Certificate as follows:
(i) On the second London Banking Day prior to the Interest Reset Date
for such Interest Reset Period (a "LIBOR Determination Date"), the
Calculation Agent for such LIBOR Reference Rate 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 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 Reset Period will be the arithmetic mean of such offered
rates as determined by the Calculation Agent for such LIBOR Reference Rate
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 Reference Rate 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 Reset Period will be the arithmetic mean of such
quotations. If fewer than two such quotations are provided, "LIBOR" for
such Interest Reset Period will be the arithmetic mean of rates quoted by
three major banks in The City of New York selected by the Calculation
Agent for such LIBOR Reference Rate 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 mentioned in this sentence,
"LIBOR" for such Interest Reset Period will be the same as LIBOR for the
immediately preceding Interest Reset Period (or, if there was no such
Interest Reset Period, the Initial Pass-Through Rate).
If LIBOR with respect to any LIBOR Reference Rate 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 Reference Rate Certificates. Each Treasury Reference Rate
Certificate will bear interest for each Interest Reset 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.
The "Treasury Rate" for each Interest Reset Period will be the rate for the
auction held on the Treasury Rate Determination Date (as defined herein) for
such Interest Reset Period of direct obligations of the United States
17
("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 Calculation Date (as defined herein) pertaining
to such Treasury Rate Determination Date, the auction average rate (expressed as
a bond equivalent on the basis of a year of 365 or 366 days, as applicable, and
applied on a daily basis) on such Treasury Rate Determination Date as otherwise
announced by the United States Department of the Treasury. In the event that the
results of the auction of Treasury bills having the specified Index Maturity are
not published or reported as provided above by 3:00 p.m., New York City time, on
such Calculation Date, or if no such auction is held on such Treasury Rate
Determination Date, then the "Treasury Rate" for such Interest Reset Period
shall be calculated by the Calculation Agent for such Treasury Reference 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 Reset Period will be the same as the Treasury Rate for the
immediately preceding Interest Reset Period (or, if there was no such Interest
Reset Period, the Initial Pass-Through Rate).
The "Treasury Rate Determination Date" for each Interest Reset Period will
be the day of the week in which the Interest Reset Date for such Interest Reset
Period falls on which Treasury bills would normally be auctioned. Treasury bills
are normally sold at auction on Monday of each week, unless that day is a legal
holiday, in which case the auction is normally held on the following Tuesday,
except that such auction may be held on the preceding Friday. If, as the result
of a legal holiday, an auction is so held on the preceding Friday, such Friday
will be the Treasury Rate Determination Date pertaining to the Interest Reset
Period commencing in the next succeeding week. If an auction date shall fall on
any day that would otherwise be an Interest Reset Date for a Treasury Reference
Rate Certificate, then such Interest Reset Date shall instead be the Business
Day immediately following such auction date.
The "Calculation Date" pertaining to any Treasury Rate Determination Date
shall be the first to occur of (a) the tenth calendar day after such Treasury
Rate Determination Date or, if such a day is not a Business Day, the next
succeeding Business Day or (b) the second Business Day preceding the date any
distribution of interest is required to be made following the applicable
Interest Reset Date.
PRINCIPAL OF THE CERTIFICATES
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 out of the future cash flow on the Deposited Assets and other assets
included in the related Trust. Distributions generally will be applied to
undistributed 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 distributions of principal thereon, and, applicable pursuant to
the terms of the related Series, by the amount of any net losses realized on any
Deposited Asset ("Realized Losses") allocated thereto. The initial aggregate
Certificate Principal Balance of a Series and each Class thereof will be
specified in the related Prospectus Supplement. Distributions of principal of
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.
OPTIONAL EXCHANGE
If a holder may exchange Certificates of any given Series for a pro rata
portion of the Deposited Assets, the applicable Prospectus Supplement will
designate such Series as an "Exchangeable Series". The terms upon which a holder
may exchange Certificates of any Exchangeable Series for a pro rata portion of
the Deposited Assets of the related Trust will be specified in the related
Prospectus Supplement; provided that any right of exchange shall be exerciseable
only to the extent that such exchange would not be inconsistent with the
Company's and such Trust's continued satisfaction of the applicable requirements
for exemption under Rule 3a-7 under the Investment Company
18
Act of 1940 and all applicable rules, regulations and interpretations
thereunder. Such terms may relate to, but are not limited to, the following:
(a) a requirement that the exchanging holder tender to the Trustee
Certificates of each Class within such Exchangeable Series;
(b) a minimum Certificate Principal Balance or Notional Amount, as
applicable, with respect to each Certificate being tendered for exchange;
(c) 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;
(d) specified dates during which a holder may effect such an exchange
(each, an "Optional Exchange Date");
(e) limitations on the right of an exchanging holder to receive any
benefit upon exchange from any Credit Support or other non-Term Assets deposited
in the applicable Trust; and
(f) 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.
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 Certificate must receive, at least 30 (or such shorter
period acceptable to the Trustee) but not more than 45 days prior to an Optional
Exchange Date (i) such Certificate with the form entitled "Option to Elect
Exchange" on the reverse thereof duly completed, or (ii) in the case of
Registered Certificates, a telegram, telex, facsimile transmission or letter
from a member of a national securities exchange or the National Association of
Securities Dealers, Inc., the Depositary (in accordance with its normal
procedures) or a commercial bank or trust company in the United States setting
forth the name of the holder of such Registered Certificate, the Certificate
Principal Balance or Notional Amount of such Registered Certificate to be
exchanged, the certificate number or a description of the tenor and terms of
such 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
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).
Because initially and unless and 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.
Upon the satisfaction of the foregoing conditions and any applicable
conditions with respect to the related Deposited Assets, as described in the
applicable Prospectus Supplement, the applicable Certificateholder will be
entitled to receive a distribution of a pro rata share of the Deposited Assets
related to the Exchangeable Series (and Class within such Exchangeable Series)
of the Certificate being exchanged, in the manner and to the extent
19
described in such Prospectus Supplement, and would therefore own the Deposited
Assets and have the ability to enforce their rights directly as owners of the
Deposited Assets. 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 such
Certificateholder, such pro rata share of the Deposited Assets, in which event
the Certificateholder shall be entitled to receive the net proceeds of such
sale, less any costs and expenses incurred by such Trustee in facilitating such
sale, subject to any additional adjustments set forth in the Prospectus
Supplement.
PUT OPTION
If specified in the applicable Prospectus Supplement, a holder may put
Certificates of a given Series to the Company or a third party. The terms upon
which a holder may put its Certificates (including the price) will be specified
in the related Prospectus Supplement; provided, however, any put option shall be
exerciseable only to the extent that such put would not be inconsistent with the
Company's or Trust's continued satisfaction of the applicable requirements for
exemption under Rule 3a-7 under the Investment Company Act of 1940 and all
applicable rules, regulations and interpretations thereunder.
GLOBAL SECURITIES
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 that 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 definitive form. See
"Limitations on Issuance of Bearer Certificates" for provisions applicable to
Certificate 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 has advised the Company as follows: 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 participants and to facilitate the clearance and settlement of
securities transactions among the institutions that have accounts with such
Depositary ("participants") in such securities through electronic book-entry
changes in accounts of the participants, thereby eliminating the need for
physical movement of securities certificates. Such Depositary's participants
include securities brokers and dealers (including the Offering Agent), banks,
trust companies, clearing corporations, and certain other organizations, some of
whom (and/or their representatives) own such Depositary. Access to such
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. The Depository
Trust Company has confirmed to the Company that it intends to follow such
procedures.
Upon the issuance of a Global Security, the Depositary for such Global
Security will credit, on its book-entry registration and transfer system, the
respective principal amounts of the individual Certificates represented by such
Global Security to the accounts of its participants. The accounts to be
accredited 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 Company or such agent or agents. Ownership of beneficial interests in a
Global Security will be limited to participants or Persons that may hold
beneficial interests through participants. Ownership of beneficial interests in
a Global Security will be shown on, and the transfer of that ownership will be
effected only through, records maintained by the Depositary for such Global
Security or by participants or Persons that hold through participants. The laws
of some states require that certain purchasers of securities take physical
delivery of such securities. Such limits and such laws may limit the market for
beneficial interests in a Global Security.
20
So long as the Depositary for a Global Security, or its nominee, is the
owner of such Global Security, such Depositary or such nominee, as the case may
be, will be considered the sole Certificateholder of the individual Certificates
represented by such Global Security for all purposes. 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 such Global Security
registered in their names, will not receive or be entitled to receive physical
delivery of any such Certificates and will not be considered the
Certificateholder thereof under the Trust Agreement governing such 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 entries
that do not participate in the Depositary's system, or to otherwise act with
respect to such Certificate, may be limited due to the lack of a physical
certificate for such Certificate.
Subject to the restrictions discussed under "Limitations on Issuance of
Bearer Certificates" below, distributions of principal of (and premium, if any)
and any interest 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 such Global Security. None of the Company, the
Administrative Agent, if any, the Trustee for such Certificates, any Paying
Agent or the Certificate Registrar for such Certificates will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial interests in such Global Security or for
maintaining, supervising or reviewing any records relating to such beneficial
interests. Receipt by owners of beneficial interests in a temporary Global
Security of payments of principal, premium or interest in respect thereof will
be subject to the restrictions discussed below under "Limitations on Issuance of
Bearer Certificates" below.
The Company expects that the Depositary for Certificates of a given Class
and Series, upon receipt of any distribution of principal, premium or interest
in respect of a definitive Global Security representing any of such
Certificates, will credit immediately participants' accounts with payments in
amounts proportionate to their respective beneficial interests in the principal
amount of such Global Security as shown on the records of such Depositary. The
Company also expects that payments by participants to owners of beneficial
interests in such Global Security held through such participants will be
governed by standing instructions and customary practices, as is now the case
with securities held for the accounts of customers in bearer form or registered
in "street name", and will be the responsibility of such participants. Receipt
by owners of beneficial interests in a temporary Global Security of payments of
principal, premium or interest in respect thereof will be subject to the
restrictions discussed below under "Limitations on Issuance of Bearer
Certificates".
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 Company within ninety days, the Company will
issue individual Definitive Certificates in exchange for the Global Security or
Securities representing such Certificates. In addition, the Company 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
Company 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 Company and the Depositary for such 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 such Global Security equal in principal
amount to such beneficial interest and to have such 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 as (a) Registered Certificates in denominations, unless
otherwise specified by the Company, of $1,000 and integral multiples thereof if
the Certificates or such Class are issuable as Registered Securities, (b) as
Bearer Certificates in the denomination or denominations specified by the
Company if the Certificates of such Class are issuable as Bearer Certificates or
(c) 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 material terms of
the depositary arrangement with respect to any Class or Series of Certificates
being offered thereby to the extent not set forth above.
21
DESCRIPTION OF DEPOSITED ASSETS AND CREDIT SUPPORT
GENERAL
[SELECT ONE OF THE BRACKETED SECTIONS]
[Alternative 1] [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 ownership interest specified for such
Series (or Class) of Certificates in a designated, publicly issued, fixed income
debt security or asset backed security or a pool of such debt securities or
asset backed securities (the "Term Assets") issued by one or more issuers (the
"Term Assets Issuers"), purchased by a Trust with proceeds from, and at the
direction of, the Company or purchased by the Company (or an affiliate thereof)
in the secondary market and assigned to a Trust as described in the applicable
Prospectus Supplement. The Term Assets Issuers will be one or more corporations,
banking organizations, insurance companies or special purpose vehicles
(including trust, limited liability companies, partnerships or other special
purpose entities) organized under the laws of the United States or any state,
which are subject to the informational requirements of the Exchange Act and
which, in accordance therewith, file reports and other information with the
Commission. Based on information contained in the offering document pursuant to
which any Term Assets Issuer's securities were originally offered (a "Term
Assets Prospectus"), the applicable Prospectus Supplement shall set forth
certain information with respect to the public availability of information with
respect to any Term Assets Issuer the debt securities of which constitute more
than ten percent of the Term Assets for any series of Certificates as of the
date of such Prospectus Supplement ("Concentrated Term Assets"). Material terms
of the Term Assets will be set forth in the related Prospectus Supplement.]
[Alternative 2] [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 ownership interest specified for such
Series (or Class) of Certificates in a designated, publicly issued, fixed income
debt security or a pool of such debt securities (the "Term Assets"), purchased
by the Company (or an affiliate thereof) in the secondary market and assigned to
a Trust as described in the applicable Prospectus Supplement. Each Term Asset
will represent an obligation issued or guaranteed by a foreign government,
political subdivision or agency or instrumentality thereof (the "Term Assets
Issuers"). Any pool of such publicly offered foreign government debt securities
may include both registered and unregistered offerings. To the extent any such
Term Asset is unregistered, the applicable Prospectus Supplement will describe
the applicable exemption from the registration requirements of the Securities
Act. Each Term Asset, or Term Assets in the case of debt securities with a
common obligor, that represents ten percent or more of the total Term Assets
with respect to any Series of Certificates as of the date of the related
Prospectus Supplement ("Concentrated Term Assets") will represent an obligation
issued or guaranteed by a foreign government, one of its political subdivisions
or an agency or instrumentality of the foregoing which has offered debt
securities in the United States pursuant to a registration statement filed with
the Commission containing information required by Schedule B of the Securities
Act ("Schedule B"), which qualifies as a "seasoned" issuer under Commission
practice and which issuer or guarantor the Company reasonably believes (based on
publicly available information) is eligible to use Schedule B as of the time of
any offering of Certificates hereunder. The Term Assets may include obligations
of any or all of the following Foreign Governments (which may include
obligations guaranteed by the following): Austria, Australia, Canada, Canadian
Provinces, Denmark, Finland, France, Germany, Ireland, Japan, Norway, Italy,
Spain, Sweden and the United Kingdom. The Prospectus Supplement for any Series
will set forth the Foreign Government obligations included in the related
Trust.]
[Alternative 3] [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 ownership interest specified for such
Series (or Class) of Certificates in a designated, publicly issued, fixed income
debt security or pool of such debt securities (the "Term Assets"), purchased by
the Company (or an affiliate thereof) in the secondary market and assigned to a
Trust as described in the applicable Prospectus Supplement. The Term Assets will
represent direct obligations of one or more foreign private issuers (as such
term is defined in Rule 405 of the Securities Act) (the "Term Assets Issuers")
subject to the informational requirements of the Exchange Act and which in
accordance therewith file reports and other information with the Commission.]
[Alternative 4] [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 ownership interest specified for such
Series (or Class) of Certificates in a designated, publicly issued, fixed income
debt security or a pool of such debt securities
22
(the "Term Assets"), purchased by the Company (or an affiliate thereof) in the
secondary market and assigned to a Trust as described in the applicable
Prospectus Supplement. The respective issuer of any Term Asset is referred to
herein as a "Term Assets Issuer". Each Term Asset will represent an obligation
(i) 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") or (ii) of a U.S. governmental
sponsored organization created pursuant to federal statute (a "GSE"). 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 Association ("Freddie
Mae"), Student Loan Marketing Association ("Sallie Mae"), Resolution Funding
Corporation ("REFCORP"), Federal Home Loan Banks ("FHLB") (to the extent such
obligations represent the joint and several obligation of the twelve Federal
Home Loan Banks), Tennessee Valley Authority ("TVA") and Federal Farm Credit
Banks ("FFCB"). The Trusts may also include securities guaranteed by the United
States Agency for International Development ("AID") and government trust
certificates. Debt securities of such GSEs may be exempt from registration under
the Securities Act pursuant to Section 3(a)(2) of the Securities Act (or deemed
by statute to be so exempt) and are not required to be registered under the
Exchange Act. The securities of any such 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) such organization makes publicly available its annual
report which shall include financial statements or similar financial information
with respect to such organization (any such GSE, a "GSE Issuer"). Based on
information contained in the offering document pursuant to which any GSE
Issuer's securities were originally offered (a "Term Assets Prospectus"), the
applicable Prospectus Supplement shall set forth certain information with
respect to the public availability of information with respect to any GSE Issuer
the debt securities of which constitute more than ten percent of the Term Assets
for any series of Certificates as of the date of such Prospectus Supplement
("Concentrated Term Assets").]
The following is a general description of the Deposited Assets which the
Company is permitted to include in a Trust and does not purport to be a complete
description of any such Deposited Asset. This description is qualified in its
entirety by reference to the applicable Prospectus Supplement, the Term Assets
Prospectus and the Term Assets themselves. Material information regarding the
actual Deposited Assets, as of the Cut-off Date (as defined herein), will be
provided in the Prospectus Supplement used to offer a Series of Certificates. A
maximum of 5% of the aggregate principal balance of the Deposited Assets
included with respect to a Series of Certificates as described in this
Prospectus and the related Prospectus Supplement as of the relevant Cut-off Date
will deviate from the characteristics of the assets as of the date of issuance
of such Series.
TERM ASSETS
[INCLUDE FOR ALTERNATIVES 1 AND 3 ONLY]
[General. As specified in the related Prospectus Supplement, each Term
Asset will have been issued pursuant to an agreement (each, a "Term Assets
Indenture") between the Term Assets Issuer and the Term Assets Trustee. Unless
otherwise specified, the Term Assets Indenture and the Term Assets Trustee will
be qualified under the Trust Indenture Act of 1939 (the "TIA") and the Term
Assets Indenture will contain certain provisions required by the TIA.
Certain Covenants. Indentures generally contain covenants intended to
protect security holders against the occurrence or effects of certain specified
events, including restrictions limiting the issuer's, and in some cases any
subsidiary's, ability to: (i) consolidate, merge, or transfer or lease assets;
(ii) incur or suffer to exist any lien, charge, or encumbrance upon any of its
property or assets, or to incur, assume, guarantee or suffer to exist any
indebtedness for borrowed money if the payment of such indebtedness is secured
by the grant of such a lien; (iii) declare or pay any cash dividends, or make
any distribution 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 reserves. Subject to certain
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 Term Assets Indenture related to one or more Term Assets 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
Term Assets are investment grade debt they are unlikely to contain significant
restrictive covenants although
23
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
or Trustee as a holder of the Term Assets against losses. The Prospectus
Supplement used to offer any Series of Certificates will describe material
covenants in relation to any Concentrated Term Asset and, as applicable, will
describe material covenants which are common to any pool of Term Assets.
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 typically include the
following or variations thereof: (i) failure by the issuer to pay an installment
of interest or principal on the securities at the time required (subject to any
specified grace period) or to redeem any of the securities when required
(subject to any specified grace period); (ii) failure by the issuer to observe
or perform any covenant, agreement, or condition contained in the securities or
the indenture which 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; (iii) failure by the issuer to make any required
payment of principal (and premium, if any) or interest with respect to certain
of the other outstanding debt obligations of the issuer or the acceleration by
or on behalf of the holders thereof of such securities, and (iv) certain events
of insolvency or bankruptcy with respect to the Term Assets Issuer.
Remedies. Indentures 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 as it may deem appropriate to protect and enforce the
rights of the security holders. Certain indentures provide that the indenture
trustee 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.
Generally, an indenture will contain a provision entitling the trustee
thereunder to be indemnified by the security holders prior to proceeding to
exercise any right or power under such indenture with respect to such securities
at the request of such security holders. An indenture is also likely to limit a
security holder's right to institute certain actions or proceedings to pursue
any remedy under the indenture unless certain conditions are satisfied,
including consent of the indenture trustee, that the proceeding be brought for
the ratable benefit of all holders of the security, and/or the indenture
trustee, after being requested to institute a proceeding by the owners of at
least a specified minimum percentage of the securities, shall have refused or
neglected to comply with such request within a reasonable time.
Each Term Assets Indenture may include some, all or none of the foregoing
provisions or variations thereof or additional events of default not discussed
herein. The Prospectus Supplement with respect to any Series of Certificates
will describe the events of default under the Term Assets Indenture with respect
to any Concentrated Term Asset ("Term Asset Events of Default") 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
Term Asset Events of Default with respect to such pool. There can be no
assurance that any such provision will protect the Trust, as a holder of the
Term Assets, against losses. If a Term Asset Event of Default occurs and the
Trustee as a holder of the Term Assets is entitled to vote or take such other
action to declare the principal amount of a Term Assets and any accrued and
unpaid interest thereon to be due and payable, the Certificateholders'
objectives may differ from those of holders of other securities of the same
series and class as any Term Asset ("outstanding debt securities") in
determining whether to declare the acceleration of the Term Assets.
Subordination. As set forth in the applicable Prospectus Supplement,
certain of the Term Assets with respect to any Trust may be either senior
("Senior Term Assets") or subordinated ("Subordinated Term Assets") in right to
payment to other existing or future indebtedness of the Term Assets Issuer. With
respect to Subordinated Term Assets, 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
Term Assets, if any, may be entitled to receive payment of the full amount due
thereon before the holders of any subordinated debt securities are entitled to
receive payment on account of the principal (and premium, if any) or any
interest on such securities. Consequently, the Trust or Trustee as a holder of
subordinated debt may suffer a greater loss than if it held unsubordinated debt
of the Term Assets Issuer. There can be no assurance, however, that in the event
of a bankruptcy or similar proceeding the Trust or Trustee as a holder of Senior
Term Assets 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
24
subordination provisions with respect to any Concentrated Term Assets and the
percentage of Senior Term Assets and Subordinated Term Assets, if any, in a
Trust comprised of a pool of securities.
Secured Obligations. Certain of the Term Assets with respect to any Trust
may represent secured obligations of the Term Assets Issuer ("Secured Term
Assets"). Generally, unless an event of default shall have occurred, or with
respect to certain collateral or as otherwise set forth in the indenture
pursuant to
which such securities were offered and sold, an issuer of secured obligations
generally has the right to remain in possession and retain exclusive control of
the collateral securing a security and to collect, invest and dispose of any
income related to the collateral. The indenture pursuant to which any secured
indebtedness is issued may also contain certain provisions for release,
substitution or disposition of collateral under certain circumstances with or
without the consent of the indenture trustee or upon the direction of not less
than a specified percentage of the security holders. The indenture pursuant to
which any secured indebtedness is issued will also provide for the disposition
of the collateral upon the occurrence of certain events of default with respect
thereto. In the event of a default in respect of any secured obligation,
security holders may experience a delay in payments on account of principal (and
premium, if any) or any interest on such securities pending the sale of any
collateral and prior to or during such period the related collateral may decline
in value. If proceeds of the sale of collateral following an indenture event of
default are insufficient to repay all amounts due in respect of any secured
obligations, the holders of such securities (to the extent not repaid from the
proceeds of the sale of the collateral) would have only an unsecured claim
ranking pari passu with the claims of all other general unsecured creditors.
The Term Assets Indenture with respect to any Secured Term Asset may
include, some, or all or none of the foregoing provisions or variations thereof.
The Prospectus Supplement used to offer any Series of Certificates which
includes Concentrated Term Assets which are Secured Term Assets, will describe
the security provisions of such Term Assets and the related collateral. With
respect to any Trust comprised of a pool of securities, a substantial portion of
which are Secured Term Assets, the applicable Prospectus Supplement will
disclose certain general information with respect to such security provisions
and the collateral.]
[INCLUDE FOR ALTERNATIVE 2 ONLY]
General. None of the Term Assets will have been issued pursuant to an
indenture and no trustee is provided for with respect to any Term Asset.
Generally, there will be a fiscal agent (each a "Fiscal Agent") for the Foreign
Government Issuer with respect to the Term Asset whose actions will be governed
by a fiscal agency agreement. A Fiscal Agent does not have the same
responsibilities or duties to act on behalf of the holders of a Foreign
Government's debt securities as would a trustee.
Contractual Restrictions. There will generally be few, if any, contractual
restrictions on the Foreign Government Issuers or Foreign Government Guarantors
in respect of the Term Assets. The Term Assets 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 Term Asset. Certain actions in respect
of the debt securities of Foreign Governments may also be subject to proper
executive, legislative or administrative approval.
The Prospectus Supplement used to offer any Series of Certificates will
describe material covenants or undertakings in relation to any Concentrated Term
Asset and, as applicable, will describe material covenants or undertakings which
are common to any pool of Term Assets. There can be no assurance that any such
provision will protect the Trust as a holder of the Term Assets 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 Term Assets 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: (i) failure by the issuer to pay an
installment of interest or principal on the securities at the time required
(subject to any specified grace period) or to redeem any of the securities when
required (subject to any specified grace period); (ii) failure by the issuer to
observe or perform any covenant, agreement, or condition contained in the
securities which failure is materially adverse to security holders and continues
for a specified period after notice thereof; (iii) the declaration of a
moratorium on payment of interest
25
or principal in respect of external indebtedness and (iv) failure by the issuer
to make any required payment of principal (and premium, if any) or interest with
respect to certain of the other outstanding debt obligations of the issuer
(including other external indebtedness) or the acceleration by or on behalf of
the holders thereof of such securities.
Each Term Asset may include some, all or none of the foregoing provisions
or variations thereof or additional events of default not discussed herein. The
Prospectus Supplement with respect to any Series of Certificates will describe
the events of default under the Term Assets with respect to any Concentrated
Term Asset ("Term Asset Events of Default") 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 Term Asset Events
of Default with respect to such pool. There can be no assurance that any such
provision will protect the Trust, as a holder of the Term Assets, against
losses. If a Term Asset Event of Default occurs and the Trustee as a holder of
the Term Assets is entitled to vote or take such other action to declare the
principal amount of a Term Assets and any accrued and unpaid interest thereon to
be due and payable, the Certificateholders' objectives may differ from those of
holders of other outstanding debt securities in determining whether to declare
the acceleration of a Term Asset.
Remedies. Generally, upon the occurrence of an event of default, the
holders of not less than a specified percentage of the outstanding securities of
a Foreign Government may enforce their rights under the securities including, in
some cases, the right to declare all or a portion of the principal and accrued
interest on the outstanding securities immediately due and payable, subject to
the issuer's right to cure, if applicable. A fiscal agency agreement will not
typically provide for the agent to enforce the rights of the security holders as
would an indenture trustee. Consequently, any rights in respect of the Term
Assets must be pursued through the Trustee as a holder thereof in the manner
prescribed with respect to the Term Assets. There can be no assurance that the
Trustee will be able to enforce any contractual obligation against a Foreign
Government. Additionally, where action may be taken in respect of the Term
Assets only by a specified percentage of the holders of the outstanding debt
securities, the Trustee's ability to influence such action will be limited by
the proportion of such securities held by the Trust.]
[INCLUDE FOR ALTERNATIVE 4 ONLY]
[General. None of the Term Assets will have been issued pursuant to an
indenture, and no trustee is provided for with respect to any Term Asset. There
will generally be a fiscal agent ("Fiscal Agent") for a GSE Issuer with respect
to any related Term Asset whose actions will be governed by a fiscal agency
agreement. A Fiscal Agent is not a trustee for the holders of the Term Assets
and does not have the same responsibilities or duties to act for the holders of
a GSE's securities as would a trustee.
Contractual and Statutory Restrictions. A GSE Issuer and the related Term
Assets may be subject to certain contractual and statutory restrictions which
may provide some protection to securityholders against the occurrence or effects
of certain specified events. In general, each GSE is limited to such activities
as will promote its statutory purposes as set forth in the publicly available
information with respect to such issuer. See "Description of Term Assets
- -Available Information" in the related Prospectus Supplement. A GSE's promotion
of its statutory purposes, as well as its statutory, structural and regulatory
relationships with the federal government, may cause or require such GSE to
conduct its business in a manner that differs from that an enterprise which is
not a GSE might employ.
Neither the United States or 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. Term Assets issued by a GSE Issuer may provide that any
one of a number of specified events will constitute an event of default with
respect thereto. Such events of default typically include the following or
variations thereof: (i) failure by the issuer to pay an installment of interest
or principal on the securities at the time required (subject to any specified
grace period) or to redeem any of the securities when required (subject to any
specified grace period); (ii) failure by the issuer to observe or perform any
covenant, agreement or condition contained in the securities or authorizing
legislation or regulation, as the case may be, which failure is materially
adverse to security holders and continues for a specified period after notice
thereof; and (iii) certain events of
26
insolvency or bankruptcy with respect to the GSE Issuer. The Term Assets will
generally provide that upon the occurrence of an event of default the holders of
not less than a specified percentage of the outstanding securities may declare
all or a portion of the principal and accrued interest on the outstanding
securities immediately due and payable, subject to the issuer's right to cure,
if applicable.
Each Term Asset may include some, all or none of the foregoing provisions
or variations thereof or additional events of default not discussed herein. The
Prospectus Supplement with respect to any Series of Certificates will describe
the events of default under the Term Assets with respect to any Concentrated
Term Asset ("Term Asset Events of Default") 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 Term Asset Events
of Default with respect to such pool. There can be no assurance that any such
provision will protect the Trust, as a holder of the Term Assets, against
losses. If a Term Asset Event of Default occurs and the Trustee as a holder of
the Term Assets is entitled to vote or take such other action to declare the
principal amount of a Term Asset and any accrued and unpaid interest thereon to
be due and payable, the Certificateholders' objectives may differ from those of
holders of other securities of the same series and class as any Term Asset in
determining whether to declare the acceleration of a Term Assets.]
PRINCIPAL ECONOMIC TERMS OF TERM ASSETS
The applicable Prospectus Supplement will disclose the name of each Term
Assets Issuer with respect to the applicable Series of Certificates. In
addition, reference is made to the applicable Prospectus Supplement with respect
to each Series of Certificates for a description of the following terms, as
applicable, of any Concentrated Term Asset: (i) the title and series of such
Term Assets, the aggregate principal amount, denomination and form thereof; (ii)
whether such securities are senior or subordinated to any other obligations of
the issuer; (iii) whether any of the obligations are secured or unsecured and
the nature of any collateral; (iv) the limit, if any, upon the aggregate
principal amount of such debt securities; (v) the dates on which, or the range
of dates within which, the principal of (and premium, if any, on) such debt
securities will be payable; (vi) the rate or rates or the method of
determination thereof, at which such Term Assets will bear interest, if any
("Term Assets Rate"); the date or dates from which such interest will accrue
("Term Assets Interest Accrual Periods"); and the dates on which such interest
will be payable ("Term Assets Payment Dates"); (vii) the obligation, if any, of
the Term Assets Issuer to redeem the outstanding debt securities pursuant to any
sinking fund or analogous provisions, or at the option of a holder thereof, and
the periods within which or the dates on which, the prices at which and the
terms and conditions upon which such debt securities may be redeemed or
repurchased, in whole or in part, pursuant to such obligation; (viii) the
periods within which or the dates on which, the prices at which and the terms
and conditions upon which such debt securities may be redeemed, if any, in whole
or in part, at the option of the Term Assets Issuer; (ix) whether the Term
Assets were issued at a price lower than the principal amount thereof; (x) 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 Term Assets will be made (the
"Term Assets Currency"), and the circumstances, if any, when such currency of
payment may be changed; (xi) material events of default or restrictive covenants
provided for with respect to such Term Assets; (xii) the rating thereof, if any;
and (xiii) any other material terms of such Term Assets.
With respect to a Trust comprised of a pool of Term Assets, the related
Prospectus Supplement will, to the extent applicable, describe the composition
of the Term Assets pool [as of the Cut-off Date], certain material events of
default or restrictive covenants common to the Term Assets, and, on an
aggregate, percentage or weighted average basis, as applicable, the
characteristics of the pool with respect to certain terms set forth above in the
preceding paragraph and any other material terms regarding such pool of
securities.
PUBLICLY AVAILABLE INFORMATION
In addition to the foregoing, the applicable Prospectus Supplement will
describe, with respect to each Concentrated Term Assets Issuer, the existence
and type of certain information that is made publicly available by such Term
Assets Issuer regarding such Term Asset or Term Assets and will disclose where
and how prospective purchasers of the Certificates may obtain such publicly
available information with respect to each such Term Assets Issuer. Such
information will typically consist of such Term Assets Issuer's annual report,
which contains financial statements or similar financial information, and can be
obtained from the Commission, if so specified in the applicable Prospectus
Supplement, or from the office of such Term Assets Issuer identified in the
related Prospectus
27
Supplement. However, the precise nature of such publicly available information
and where and how it may be obtained with respect to any given Term Assets
Issuer will vary, and, as described above, will be set forth in the applicable
Prospectus Supplement.
OTHER DEPOSITED ASSETS
In addition to the Term Assets, the Company 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 Term Assets or to some other asset deposited
in the Trust, including hedging contracts and other similar arrangements (such
as puts, calls, interest rate swaps, currency swaps, credit swaps, default
swaps, floors, caps and collars, cash and assets ancillary or incidental to the
foregoing or to the Term Assets (including assets obtained through foreclosure
or in settlement of claims with respect thereto) (all such assets for any given
Series, together with the related Term Assets, the "Deposited Assets"). The
applicable Prospectus Supplement will to the extent appropriate contain
analogous disclosure with respect to the foregoing assets as referred to above
with respect to the Term 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 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 applicable 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. Such Credit Support may be provided by any
combination of the following means described below. 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, Credit Support and, if so, the amount, type and other relevant terms
of each element of Credit Support with respect to any such Class or Classes and
certain information with respect to the obligors of each such element. In
addition, the applicable Prospectus Supplement will include (or incorporate by
reference, as applicable) audited financial statements for any obligor providing
Credit Support for 20% or more of the cashflow of the relevant Series and
information required by Item 301 of Regulation S-K for any obligor providing
Credit Support for between 10 and 20% of the cashflow of such Series.
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 those Certificateholders of those other Classes. For example,
its losses are realized during a given period on the Deposited Assets relating
to a Series of Certificates such that the collections received thereon are
insufficient to make all distributions on the Certificates of such Series, those
realized losses would be allocated to the Certificateholder of any Class of 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
28
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 (a "Letter of Credit") issued by a bank (a "Letter of Credit Bank") or
a surety bond or bonds (a "Surety Bond") issued by a surety company (a
"Surety"). 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
describe the manner, priority and source of funds by which any such draws are to
be repaid.
In the event that the Letter of Credit Bank or the Surety, 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, 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, the 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
Trustee or such other person specified in the Prospectus Supplement will deposit
or cause to be deposited into an account maintained with an eligible institution
(which may be the Trustee) (a "Reserve Account") any combination of cash or
permitted investments in specified amounts, which will be applied and maintained
in the manner and under the conditions specified in such Prospectus Supplement.
In the alternative or in addition to such deposit, a Reserve Account may be
funded through application of a portion of collections received on the Deposited
Assets for a given Series of Certificates, in the manner and priority specified
in the applicable Prospectus Supplement Amounts may be distributed to
Certificateholders of such Class or group of Classes within such Series, or may
be used for other purposes, in the manner and to the extent provided in the
related Prospectus Supplement. Amounts deposited in any Reserve Account will be
invested in certain permitted investments by, or at the direction of, the
Trustee, the Company or such other person named in the related Prospectus
Supplement.
Other Credit Support. If so provided in the related Prospectus Supplement,
the Trust may include, or the Certificateholders of any Series (or any Class or
group of Classes within such Series) may have the benefit of, one or more
interest rate, currency, securities, commodity or credit swaps, caps, floors,
collars or options. The Prospectus Supplement will identify the counterparty to
any such instrument and will provide a description of the material terms
thereof.
COLLECTIONS
The Trust Agreement will establish procedures by which the Trustee or such
other person specified in the Prospectus Supplement is obligated, for the
benefit of the Certificateholders of each Series of Certificates, to administer
the related Deposited Assets, including making collections of all payments made
thereon, depositing from time to time prior to any applicable Distribution Date
such collections into a segregated account maintained or controlled by the
applicable Trustee for the benefit of such Series (each a "Certificate
Account"). An Administration 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
29
other amounts available for distribution to the payment of any administrative or
collection expenses (such as any administrative fee) and certain 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. There can be no assurance that amounts
received from the Deposited Assets and any Credit Support obtained for the
benefit of Certificateholders for a particular Series or Class of Certificates
over a specified period will 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 Loss 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 TRUST AGREEMENT
GENERAL
The following summary of material provisions of the Trust Agreement and
the Certificates does not purport to be complete and such summary 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. The applicable
Prospectus Supplement for a Series of Certificates will describe any applicable
material provision of the Trust Agreement or the Certificates that is not
described herein. Wherever particular sections or defined terms of the Trust
Agreement are referred to, such sections or defined terms are incorporated
herein by reference as part of the statement made, and the statement is
qualified in its entirety by such reference.
ASSIGNMENT OF DEPOSITED ASSETS
At the time of issuance of any Series of Certificates, the Company will
cause the Term Assets to be included in the related Trust, and any other
Deposited Asset specified in the Prospectus Supplement, to be assigned to the
related Trustee, together with all principal, premium (if any) and interest
received by or on behalf of the Company on or with respect to such Deposited
Assets after the cut-off date specified in the Prospectus Supplement (the
"Cut-off Date"), other than principal, premium (if any) and interest due on or
before the Cut-off Date and other than any Retained Interest. If specified in
the Prospectus Supplement, the Trustee will, concurrently with such assignment,
deliver the Certificates to the Company in exchange for certain assets to be
deposited in the Trust. Each Deposited Asset 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 Term Asset and each other
Deposited Asset as of the Cut-off Date, and in the event any Term Asset
represents ten percent or more of the total Term Assets with respect to any
Series of Certificates, 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, the Company 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 such documents
upon receipt thereof or within such period as is permitted in the Prospectus
Supplement, and the Trustee (or such custodian) will hold such documents in
trust for the benefit of the Certificateholders.
With respect to certain types of Deposited Assets specified in the
applicable Prospectus Supplement only if and to the extent provided therein, if
any such document is found to be missing or defective in any material respect,
the Trustee (or such custodian) shall immediately notify the Administrative
Agent, if any, and the Company, and the Administrative Agent, if any, and
otherwise the Trustee shall immediately notify the relevant person who sold the
applicable Deposited Asset to the Company (a "Deposited Asset Provider"). To the
extent specified in the applicable Prospectus Supplement, if the Deposited Asset
Provider cannot cure such omission or defect within 60 days after receipt of
such notice, the Deposited Asset Provider will be obligated, within 90 days of
receipt of such
notice, to repurchase the related Deposited Asset from the Trust at the Purchase
Price (as defined herein) or provide a substitute for such Deposited Asset.
There can be no assurance that a Deposited Asset Provider will fulfill this
repurchase or substitution obligation. Although the Administrative Agent, if
any, or otherwise an Administrator, on behalf of the Trustee is obligated to use
its best efforts to enforce such obligation, neither such Administrative Agent
nor the Company will be obligated to repurchase or substitute for such Deposited
Asset if the Deposited Asset Provider defaults on its obligation. 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, and the Trust
and the Certificateholders will not have any continuing direct or indirect
liability under the Trust Agreement as sellers of the assets of the Trust in
enforcing such obligation.
Each of the Company 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 Company or any such Administrative
Agent, as the case may be, which materially and adversely affects the interests
of the Certificateholders, the Company 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 and will follow or cause to be followed 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 any related instrument governing any
Credit Support (collectively, the "Credit Support 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), but
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 (as defined herein).
The agreement between any Administrative Agent or Trustee and a
Sub-Administrative Agent (a "Sub-Administration Agreement") will be consistent
with the terms of the Trust Agreement and such assignment to the
Sub-Administrator by itself will not result in a withdrawal or downgrading of
the rating of any Class of Certificates issued pursuant to the Trust Agreement.
With respect to any Sub-Administrative Agreement between an Administrative Agent
and a Sub-Administrative Agent, 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 such Administrative
Agent for such 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 such Sub-Administration
Agreement.
The Administrative Agent or Trustee, as applicable, 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
31
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, as applicable, may require any
Sub-Administrative Agent to agree to indemnify the Administrative Agent or
Trustee, as applicable, for any liability or obligation sustained by the
Administrative Agent or Trustee, as applicable, in connection with any act or
failure to act by the Sub-Administrative Agent.
Realization upon Defaulted Deposited Assets. As administrator with respect
to the Deposited Assets, the Trustee (or an Administrator on its behalf), on
behalf of the Certificateholders of a given Series (or any Class or Classes
within such Series), will present claims under each applicable Credit Support
Instrument, and will take such reasonable steps as are necessary to receive
payment or to permit recovery thereunder with respect to defaulted Deposited
Assets. As set forth above, all collections by or on behalf of the Trustee or
Administrative Agent under any Credit Support Instrument are to be deposited in
the Certificate Account for the related Trust, subject to withdrawal as
described above.
If recovery on a defaulted Deposited Asset under any related Credit Support
Instrument is not available, the Trustee will be obligated to follow or cause to
be followed such normal practices and procedures as it deems necessary or
advisable to realize upon the defaulted Deposited Asset, provided that 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 the defaulted
Deposited Asset are less than the sum of (i) the outstanding principal balance
of the defaulted Deposited Asset, (ii) interest accrued thereon at the
applicable interest rate and (iii) the aggregate amount of expenses incurred by
the Administrative Agent and the Trustee, as applicable, in connection with such
proceedings to the extent reimbursable from the assets of the Trust under the
Trust Agreement, the Trust will realize a loss in the amount of such difference.
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 Deposited Asset, prior to the distribution
of such proceeds to Certificateholders, amounts representing its normal
administrative compensation on the Deposited Asset, unreimbursed administrative
expenses incurred with respect to the Deposited Asset and any unreimbursed
advances of delinquent payments made with respect to the Deposited Asset.
RETAINED INTEREST; ADMINISTRATIVE AGENT COMPENSATION AND PAYMENT
OF EXPENSES
The Prospectus Supplement for a Series of Certificates will specify
whether there will be any Retained Interest in the Deposited Assets, and, if so,
the owner thereof. If so provided, the Retained Interest will be established on
an asset-by-asset basis and will be specified in an exhibit to the applicable
series supplement to the Trust Agreement. A Retained Interest in a Deposited
Asset represents a specified interest therein. Payments in respect of the
Retained Interest will be deducted from payments on the Deposited Assets 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 a
Deposited Asset, 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.
The applicable Prospectus Supplement will specify the Administrative
Agent's, if any, and the Trustee's compensation, and the source, manner and
priority of payment thereof, with respect to a given Series of Certificates.
If and to the extent specified in the applicable Prospectus Supplement, in
addition to amounts payable to any Sub-Administrative Agent, 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.
32
ADVANCES IN RESPECT OF DELINQUENCIES
The Administrative Agent, if any, specified in the applicable Prospectus
Supplement will have no obligation to make any advances with respect to
collections on the Deposited Assets or in favor of the Certificateholders of the
related Series of Certificates. However, to the extent provided in the
applicable Prospectus Supplement, any such Administrative Agent will advance on
or before each Distribution Date its own funds or funds held in the Certificate
Account for such Series that are not part of the funds available for
distribution for such Distribution Date, in an amount equal to the aggregate of
payments of principal, premium (if any) and interest (net of related
administration fees and any Retained Interest) with respect to the Deposited
Assets that were due during the related Collection Period and were delinquent on
the related Determination Date, subject to (i) any such Administrative Agent's
good faith determination that such advances will be reimbursable from Related
Proceeds (as defined herein) and (ii) such other conditions as may be specified
in the Prospectus Supplement.
Advances, if any, 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. Advances of an Administrative Agent's funds, if any, will be
reimbursable only out of related recoveries on the Deposited Assets (and amounts
received under any form of Credit Support) for such Series with respect to which
such advances were made (as to any Deposited Assets, "Related Proceeds");
provided, however, that any such advance will be reimbursable from any amounts
in the Certificate Account for such Series to the extent that such
Administrative Agent shall determine, in its sole judgment, that such advance (a
"Nonrecoverable Advance") is not ultimately recoverable from Related Proceeds.
If advances have been made by such Administrative Agent from excess funds in the
Certificate Account for any Series, such Administrative Agent will replace such
funds in such Certificate Account on any future Distribution Date to the extent
that funds in such Certificate Account on such 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 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 COMPANY
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
Company, an affiliate of either thereof, the Deposited Asset Provider or any
third party and may have other normal business relationships with the Trustee,
the Company, their affiliates or the Deposited Asset Provider.
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 such 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 such an
Administrative Agent, the Company nor any director, officer, employee, or agent
of the Administrative Agent or the Company 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
Company nor any such person will be protected against any liability that would
otherwise be imposed by reason of willful misfeasance, bad faith or negligence
in the performance of duties thereunder or by reason of reckless disregard of
obligations and duties thereunder. The Trust Agreement may further provide that,
unless otherwise provided in the applicable series supplement thereto, such an
Administrative Agent, the Company and any director, officer, employee or agent
of the Administrative Agent or the Company will be entitled to the
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 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 such an Administrative Agent nor the Company will be under any
obligation to appear in,
33
prosecute or defend any legal action which is not incidental to their respective
responsibilities under the Trust Agreement or which in its opinion may involve
it in any expense or liability. Each of such Administrative Agent or the Company
any, however, in its discretion undertake any such 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 such legal
expenses and costs of such action and any liability resulting therefrom will be
allocated.
Any person into 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
"Administrative Agent Termination Events" under the Trust Agreement with
respect to any given Series of Certificates will consist of the following: (i)
any failure by an Administrative Agent to remit to the Trustee any funds in
respect of collections on the Deposited Assets and Credit Support, if any, 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 Company, or to the Administrative Agent, the Company and
the Trustee by the holders of such Certificates evidencing not less than 25% of
the Voting Rights (as defined herein); (ii) 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 Company, or to
the Administrative Agent, the Company and the Trustee by the holders of such
Certificates evidencing not less than 25% of the Voting Rights; and (iii)
certain events of insolvency, readjustment of debt, marshalling 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 herein) applicable to each such 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 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
Company or the Trustee may, and at the direction of holders of such Certificates
evidencing not less than the "Required Percentage--Administrative Agent
Termination" of the Voting Rights, the Trustee will, terminate all the rights
and obligations of such 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), whereupon the Trustee will
succeed to all the responsibilities, duties and liabilities of such
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 Deposited Assets, 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 so to act, it may, or, at the
written request of the holders of such Certificates evidencing not less than the
"Required Percentage--Termination" of the Voting Rights, it will appoint, or
petition a court of competent jurisdiction for the appointment of, an
administration agent 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
Deposited Assets, then the Trustee will not be so obligated). The Trustee and
any such successor may agree upon the compensation to
34
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.
REMEDIES OF CERTIFICATEHOLDERS
Any Certificateholder may institute any proceeding with respect to the
applicable Trust Agreement subject to the following conditions: (i) such holder
previously has given to the Trustee written notice of breach; (ii) the holders
of Certificates evidencing not less than the "Required Percentage--Remedies" 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 (iii) 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 such 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
The Trust Agreement for each Series of Certificates may be amended by the
Company and the Trustee with respect to such Series, without notice to or
consent of the Certificateholders, for certain purposes including (i) to cure
any ambiguity, (ii) to correct or supplement any provision therein which may be
inconsistent with any other provision therein or in the Prospectus Supplement,
(iii) to add or supplement any Credit Support for the benefit of any
Certificateholders (provided that if any such addition affects any series or
class of Certificateholders differently than any other series or class of
Certificateholders, then such addition will not, as evidenced by an opinion of
counsel, have a material adverse effect on the interests of any affected series
or class of Certificateholders), (iv) to add to the covenants, restrictions or
obligations of the Company, the Administrative Agent, if any, or the Trustee for
the benefit of the Certificateholders, (v) to add, change or eliminate any other
provisions with respect to matters or questions arising under such Trust
Agreement, so long as (x) any such addition, change or elimination will not, as
evidenced by an opinion of counsel, affect the tax status of the Trust or result
in a sale or exchange of any Certificate for tax purposes and (y) the Trustee
has received written confirmation from each Rating Agency rating such
Certificates that such amendment will not cause such Rating Agency to reduce or
withdraw the then current rating thereof, or (vi) to comply with any
requirements imposed by the Code. Without limiting the generality of the
foregoing, the Trust Agreement may also be modified or amended from time to time
by the Company, and the Trustee, with the consent of the holders of Certificates
evidencing not less than the "Required Percentage--Amendment" of the Voting
Rights of those Certificates that are materially adversely affected by such
modification or amendment for the purpose of adding any provision to or changing
in any manner or eliminating any provision of the Trust Agreement or of
modifying in any manner the rights of such Certificateholders; provided,
however, that in the event such modification or amendment would materially
adversely affect the rating of any Series or Class by each Rating Agency, the
"Required Percentage--Amendment" specified in the related series supplement to
the Trust Agreement shall include an additional specified percentage of the
Certificates of such Series or Class.
No such modification or amendment may, however, (i) reduce in any manner
the amount of or alter the timing of, distributions or payments which are
required to be made on any Certificate without the consent of the holder of such
Certificate or (ii) reduce the aforesaid Required Percentage of Voting Rights
required for the consent to any such amendment without the consent of the
holders of all Certificates covered by the Trust Agreement then outstanding.
Holders of Certificates evidencing not less than the "Required
Percentage--Waiver" of the Voting Rights of a given Series may, on behalf of all
Certificateholders of that Series, (i) waive, insofar as that Series is
concerned, compliance by the Company, the Trustee or the Administrative Agent,
if any, with certain restrictive provisions, if any, of the Trust Agreement
before the time for such compliance and (ii) waive any past default under the
Trust Agreement with respect to Certificates of that Series, except a default in
the failure to distribute amounts received as principal of (and premium, if any)
or any interest on any such Certificate and except a default in respect of a
covenant or provision the modification or amendment of which would require the
consent of the holder of each outstanding Certificate affected thereby.
35
REPORTS TO CERTIFICATEHOLDERS; NOTICES
Reports to Certificateholders. 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 Company and to such other parties as may be specified
in the Trust Agreement, a statement setting forth:
(i) 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;
(ii) 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;
(iii)the amount of compensation received by the Administrative Agent, if
any, and the Trustee for the period relating to such Distribution Date, 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;
(iv) 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;
(v) the aggregate stated principal amount or, if applicable, notional
principal amount of the Deposited Assets and the current interest rate thereon
at the close of business on such Distribution Date;
(vi) 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;
(vii)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 pursuant to subclauses (i) and (iii)
above, 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, if
any, or the Trustee shall furnish to each person who at any time during the
calendar year was a Certificateholder a statement containing the information set
forth in subclauses (i) and (iii) above, 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, shall
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. Any notice required to be given to a holder of a Registered
Certificate will be mailed to the 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 newspaper of general circulation in
the city or cities specified in the Prospectus Supplement relating to such
Bearer Certificate.
EVIDENCE AS TO COMPLIANCE
If so specified in the applicable Prospectus Supplement, the Trust
Agreement will provide that on or before a specified date in each year, 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
36
Issue Date), which report should enable the recipients to determine whether such
administration was conducted in compliance with the terms of the Trust
Agreement. Such report shall identify any exceptions found during the
examination.
The Trust Agreement will also provide for delivery to the Company, 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, if any, 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.
REPLACEMENT CERTIFICATES
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 Securities) 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 Asset subject thereto or the disposition of
all property acquired upon foreclosure or liquidation of any such Deposited
Asset and (ii) the purchase of all the assets of the Trust by the party entitled
to effect such termination, 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 such purchase of Deposited Assets and property acquired in respect of
Deposited Assets evidenced by a Series of Certificates shall 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, which price will not be less than the outstanding
principal balance of the Certificates plus accrued interest, if any, thereon
(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 not more than 10% of the aggregate principal balance of the
Deposited Assets at the Cut-off Date for that Series, or such smaller percentage
as shall be specified in the related Prospectus Supplement. The Trust and the
Certificateholders shall have no continuing direct or indirect liability under
the Trust Agreement as sellers of the assets of the Trust in effecting such
termination.
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 Asset or
related
37
document and is not accountable for the use or application by or on behalf of
any Administrative Agent of any funds paid to such 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 such Administrative Agent. 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 Company,
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 Company 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 date of such Bearer Certificate, they will not offer, sell or deliver
such Bearer Certificate, directly or indirectly, to a U.S. Person or to any
person within the United States, except to the extent permitted under U.S.
Treasury regulations.
Bearer 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 1650(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, Securities 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
Morgan Guaranty Trust Company of New York, Brussels Office, as operator of the
Euroclear System ("Euroclear"), and Centrale de Livraison de Valeurs Mobilieres
S.A. ("CEDEL") for credit to the accounts designated by or on behalf of the
purchases 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 CEDEL with respect to that portion of
such temporary Global Security held for its account, but only upon receipt as of
the relevant Distribution Date of a Certificate of Non-U.S. Beneficial
Ownership.
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,
38
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
Company 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 Company has identified the
following currencies in which distributions of principal, premium and interest
on Certificates may be made: Australian dollars, Canadian dollars, 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 Certificates--General" or as otherwise specified in the
applicable Prospectus Supplement.
IT IS STRONGLY RECOMMENDED THAT PROSPECTIVE PURCHASERS 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, 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 Company'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.
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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.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of material United States federal income tax
consequences of the ownership of the Certificates as of the date hereof.
(Certain minor and incidental consequences are discussed as well.) It is based
on the advice of Orrick, Herrington & Sutcliffe LLP, Special Tax Counsel
("Special Tax Counsel"), which has delivered an opinion to the Company that the
discussion below, to the extent it constitutes matters of law or legal
conclusions thereto, is true and correct in all material respects.
Special Tax Counsel has also delivered an opinion that the Trust will not
be characterized as an association taxable as a corporation (or publicly traded
partnership treated as an association) for federal income tax purposes. Special
Tax Counsel has not delivered (and unless otherwise indicated in the 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 consequences,
among other consequences, the Trust would be subject to federal income tax (and
similar state income or franchise taxes) on its income and distributions to
Certificateholders would be impaired. In light of Special Tax Counsel's opinion,
however, the balance of this discussion assumes that the Trust will not be
characterized or treated as a corporation.
This summary is based on the Internal Revenue Code of 1986 (the "Code") as
well as Treasury regulations and administrative and judicial rulings and
practice. Legislative, judicial and administrative changes may occur, possibly
with retroactive effect, that could alter or modify the continued validity of
the statements and conclusions set forth herein. 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
40
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.
Except with respect to certain withholding tax matters discussed below
under "Withholding Taxes", the discussion is limited to consequences to U.S.
Persons. For purposes of this discussion, a U.S. Person is: (i) a citizen or
resident of the United States, (ii) a corporation or partnership organized in or
under the laws of the United States, any state thereof or the District of
Columbia, or (iii) an estate or trust that is a United States Person within the
meaning of Section 7701(a)(30) of the Code.
For the purposes of this discussion, the Company and Special Tax Counsel
have assumed, without inquiry, that the Term Assets will be characterized as
indebtedness for federal income tax purposes. The Prospectus Supplement may
contain additional information about the federal income tax characterization of
the Term Assets.
TAX STATUS OF THE TRUST
The Trustee intends for tax reporting purposes to treat the Trust as a
grantor trust. Prospective investors should be aware, however, that certain of
the terms of Certificates (for example, the allocation of the proceeds of a
disposition of the Term Assets) may be viewed by the IRS as inconsistent with
the grantor trust rules and, accordingly, unless otherwise indicated in the
Prospectus Supplement, Special Tax Counsel is not able to deliver an opinion
that the Trust will be treated as a grantor trust. Nonetheless, because treating
the Trust as a grantor trust is the more appropriate approach for tax reporting
purposes, the Trustee currently intends to treat the trust as a grantor trust
and, except as specifically indicated otherwise under "Possible
Recharacterization of the Trust as a Partnership" below, the balance of this
discussion assumes that the Trust will be so classified. (The Trust Agreement
prohibits the Trust from electing to be taxed as a corporation.)
Each Certificateholder will be treated, for federal income tax purposes,
as a holder of an equity interest in the Trust and, accordingly, (i) as if it
had purchased its pro rata interest of the Trust's underlying assets and (ii) as
if it were the obligor on its pro rata portion of the Trust's obligations. Thus,
for example, if the Certificates are subject to early redemption on account of
the Trust being the obligor under any call options ("Call Warrants"), each
Certificateholder will be treated as if it had sold Call Warrants with respect
to the Term Assets in an amount representing its pro rata interest in the Trust.
Further, if the income of the Trust is used (directly or indirectly) to pay
expenses of the Trust, the holders will be treated as if each had first earned
its pro rata share of that income and then paid its share of the expense.
Prospective investors should be aware that expenses of the Trust may be subject
to limitations on deductibility, which may depend on each particular investor's
circumstances, but would include, in the case of an individual (or entity
treated as an individual) section 67 of the Code that allows miscellaneous
itemized deductions only to the extent that in the aggregate they exceed 2
percent of adjusted gross income.
The Trust has identified the Term Assets and any Call Warrants as part of
an integrated transaction within the meaning of Treasury Regulation 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
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
Term Assets. It is also 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 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.
INCOME OF CERTIFICATEHOLDERS
Original Issue Discount. Each Certificateholder will be subject to the
original issue discount ("OID") rules of the Code and Treasury Regulations with
respect to such Certificates. Under those rules, the Certificateholder (whether
on the cash or accrual method of accounting) will be required to include in
income the OID on the Certificates as it accrues on a daily basis, on a constant
yield method regardless of when cash payments are received.
41
The amount of OID on a Certificate generally will be equal to the excess of all
amounts payable on the Certificate over the amount paid to acquire the
Certificate and the constant yield used in accruing OID generally will be the
yield to maturity of a Certificate as determined by each holder based on that
holder's purchase price for the Certificate. It is unclear whether the holder of
a Certificate should, in calculating OID, assume that the Term Assets will, or
will not, be called pursuant to any Call Warrant. Further, it is not clear how
actual and expected future prepayments or losses on the Term Assets are to be
taken into account.
The Trustee intends for information reporting purposes to account for OID,
if any, reportable by Certificateholders by reference to the price paid for a
Certificate by an initial purchaser at an assumed issue price, although the
amount of OID will differ for other purchasers. Such purchasers should consult
their tax advisers regarding the proper calculation of OID.
The amount of OID that is reported in income in any particular year will
not necessarily bear any relationship to the amount of distributions, if any,
paid to a holder in that year.
Purchase and Sale of a Certificate. A Certificateholder's tax basis in a
Certificate generally will equal the cost of the Certificates increased by any
amounts includible in income as OID, and reduced by any payments made on the
Certificates. If a Certificate is sold or redeemed, capital gain or loss will be
recognized equal to the difference between the proceeds of sale and the
Certificateholder's adjusted basis in the Certificates.
POSSIBLE RECHARACTERIZATION OF THE TRUST AS A PARTNERSHIP
As indicated above, it is possible that the IRS will seek to
recharacterize the Trust as a partnership. If the IRS were to successfully
recharacterize the Trust as a partnership, the Trust would not be subject to
federal income tax. Under Treasury Regulation 1.761-2, certain partnerships may
"elect out" of subchapter K of the Code (partnership tax accounting). Although
subject to uncertainty, the Trust is likely to be eligible for this election.
Assuming that it is so eligible, each Certificateholder will be required to
report its respective share of the items of income, deductions, and credits of
the organization on their respective returns (making such elections as to
individual items as may be appropriate) in a manner consistent with the
exclusion of the Trust from partnership tax accounting. Such reporting should be
substantially similar to the income tax reporting that would be required under
the grantor trust rules. In mutual consideration for each Holder's purchase of a
Certificate, each such Holder is deemed to consent to the Trust's making of a
protective election out of subchapter K of the Code.
If the election to be excluded from the partnership tax accounting
provisions of the Code is not effective, among other consequences, (i) the Trust
would be required to account for its income and deductions at the Trust level
(not necessarily taking into account any particular holder's circumstances,
including any difference between the holder's basis in its Certificates and the
Trust's basis in its assets) and to utilize a taxable year for reporting
purposes and (ii) each Holder would be required to separately take into account
such Holder's distributive share of income and deductions of the Trust. A Holder
would take into account its distributive share of Trust income and deductions
for each taxable year of the Trust in the Holder's taxable year which ends with
or within the Trust's taxable year. A Holder's share of the income of the Trust
computed at the Trust level would not necessarily be the same if computed under
the OID rule described above under "Income of Certificateholders" and, in
particular, may not take account of any difference in the yield on the
Certificate to the Holder based on the Certificateholder's purchase price and
the yield on the Term Assets determined at the Trust level.
WITHHOLDING TAXES
Payments made on a Certificate to a person that is not a U.S. Person and
has no connection with the United States other than holding its certificates
generally will be made free of United States federal withholding tax, provided
that (i) the holder is not related (directly or indirectly) to the obligor,
guarantor, if any, or sponsor of the Term Assets, the Company, the holder of any
other class of Certificates (if such Series provides for multiple classes of
Certificates), the holder of any Call Warrant or the counterparty on any notion
principal contract or other derivative contract of which the Trust is a party
and (ii) the holder complies with certain identification and certification
requirements imposed by the IRS.
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STATE AND OTHER TAX CONSEQUENCES
In addition to the federal income tax consequences described above,
potential investors should consider the state, local and foreign tax
consequences of the acquisition, ownership and disposition of the Certificates.
State, local and foreign tax law may differ substantially from federal tax law,
and this discussion does not purport to describe any aspect of the tax law of a
state or other jurisdiction (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.
PLAN OF DISTRIBUTION
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 such Certificates and the proceeds to
the Company from such sale, any underwriting discounts and other items
constituting underwriters' compensation, any initial public offering price, any
discounts or concessions allowed or reallowed or paid to dealers, any securities
exchanges on which such 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. Such Certificates may
be offered to the public either through underwriting syndicates represented by
managing underwriters or by underwriters without a syndicate. Such managing
underwriters or underwriters in the United States will include Salomon Brothers
Inc, an affiliate of the Company. Unless otherwise set forth in the applicable
Prospectus Supplement, the obligations of the underwriters to purchase such
Certificates will be subject to certain conditions precedent, and the
underwriters will be obligated to purchase all such Certificates if any of such
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 Company
from time to time. Any agent involved in the offer or sale of Certificates will
be named, and any commissions payable by the Company to such agent will be set
forth, in the applicable Prospectus Supplement. Unless otherwise indicated in
the applicable Prospectus Supplement, any such agent will act on a best efforts
basis for the period of its appointment.
If so indicated in the applicable Prospectus Supplement, the Company 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 Company to
indemnification by the Company 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 Company or its affiliates in the ordinary
course of business.
Salomon Brothers Inc is an affiliate of the Company and is an indirect
wholly owned subsidiary of Salomon Smith Barney Holdings Inc., the indirect
parent corporation of the Company. Salomon Brothers Inc's participation in the
offer and sale of Certificates complies with the requirements of Rule 2720 of
the National Association of Securities Dealers, Inc. regarding underwriting
securities of an affiliate.
43
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 Company 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. A Prospectus Supplement will be prepared with respect to
the Certificates for use by such affiliates in connection with offers and sales
related to market-making transactions in the Certificates.
LEGAL OPINIONS
Certain legal matters (including federal income tax matters) with respect
to the Certificates will be passed upon for the Company and the Underwriters by
Orrick, Herrington & Sutcliffe LLP, New York, New York or other counsel
identified in the applicable Prospectus Supplement.
44
INDEX OF TERMS
Administration Fee................................................6
Administrative Agent..............................................1
AID..............................................................21
Base Rate........................................................12
Bearer Certificates...............................................1
Business Day.....................................................11
Calculation Agent................................................12
Calculation Date.................................................13
CD Rate..........................................................13
CD Rate Determination Date.......................................13
CD Reference Rate Certificate....................................12
Cede..............................................................2
CEDEL............................................................36
Certificate Account..............................................28
Certificate Principal Balance....................................16
Certificateholders................................................1
Certificates......................................................1
Class.............................................................1
Code.............................................................39
Commercial Paper Rate Determination Date.........................14
Commercial Paper Reference Rate Certificate......................14
Commission........................................................1
Company...........................................................1
Components.......................................................38
Composite Quotations.............................................12
Concentrated Term Assets.....................................20, 21
Coupons...........................................................9
Credit Support....................................................1
Credit Support Instruments.......................................29
Day of Valuation.................................................38
Definitive Certificate...........................................18
Depositary.......................................................18
Deposited Asset Provider.........................................29
Deposited Assets..................................................1
Determination Date...............................................10
Distribution Date.................................................1
ECU...............................................................1
Euroclear........................................................36
Exchange Act......................................................1
Exchange Rate Agent...............................................9
Exchangeable Series..............................................17
Fannie Mae.......................................................21
Federal Funds Rate...............................................14
Federal Funds Rate Determination Date............................14
Federal Funds Reference Rate Certificate.........................12
FFCB.............................................................21
FHLB.............................................................21
Fiscal Agent.................................................23, 24
Fixed Pass-Through Rate...........................................9
Fixed Rate Certificates..........................................11
Floating Rate Certificates.......................................11
Freddie Mae......................................................21
Global Security...................................................1
GSE Issuer.......................................................21
H.15(519)........................................................12
45
Index Maturity...................................................12
Interest Reset Date..............................................12
Interest Reset Period............................................12
IRS..............................................................39
Letter of Credit.................................................27
Letter of Credit Bank............................................27
LIBOR............................................................15
LIBOR Determination Date.........................................15
LIBOR Reference Rate Certificate.................................12
London Banking Day...............................................11
Market Exchange Rate..............................................9
Maximum Pass-Through Rate........................................12
Minimum Pass-Through Rate........................................12
Money Market Yield...............................................14
Nonrecoverable Advance...........................................31
Notional Amount..................................................11
Offering Agent....................................................2
Option to Elect Exchange.........................................17
Optional Exchange Date...........................................17
Original Issue Date...............................................8
outstanding debt securities......................................23
Pass-Through Rate.................................................8
Prospectus Supplement.............................................1
Purchase Price...................................................36
Rating Agency.....................................................3
Realized Losses..................................................16
REFCORP..........................................................21
Registered Certificates...........................................1
Registration Statement............................................1
Related Proceeds.................................................31
Required Percentage..............................................32
Reserve Account..................................................27
Retained Interest.................................................7
Reuters Screen LIBO Page.........................................15
Sallie Mae.......................................................21
Secured Term Assets..............................................23
Securities Act....................................................1
Senior Term Assets...............................................23
Series............................................................1
Special Tax Counsel..............................................38
Specified Currency................................................1
Specified Interest Currency.......................................1
Specified Premium Currency........................................1
Specified Principal Currency......................................1
Spread...........................................................12
Spread Multiplier................................................12
Strip Certificates................................................9
Stripped Interest................................................11
Sub-Administration Agreement.....................................30
Sub-Administrative Agent.........................................29
Subordinated Term Assets.........................................23
Surety...........................................................27
Surety Bond......................................................27
Term Asset Events of Default.............................22, 24, 25
Term Assets.......................................................1
Term Assets Currency.............................................25
Term Assets Indenture............................................21
46
Term Assets Interest Accrual Periods.............................25
Term Assets Issuer...............................................21
Term Assets Issuers..........................................20, 21
Term Assets Payment Dates........................................25
Term Assets Prospectus...........................................21
Term Assets Rate.................................................25
Treasury bills...................................................16
Treasury Rate....................................................16
Treasury Rate Determination Date.................................16
Treasury Reference Rate Certificate..............................12
Trust.............................................................1
Trust Agreement...................................................1
Trustee...........................................................1
Trustee's Fee.....................................................6
TVA..............................................................21
U.S. Person......................................................36
United States....................................................36
Variable Pass-Through Rate........................................9
Voting Rights....................................................32
47
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED [ ], [ ])
STRUCTURED PRODUCTS SERIES [ ] - [ ] TRUST
$[ ] Class [ ] Notes, [ ]% [Variable] Note Interest Rate
$[ ] [Notional Amount (Approximate)], Class [ ]Certificates, [ %]
[Variable] Pass-Through Rate
STRUCTURED PRODUCTS CORP.
DEPOSITOR
Each Structured Products Trust Certificate Series [ ____ ]-[ ____ ] will
represent a fractional undivided beneficial interest in the Structured Products
Series [ _____ ]-[ _____ ] Trust (the "Trust") to be formed pursuant to the
Trust Agreement dated as of [ ], [ ____ ] (the "Trust Agreement"), between
Structured Products Corp. (the "Company")and [ _______________ ], as trustee
(the "Owner Trustee"). The Certificates will consist of [ ] classes of
Certificates, designated as Class [ ____ ] Certificates(,) [and] Class [ ____ ]
Certificates [and list others], [all] of which [only the Class [ ____ ]
Certificates(,) [and] Class [ ____ ] Certificates [and list others]] are being
offered hereby (collectively, the "Certificates"). The Certificates will be
issued by the Trust. The Structured Products Trust Series [ ____ ]-[ ____ ]
Notes (the "Notes")and, collectively with the Certificates, the "Securities")
are also being offered hereby and will be issued pursuant to an indenture dated
as of [ _____ ], [ _____ ] (the "Indenture"), between the Trust and [ __ ], as
trustee (the "Indenture Trustee"). The property of the Trust will consist [in
part] of [SELECT ONE OF THE FOLLOWING BRACKETED SELECTIONS] [Alternative 1:
specify publicly issued 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)] [Alternative 2: specify publicly issued obligations of one or
more foreign private issuers] [Alternative 3: specify publicly issued debt
security or 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
governmental sponsored organization created pursuant to a federal statute]
[Alternative 4: specify publicly issued debt security or pool of such debt
securities which represent obligations issued by or guaranteed by a foreign
government, political subdivision or agency or instrumentality thereof]
[maturing in ___ years] issued by [specify issuers] (collectively, the "Term
Assets"), and having the characteristics described herein under "Description of
Term Assets". Terms used but not otherwise defined herein are defined in the
Prospectus attached hereto (the "Prospectus").
The Term Assets will be acquired by the Company and, pursuant to the Trust
Agreement, deposited into the Trust for the benefit of Certificateholders,
subject to the pledge of the Indenture. The Trust's rights in, to and under the
Term Assets will be pledged to the Indenture Trustee pursuant to the Indenture.
[The Term Assets were issued and sold as part of an underwritten public offering
in [ ].] [The Term Assets are obligations of the Term Assets Issuer[s] and]
[explain whether senior or subordinate, and whether subject to any redemption or
put rights]. [Describe any required principal payments or amortization or
accumulation of Term Assets.]
(COVER CONTINUED ON NEXT PAGE)
PROSPECTIVE INVESTORS SHOULD CONSIDER, AMONG OTHER THINGS, THE INFORMATION SET
FORTH UNDER "RISK FACTORS" HEREIN ON PAGES S-[ ] TO S-[ ] AND IN THE PROSPECTUS
ON PAGES [ ] TO [ ].
------------
THE SECURITIES REPRESENT INTERESTS IN OR OBLIGATIONS OF THE TRUST ONLY AND DO
NOT REPRESENT AN OBLIGATION OF OR INTEREST IN THE COMPANY OR ANY OF ITS
AFFILIATES. THE SECURITIES DO NOT REPRESENT A DIRECT OBLIGATION OF ANY TERM
ASSETS ISSUER OR ANY OF THEIR RESPECTIVE AFFILIATES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-----------
The Underwriter has agreed to purchase the Certificates from the Company at
[ ]% of the Certificate Principal Balance thereof plus accrued interest, if any,
at the Pass-Through Rate calculated from [ _________ ], [ ____ ] (the "Expected
Settlement Date"), subject to the terms and conditions set forth in the
Underwriting Agreement referred to herein. The Underwriter has agreed to
purchase the Notes from the Company at [ ]% of the Note Principal Balance
thereof plus accrued interest, if any, at the Note Interest Rate calculated from
the Expected Settlement Date, subject to the terms and conditions set forth in
the Underwriting Agreement referred to herein. See "Method of Distribution".
The Underwriter proposes to offer the Securities from time to time for sale in
negotiated transactions or otherwise at prices determined at the time of sale.
For further information with respect to the plan of distribution and any
discounts, commissions or profits that may be deemed underwriting discounts or
commissions, see "Method of Distribution".
The Securities are offered subject to receipt and acceptance by the Underwriter,
to prior sale and to the Underwriter's right to reject any order in whole or in
part and to withdraw, cancel or modify the offer without notice. It is expected
that delivery of the [specify applicable classes] Securities will be made in
book-entry form through the facilities of The Depository Trust Company on or
about the Expected Settlement Date.
- -----------------
SALOMON SMITH BARNEY
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS [ ], [ ]
S-2
(COVER PAGE CONTINUED)
Distributions on the Certificates will be made[[monthly] [quarterly]
[semi-annually] or[[ ] of each year] [to be conformed to interest payment dates
for Term Assets], or, if any such date is not a business day, then on the
immediately following business day (each, a "Distribution Date") commencing [ ],
[ _____ ]. The last day on which distributions are scheduled to be made on the
Certificates is [ _________ ], [ ____ ] (the "Final Distribution Date"), by
which date the holders of the Certificates will receive a distribution of all
amounts allocable to principal of such Certificates or, to the extent specified
herein, a pro rata share of any remaining Term Assets.
Distribution on the Notes will be made on each Distribution Date. The last
day on which payments on the Notes are scheduled to be made is [ __ ], [___]
(the "Scheduled Maturity Date").
As and to the extent described herein, collections received with respect to
the Deposited Assets will be distributed to Noteholders and Certificateholders
[of each class] in the manner and priority described herein. [The rights of the
holders of the Class [ ____ ] Certificates [and specify other classes] to
receive distributions of such collections are subordinated to the rights of the
holders of the Notes and the Class [ ____ ] Certificates [specify other
classes]. As and to the extent described herein, losses realized on the
Deposited Assets will be borne by the holders of the Class [ ____ ] Certificates
[specify other classes] before such losses will be borne by the holders of the
other classes of Certificates [and the Class [ ] Certificates ([specify other
classes)] and the holders of the Notes. To the extent described herein, the
relative priorities of each class of Certificates and Notes with respect to
collections from and losses on the Deposited Assets may each change over time,
either permanently or temporarily, upon the occurrence of certain circumstances
specified herein. See "Description of Securities-Allocation of Losses;
Subordination".
The Term Assets Issuer is not participating in, and will not receive any
proceeds in connection with, this offering.
There is currently no secondary market for the Securities, and there can be no
assurance that a secondary market for the Securities will develop or, if it does
develop, that it will continue. See "Risk Factors" herein and in the Prospectus.
The [specify applicable classes] Securities initially will be represented by
certificates registered in the name of Cede & Co., as nominee of The Depository
Trust Company ("DTC"). The interest of beneficial owners of such Securities will
be represented by book entries on the records of participating members of DTC.
Definitive certificates will be available for such Securities only under the
limited circumstances described herein. See "Description of
Securities-Definitive Securities".
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVERALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES AT A
LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
THE SECURITIES OFFERED BY THIS PROSPECTUS SUPPLEMENT WILL CONSTITUTE A SEPARATE
SERIES OF SECURITIES BEING OFFERED BY THE COMPANY PURSUANT TO ITS PROSPECTUS
DATED [ __ ], [ ___ ], OF WHICH THIS PROSPECTUS SUPPLEMENT IS A PART AND WHICH
ACCOMPANIES THIS PROSPECTUS SUPPLEMENT. THE PROSPECTUS CONTAINS IMPORTANT
INFORMATION REGARDING THIS OFFERING WHICH IS NOT CONTAINED HEREIN, AND
PROSPECTIVE INVESTORS ARE URGED TO READ THE PROSPECTUS AND THIS PROSPECTUS
SUPPLEMENT IN FULL. IN PARTICULAR, INVESTORS SHOULD CAREFULLY CONSIDER THE
FACTORS SET FORTH UNDER "RISK FACTORS" IN THE PROSPECTUS AND IN THIS PROSPECTUS
SUPPLEMENT.
UNTIL [ _ ], [ _ ], ALL DEALERS EFFECTING TRANSACTIONS IN THE OFFERED
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS SUPPLEMENT AND THE PROSPECTUS TO WHICH IT RELATES. THIS
DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS SUPPLEMENT AND PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH
RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
S-3
SUMMARY OF PRINCIPAL ECONOMIC TERMS
The following summary of principal economic terms does not purport to be
complete and is qualified in its entirety by reference to the detailed
information appearing elsewhere herein and in the Prospectus, including under
the heading "Description of Securities", "Description of Term Assets" and
"Description of Credit Support". Certain capitalized terms used herein are
defined elsewhere in the Prospectus Supplement on the pages indicated in the
"Index of Terms" appearing at page S-[ ____ ] of this Prospectus Supplement or,
to the extent not defined herein, have the meanings assigned to such terms in
the Prospectus.
THE CERTIFICATES
The Trust........... Structured Products Series [ ]-[ ]
Trust. The Trust will be formed pursuant to
the Trust Agreement dated as of [ ],
[ ] (the "Trust Agreement"), between the
Company and the Owner Trustee, dated as of
the Expected Settlement Date.
Certificates Offered Structured Products Trust Certificates,
Series [ _____ ]-[ _____ ], consisting of Class [ ]
Certificates [,] [and] Class [ ] Certificates [and
specify others] (collectively, the "Certificates").
[Initial Certificate
Principal Balance or
Notional Amount].... Class [ ]: [$] [ ].
Class [ ]: [$] [ ].
Final Distribution
Date................ Class [ ]: [ ], [ ].
Class [ ]: [ ], [ ].
Pass-Through Rates.. [The Variable Pass-Through Rates applicable to the
calculation of the interest distributable on any
Distribution Date on the Certificates [(other than the
Class [ ] Certificates)] are equal to [describe method for
determining variable rates]. The initial Variable
Pass-Through Rates for the Class [ ] Certificates [,] [and]
the Class [ ] Certificates [and specify others] are
approximately [ ____ ]% [,] [and] [ ____ ]% and [ ]% per
annum, respectively.] [The Pass-Through Rate
applicable to the calculation of the interest
distributable on any Distribution Date on the [specify
classes] Certificates is fixed at [ ____ ]% [and [ ____ ]%,
respectively,] per annum.]
Original Issue Date [ ], [ ].
Cut-off Date ....... [ ], [ ].
Distribution Dates . [ ], commencing [ ], [ ].
Record Dates........ The [ ] day immediately preceding each
Distribution Date.
Denominations;
Specified Currency.. The Class [ ] Certificates [,] [and] Class [ ]
Certificates [and specify others] will be denominated and
payable in [U.S. dollars] [ ] [(the "Specified
Currency") and will be available for purchase in minimum
denominations of [$] [ ] and [integral multiples thereof]
[multiples of [$] [ ] in excess thereof].
Interest Accrual
Periods............. [Monthly] [Quarterly] [Semi-annually] (or, in
the case of the first interest Accrual
Period, from and including the Original Issue
Date to but excluding the first Distribution Date).
S-4
Form of Security.... Book-entry securities with DTC, except in
certain limited circumstances. See
"Description of Securities-Definitive
Certificates". Distributions thereon will be
settled in [immediately available (same-day)]
[clearinghouse(next-day)] funds.
Owner Trustee ...... [ ].
Ratings............. [ ] by [ ] [and [ ] by
[ ]]. [Specify specific ratings
requirements for particular classes,
including the extent to which the issuance of
the Certificates of a given class is
conditioned upon satisfaction of the ratings
of each other class of Certificates.] See "Ratings".
THE NOTES
The Trust .......... Structured Products Series [ ]-[ ] Trust.
Notes Offered....... Structured Products Trust Notes, Series [ ]-[ ]
[specify others](collectively, the "Notes").
[Initial Note
Principal Balance/
Notional Amount].... [$] [ ].
Scheduled Maturity
Date................ [ ], [ ].
Note Interest Rate.. [The Variable Note Interest Rate applicable
to the calculation of the interest distributable
on any Distribution Date on the Notes is equal to [describe
method for determining variable rates]. The initial
Variable Note Interest Rate [specify others] is
approximately [ ]% per annum.] [The Note Interest Rate
applicable to the calculation of the interest distributable
on any Distribution Date on the Notes is fixed at [ ____ ]%
per annum.]
Original Issue Date. [ ], [ ].
Cut-off Date........ [ ], [ ].
Distribution Dates.. [ ], commencing [ ], [ ].
Record Dates........ The [ ] day immediately preceding each
Distribution Date.
Denominations;
Specified urrency . The Class [ ] Notes [and specify others] will be
denominated and payable in [U.S. dollars] [ ] [(the
"Specified ____ Currency") and will be available for
purchase in minimum denominations of [$] _____ [ ___]
and [integral multiples thereof] [multiples of [$] ______ ]
in excess thereof].
Interest Accrual
Periods............. [Monthly] [Quarterly] [Semi-annually] (or in
the case of the first Interest Accrual
Period, from and including the Original Issue
Date to but excluding the first Distribution Date).
Form of Security.... Book-entry securities with DTC, except in
certain limited circumstances. See
"Description of Securities-Definitive
Certificates". Distributions thereon will be
settled in [immediately available (same-day)]
[clearinghouse (next-day)] funds.
Indenture Trustee... [ ].
Ratings............. [ ] by [ ] [and [ ]
by [ ]]. See "Ratings".
S-5
THE TERM ASSETS
Term sets ........ [SELECT ONE OF THE FOLLOWING BRACKETED
SELECTIONS] [Alternative 1: specify publicly issued 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)] [Alternative 2: specify publicly issued
obligations of one or more foreign private issuers]
[Alternative 3: specify publicly issued debt security or
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
governmental sponsored organization created pursuant to a
federal statute] [Alternative 4: specify publicly issued
debt security or pool of such debt securities which
represent obligations issued by or guaranteed by a foreign
government, political subdivision or agency or
instrumentality thereof].
Term Assets Issuer[s]. [Specify issuer or pool].
Term Assets Original
Issue Date.......... [ ], [ ].
Term Asset Scheduled
Final Payment
Date ............... [ ], [ ].
[Amortization]
[Accumulation]...... [Describe amortization or accumulation
schedule, if any].
Denominations; Term
Assets Currency..... The Term Assets are denominated and payable
in [U.S. dollars] [ ] (the "Term
Assets Currency") and are available in
minimum denominations of [$][ ] and
[integral multiples thereof] [multiples of
[$][ ] in excess thereof].
Term Assets
Payment Dates....... [ ], commencing [ ].
Term Assets Rate.... [ % per annum.] [A [weighted average]
rate per annum equal to [specify interest
rate formula for debt security].]
Term Assets Interest
Accrual Periods .... [Monthly] [Quarterly] [Semi-annually].
Priority............ [Describe senior or subordinated status of
Term Assets].
Redemption/Put/
Other Features...... [Describe existence of any redemption, put or
other material features applicable to the Term Assets].
Form of
Security ........... [Book-entry securities with DTC.]
Term Assets Trustee. [ ]. The Term Assets have been issued pursuant to
[an indenture] [a pooling and servicing agreement]
[master pooling and servicing agreement
[as supplemented by a series supplement] [trust
agreement [an indenture] dated as
S-6
of [ ], 19[ ] (the "Term Assets Agreement"), among the
Term Assets Trustee and the Term Assets Issuer [specify
any other parties thereto].
Ratings............. [ ] by [ ] [and [ ] by
[ ]]. See "Description of Term
Assets - Ratings of Term Assets".
OTHER DEPOSITED ASSETS
[Provide similar tabular summary description of the principal economic terms of
any credit support or other ancillary or incidental asset]
S-7
SUMMARY OF PROSPECTUS SUPPLEMENT
The following summary does not purport to be complete and is qualified in
its entirety by reference to the detailed information appearing elsewhere herein
and in the Prospectus.
Depositor .......... Structured Products Corp., an indirect wholly-owned
subsidiary of Salomon Smith Barney Holdings, Inc. and
an affiliate of [an] [the] Underwriter (the "Company").
See "The Company" in the Prospectus.
Certificates........ The Certificates, each of which represents a fractional
undivided beneficial interest in the Trust, will be issued
pursuant to the Trust Agreement. The Certificates will
consists of [ ] classes, designated as Class [ ]
Certificates [and] [,] Class [ ] Certificates [and [specify
other classes]], [all] of which [all but the Class [ ]
Certificates] are being offered hereby (collectively, the
"Certificates").
The Certificate Principal Balance of a Certificate
outstanding at any time represents the maximum amount that
the holder thereof is entitled to receive as distributions
allocable to principal. The Certificate Principal Balance of
a Certificate will decline to the extent distributions
allocable to principal are made to such holder. [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 are 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.]
[The Class [ ] Certificates, which are not being offered
hereby, have in the aggregate an initial Certificate
Principal balance of [$] [ _______ ] (approximate) and a
[Variable] Pass-Through Rate [of [ ]%]. The Class [ ]
Certificates represent the right to receive distributions
in respect of their Certificate Principal Balance and
interest thereon at their applicable Pass-Through Rate.]
Shortfalls in collections with respect to the Deposited
Assets will be allocated solely to the Class [ ]
Certificates to the extent provided herein and, thereafter,
will be allocated among the Certificates and the
Class [ ____ ] Certificates, as provided herein. [The
Class [ ] Certificates will be transferred by the Company
to an affiliate on or about [ ], [ _____ ] (the "Closing
Date"), and may be sold at any time in accordance with any
restrictions in the Trust Agreement.]]
Notes .............. The Notes, which are secured by the Trust's
rights in, to and under the Deposited Assets,
will be issued pursuant to the Indenture.
The Notes will consist of [ ].
Risk Factors........ There are material risks associated with any
investment in the Certificates or the Notes.
See "Risk Factors" herein and in the
Prospectus.
The Term Assets .... Interest on the Term Assets accrues at the
Term Assets Rate for each Term Assets Accrual Period and is
payable on each Term Assets Payment Date. The entire
principal amount of the Term Assets will be payable on the
Term Assets Final Payment Date. [The Term Assets have a
remaining term to maturity of approximately [ ] years.] [As
of the Cut-off Date, the pool of Term Assets has a weighted
average interest rate of [ ]% and a weighted average
remaining term to maturity of approximately [ _____ ]
years.]
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[Other Deposited
Assets and Credit
Support]........... [The Deposited Assets will also include
[describe any assets which are ancillary or incidental to
the Term Assets, including hedging contracts such as puts,
calls, interest rate swaps, currency swaps, floors, caps
and collars] (such assets, together with the Term Assets,
the "Deposited Assets"). See "Description of Deposited
Assets".
The [Certificateholders] [Noteholders] of the [specify
particular classes] will have the benefit of [describe
credit support] to support or ensure the [servicing and]
[timely [ultimate]] distribution of amounts due with
respect to the Deposited Assets[, including providing
certain coverage with respect to losses thereon.]
Distributions....... Holders of the Securities will be entitled to receive on
each Distribution Date, to the extent of available
funds on such Distribution Date, after payment of the
expenses of the Trust, and its respective agents, (i)
distributions payable in respect of or allocable to
interest at the applicable Note Interest Rate or
Pass-Through Rate on the applicable Note Principal Balance
or Certificate Principal Balance, (ii)
distributions payable in respect of or allocable to
principal and (iii) [in the case of [ _____ ],]
distributions allocable to premium (if any) in an amount
equal to all payments to premium (if any) received on the
Term Assets for the applicable Collection Period.
Distributions will be made on the Securities only if, and
to the extent that, payments are made with respect to the
Deposited Assets or are otherwise covered by any Credit
Support. [The holders of the Class [ ] Certificates will 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 Securities
-Distributions".]
Special Distribution
Dates............... If a payment with respect to the Term Assets is made after
the Term Assets Payment Date on which such payment was due,
then such amount shall be distributed on the next occurring
Business Day (a "Special Distribution Date") as if such
funds had been available on the Distribution Date
immediately preceding such Special Distribution Date;
PROVIDED, HOWEVER, that the Record Date for such Special
Distribution Date shall be [[ ] Business Days] prior to the
day on which the related payment was received from the Term
Assets Trustee.
Subordination....... As to the extent described herein, the rights of the
holders of the Class [ ] Certificates [and specify other
classes] to receive distributions of principal, premium (if
any) and interest with respect to the Deposited Assets will
be subordinated to the rights of the holders of the Notes
and the other classes of Certificates with respect to
losses attributable to principal, premium (if any) and
interest realized on a Deposited Asset (such losses,
"Realized Losses"). See "Description of Securities -
Allocation of Losses; Subordination".
Optional Termination At its option, the [Company] may
purchase all the Deposited Assets in the Trust, and thereby
cause the termination of the Trust, early
retirement of the Certificates and redemption of the Notes,
on any Distribution Date on which the aggregate principal
amount of the Deposited Assets remaining in the Trust is
not more than [specify percentage no greater than 10%] of
the aggregate principal amount of the Deposited Assets as
of the Cut-off Date [Specify any other purchase or
repurchase option of the Company or any Holder of
Certificates.] See "Description of Trust Agreement -
Termination" herein.
Termination of the
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Trust............... The Trust Agreement will terminate upon the final
distribution of Certificateholders of all amounts due in
respect of the Deposited Assets. [Describe any further
termination events].
Federal Income Tax
Consequences........ Orrick, Herrington & Sutcliffe LLP, Special Tax Counsel,
has delivered an opinion that the (i) the Notes should be
treated as indebtedness for federal income purposes and
(ii) without regard to whether the Notes are characterized
as indebtedness, the Trust will be characterized as a
grantor trust or as a partnership for federal income tax
purposes and will not be characterized as an association
taxable as a corporation (or publicly traded partnership
treated as an association). Each Securityholder
is required to treat the Notes as indebtedness. Further,
although such treatment is not certain, the Trustee intends
for tax reporting purposes to treat the Trust as a grantor
trust. For a discussion of the consequences of
recharacterization of the Trust as a partnership for
federal income tax purposes, see "- Possible
Recharacterization of the Trust as a Partnership" in
"Federal Income Tax Consequences," in the Prospectus.
Income on Certificates is likely to be subject to tax in
whole or significant part in the hands of pension plans,
individual retirement accounts and other tax-exempt
investors. Certificates are not a suitable investment for
any person that is not a U.S. Person and will not be
permitted to be transferred to any such person.
See "Federal Income Tax Consequences" herein and in the
Prospectus.
[Listing or Quotation
of Securities]...... The Company has filed an application to list [specify
listed Certificates or Notes] on the [specify exchange] or
expects [specify Securities] to be quoted on [specify
automated quotation system].]
Ratings............. It is a condition to the issuance of the Certificates
that the certificates have the ratings specified above
under "Summary of Principal Economic Terms - The
Certificates - Ratings". It is a condition to the
issuance of the Notes that the Notes have the ratings
specified above under "Summary of Principal Economic
Terms - the Notes - Ratings". A security rating is not
a recommendation to buy, sell or hold securities and
may be subject to revision or withdrawal at anytime 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 Deposited Assets, the corresponding effect on yield to
investors [or whether investors in the Class [ ]
Certificates may fail to recover fully their initial
investment]. See "Ratings".
ERISA Considerations [modify, as appropriate] The Class [ ] Certificates
[and the Notes] may be eligible for purchase by Plans.
The Class [ ] Certificates [and the Notes] are
not expected to be eligible for purchase by Plans. See
"ERISA Considerations".
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RISK FACTORS
In connection with any investment in the any of the Securities,
prospective investors should consider, among other things, the material risk
factors described below and any additional risk factors set forth in the
Prospectus.
LIMITED ASSETS; TRUST'S RELATIONSHIP TO THE COMPANY
Term Assets and Deposited Assets Are the Only Assets Available to Make
Payments on the Securities. The Trust has no significant assets other than the
Term Assets and other Deposited Assets. If the Term Assets and such other
Deposited Assets are insufficient to make payments or distributions with respect
to the Securities, no other assets will be available for payment of the
deficiency. The Company is not obligated to make any payments in respect of the
Notes, the Certificates or the Term Assets. Accordingly, prospective investors
should avail themselves of the same information concerning each Term Assets
Issuer and each Term Asset as they would if they were purchasing the Term Assets
directly. See "Description of Term Assets - Available Information".
MATURITY AND YIELD CONSIDERATIONS; REINVESTMENT RISK
Repayment May Occur Earlier Than Expected Creating Reinvestment Risk. The
rate of payment of principal of the Securities, the aggregate amount of each
distribution on, and the yield to maturity of, the Securities will depend on the
rate of payment of principal of the Term Assets. [Describe particular risks of
particular Classes, if applicable.] The Term Assets are generally subject to
[redemption] [prepayment] [early amortization] upon the occurrence of any of the
[redemption] [prepayment] [amortization] events applicable to such Term Assets
as described herein and in the prospectus used in connection with the offering
of such Term Assets (the "Term Assets Prospectus"). The rate of payment of
principal of the Certificates may also be affected by the repurchase by a Term
Assets Issuer of the Term Assets issued by such Term Assets Issuer at a purchase
price equal to a percentage of the principal balance thereof plus accrued and
unpaid interest, which right is exercisable only after the aggregate principal
balance of the Term Assets is less than a specified percentage of their original
principal balance. In such event the repurchase price paid by the Term Assets
Issuer would be passed through to the Securityholders.
In the event that the Term Assets are redeemed or prepaid or if the Term
Assets are sold and the proceeds thereof distributed prior to maturity as a
result of a default, an investor's investment in the Securities and the Term
Assets will have a shorter average maturity than if such redemption, prepayment
or other distribution had not occurred. Prevailing interest rates at the time of
such early redemption, prepayment or distribution may be lower than the yield on
the Securities. Therefore, an investor in the Securities may be unable to
realize a comparable yield upon reinvestment of the funds from such redemption,
prepayment or distribution.
NO ASSURANCE OF LIQUIDITY
The Securities May Not Be A Liquid Investment. There is no assurance that
any secondary market will develop or be maintained for any class of Securities.
While the Underwriter intends to maintain a secondary market for Securities, it
is not obligated to do so and any such market-making activity may be
discontinued at any time without notice. There can be no assurance that a
secondary market in the Securities will develop or, if it does develop, that it
will remain in existence for any period of time. The absence of a secondary
market would adversely affect the liquidity of the Securities.
[SECURITIES NOT LISTED ON EXCHANGE OR QUOTATION SYSTEM]
Sales of Securities Cannot Be Made on an Exchange. [The Securities are not
required or expected to be listed on any securities exchange or quoted on any
automated quotation system of a registered securities association. The absence
of such listing or quotation may adversely affect the liquidity of the
Securities.]
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NO MANAGEMENT OF TERM ASSETS
The Term Assets Will Not Be Managed to Avoid Adverse Effects. Except as
described herein, the Trust will not dispose of any Term Assets, regardless of
adverse events (financial or otherwise) which may affect the value of the Term
Asset or the Term Assets Issuer. If there is a payment default on any Term Asset
or any other default which may result in the acceleration of the Term Asset, the
Trust will only dispose of or otherwise deal with the defaulted Term Asset in
the manner provided in the Trust Agreement. [If a payment default on or
acceleration of the Term Assets occurs, the Trust Agreement will provide that
the Trust will sell or distribute the Term Assets notwithstanding market
conditions at the time and the Trustee will have no discretion to do otherwise.
Such sale or distribution may result in greater losses than might occur if the
Trust continued to hold the Term Assets.]
[CREDIT RISK OF SINGLE OBLIGOR]
The Securities Represent Credit Risk to a Single Obligor. [The Securities
represent interests in obligations of a single obligor. In particular, the
Securities will be subject to all the risks associated with a direct investment
in [unsecured] obligations of the Term Assets Issuer.]
[TERM ASSETS ARE UNSECURED]
Payments on the Terms Assets Are Unsecured. [In a liquidation, holders of
the Term Assets will be paid only after holders of secured obligations of the
Term Assets Issuer[s]. According to the Term Assets Prospectus[es] the Term
Assets are general unsecured obligations of the Term Assets Issuer[s], which
rank on a parity with all other unsecured and unsubordinated indebtedness of the
Term Assets Issuer, but which are effectively subordinated to the Term Assets
Issuer's existing and future senior secured indebtedness to the extent of
collateral therefor.]
[LIMITED REMEDIES AGAINST FOREIGN PRIVATE ISSUERS; REPORTING
PRACTICES MAY VARY]
Holders of the Term Assets May Have Limited Remedies Against Foreign
Issuer; Reporting Practices of Foreign Issuers May Vary from Reporting by
Domestic Issuers. [The Term Assets will be obligations of companies incorporated
or organized under the laws of a foreign country (each a "Foreign Issuer"). Some
or all of the officers, directors and controlling persons of such Foreign
Issuers may be residents of a foreign country, some or all of the experts named
in their related registration statements may be residents of a foreign country
and all or a substantial portion of the assets of the Foreign Issuers and such
persons may be located outside the United States. Consequently, it may be
difficult for the applicable Trust, as a holder of the Term Assets, to effect
service within the United States upon a Foreign Issuer's directors, controlling
persons, officers and experts who are not residents of the United States or to
obtain or realize upon judgments in the United States against such foreign
obligor predicated upon civil liability under the United States federal
securities laws. While a Foreign Issuer may make certain information available
by filing periodic reports and other information with the Commission, such
information (including financial information) may differ in timing, form and
substance from that normally available with respect to domestic issuers.]
[LIMITED REMEDIES AGAINST FOREIGN GOVERNMENT ISSUERS; SOVEREIGN
RISK; REPORTING PRACTICES]
Holders of the Term Assets May Have Limited Remedies Against Foreign
Issuer; Reporting Practices of Foreign Issuers May Vary from Reporting by
Domestic Issuers. [The Term Assets will include obligations of, or guaranteed
by, foreign governments, foreign political subdivisions, or agencies and
instrumentalities thereof (each such issuer and guarantor, if any, sometimes
referred to herein as a "Foreign Government Issuer" and a "Foreign Government
Guarantor", respectively; and collectively referred to as "Foreign
Governments"). Consequently, it may be difficult for the applicable Trust as a
holder of the Term Assets to obtain or realize upon judgments in the United
States against such obligor. In the absence of a waiver or immunity by a Foreign
Government, it would not be possible to obtain a United States judgment against
such Foreign Government unless a court were to determine that such issuer is not
entitled under the Sovereign Immunities Act of 1976 (the "Immunities Act") to
sovereign immunity with respect to such action. Even if such an issuer is
amenable to suit in the United States, the enforceability of any judgment
obtained may be limited by a lack of substantial assets which can be levied upon
in the United States or the inability to obtain recognition and enforcement of
the judgment in the issuer's country.
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Because the Term Assets represent direct or indirect obligations of foreign
governments, Certificateholders should consider the political, economic and
other risks attendant to holding the obligations of a foreign government which
are not typically associated with an investment in securities of a domestic
issuer. Such risks include future political and economic developments,
governmental repudiation, moratorium on payment or rescheduling of external
debts, confiscatory taxation, imposition of any withholding tax, exchange rate
fluctuations, political or social instability or diplomatic developments and the
imposition of additional governmental laws or restrictions. While a Foreign
Government Issuer may make certain information available by filing periodic
reports and other information with the Commission, such information (including
financial information) may differ in timing, form and substance from that
normally available with respect to domestic issuers.]
NO INVESTIGATION OF TERM ASSETS OR TERM ASSETS ISSUERS
No Investigation of the Term Assets or the Term Assets Issuers Has Been
Made by the Company, Underwriter or Trustee. None of the Company, the
Underwriter or the Trustee has made, or will make, any investigation of the
business condition, financial or otherwise, of the Term Assets Issuers, or
verify any reports or information filed by the Term Assets Issuers with the
Commission or otherwise made available to the public. It is strongly recommended
that prospective investors in the Securities consider publicly available
financial and other information regarding the Term Assets Issuers. See
"Description of Term Assets - Available Information". The issuance of the
Securities should not be construed as an endorsement by the Company, the
Underwriter or the Trustee of the financial condition or business prospects of
any of the Term Assets Issuers.
[Describe any other risk factors and special considerations applicable to
the specific Term Assets, other Deposited Assets and the particular structure of
the Securities being offered, including factors relating to the yield of the
Securities and risks associated with the Deposited Assets and the terms
thereof.]
FORMATION OF THE TRUST
The Trust will be formed pursuant to the Trust Agreement between the
Company and the Owner Trustee. Concurrently with the execution and delivery of
the Trust Agreement, the Company will deposit the Term Assets (or proceeds of
the offering sufficient to purchase the Term Assets) in the Trust. The Owner
Trustee, on behalf of the Trust, will accept (or purchase) such Term Assets,
will pledge the Term Assets to the Indenture Trustee pursuant to the Indenture
and will deliver the Securities to or upon the order of the Company.
The Term Assets will be purchased by the Company in the secondary market
(either directly or through an affiliate of the Company). The Term Assets will
not be acquired from the Term Assets Issuers as part of any distribution by or
pursuant to any agreement with the Term Assets Issuers. The Term Assets Issuers
are not participating in this offering and will not receive any of the proceeds
of the sale of the Term Assets to the Company or the issuance of the Securities.
DESCRIPTION OF DEPOSITED ASSETS
This Prospectus Supplement sets forth material terms with respect to the
Deposited Assets, including the Term Assets and Term Assets Agreements but does
not provide detailed information with respect thereto. This Prospectus
Supplement relates only to the Securities offered hereby and is not an offering
document for the Term Assets. All disclosure contained herein with respect to
the Term Assets and Term Assets Agreements is derived from publicly available
documents. [Describe publicly available documents]. See "Description of Term
Assets - Available Information". [The] [Each] [describe portion that is subject]
Term Assets Issuer is subject to the information reporting requirements of the
Securities Exchange Act of 1934 (the "Exchange Act"). Accordingly, each such
Term Assets Issuer is obligated to file reports and other information concerning
the Term Assets with the Securities and Exchange Commission (the "Commission").
Although the Company has no reason to believe the information concerning the
Term Assets, the Term Assets Agreements or [the] [each] Term Assets Issuer set
forth in each Term Assets Prospectus or any report filed under the Exchange Act
is not reliable, neither the Company nor any of the Underwriters has
participated in the preparation of such documents, or made any due diligence
inquiry with respect to the information provided therein. Neither the Company
nor [any of] the Underwriter[s] has verified
S-13
the accuracy or completeness of such documents or reports. Information contained
in such documents and reports is as of the date(s) stated therein, and
comparable information, if given as of the date hereof, may be different. There
can be no assurance that events affecting the Term Assets, the Term Assets
Agreements or any Term Assets Issuer have not occurred, which have not yet been
publicly disclosed, which would affect the accuracy or completeness of the
publicly available documents described above.
[SELECT ONE OF THE FOLLOWING BRACKETED SELECTIONS] The Deposited Assets
will consist primarily of the Term Assets, which are [Alternative 1: specify
publicly issued 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)] [Alternative 2: specify publicly issued obligations of one or
more foreign private issuers] [Alternative 3: specify publicly issued debt
security or 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
governmental sponsored organization created pursuant to a federal statute]
[Alternative 4: specify publicly issued debt security or pool of such debt
securities which represent obligations issued by or guaranteed by a foreign
government, political subdivision or agency or instrumentality thereof].
DESCRIPTION OF TERM ASSETS
[USE THE FOLLOWING (I) WHERE THE TERM ASSETS CONSIST OF A SINGLE PUBLIC SECURITY
AND (II) FOR EACH TERM ASSET WHICH COMPRISES MORE THAN TEN PERCENT (10%) OF A
POOL OF SECURITIES]
[The table below sets forth certain of the characteristics of the Term
Assets. The table does not purport to be complete and is subject to, and
qualified in its entirety by reference to, the relevant Term Assets
Prospectuses.
Terms of Term Assets
Term Assets Issuer:
Term Assets: _______, due _______
Dated:
Original Principal Maturity Date:
Original Par Value Amount Issued:
CUSIP Number:
Stated Interest Rate:
Interest Payment Dates:
Mode of Payment of Term Assets:
Par Value Amount of Term Assets
Deposited Under Trust Agreement:
AVAILABLE INFORMATION
[INSERT BRACKETED LANGUAGE AS APPLICABLE]
[The] [Each] [specify which] Term Assets Issuer is subject to the
information requirements of the Exchange Act and in accordance therewith files
reports and other information with the Commission. Such reports, proxy and
information statements and other information filed by the Term Assets Issuers
with the Commission can be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's regional offices at 500 West Madison Street,
14th Floor,
S-14
Chicago, Illinois 60661 and 75 Park Place, New York, New York 10007. Copies of
such material can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The Commission maintains a Web site at http://www.sec.gov containing
reports, proxy statements and other information regarding registrants that file
electronically with the Commission. [In addition, certain material described
above and other information will also be available for inspection at the offices
of the New York Stock Exchange at 20 Broad Street, New York, New York.]
[FEDERAL NATIONAL MORTGAGE ASSOCIATION. The Federal National Mortgage
Association ("Fannie Mae") is a federally chartered and stockholder-owned
corporation organized and existing under the Federal National Mortgage
Association Charter Act, 12 U.S.C. ss. 1716 et seq. It is the largest investor
in home mortgage loans in the United States. Fannie Mae originally was
established in 1938, as a United States government agency to provide
supplemental liquidity to the mortgage market and was transformed into a
stockholder-owned and privately managed corporation by legislation enacted in
1968. Fannie Mae provides funds to the mortgage market by purchasing mortgage
loans from lenders, thereby replenishing their funds for additional lending.
Fannie Mae acquires funds to purchase loans from many capital market investors
that ordinarily may not invest in mortgage loans, thereby expanding the total
amount of funds available for housing. Operating nationwide, Fannie Mae helps to
redistribute mortgage funds from capital-surplus to capital-short areas. Fannie
Mae also issues mortgaged-backed securities ("MBS"). Fannie Mae receives
guaranty fees for its guaranty of timely payment of principal of and interest on
MBS. Fannie Mae issues MBS primarily in exchange for pools of mortgage loans
from lenders. The issuance of MBS enables Fannie Mae to further its statutory
purpose of increasing the liquidity of residential mortgage loans.
Fannie Mae prepares an Information Statement annually which describes
Fannie Mae, its business and operations and contains Fannie Mae's audited
financial statements. From time to time Fannie Mae prepares supplements to its
Information Statement which include certain unaudited financial data and other
information concerning the business and operations of Fannie Mae. These
documents can be obtained without charge from Paul Paquin, Senior Vice President
- -- Investor Relations, Fannie Mae, 3900 Wisconsin Avenue, N.W., Washington, D.C.
20016 (telephone: (202) 752-7115). Obligations issued by Fannie Mae are not
subject to the registration requirements of the Securities Act and Fannie Mae is
not subject to the periodic reporting requirements of the Exchange Act.]
[FEDERAL HOME LOAN MORTGAGE CORPORATION. The Federal Home Loan Mortgage
Corporation ("Freddie Mac") is a publicly held government-sponsored enterprise
created on July 24, 1970 pursuant to the Federal Home Loan Mortgage Corporation
Act, Title III of the Emergency Home Finance Act of 1970, as amended (the "FHLMC
Act"). Freddie Mac's statutory mission is to provide stability in the secondary
market for home mortgages, to respond appropriately to the private capital
market and to provide ongoing assistance to the secondary market for home
mortgages (including mortgages secured by housing for low-and moderate-income
families involving a reasonable economic return to Freddie Mac) by increasing
the liquidity of mortgage investments and improving the distribution of
investment capital available for home mortgage financing. The principal activity
of Freddie Mac consists of the purchase of first lien, conventional, residential
mortgages and participation interests in such mortgages from mortgage lending
institutions and the resale of the mortgages so purchased in the form of
guaranteed mortgage securities. Freddie Mac generally matches and finances its
purchases or mortgages with sales of guaranteed securities which are exempt from
the registration requirements of the Securities Act. 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, calling or emailing
Freddie Mac's Investor Inquiry Department at 8200 Jones Branch Drive, McLean,
Virginia 22102 (telephone (800) 336-3672; e-mail:
Investor_Inquiry@freddiemac.com). Freddie Mac is not subject to the periodic
reporting requirements of the Exchange Act.]
[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
S-15
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.
Pursuant to the Student Loan Marketing Association Reorganization Act of
1996 (the "Privatization Act"), the existing Sallie Mae, which is a GSE, became
a subsidiary of SLM Holding Corporation, a Delaware corporation. SLM Holding
Corporation is not a GSE. The Privatization Act provides that Sallie Mae may
continue to issue debt obligations maturing on or before September 30, 2008 and
further provides that the legal status of Sallie Mae's debt obligations will be
fully preserved until their respective maturities. Such debt obligations will
remain GSE obligations. Pursuant to the Privatization Act, Sallie Mae will wind
down its operations and dissolve on or before September 30, 2008, with any
outstanding Sallie Mae obligations being defeased on such date with United
States government or agency obligations.
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 Investor
Relations Department of Sallie Mae at 11600 Sallie Mae Drive, Reston, Virginia
20193, telephone (703) 810-7600. Sallie Mae is not subject to the periodic
reporting requirements of the Exchange Act.]
[RESOLUTION FUNDING CORPORATION. The Resolution Funding Corporation
("REFCORP") 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 REFCORP was to provide financing for the
Resolution Trust Corporation (the "RTC"), which was established by the FIRRE Act
to manage and resolve cases involving failed savings and loan institutions and
terminated in 1996. REFCORP 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 REFCORP are under the management of a three-member
Directorate comprised of the Director of the Office of Finance of the FHLBs and
two members selected by the Oversight Board from among the presidents of twelve
FHLBs. The FIRRE Act limits the aggregate principal amount of interest bearing
obligations which may be issued by REFCORP to $30 billion, which amount of
obligations was issued in 1989. Pursuant to the FIRRE Act, the net proceeds of
these obligations may be used to purchase nonvoting capital certificates issued
by the RTC or to retire previously issued REFCORP obligations. REFCORP is to be
dissolved, as soon as practicable, after the maturity and full payment of all
obligations issued by it.
REFCORP obligations are not obligations of, or guaranteed as to principal
by, the Federal Home Loan Bank System, the Federal Home Loan Banks, the RTC or
the United States of America. However, the principal of REFCORP obligations is
fully payable from non-interest bearing obligations of the United States of
America issued by the Secretary of the Treasury and deposited in a separate
account at the Federal Reserve Bank of New York. Interest on REFCORP obligations
is payable from earnings on assets of REFCORP, the net proceeds of
receiverships, Federal Home Loan Bank contributions (to a maximum of $300
million annually) and the net proceeds of the sale of assets of the FSLIC
Resolution Fund. To the extent not paid from these sources, any interest on
REFCORP obligations is payable by the Secretary of the Treasury pursuant to an
existing appropriation. Obligations issued by REFCORP are exempt from
registration under the Securities Act.
Information concerning REFCORP may be obtained from the Resolution Funding
Corporation, Suite 850, 655 Fifteenth Street, N.W., Washington, D.C. 20005.
REFCORP is not subject to the periodic reporting requirements of the Exchange
Act.]
S-16
[FEDERAL HOME LOAN BANKS. The Federal Home Loan Banks constitute a system
of twelve federally chartered corporations (collectively, the "FHLBs"). The
mission of each FHLB 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 FHLBs 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 FHLBs. The
FHLBs 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 FHLBs 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 FHLBs.
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, (202) 406-2901. 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 (the "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 securities are "exempted securities" within the meaning of
the Exchange Act. 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,
or by calling (423) 632-3366.]
[FEDERAL FARM CREDIT BANKS. The Farm Credit System is a nationwide system
of lending institutions and affiliated service and other entities (the
"System"). Through its Banks ("FCBs") and related associations, the 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 (the "Farm Credit Act"), and are subject to regulation by a Federal
agency, the Farm Credit Administration (the "FCA"). The FCBs 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 System institutions are
restricted solely to making loans to qualified borrowers in the agricultural
sector and to certain related businesses. Moreover, the 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 System maintains lending units in all
50 states and the Commonwealth of Puerto Rico.
The 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 FCBs are jointly and severally liable on all
Systemwide Debt Securities. Systemwide Debt Securities are issued by the FCBs
through the Federal Farm Credit Banks Funding Corporation, as agent for the FCBs
(the "Funding Corporation"). Each FCB 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
Funding Corporation as to conditions of participation and terms of each
issuance, and to FCA approval.
Important information regarding the FCBs and the Farm Credit System,
including combined financial information, is contained in disclosure information
made available by the Funding Corporation. This information consists of the most
recent Farm Credit System Annual Information Statement and any Quarterly
Information Statements issued subsequent thereto (collectively, "Information
Statements") and certain press releases issued from time to time by the 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
S-17
Corporation, Investment Banking Services Department, 10 Exchange Place, Suite
1401, Jersey City, New Jersey 07302; Telephone: (201) 200-8000. Upon request,
the Funding Corporation will furnish, without charge, copies of the above
information. Additional information regarding the FCBs can be obtained on the
Internet at www://farmcredit-ffcb.com.]
[GOVERNMENT TRUST CERTIFICATES. Government Trust Certificates ("GTCs")
consist of 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 (the "DSAA"), 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 or agencies
thereof, sufficient to pay the remaining 10% of all payments of principal and
interest due on the GTC Notes. Many issuances of GTCs were undertaken pursuant
to Title III of the Foreign Operations, Export Financing and Related Programs
Appropriations Acts (the "Appropriations Acts"), which permit borrowers to
prepay certain eligible high-interest loans made by the Federal Financing Bank
(the "FFB") under the Foreign Military Sales ("FMS") Credit Program. The
Appropriations Acts permit prepayment of the FMS loans with the proceeds of new
loans and authorize the issuance of a United States government guaranty covering
no more and no less than ninety percent (90%) of the payments due on each such
new loan, in accordance with the requirements of the Arms Export Control Act, as
amended (the "AECA"). It is a condition to the issuance of Certificates under
such program that the DSAA approve the refinancing of any such FMS loan.
Although 90% of all payments of principal and interest on the GTC Notes are
guaranteed by the United States government or agencies thereof, and 10% of such
payments are secured by securities of the United States government or agencies
thereof, the GTCs themselves are not so guaranteed. In the event of a default on
the GTC Notes, the Trustee of the Trust would be required by the operative
documents to make a claim against the United States government or an agency
thereof or would be required to liquidate the collateral securing the GTC Notes.
If the borrower under the GTC Notes fails to deposit with the related
trustee all amounts due on the GTC Notes on any GTC Note payment date (each, a
"GTC Note Payment Date"), the trustee will first notify the borrower and, one
business day thereafter, will send a notice to the Director of the DSAA and to
the related depositary setting forth the amounts due on the GTC Notes on such
GTC Note Payment Date and the amounts, if any, received from the borrower. On
the [11th calendar day] following the GTC Note Payment Date, if any amounts due
on a GTC Note remain unpaid, the trustee will demand payment from DSAA on the
applicable guaranty in accordance with its terms. On the day the trustee
receives such payment, it will instruct the depositary immediately to deliver
sufficient funds to pay the amounts remaining unpaid on the GTC Note.
On the occurrence of an event of default (as defined in the related loan
agreement), the trustee in its discretion may proceed to protect and enforce the
rights of the GTC holders under the declaration of trust by a suit, action or
other proceeding. As provided in the loan agreement, the guaranty and the
depositary agreement, the trustee has the legal power to exercise all the
rights, powers and privileges of a holder of the GTC Note.
The trustee is required to take all necessary action, as permitted by the
declaration of trust and applicable law (i) to enforce payments due from DSAA
under the guaranty and (ii) to take possession of collateral maturing or paying
interest on or prior to the GTC Note Payment Date on which default occurred, and
to apply such funds in accordance with the declaration of trust for the benefit
of holders of GTCs. The trustee is required to notify the borrower upon taking
the foregoing actions. Neither the Trust holding a GTC Note nor DSAA has the
right to accelerate payment of the GTC Note, notwithstanding any failure of the
borrower to make payment on the GTC Note or other event of default with respect
to the GTC Note. [The applicable Prospectus Supplement will specify, to the
extent GTCs are included as Term Assets, the waiting period that must elapse
before reimbursement for a default on the GTC Notes, and the delay between
payment on the GTC Notes and payment on the GTCs that is built into the GTCs to
protect against a delay in reimbursement. In addition, the related Prospectus
Supplement will specify, to the extent applicable: (i) the aggregate principal
amount of such GTCs; (ii) the coupon, if any, borne by such GTCs; (iii) the
stated maturity of each GTC; (iv) the identity of each underlying obligor; and
(v) the conditions under which, and the terms on which, any underlying
obligation may be prepaid or redeemed prior to the stated maturity of the
obligation.]]
S-18
[AID-GUARANTEED SECURITIES. Obligations guaranteed by the United States
Agency for International Development ("AID-Guaranteed Securities") consist of
notes, bonds, credit facilities and other debt instruments issued by the United
States Agency for International Development ("AID") which are issued or arranged
by intermediary financial institutions ("IFIs") and guaranteed in whole or in
part by AID.
Most AID guarantees are established under the auspices of the Private
Sector Investment Program (the "Investment Program"), created in 1983 under
Section 108 of the Foreign Assistance Act of 1961 and administered by AID. The
Investment Program seeks to promote sustainable economic development by
strengthening the private sector in developing countries, primarily through the
facilitation of small business financing needs. In 1988 Congress provided the
Investment Program with loan guarantee authority, and guarantees have become the
Investment Program's principal financing instrument. AID guarantees are backed
by the full faith and credit of the United States government.
The Housing Guaranty Program (the "Housing Program") is administered by
the AID Office of Housing and Urban Programs. The Housing Program facilitates
collaboration between AID and host-country housing institution borrowers in both
the public and private sectors. Under the Housing Program AID participates in
the planning, structuring and execution of a housing or shelter finance program.
Through the conclusion of "implementation agreements")the Housing Program aids
developing countries in securing favorable terms in U.S. capital markets for a
U.S. government-guaranteed loan.
Pursuant to the fiscal agency agreement, if the borrower does not deposit
with the fiscal agent at or before 12:00 noon, New York City time, on any date
on which a payment of principal, interest or maturity amount on the
AID-Guaranteed Securities is due (each, an "AID-Guaranteed Security Payment
Date"), immediately available funds in an amount sufficient to pay in full any
interest and principal, and any maturity amount, due on such AID-Guaranteed
Security Payment Date with respect to the AID-Guaranteed Securities, the fiscal
agent, acting on behalf of the holders of the AID-Guaranteed Securities, is
obligated to make a demand upon AID, not later than 2:00 p.m., New York City
time, on such AID-Guaranteed Security Payment Date for payment pursuant to the
guarantees.
Pursuant to the guarantees, AID is required, not later than three (3)
business days following receipt of such demand, to pay to the demanding
AID-Guaranteed Securityholders the applicable guaranteed amount. Upon receipt by
the fiscal agent of payments from AID pursuant to the guarantees, the fiscal
agent will be required, if such payments are received at or prior to 12:00 noon,
New York City time, on any business day, to remit such payments to the
registered holders of the AID-Guaranteed Securities entitled thereto on such
business day and, if such payments are received after such time, to remit such
payments to such registered holders on the next such business day.
Each AID-Guaranteed Securityholder is deemed by the acceptance of a
AID-Guaranteed Security to have irrevocably appointed the fiscal agent as its
agent for the purpose of making a demand for payment upon AID pursuant to the
guarantees and receiving any payment to an AID-Guaranteed Securityholder by AID
pursuant to the guarantees. The Regulations also provide that any AID-Guaranteed
Securityholder may make demand for payment on AID under a guarantee on its own
behalf immediately upon the failure of the borrower to make any payment when due
under the applicable AID-Guaranteed Security. All payments made by AID to the
fiscal agent pursuant to the guarantees will be held in trust by the fiscal
agent solely for the benefit of the registered holders of the AID-Guaranteed
Securities until remitted to such holders. AID will be discharged from its
obligations to make a payment pursuant to the guarantees upon the making of such
payment to the fiscal agent on behalf of the AID-Guaranteed Securityholders,
provided that such discharge will be effective only as to such payment and to
the extent of the amount of such payment.
As provided by the terms of each AID-Guaranteed Security, an event of
default will be deemed to have occurred if the borrower fails to make any
payment on such AID-Guaranteed Security on the applicable Payment Date. On the
occurrence of an event of default, the trustee of such AID-Guaranteed Security
or the Trustee may make demand on AID under the guarantees. However, none of the
fiscal agent, the Trustee or AID may accelerate payment of any AID-Guaranteed
Security, notwithstanding any failure of the borrower to make payment on the
AID-Guaranteed Securities.
S-19
[USE THE FOLLOWING (I) WHERE THE TERM ASSETS CONSIST OF A POOL OF PUBLIC
SECURITIES AND (II) FOR EACH TERM ASSET WHICH COMPRISES MORE THAN TEN PERCENT
(10%) OF A POOL OF SECURITIES]
[The Deposited Assets will consist primarily of the Term Assets, which are
a pool of [Alternative 1: specify publicly issued debt securities issued by one
or more corporations, banking organizations or insurance companies] [Alternative
2: specify publicly issued obligations of one or more foreign private issuers]
[Alternative 3: specify publicly issued 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 governmental sponsored organization created pursuant to a
federal statute] [Alternative 4: specify publicly issued debt securities which
represent obligations issued by or guaranteed by a foreign government, political
subdivision or agency or instrumentality thereof]. The Term Assets will be
purchased by the Company in the secondary market (either directly or through an
affiliate of the Company) and will be deposited into the Trust. The Term Assets
will not be acquired either from the respective Term Assets Issuers or pursuant
to any distribution by or agreement with Term Assets Issuers.
The composition of the Term Assets pool and the distribution by ratings,
remaining term to maturity and interest rate of the Term Assets as of [
__________ ], [ _____ ] (the "Cut-off Date"), as derived from the relevant Term
Assets Prospectuses, is as set forth below:
Composition of the Term Assets Pool
as of the Cut-off Date
Number of Term Assets:
Aggregate Principal Balance: [$]
Average Principal Balance: [$]
Largest Balance: [$]
Weighted Average Interest Rate: [%]
Weighted Average Original Term
to Maturity: years
Weighted Average Remaining Term
to Maturity: years
Longest Remaining Term
to Maturity: years
Distribution by Ratings
of the Term Assets Pool as of the Cut-off Date
Aggregate Percentage of
Principal Aggregate
Rating Number Balance Principal
Balance
============== =============== ================
Total
Distribution by Remaining Term to Maturity
of the Term Assets Pool as of the Cut-off Date
Aggregate Percentage of
Principal Aggregate
Rating Number Balance Principal
Balance
============== =============== ================
Total
S-20
Distribution by Interest Rate of the
Term Assets as of the Cut-off Date
Aggregate Percentage of
Principal Aggregate
Rating Number Balance Principal
Balance
============== =============== ================
Total
[USE THE FOLLOWING WHERE THE TERM ASSETS CONSIST OF A POOL OF
ASSET BACKED SECURITIES OF MULTIPLE ISSUERS]
[The Deposited Assets will consist primarily of the Term Assets, which are
a pool of publicly issued asset backed securities. [Describe applicable type(s)
of asset backed securities]. The Term Assets will be purchased by the Company or
the Trust in the secondary market (either directly or through an affiliate of
the Company) and will be deposited into the Trust. The Term Assets will not be
acquired either from the respective issuers of the Term Assets or pursuant to
any distribution by or agreement with such issuers. The composition of the Term
Assets pool as of [ __________ ], [ _____ ] (the "Cut-off Date"), as derived
from the relevant Term Assets Prospectuses, is as set forth below:]
Terms of Term Assets
Issuer .............
Servicer............
Trustee ............
Designation.........
Percentage of Total Term Assets Pool
Investor Amount.....
Series Termination Date (1)
Certificate Rate....
Monthly Payment Date (2)
Commencement of Controlled
Amortization/Accumulation Period (3)
Minimum Seller's Percentage
Cash Collateral Guaranty (4) Amount .
Percentage of Subordinated
Class ___ Certificates
Optional Repurchase Percentage
Ratings (5)...........
- -------------
(1) Includes defined terms: Series Termination Date and Stated
Series Termination Date.
(2) Includes defined terms: Payment Date and Distribution Date.
(3) Includes defined terms: Controlled Amortization Period,
Controlled Accumulation Period and Controlled Liquidation
Period.
(4) A "Cash Collateral Guaranty")generally provides, that in the event that a
deficiency exists with respect to a payment of interest and/or principal,
an amount equal to such deficiency may be withdrawn from the cash
collateral account and applied to such deficiency up to the amount
provided in the Term Assets Agreement.
(5) As of [ ], [ .]]
-------------
S-21
As of the Cut-off Date, [all of] [approximately [ ]% of] the Term Assets
were rated [investment grade] [specify particular rating] by at least one
nationally recognized rating agency, and no obligor of any Term Asset was in
default in the payment of any installments of principal, interest or premium (if
any) with respect thereto. Any such rating of any of the Term Assets is not a
recommendation to purchase, hold or sell such Term Asset or the Securities, and
there can be no assurance that a rating will remain for any given period of time
or that a rating will not be lowered or withdrawn entirely by a rating agency if
in its judgment circumstances in the future so warrant. See "Ratings" herein and
"Risk Factors--Limited Nature of Rating; Reduction or Withdrawal of Rating" in
the accompanying Prospectus regarding certain considerations applicable to the
ratings of the Securities.]
[The Term Assets will be held by the Trustee as book-entry credits to an
account of the Trustee at DTC.]
TERMS OF TERM ASSETS [REPEAT FOR EACH TERM ASSET WHICH COMPRISES MORE
THAN TEN PERCENT (10%) OF A POOL OF SECURITIES]
[Include information as applicable][The Term Assets of the Trust will
consist solely of initially [$] [ ____ ] aggregate principal amount of [ ____ ]
[ _____ ]% [specify applicable type/designation of assets], due [ ____ ], [ ]
issued by [identify Term Assets Issuer[s]], having the characteristics described
in the applicable Term Assets Prospectus. The Term Assets were originally issued
by the applicable Term Assets Issuer as part of an underwritten public offering
of [$] [ ____ ] aggregate principal amount of such securities, pursuant to a
registration statement on [Form S-3][Insert applicable form/schedule] (together
with all amendments and exhibits thereto, the "Term Asset Registration
Statement"), filed by the Term Assets Issuer with the Commission under the
Securities Act . Distributions are required to be made on the Term Assets
semiannually on the [ _____ ] day of each [ ] and [ _____ ], commencing [ _____
] (each, a "Term Assets Payment Date"), or if such day is not a Business Day, on
the next succeeding Business Day.
The Term Assets, together with any other Deposited Assets described below
and any Credit Support, represent the sole assets of the Trust that are
available to make distributions in respect of the Securities. Consequently, the
ability of Securityholders to receive distributions in respect of the Securities
will depend on the Trust's receipt of payments on, or in respect of, the Term
Assets.
This Prospectus Supplement, the Prospectus, each Term Assets Prospectus
and each Term Asset Registration Statement describes the material terms of the
Term Assets and the Term Assets Agreements. This Prospectus Supplement is
qualified in its entirety by, and should be read in conjunction with, (i) the
Prospectus, (ii) each Term Assets Prospectus, and (iii) the Term Asset
Registration Statement of which such Term Assets Prospectus is a part. No
representation is made by the Trust, the Trustee or the Company as to the
accuracy or completeness of the information contained in any Term Assets
Prospectus or Term Asset Registration Statement.
INTEREST PAYMENTS
Interest accrues on the Term Assets at the certificate rate for each class
and series of such securities, from the date of the initial issuance thereof.
Interest at the applicable rate will be paid to the Certificateholders [ ]
[monthly] [quarterly] [semiannually] on the [ ] day of each [ ] (or, if such day
is not a business day, the next succeeding business day).
[Interest on the Term Assets is calculated on the basis of the actual
number of days in the related interest period and a 360-day year.]
The Term Assets bear interest [in the aggregate] at a [weighted average]
rate per annum equal to [ %] [describe rate or method of calculation].
PRINCIPAL PAYMENTS
[Identify principal payment dates of Term Assets]
S-22
[Include if applicable, with definitions of relevant terms] [Generally,
principal payments due to the holders of the Term Assets are scheduled to
commence on the first payment date with respect to a Controlled Amortization
Period for a series of Term Assets (a "Term Asset Controlled Amortization
Period") or will be provided for by accumulating collections on the Receivables
for a specified period (a "Term Asset Accumulation Period") and paid on the
schedule final payment date, but in either case may be paid earlier or later
than such date. However, if an [Early Amortization Event, Payout Event,
Liquidation Event or Economic Amortization Event] (as such terms are defined in
Term Assets Agreements) (each such event, a "Term Asset Early Amortization
Event") occurs, [monthly] distributions of principal to the holders of the Term
Assets will begin on the first payment date following the occurrence of such
Term Asset Amortization Event.
See "Term Asset Amortization Events" below.
If a Term Asset Early Amortization Event does not occur, principal will be
distributed to the holder of the Term Assets on the first payments date during
the applicable Term Asset Controlled Amortization Period or at the
end of thenTerm Asset Accumulation Period") If, however, the amount of principal
distributed on the scheduled final payment date is not sufficient to pay the
holders of the Terms Assets in full, then monthly distributions of principal to
the holders of Term Assets will occur on each Payment Date after the scheduled
final payment date.]
[INCLUDE IF APPLICABLE] [REDEMPTION OR CONVERSION FEATURES]
[Describe any redemption, put, call or other conversion
features of the Term Assets].
[INCLUDE IF APPLICABLE] [SECURED] [UNSECURED] [OBLIGATIONS]
[Describe the security, including any collateral, for the Term Assets and
the priority (senior, subordinated) thereof with respect to other indebtedness
of the applicable Term Assets Issuer.]
[INCLUDE IF APPLICABLE][INVESTOR PERCENTAGE AND SELLER'S
PERCENTAGE]
[Pursuant to the Term Assets Agreements, all amounts collected on
Receivables will be allocated between the Investor Interest of the holders of
the Term Assets, the Investor Interest of any other series and the Seller's
Interest by reference to the Investor Percentage of the holders of the Term
Assets, the Investor Percentage of any other series and the Seller's Percentage.
The Seller's Percentage generally means the excess of 100% over the
aggregate Investor Percentage of all series issued by such Term Assets Issuer
then outstanding.]
[INCLUDE IF APPLICABLE][ALLOCATION OF COLLECTIONS]
[The Term Asset Servicer will deposit any payments collected by the Term
Asset Servicer with respect to the Receivables and will generally allocate such
amounts as follows:
[(a) an amount equal to the applicable Seller's Percentage of the
aggregate amount of deposits in respect of Principal Receivables and Finance
Charge Receivables, respectively, will be paid to the holder of the Seller's
Certificate;
(b) an amount equal to the applicable Investor Percentage of the aggregate
amount of such deposits in respect of Finance Charge Receivables will be
deposited into an account for the benefit of the holders of the Term Assets;
(c) during the Revolving Period, an amount generally equal to the
applicable Investor Percentage of the aggregate amount of such collections in
respect of Principal Receivables will be paid to the holder of the Seller's
Certificate, provided, however, that such amount may not exceed the amount equal
to the Seller's Interest. The term "Seller's Certificate" also encompasses the
terms Exchangeable Seller's Certificate and Exchangeable Transferor's
Certificate. "Principal Receivables")generally consist of amount charged by
cardholders for merchandise and services, amounts advanced as cash advances and
the interest portion of any participation interests. "Finance
S-23
Charge Receivables" generally consist of monthly periodic charges, annual fees,
cash advance fees, late charges, over-the-limit fees and all other fees billed
to cardholders, including administrative fees;
(d) during the Controlled Amortization Period, Rapid Amortization Period
or Accumulation Period, collections of Principal Receivables will be allocated
to the holders of Term Assets based on the Investor Percentage, subject, during
a Controlled Amortization Period, to a cap.]]
[TERM ASSETS EVENTS OF DEFAULT][TERM ASSET EARLY AMORTIZATION EVENTS]
The following is a summary of the typical Term Assets [Events of
Default][Early Amortization Events] for each series of Term Assets. [Any
additional Term Asset Early Amortization Events, unique to a particular series
of Term Asset, will be described following the summary];
[(a) failure to make payments to holders of Term Assets with the time
periods given in the Term Assets Agreements;]
[(b) material breaches of certain representations, warranties or covenants
or failure to observe or perform in a material respect any covenant or agreement
under any Term Assets Agreement;]
[(c) occurrence of a material default by a Term Asset
Servicer;]
[(d) failure to maintain the minimum Seller's Percentage;]
[(e) failure to maintain a certain minimum level of Receivables or
accounts, or the Seller being unable to transfer Receivables or accounts to Term
Assets Issuer;]
[(f) certain events of bankruptcy or insolvency relating to the Seller;]
[(g) Term Assets Issuer becomes an "investment company" within the meaning
of the Investment Company Act of 1940, as amended;]
[(h) any reduction of the portfolio yield or excess spread (averaged over
any three consecutive months) to a rate below a certain rate provided in the
Term Assets Agreement for such a period;]
[(i) the available amount of the cash collateral guaranty is less than
[____ ]% of the amount of the Investor Interest for the underlying series of
Term Assets.]
[Describe Additional Term Asset Events of Default or Specific Amortization
Events]
[The pool of Term Assets, together with any other assets described below
any Credit Support described under "Description of Credit Support", represents
the sole assets of the Trust that are available to make distributions in respect
of the Certificates.]
The Deposited Assets will also include [describe any assets which are
ancillary or incidental to the Term Assets, including hedging contracts such as
puts, calls, interest rate swaps, currency swaps, floors, caps, and collars, and
any cash or other security pledged to support the Term Assets].
[DESCRIPTION OF CREDIT SUPPORT]
For the benefit [solely] of the [Notes] [Offered] [Class [ ] Certificates
[and the Class [ ] Certificates]], Credit Support will be obtained [and will
constitute part of the Trust to the extent provided below] to support or ensure
the [servicing and [timely] [ultimate]] distribution of amounts due with respect
to the Deposited Assets, in the form and amount described below.
S-24
[THE LETTER OF CREDIT]
Simultaneously with the Company's assignment of the Deposited Assets to the
Trust, the Company will obtain the Letter of Credit from [ ] (the "Letter of
Credit Bank") in favor of the Owner Trustee. The Letter of Credit will be
irrevocable and will [support the [timely] [ultimate] remittance of amounts due
with respect to the Deposited Assets]. [The maximum amount that may be drawn
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 Security 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 Deposited Assets] [describe other
methods]. The Letter of Credit expires on [__], [ ]. The [Indenture][Owner]
Trustee will be obligated, in the event of a drawing on the Letter of Credit, to
pursue appropriate remedies against the Deposited Assets and other collateral,
and any realization thereon shall be paid to the Letter of Credit Bank to the
extent of any amounts owing, in the manner and priority specified herein.]
[Add 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 cashflow to
the applicable Series, provide (or incorporate by reference) the audited
financial statements of the Letter of Credit Bank. To the extent that the Letter
of Credit will cover payment of between 10 and 20% of the cashflow to the
applicable Series, provide (or incorporate by reference) information required by
Item 301 of Regulation S-K with respect to the Letter of Credit Bank.]
[THE SURETY BOND]
Simultaneously with the Company's assignment of the Deposited Assets to
the Trust, the Company will obtain the Surety Bond from [ ] (the "Surety")
in favor of the [Indenture][Owner] Trustee. The Surety Bond will
guaranty [timely] [ultimate] distributions of the principal of and premium (if
any) and interest with respect to the [Notes] [Class[ ] Certificates]. The
Surety Bond expires on [ ____ ], [ ]. The [Indenture][Owner] Trustee will
be obligated, in the event of a drawing on the Surety Bond, to pursue
appropriate remedies against the Deposited Assets and other Assets and other
collateral, and any realization thereon shall be paid to the Surety to the
extent of any owing, in the manner and priority specified herein.
[Add language regarding the issuer of the Surety Bond with respect to its
debt ratings, activities in 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 and
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 cashflow to
the applicable Series, provide (or incorporate by reference) the audited
financial statements of the Surety. To the extent that the Surety Bond will
cover payment of between 10 and 20% of the cashflow to the applicable Series,
provide (or incorporate by reference) information required by Item 301 of
Regulation S-K.
[RESERVE ACCOUNT]
The Company will deposit with the [Indenture][Owner] Trustee on the
Closing Date cash, letters of credit and short-term investments acceptable to
the Rating Agency initially rating the Securities in the amount of [$] [
__________ ]. [Collections with respect to the Deposited Assets not distributed
with respect to the Securities shall be deposited in the Reserve Account.]
Amounts so deposited in such Reserve Account will be used to make payments of
principal of and premium (if any) and interest on the Securities to the extent
that funds are not otherwise available. Immediately after any Distribution Date,
amounts in the Reserve Account in excess of [indicate formula] [may be paid to
the Company.]
[OTHER FORMS OF CREDIT ENHANCEMENT]
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[Describe the material terms of any other form of credit enhancement which
is included in the Trust, including any interest rate, currency, securities,
commodity or credit swaps, caps, floors, collars or options, and identify each
counterparty thereto. To the extent the credit exposure pursuant to such credit
enhancement will equal or exceed 20% of the cashflow to the applicable Series,
provide (or incorporate by reference) the audited financial statements of the
applicable counterparty. To the extent that such exposure is between 10 and 20%
of cashflow to the applicable Series, provide (or incorporate by reference)
information required by Item 301 of Regulation S-K with respect to the
counterparty.]
YIELD ON THE CERTIFICATES
[Describe factors relating to the Deposited Assets, the terms thereof and
the manner and priority in which collections thereon are paid or allocated to
the Notes and each class of the Certificates, as described elsewhere herein.]
See "Maturity and Yield Considerations" in the Prospectus.
DESCRIPTION OF SECURITIES
GENERAL
The Certificates will consist of [ ] classes of Certificates, designated
as Class[ ] [ ,] [and] Class [ ] [and Class____] Certificates. ____ 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 related Trust. The Class [ ]
Certificates have in the aggregate an initial [Certificate Principal Balance]
[Notional Amount] of [$] [ __________ ] (approximate) and a [ ____ %] [Variable]
Pass-Through Rate. The Class [ ] Certificates have in the aggregate an initial
[Certificate Principal Balance] [Notional Amount] of [$] [ __________ ]
(approximate) and a [ ____ %] [Variable] Pass-Through Rate. The Class [ ]
Certificates have in the aggregate an initial [Certificate Principal Balance]
[Notional Amount] of [$] [ __________ ] (approximate) and a [ ____ %] [Variable]
Pass-Through Rate. [The Class [ ] Certificates, which are not being offered
hereby, will be transferred by the Company to an affiliate on the Closing Date,
and may be sold at any time by the Company in accordance with the terms of the
Trust Agreement.]
The Certificates (other than the Class [ ] Certificates [and specify
others] (the "Definitive Classes")) will be issued, maintained and transferred
on the book-entry records of DTC and it Participants in minimum denominations of
[$ ] and [integral multiplies thereof] [multiplies of [$ ] in excess thereof].
[The Class [ ] Certificates [and specify any others] will be offered in
registered, certificated form, in minimum percentage interests corresponding to
the initial Notional Amounts or Certificate Principal Balance, as applicable, of
[$ ] and integral multiples thereof, except that one Certificate of each such
class may be issued with an initial Notional Amount or Certificate Principal
Balance, as applicable, equal to an integral multiple of [$ ] plus the excess of
the initial aggregate Notional Amount or Certificate Principal Balance, as
applicable, of such class over the greatest integral multiple of [$ ] that is
not more than such initial aggregate Notional Amount or Certificate Principal
Balance, as applicable.]
Distributions with respect to the Notes and the Certificates will be
payable in the applicable Specified Currency.
The Notes [and specify others] will be issued, maintained and transferred
on the book-entry records of DTC and it Participants in minimum
denominations of [$ ] and [integral multiples thereof] [multiples of [$ ]
in excess thereof.]
The Notes and the Certificates [(other than the Definitive Classes of
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 Company, the "Clearing Agency"),
except as provided below. The Company has been informed by DTC that DTC's
nominee will be Cede & Co. ("Cede"). No holder of any such Note or Certificate
(a "Security Owner") will be entitled to receive certificate representing such
person's interest, except as set forth below under " - Definitive Securities".
Unless and until Definitive Securities are issued under
S-26
the limited circumstances described herein, all references to actions by holders
with respect to any such Notes or Certificates shall refer to actions taken by
DTC upon instructions from its Participants. See "Definitive Securities" below
and "Description of Securities Global Securities" in the Prospectus.
Under the rules, regulations and procedures creating and affecting DTC and
its operations, DTC will take action permitted to be taken by a Security Owner
only at the direction of one or more Participants to whose DTC account such
Securities are credited. Additionally, DTC will take such actions with respect
to specified Voting Rights only at the direction and on behalf of Participants
whose holdings of such Securities evidence such specified Voting Rights. DTC may
take conflicting actions with respect to Voting Rights, to the extent that
Participants whose holdings of Securities evidence such Voting Rights, authorize
divergent action.
DEFINITIVE SECURITIES
Definitive Securities will be issued to Security Owners or their nominees
respectively, rather than to DTC or its nominee, only if (i) the Company advises
the Owner Trustee or Indenture Trustee in writing that DTC is no
longer willing or able to discharge properly its responsibilities as
Clearing Agency") with respect to a class of Securities [(other than the
Definitive Classes)] and the Company is unable to locate a qualified successor
or (ii) the Company, 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 Participants of the
availability through DTC of Definitive Securities. Upon surrender by DTC of the
definitive certificates representing the Securities [(other than the Definitive
Classes of Securities)] and receipt of instructions for re-registration, the
Owner Trustee or Indenture Trustee will reissue such Securities as Definitive
Securities issued in the respective principal amounts owned by the individual
owners of such Securities, and thereafter the Owner Trustee or Indenture Trustee
will recognize the holders of such Definitive Securities as holders under the
Trust Agreement or Indenture, as applicable.
DISTRIBUTION
Collections on the Deposited Assets that are received for a given
Collection Period pursuant to the collection procedures described herein and in
the Prospectus will be applied by on each applicable Distribution Date to the
following distributions in the following order of priority, solely to the extent
of Available Funds (as defined below) on such Distribution Date:
(i) to the Owner Trustee and the Indenture Trustee, all unpaid fees and
expenses owed thereto and its respective agents, up to the Allowable
Expense Amount (as defined below) for the related Collection Period;
(ii) [to the providers of Credit Support ("Credit Support Providers")],
any amount required to be paid or reimbursed to, or deposited with,
any such person (collectively, "Credit Support Payments");]
(iii)to the Securityholders of each Class of such Series, first, to the
payment of Required Interest [and on a pro rata basis to the Credit
Support Providers for the payment of any Credit Support Payments],
second, to the payment of Required Principal and third, to the
payment of Required Premium, in each case applicable to such Class,
commencing with the most highly ranked Class and, to the extent
Available Funds remain available, to each other Class in accordance
with the ranking specified herein under "--Allocation of Losses;
Subordination";
(iv) [to the Credit Support Providers, any Credit Support
Payments;]
(v) to the Owner Trustee and the Indenture Trustee, all its remaining
unpaid fees and expenses and those of its respective agents not
otherwise paid pursuant to clause (i) above;
(vi) [all remaining amounts, if any, to the Company.]
S-27
There can be no assurance that collections received from the Deposited
Assets and any applicable Credit Support relating to the Securities over a
specified period will be sufficient, after payment of all Allowable Expense
Amounts [and payments of all amounts required to be paid to the Credit Support
Providers] for such period, to make all required distributions on the
Securities. 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 distributed on the next Distribution Date on which sufficient
funds exist to pay such shortfalls.
For purposes hereof, the following terms have the following meanings:
"Allowable Expense Amount" means, for any given Collection Period,
the sum of (x) [$] [ ] and (y) amounts in respect of the Allowable Expense
Amount from the preceding Collection Period that have not been applied on
the Distribution Date for such preceding Collection Period.
"Available Funds" for any Distribution Date means the sum of (a)
all amount received on or with respect to the Deposited Assets
(including investment income on Eligible Investment) received during
the preceding Collection Period[,] [and] (b) amounts available as such
Distribution Date pursuant to the Credit Support described herein [and
(c) any additional amount that the [Company] may remit to the Owner
Trustee from time to time according to the terms of the Trust
Agreement for application as Available Funds].
"Call Premium Percentage" for any given Distribution Date means [a
fixed percentage] [a percentage that varies depending on [describe basis
for variable formula, such as the applicable date or other factors or
indices.]].
"Eligible Investments" means, with respect to the Securities, those
investments acceptable to the Ratings Agency as being consistent with the
rating of such Securities. Generally, Eligible Investments must be limited
to obligations or securities that mature no later than the business day
prior to the next succeeding Distribution Date.
"Required Interest" for the Securities or any Class thereof on any
given Distribution Date means the accrued and unpaid interest on the
outstanding Security Principal Balance [or Notional Amount] of such
Securities, computed at the applicable Note Interest Rate or Pass-Through
Rate.
"Required Premium" for the Securities or any Class thereof for any
Distribution Date means an amount equal to the product of (a) the Required
Principal for such Securities on such Distribution Date and (b) the Call
Premium Percentage for such Distribution Date.
"Required Principal" for the Securities or any Class thereof for any
Distribution Date means the amount received on the Deposited Assets
attributable to principal payments thereon during the related Collection
Period, to the extent payable or allocable to such Securities. The
Security Principal Balance of a Security outstanding at an time presents
the maximum amount that the holder thereof is entitled to receive as
distribution payable in respect of or allocate to principal from the cash
flow on the Term Assets, the other assets in the Trust and any Credit
Support obtained for the benefit of such holder. The Security Principal
balance of any class of Securities [(other than the Class [ ]
Certificates)] as of any date of determination is equal to the initial
Security Principal Balance thereof, reduced by the aggregate of (a) all
amounts allocable to principal previously distributed with respect to such
Security and (b) any reductions in the Security Principal Balance there
deemed to have occurred in connection with allocations of (i) Realized
Losses allocable to principal on the Deposited Assets and (ii)
Extraordinary Trust Expenses, as described herein. [The Notional Amount of
the Class [ ] Certificates as of any date of determination is equal to
[specify amount].] [Holders of the Class [ ] Certificates are not entitled
to receive any distributions allocable to principal
[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] in reduction of
S-28
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]
[Subject to the following limitations, the [Trustee] will be obligated to
advance or cause to be advanced on or before each Distribution Date its own
funds, or other available funds, in an amount equal to the aggregate of payments
of principal, premium (if any) and interest, net of that portion of the
Administrative Fee (as defined herein) attributable to fees and expenses of the
Owner Trustee or Indenture Trustee, that were due during the related Collection
Period and that were delinquent on the related Determination Date (any such
advance, an "Advance").
Advances are required to be made only to the extent they are deemed by the
[Trustee] to be recoverable from related late collections, insurance proceeds,
if any, or Liquidation Proceeds. The purpose of making such Advance is to
maintain a regular cash flow, rather than to guarantee or insure against losses.
The [Trustee] will not
be required to make any Advances with respect to reductions in the amount
of the payments on the Deposited Assets due to bankruptcy proceedings with
respect to the Deposited Assets.
All Advances will be reimbursable from late collections, insurance
proceeds, if any, and any proceeds from the liquidation of the Deposited Asset
("Liquidation Proceeds") as to which such unreimbursed Advance was made. In
addition, any Advance previously made in respect of any Deposited Asset that are
deemed to be nonrecoverable from related late collections, insurance proceeds,
if any, or Liquidation Proceeds may be reimbursed to the [Trustee] out of any
funds allocable to any of the Deposited Assets prior to the distributions on the
Securities.
ALLOCATION OF LOSSES; SUBORDINATION
The subordination described herein provided by the Class [ ] Certificates
[and the Class [ ] Certificates] is designed to protect holders of the Notes and
the remaining classes of 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 Notes and the
remaining classes of Certificates, to the extent described below, only if such
losses and other shortfalls are not so covered, or the coverage in respect
thereof has been exhausted.
[Realized Losses and Extraordinary Trust Expenses will be allocated on any
Distribution Date as follows: [describe allocation among the various classes].]
[An "Extraordinary Trust Expense" is an expense of a given Trust in excess
of the Allowable Expense Amount.]
[RESTRICTION ON TRANSFER OF THE CLASS [ ] CERTIFICATES
Because the Class [ ] Certificates are subordinate to the Notes, the Class
[ ] Certificates and 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 TRUST AGREEMENT
GENERAL
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 containing a copy of the Trust Agreement
as executed will be filed by the Company with the Commission following the
issuance and sale of the Certificates. The Trust created under the Trust
Agreement will consist of (i) the Deposited Assets (exclusive of any Retained
Interest, which is not part of the Trust), (ii) all payments on or collections
in respect of the Deposited Assets due after the Cut-off Date, together with any
proceeds thereof[,] [and] [(iii) any Credit Support in respect of any class or
classes of Certificates] [and (iv) the rights of the Company under the purchase
agreement for to the
S-29
Deposited Asset between the Company and the seller of the Deposited Asset]. [In
addition, the Certificateholders of the Certificates may also have the benefit
of certain Credit Support discussed above. See "Description of Credit Support".]
Reference is made to the Prospectus for important information in addition to
that set forth herein regarding the Trust, the terms and conditions of the Trust
Agreement and the Certificates. The material terms of the Trust Agreement are
described below and in the Prospectus. Such summaries 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.
THE OWNER TRUSTEE
[ ], a [ ], will act as trustee for the Certificates and the Trust pursuant
to the Trust Agreement. The Owner Trustee's offices are located at [ ] and its
telephone number is [ ].
The Trust Agreement will provide that the Owner Trustee and any director,
officer, employee or agent of the Owner 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 Owner Trustee's duties under the Trust
Agreement, other than any loss, liability or expense (i) that constitutes a
specific liability of the Owner Trustee under the Trust Agreement or (ii)
incurred by reason of willful misfeasance, bad faith or negligence in the
performance of the Owner Trustee's duties under the Trust Agreement or as a
result of a breach, or by reason of reckless disregard of the Owner Trustee's
obligations and duties under the Trust Agreement.
DISTRIBUTION OF TERM ASSETS
In the event the Term Assets Issuer were to cease reporting as required
under the Securities and Exchange Act of 1934 at a time when the Depositor is
subject to such a reporting requirement, then the Term Assets will be
distributed to holders of the Certificates pursuant to the following formula
[describe formula], and the Certificates would be cancelled.
VOTING RIGHTS
[At all times,] [Subject to the succeeding paragraph,] [ ]% of all Voting
Rights will be allocated among all holders of the Class [ ] Certificates[,]
[and] the Class [ ] Certificates [and specify other classes] in proportion to
the outstanding Certificate Principal Balances [or Notional Amounts] of their
respective Certificates and [ ]% of all Voting Rights will be allocated among
all holders of the Class [ ] Certificates in proportion to the then outstanding
[Certificate Principal Balances] [Notional Amounts] of their respective
Certificates. [Specify whether and what circumstances voting will be
class-by-class.]
[Specify conditions, if any, under which allocation of Voting Rights might
change from the foregoing percentages].
VOTING OF TERM ASSETS, MODIFICATION OF TERM ASSETS AGREEMENT
The Owner Trustee, as holder of the Term Assets, has the right to vote and
give consents and waivers in respect of such Term Assets as permitted by [DTC]
and except as otherwise limited by the Trust Agreement or the Indenture. In the
event that the Owner Trustee receives a request from [DTC], the Term Assets
Trustee or the Term Assets Issuer for it consent to any amendment, modification
or waiver of the Term Assets, the Term Assets Agreement or any other documents
thereunder or relating thereto, or receives any other solicitation for any
action with respect to the Terms Assets, the Owner Trustee shall mail notice of
such proposed amendment, modification, waiver or solicitation to each
Securityholders of record as such date. The Owner Trustee shall request
instructions from the Securityholders as to whether or not to consent to or vote
to accept such amendment, modification, waiver, or solicitation. The Owner
Trustee shall consent or vote, or refrain from consenting or voting, in the same
proportion (based on the relative [Note][Certificate] Principal Balance and
Notional Amounts of the [Notes][Certificates], as applicable) as the
[Note][Certificates] of the Trust were actually voted or not by the
[Noteholders][Certificateholders] thereof as of date determined by the Owner
Trustee prior to the date on which
S-30
such consent or vote is required; provided, however, that, notwithstanding
anything to the contrary, the Owner 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 for Federal income tax purpose, (ii)
which would alter the timing or amount of any payment on the Term Assets, except
in the event of a [Term Assets Event of Default] [Term Asset Early Amortization
Event or an event which with the passage of time would become a [Term Assets
Event of Default][Term Asset Early Amortization Event] and with the unanimous
consent of all Outstanding [Notes][Certificates] or (iii) which would result in
the exchange or substitution of any of the outstanding Term Assets pursuant to a
plan for the refunding or refinancing of such Term Assets except in the event of
a default under the Indenture and only with the consent of Securityholders
representing 100% of the aggregate voting rights of each outstanding Class of
the Securities. The Owner Trustee shall have no liability for any failure to act
resulting from Securityholders' late return, directions requested by the Owner
Trustee from the Securityholders.
In the event that an offer is made by the Term Assets Issuer to issue new
obligations in exchange and substitution for any of the Term Assets, pursuant to
a plan for the refunding or refinancing of the Term Assets or any other offer is
made for the Term Assets, the Owner Trustee shall notify the Securityholders of
such offer as promptly as practicable. The Owner Trustee must reject any such
offer unless an event of default under the Term Assets Agreement has occurred,
the Owner Trustee is directed by the affirmative vote of all of the
Securityholders to accept such offer and the Owner Trustee has received the tax
opinion described above. Accordingly, a Securityholder generally would be
required to effect a withdrawal of Requested Term Assets from the Trust in order
to accept such offer. See "--Optional Exchange of Certificates".
If an event of default under the Term Assets Agreement occurs and is
continuing and if directed by all the holders of outstanding Class [ ]
Securities and, unless the Class [ ] Securities are no longer outstanding, by
all the holders of outstanding Class [ ] Securities, the Owner Trustee shall
vote the Term Assets in favor of directing, or take such other action as may be
appropriate to direct, the Term Assets Trustee to declare the unpaid principal
amount of the Term Assets 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 Term Assets, the Securityholders' interests of each Class
may differ and the interests of either Class may differ from holders of other
securities of the same series or class.
TERMINATION
The Company will have the right to purchase all remaining Deposited Assets
in the Trust and thereby effect early retirement of the Certificates on any
Distribution Date, [(a)] once the aggregate principal amount of the Deposited
Assets at the time of any such purchase is not greater than [specify percentage
not greater than 10%] of the aggregate principal amount of the Deposited Assets
as of the Cut-off Date [and (b) at the option of the Company at [specify when
and on what terms any such option may be exercised]; provided, however, that the
right to exercise any such option is contingent on such exercise being
consistent with the Company's continued satisfaction of the applicable
requirements for exemption under Rule 3a-7 under the Investment Company Act of
1940 and all applicable rules, regulations and interpretations thereunder. In
the event the Company exercises any such option, the portion of the purchase
price allocable to the Certificates of each class will be, to the extent of
available funds, [100% of their then aggregate outstanding [Note][Certificate]
Principal Balance or Notional Amount, as applicable, plus with respect to the
[Notes][Certificates] [one month's] [three month's] [specify other period]
interest thereon at the Fixed Pass-Through Rate or the then applicable Variable
Pass-Through Rate, as the case may be, plus, with respect to each class of
[Notes][Certificates], any previously accrued but unpaid interest thereon.]
[Specify alternative allocations method if different from above.]
DESCRIPTION OF INDENTURE
[Describe material provisions of Indenture not described in
Prospectus, if any.]
[ ___ ], a [ __ ] will act as trustee pursuant to the Indenture. The
Indenture Trustee's offices are located at [ _______ ] and its telephone number
is [ __ ].
S-31
CERTAIN LEGAL ASPECTS OF DEPOSITED ASSETS
[Describe any applicable legal aspects of the Deposited Assets or relating
to the enforceability by the Certificateholders of the security interest, if
any, securing such Deposited Assets.]
YEAR 2000
Certain information technology ("IT") and non-IT systems (i.e. embedded
technology such as microcontrollers) may utilize older computer programs that
were written using two digits rather than four to define the applicable year.
Consequently, such computer programs may recognize a date using "00" as the year
1900 rather than the year 2000. These computer programs may fail to operate
properly in the year 2000 and after if they are not modified or replaced to
comply with year 2000 requirements.
Various Term Assets Issuers may not timely conduct or complete a year 2000
assessment and there can be no assurance that any Term Assets Issuers will make
any necessary modifications or replacements of their IT or non-IT systems in
time, if at all. Failure to do so could result in a disruption of operations of
various Term Assets Issuers, including, among other things, a temporary
inability to process funds or engage in similar normal business practices. As a
result, payments to Securityholders may be interrupted or impaired.
[Summarize year 2000 disclosure from Term Assets Prospectus(es) concerning
readiness, costs, material risks and contingency plans, as applicable].
FEDERAL INCOME TAX CONSEQUENCES
Orrick, Herrington & Sutcliffe LLP, Special Tax Counsel, has delivered an
opinion that the (i) the Notes should be treated as indebtedness for federal
income purposes and (ii) without regard to whether the Notes are characterized
as indebtedness, the Trust will be characterized as a grantor trust or as a
partnership for federal income tax purposes and will not be characterized as an
association taxable as a corporation (or publicly traded partnership treated as
an association). Each Securityholder is required to treat the Notes as
indebtedness. Further, although such treatment is not certain, the Trustee
intends for tax reporting purposes to treat the Trust as a grantor trust. For a
discussion of the consequences of recharacterization of the Trust as a
partnership for federal income tax purposes, see "--Possible Recharacterization
of the Trust as a Partnership" in "Federal Income Tax Consequences," in the
Prospectus.
[INSERT DISCUSSION OF TAX CHARACTERIZATION OF TERM ASSETS AS
APPROPRIATE]
Prospective investors should be aware that expenses of the Trust may be
subject to limitations on deductibility, which may depend on each particular
investor's circumstances, but, in general, are particularly significant for
investors that are not corporations.
Income on Certificates is likely to be subject to tax in whole or
significant part in the hands of pension plans, individual retirement accounts
and other tax-exempt investors.
Payments made on a Note to a person that is not a U.S. Person and has no
connection with the United States other than holding its Note generally will be
made free of United States federal withholding tax, provided that (i) the holder
is not related (directly or indirectly) to the obligor, guarantor, if any, or
sponsor of the Term Assets, the Depositor, the holder of any Certificate, the
holder of any Call Warrant or the counterparty on any notion principal contract
or other derivative contract of which the Trust is a party and (ii) the holder
complies with certain identification and certification requirements imposed by
the IRS.
Certificates are not a suitable investment for any person that is not a
U.S. Person and will not be permitted to be transferred to any such person.
See "Federal Income Tax Consequences" in the Prospectus.
S-32
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and Section 4975 of the Code impose certain requirements on (a) an
employee benefit plan (as defined in Section 3(3) of ERISA), (b) a plan
described in Section 4975(e)(1) of the Code, including an individual retirement
account ("IRA") or Keogh plan, or (c) any entity whose underlying assets include
plan assets by reason of a plan's investment in the entity (each, a "Plan").
ERISA and Section 4975 of the Code prohibit certain transactions
involving the assets of a Plan and persons who have specified relationships to
the Plan, I.E., "parties in interest" within the meaning of ERISA or
"disqualified persons" within the meaning of the Code (collectively, "Parties in
Interest"). Thus, a Plan fiduciary considering an investment in the Securities
should consider whether such an investment might constitute or give rise to a
prohibited transaction under ERISA or Section 4975 of the Code. The Term Assets
Issuer, the Underwriter, the Owner Trustee and their respective affiliates may
be Parties in Interest with respect to any Plans.
If an investment in a Security by a Plan were to result in the assets
of the Trust being deemed to constitute "plan assets" of such Plan, certain
aspects of such investment, including the operations of the Trust and the deemed
extension of credit between the Term Assets Issuer and the holder of the
Security (as a result of the Term Assets being deemed to be plan assets), as
well as subsequent transactions involving the Trust or its assets, might
constitute or result in prohibited transactions under Section 406 of ERISA and
Section 4975 of the Code unless exemptive relief were available under an
applicable exemption issued by the United States Department of Labor (the
"DOL"). Neither ERISA nor the Code defines the term "plan assets." Under Section
2510.3-101 of the DOL regulations (the "Regulation"), a Plan's assets may
include the assets of an entity if the Plan acquires an "equity interest" in
such entity unless an exception applies under the Regulation.
The Regulation defines the term "equity interest" as any interest in
an entity other than an instrument which is treated as indebtedness under
applicable local law and which has no "substantial equity features." [Although
there is no authority directly on point, the Notes should be treated as
indebtedness under applicable local law and should not be treated as having any
substantial equity features.] The Regulation states that a beneficial interest
in a trust (such as a Certificate) is an equity interest. Thus, if a Plan
acquires a Certificate, for certain purposes (including the prohibited
transaction provisions of Section 406 of ERISA and Section 4975 of the Code),
the Plan would be considered to own an undivided interest in the underlying
assets of the Trust unless such Certificate is a "publicly-offered security" or
another exception applies under the Regulation.
[The Underwriter expects that the Certificates will satisfy the
criteria for treatment as publicly-offered securities under the Regulation.] A
publicly-offered security is a security that is (i) freely transferable, (ii)
part of a class of securities that is owned by 100 or more investors independent
of the issuer and of one another at the conclusion of the initial offering, and
(iii) either is (A) part of a class of securities registered under Section 12(b)
or 12(g) of the Exchange Act, or (B) sold to the Plan as part of an offering of
securities to the public pursuant to an effective registration statement under
the Securities Act and the class of securities of which such security is a part
is registered under the Exchange Act within 120 days (or such later time as may
be allowed by the Commission) after the end of the fiscal year of the issuer
during which the offering of such securities to the public occurred. [The
Underwriter will verify that there will be at least 100 separate purchasers
(whom the Underwriter has no reason to believe are not independent of the
Company or of one another) at the conclusion of the initial offering. There is
no assurance that the 100 independent investor requirement of the
"public-offered security" exception will, in fact, be satisfied.]
Without regard to whether the Securities are treated as equity
interests in the Trust, exemptive relief from the prohibited transaction rules
of ERISA and Section 4975 of the Code could be available if a Security is
acquired in accordance with one or more "class exemptions" issued by the DOL,
such as Prohibited Transaction Class Exemption ("PTCE") 96-23 (the "in-house
asset manager" exemption), PTCE 95-60 (the insurance company general account
exemption), PTCE 91-38 (the bank collective investment fund exemption), PTCE
90-1 (the insurance company pooled separate account exemption), PTCE 84-14 (the
"qualified professional asset manager" exemption) or PTCE 75-1 (the
broker-dealer exemption). There is no assurance that any of these exemptions,
even if all of the conditions specified therein are satisfied, will apply to all
transactions involving the acquisition of the Security and the operation of the
Trust.
S-33
Each purchaser of a [Security] [Note] [Certificate] and each
fiduciary who causes any entity to purchase a [Security] [Note] [Certificate]
will be deemed to have represented and warranted that either (i) it is neither a
Plan nor an entity the assets of which are deemed to be "plan assets" or (ii)
its purchase and holding of such [Security] [Note] [Certificate] will not
constitute or result in a non-exempt prohibited transaction. In this regard,
prospective Plan investors as to which the Term Assets Issuer, the Underwriter
or any of their affiliates may be a Party in Interest should consider whether
adequate exemptive relief is available under any of the class exemptions
mentioned above.
NOTHING HEREIN SHALL BE CONSTRUED AS A REPRESENTATION THAT AN
INVESTMENT IN THE SECURITIES MEET ANY OR ALL OF THE RELEVANT LEGAL REQUIREMENTS
WITH RESPECT TO INVESTMENTS BY, OR IS APPROPRIATE FOR, PLANS GENERALLY OR ANY
PARTICULAR PLAN. ANY PLAN OR ANY OTHER ENTITY THE ASSETS OF WHICH ARE DEEMED TO
BE "PLAN ASSETS," SUCH AS AN INSURANCE COMPANY INVESTING ASSETS OF ITS GENERAL
ACCOUNT, PROPOSING TO ACQUIRE SECURITIES SHOULD CONSULT WITH ITS COUNSEL.
METHOD OF DISTRIBUTION
Subject to the terms and conditions set forth in the Underwriting
Agreement, dated as of [ ], 199[ ] (the "Underwriting Agreement"), the Company
has agreed to sell and [Salomon Brothers Inc. (an affiliate of the Company)]
(each of the Underwriters named below, including Salomon Brothers Inc (an
affiliate of the Company)] (the "Underwriter[s]")[,] has [severally] agreed to
purchase, the Notes and the [Certificates] [principal amount of each class of
Certificates set forth below opposite its name].
CLASS [ ] CLASS [ ] CLASS [ ]
NOTES [ ] CERTIFICATES CERTIFICATES CERTIFICATES
---------------- ------------- ------------- -------------
Salomon Brothers $ $ $ $
Inc..............
Total.....
[Salomon Brothers Inc has] [The several Underwriters have] agreed,
subject to the terms and conditions set forth in the Underwriting Agreement, to
purchase all Certificates and Notes offered hereby if any of such Securities are
purchased. [In the event of default by any Underwriter, the Underwriting
Agreement provides that, in certain circumstances, the purchase commitments of
non-defaulting Underwriters may be increased or the Underwriting Agreement may
be terminated.]
The Company has been advised by the Underwriter[s] that [it] [they]
propose[s] to offer the Securities from time to time in negotiated transactions
or otherwise at varying prices to be determined at the time of sale. The
Underwriter[s] may effect such transactions by selling Securities to or through
dealers and such dealers may receive compensation in the form of underwriting
discounts, concessions or commissions from the Underwriter[s] and any purchasers
of Securities for whom they may act as agents. The Underwriter[s] and any
dealers that participate with the Underwriter[s] in the distribution of
Securities may be deemed to be underwriters, and any profit on the resale of
Securities by them may be deemed to be underwriting discounts or commissions
under the Securities Act.
The Underwriting Agreement provides that the Company will indemnify
the Underwriter[s] against certain civil liabilities, including liabilities
under the Securities Act, or will contribute to payments the Underwriter[s] may
be required to make in respect thereof.
Salomon Brothers Inc is an affiliate of the Company, and the
participation by Salomon Brothers Inc is the offering of the Certificates
complies with Schedule E of the By-Laws of the National Association of
Securities Dealers, Inc. regarding underwriting securities of an affiliate.
S-34
RATINGS
It is a condition to the issuance of the Certificates and the Notes
that the Certificates be rated not lower than [specify ratings applicable to
each class] and the Notes be rated not lower than [specify ratings applicable to
each class] by [Standard & Poor's Ratings Services ("Standard & Poor's")] [
Moody's Investors Service, Inc. ("Moody's")] [Fitch's Investors Service, L.P.
("Fitch's")] [and] [Duff & Phelps Credit Rating Company ("Duff & Phelps")] (the
"Rating [Agency] [Agencies]"). The ratings address the likelihood of the receipt
by Securityholders of payments required under the Trust Agreement or Indenture,
as applicable, and are based primarily on the credit quality of the Deposited
Assets and any providers of Credit Support, as well as on the relative
priorities of the Notes and each class of the Certificates with respect to
collections and losses with respect to the Deposited Assets. The rating on the
Certificates or the Notes does not, however, constitute a statement regarding
the occurrence or frequency of redemptions or prepayments on, or extensions of
the maturity of, the Deposited Assets, the corresponding effect on yield to
investors, or whether investors in the Class [ ] Certificates [or Notes]
[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 Company has not requested a rating on the Securities 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 Securities, or,
if it does, what rating would be assigned by any such other rating agency. A
rating on the Securities by another rating agency, if assigned at all, may be
lower than the ratings assigned to the Securities by the Rating [Agency]
[Agencies].
S-35
INDEX OF TERMS
Advance..........................................................28
AECA.............................................................17
AID..............................................................18
AID-Guaranteed Securities........................................18
AID-Guaranteed Security Payment Date.............................18
Allowable Expense Amount.........................................27
Appropriations Acts..............................................17
Available Funds..................................................27
Call Premium Percentage..........................................27
Cash Collateral Guaranty.........................................21
Cede.............................................................26
Certificates......................................................1
Clearing Agency..................................................26
Closing Date......................................................8
Code.............................................................31
Commission.......................................................13
Company...........................................................1
Credit Support Payments..........................................27
Credit Support Providers.........................................27
Cut-off Date.................................................19, 20
Definitive Classes...............................................26
Deposited Assets..................................................9
Distribution Date.................................................3
DSAA.............................................................17
DTC...............................................................3
Duff & Phelps....................................................42
Eligible Investments.............................................28
ERISA............................................................40
Exchange Act.....................................................11
Expected Settlement Date..........................................1
Extraordinary Trust Expense......................................29
Fannie Mae.......................................................14
Farm Credit Act..................................................16
FCA..............................................................16
FCBs.............................................................16
FFB..............................................................17
FFEL.............................................................15
FHLBs............................................................16
FHLMC Act........................................................14
Final Distribution Date...........................................3
Finance Charge Receivables.......................................23
FIRRE Act........................................................15
FMS..............................................................17
Freddie Mac......................................................14
functional currency..............................................31
Funding Corporation..............................................17
GTC Note Payment Date............................................17
GTCs.............................................................17
Housing Program..................................................18
IFIs.............................................................18
implementation agreements........................................18
Indenture.........................................................1
Indenture Trustee.................................................1
Information Statements...........................................17
S-36
investment company...............................................24
Investment Program...............................................18
IRA..............................................................40
Letter of Credit Bank............................................24
Liquidation Proceeds.............................................28
MBS..............................................................14
Moody's..........................................................42
Notes.............................................................1
Owner Trustee.....................................................1
Parties in Interest..............................................40
Plan.............................................................40
Principal Receivables............................................23
Privatization Act................................................15
Prospectus........................................................1
PTCE.............................................................40
Rating [Agency] [Agencies].......................................42
Realized Losses...................................................9
REFCORP..........................................................15
Regulation.......................................................40
Required Interest................................................28
Required Premium.................................................28
Required Principal...............................................28
RTC..............................................................15
Sallie Mae.......................................................15
Scheduled Maturity Date...........................................3
Securities........................................................1
Security Owner...................................................26
Special Distribution Date.........................................9
Specified Currency................................................4
Standard & Poor's................................................42
Surety...........................................................25
System...........................................................16
Systemwide Debt Securities.......................................17
Term Asset Accumulation Period...................................22
Term Assets Agreement.............................................6
Term Asset Controlled Amortization Period........................22
Term Assets.......................................................1
Term Assets Currency..............................................6
Term Asset Early Amortization Event..............................22
Term Assets Payment Date.........................................22
Term Assets Prospectus...........................................11
Term Asset Registration Statement................................22
Trust.............................................................1
Trust Agreement................................................1, 4
TVA Act..........................................................16
U.S. Persons.....................................................31
Underwriter[s]...................................................41
Underwriting Agreement...........................................41
S-37
Prospectus
Notes
Trust Certificates
(Issuable in Series)
Structured Products Corp.
Depositor
The Notes (the "Notes") and Trust Certificates(the "Certificates" and,
collectively with the Notes, the "Securities") offered hereby and by supplements
(each a "Prospectus Supplement") to this Prospectus will be offered from time to
time in one or more series (each a "Series") and in one or more classes within
each such Series (each a "Class") with an aggregate initial public offering
price or purchase price of up to [$1,000,000] or the equivalent thereof in one
or more foreign or composite currencies, including the European Currency Unit
("ECU"). Securities of each respective Series and Class will be offered on terms
to be determined at the time of sale as described in the related Prospectus
Supplement accompanying the delivery of this Prospectus. Securities may be sold
for United States dollars or for one or more foreign or composite currencies,
and the principal of, premium, if any, and any interest to be distributed in
respect of Securities may be payable in United States dollars or in one or more
foreign or composite currencies. Each Series and Class of Securities may be
issuable as individual securities in registered form without coupons
("Registered Securities") or in bearer form with or without coupons attached
("Bearer Securities") or as one or more global securities in registered or
bearer form (each a "Global Security").
Each Series of Notes will be secured by, and each Series of Certificates
will represent beneficial ownership interests in, securities (the "Term
Assets"), together with certain other assets described herein and in the related
Prospectus Supplement (such assets, together with the Term Assets, the
"Deposited Assets") to be (i) sold by Structured Products Corp. (the "Company")
to a business trust, owner trust, limited liability company, partnership or
other special purpose, bankruptcy-remote entity established by the Company
(each, an "SPV"), and pledged to the indenture trustee (the "Indenture Trustee")
named in the related Prospectus Supplement for the benefit of holders of the
Notes of such Series pursuant to an indenture and a series supplement thereto
with respect to a given Series (collectively, the "Indenture") between the SPV,
as issuer, and the Indenture Trustee or (ii) deposited in or transferred to a
trust (the "Trust") for the benefit of holders of Certificates of such Series by
the Company pursuant to a trust agreement and a series supplement thereto with
respect to a given Series (collectively, the "Trust Agreement") among the
Company, as depositor or transferor, the administrative agent, if any (the
"Administrative Agent"), and the trustee (the "Certificate Trustee"). If so
specified in the related Prospectus Supplement, Certificates representing
beneficial interests in the applicable SPV will also be offered hereby. The Term
Assets consist of [SELECT ONE OF THE BRACKETED SECTIONS][Alternative 1: a
publicly issued, fixed income debt security or asset backed security or 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), organized under the laws of the United States of
America or any state, which are subject to the informational requirements of the
Securities Exchange Act of 1934 and which in accordance therewith file reports
and other information with the Securities and Exchange Commission] [Alternative
2: a publicly issued, fixed income debt security or pool of such debt securities
which represent obligations of one or more foreign private issuers (as such term
is defined in Rule 405 of the Securities Act of 1933) subject to the
informational requirements of the Securities Exchange Act of 1934 and which in
accordance therewith file reports and other information with the Securities and
Exchange Commission] [Alternative 3: a publicly issued, fixed income debt
security or pool of such debt securities which represent obligations of 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 or a United States
governmental sponsored organization created pursuant to a federal statute]
[Alternative 4: a publicly issued, fixed income debt security or pool of such
debt securities which represent obligations issued by or guaranteed by a foreign
government, political subdivision or agency or instrumentality thereof]. If so
specified in the related Prospectus Supplement, a Trust may also include or a
Series of Securities may be secured by, or the holders of such Securities (the
"Securityholders") may have the benefit of, any combination of insurance
policies, letters of credit, reserve accounts and other types of rights or
assets designed to support or ensure the servicing and distribution of amounts
due in respect of the Deposited Assets (collectively, "Credit Support"). See
"Description of Securities" and "Description of Deposited Assets and Credit
Support."
PROSPECTIVE INVESTORS SHOULD CONSIDER, AMONG OTHER THINGS, THE INFORMATION SET
FORTH UNDER "RISK FACTORS" COMMENCING ON PAGE [ ] OF THIS PROSPECTUS AND IN THE
RELATED PROSPECTUS SUPPLEMENT.
Each Class of Securities of any Series will represent the right, which may be
senior to those of one or more of the other Classes of such Series, to receive
specified portions of payments of principal, interest and certain other amounts
on the Deposited Assets in the manner described herein and in the related
Prospectus Supplement. A Series may include two or more Classes differing as to
the timing, sequential order or amount of distributions of principal, interest
or premium and one or more Classes within such Series may be subordinated in
certain respects to other Classes of such Series. The Securities of each Series
(or each Class within such Series) offered hereby will be rated at the time of
issuance in one of the recognized investment grade rating categories by one or
more nationally recognized rating agencies.
To the extent provided herein and in the applicable Prospectus Supplement, the
Company's only obligations with respect to each Series of Securities will be,
pursuant to certain representations and warranties concerning the Deposited
Assets, to assign and deliver the Deposited Assets and certain related documents
to the applicable SPV or Trustee and, in certain cases, to provide for the
Credit Support, if any. The principal obligations of an Administrative Agent, if
any is named in the applicable Prospectus Supplement, with respect to a Series
of Securities will be pursuant to its contractual administrative obligations
and, only as and to the extent provided in the related Prospectus Supplement,
its obligation to make certain cash advances in the event of payment
delinquencies on the Deposited Assets. See "Description of Trust Agreement
Advances in Respect of Delinquencies."
The Securities of each Series will not represent an obligation of or interest in
the Company, any SPV, any Administrative Agent or any of their respective
affiliates, except to the limited extent described herein and in the related
Prospectus Supplement. The Securities will not be guaranteed or insured by any
governmental agency or instrumentality, or by the Company, any SPV, any
Administrative Agent or their respective affiliates.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Securities may be offered and sold to or through underwriters, through
dealers or agents or directly to purchasers, as more fully described under "Plan
of Distribution" herein and "Method of Distribution" in the related Prospectus
Supplement. This Prospectus may not be used to consummate sales of Securities
offered hereby unless accompanied by a Prospectus Supplement.
The date of this Prospectus is [ ___________ ], [ ____ ].
2
PROSPECTUS SUPPLEMENT
The Prospectus Supplement relating to a Series of Securities to be offered
thereby and hereby will set forth, among other things, the following with
respect to such Series: (a) the specific designation and aggregate principal
amount, (b) the currency or currencies in which the principal (the "Specified
Principal Currency"), premium, if any (the "Specified Premium Currency"), and
any interest (the "Specified Interest Currency") are distributable (the
Specified Principal Currency, the Specified Premium Currency and the Specified
Interest Currency being collectively referred to as the "Specified Currency"),
(c) 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, (d) certain information concerning the
type, characteristics and specifications of the Deposited Assets and any Credit
Support for such Series or Class, (e) the relative rights and priorities of each
such Class (including the method for allocating collections from the Deposited
Assets to the Securityholders of each Class and the relative ranking of the
claims of the Securityholders of each Class to such Deposited Assets), (f) the
name of the Trustee and the Administrative Agent, if any, for such Series, (g)
the Note Interest Rate or Pass-Through Rate (each as defined below) or the terms
relating to the applicable method of calculation thereof, (h) the time and place
of distribution (each such date a "Distribution Date") of any interest, premium
(if any) and/or principal, (i) the date of issue, (j) the scheduled final
Distribution Date, if applicable, (k) the offering price, (1) any exchange,
whether mandatory or optional, the redemption terms and any other specific terms
of Securities of each such Series or Class. See "Description of
Securities--General" for a listing of other items that may be specified
in the applicable Prospectus Supplement.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). Reports and other information concerning the
Company can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's Regional Offices at Seven World Trade
Center, New York, New York 10048, and Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can
be obtained upon written request addressed to the Commission, Public Reference
Section, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
The Commission maintains a Web site at http://www.sec.gov containing reports,
proxy statements and other information regarding registrants that file
electronically with the Commission. The Company does not intend to send any
financial reports to Securityholders.
The Company has filed with the Commission a registration statement on Form
S-3 (together with all amendments and exhibits, the "Registration Statement")
under the Securities Act of 1933, as amended (the "Securities Act"), relating to
the Securities. This Prospectus does not contain all the information set forth
in the Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission. For further information,
reference is hereby made to the Registration Statement.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or 15(d)
of the Exchange Act subsequent to the date of this Prospectus and prior to the
termination of the offering of the Securities shall be deemed to be incorporated
by reference in this Prospectus. Any statement contained herein or in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any subsequently filed document which also is
or is deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
3
The Company will provide without charge to each person to whom a copy of this
Prospectus is delivered, on the written or oral request of any such person, a
copy of any or all of the documents incorporated herein by reference, except the
exhibits to such documents (unless such exhibits are specifically incorporated
by reference in such documents). Written requests for such copies should be
directed to the Secretary of Structured Products Corp., 32nd Floor, Room 33-126,
Seven World Trade Center, New York, New York 10048. Telephone requests for such
copies should be directed to the Secretary of Structured Products Corp. at (212)
783-6645.
REPORTS TO SECURITYHOLDERS
Unless and until Definitive Securities are issued, on each Distribution
Date unaudited reports containing information concerning the related
Trust will be prepared by the related Trustee and sent on behalf of each Trust
only to Cede & Co. ("Cede"), as nominee of DTC and registered holder of the
Securities. See "Description of Securities-Global Securities", "Description of
Indenture-Reports to Noteholders" and "Description of Trust Agreement-Reports to
Certificateholders; Notice". Such reports will not constitute financial
statements prepared in accordance with generally accepted accounting principles.
The Company, on behalf of each Trust, will cause to be filed with the Commission
such periodic reports as are required under the Exchange Act.
IMPORTANT CURRENCY INFORMATION
Purchasers are required to pay for each Security in the Specified
Principal Currency for such Security. 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 Security having a Specified Principal Currency other than U.S.
dollars, Salomon Brothers Inc (the "Offering Agent") will arrange for the
exchange of U.S. dollars into such Specified Principal Currency to enable the
purchaser to pay for such Security. Such request must be made on or before the
fifth Business Day (as defined herein) preceding the date of delivery of such
Security or by such later date as is determined by the Offering Agent. Each such
exchange will be made by the Offering Agent on such terms and subject to such
conditions, limitations and charges as the Offering Agent may from time to time
establish in accordance with its regular foreign exchange practice. All costs of
exchange will be borne by the purchaser.
References herein to "U.S. dollars," "U.S.$", "USD", "dollar" or "$" are to the
lawful currency of the United States.
RISK FACTORS
In connection with an investment in the Securities of any Series,
prospective investors should consider, among other things, the material
risk factors set forth below and any additional material risk factors set forth
in the applicable Prospectus Supplement.
THE SECURITIES MAY NOT BE A LIQUID INVESTMENT. There will be no market for
any Series (or Class within such Series) of Securities prior to the issuance
thereof, and there can be no assurance that a secondary market will develop or,
if it does develop, that it will provide Securityholders with liquidity of
investment or will continue for the life of such Securities.
SECURITIES ARE LIMITED OBLIGATIONS AND ARE NOT RECOURSE OBLIGATIONS OF THE
COMPANY OR ITS AFFILIATES. The Securities will not represent a recourse
obligation of or interest in the Company, any SPV or any of their respective
affiliates. The Securities of each Series will not be insured or guaranteed by
any government agency or instrumentality, the Company, any SPV, any Person
affiliated with the Company or any SPV, or any other Person. The obligations, if
any, of the Company with respect to the Securities of any Series will only be
pursuant to certain limited representations and warranties with respect to the
Term Assets or other Deposited Assets. The Company 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, for
4
example, the Company were required to repurchase a Term Asset with respect to
which the Company has breached a representation or warranty, its only sources of
funds to make such repurchase would be from funds obtained from the enforcement
of a corresponding obligation, if any, on the part of the seller of such Term
Asset to the Company, or from a reserve fund established to provide funds for
such repurchases. The Company has no obligation to establish or maintain any
such reserve fund.
TRUST CONSISTS OF LIMITED ASSETS AND PAYMENTS ON THE CERTIFICATES WILL BE
MADE SOLELY FROM DEPOSITED ASSETS. The only material assets expected to be in a
Trust are the Deposited Assets corresponding to the related Series (or Class) of
Securities being offered. The Securities are not insured or guaranteed by the
Company, any SPV, any Administrative Agent or any of their affiliates.
Accordingly, Securityholders' receipt of distributions in respect of the
Securities will depend entirely on the performance of and receipt of payments
with respect to the Deposited Assets and any Credit Support identified in the
related Prospectus Supplement. See "Description of Deposited Assets and Credit
Support."
AVERAGE LIFE AND YIELD OF SECURITIES MAY VARY THUS CREATING REINVESTMENT
RISK. The timing of distributions of interest, premium (if any) and principal of
any Series (or of any Class within such Series) of Securities may be affected by
a number of factors, including the performance of the related Deposited Assets,
the extent of any early redemption, repayment, amortization, acceleration of
payment rate, slow down of payment rate or extension of maturity or amortization
with respect to the related Term Assets (or portion thereof) and the manner and
priority in which the collections from such Term Assets and any other Deposited
Assets are allocated to each Class of such Series. Certain of these factors may
be influenced by a variety of accounting, tax, economic, social and other
factors.
See "Maturity and Yield Considerations."
TAX CONSIDERATIONS SHOULD BE REVIEWED. Special Tax Counsel has delivered an
opinion to the Company that the discussion contained herein under the caption
"Federal Income Tax Consequences", to the extent it constitutes matters of law
or legal conclusions thereto, is true and correct in all material respects.
Special Tax Counsel has also delivered an opinion that the (i) the Notes should
be treated as indebtedness for federal income purposes and (ii) without regard
to whether the Notes are ___ characterized ___ as indebtedness, the Trust will
be characterized as a grantor trust or as a partnership for federal income tax
purposes and will not be characterized as an association taxable as a
corporation (or publicly traded partnership treated as an association). (If
there is only a single holder of Certificates and if no other interest in the
Trust is treated as an equity interest in the Trust, the Trust would be treated
for federal income tax purposes as a not an entity separate from that single
owner.) Special Tax Counsel has not delivered (and unless otherwise indicated in
the 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 consequences,
among other consequences, the Trust would be subject to federal income tax (and
similar state income or franchise taxes) on its income and distributions to
Certificateholders and Noteholders would be impaired. See "Federal Income Tax
Considerations" herein and in the related Prospectus Supplement.
LIMITED NATURE OF RATING; REDUCTION OR WITHDRAWAL OF Rating. At the time of
issue, the Securities of any given Series (or each Class of such Series that is
offered hereby) will be rated in one of the investment grade categories by one
or more nationally recognized rating agencies (a "Rating Agency"). Unless
otherwise specified in the applicable Prospectus Supplement, the rating of any
Series or Class of Securities is based primarily on the related Deposited Assets
and any Credit Support and the relative priorities of the Securityholders of
such Series or Class to receive collections from, and to assert claims against,
such Deposited Assets and any Credit Support. The rating is not a recommendation
to purchase, hold or sell Securities, inasmuch as such rating does not comment
as to 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. There can be no
assurance that the rating will remain for any given period of time or that the
rating will not be lowered or withdrawn entirely by the Rating Agency if in its
judgment circumstances in the future so warrant. Any Class or Classes of a given
Series of Securities may not be offered pursuant to this Prospectus, in which
case such Class or Classes may or may not be rated in an investment grade
category by a Rating Agency.
5
GLOBAL SECURITIES LIMIT DIRECT VOTING AND ABILITY TO PLEDGE Securities. The
Securities 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, or on behalf of, a Depositary (as defined herein) and will not be issued
as individual definitive Securities to the purchasers of such Securities.
Consequently, unless and until such individual definitive Securities of a
particular Series or Class are issued, such purchasers will not be recognized as
Securityholders under the applicable Indenture or Trust Agreement. Hence, until
such time, such purchasers will only be able to exercise the rights of
Securityholders indirectly through the Depositary and its respective
participating organizations and, as a result, the ability of any such purchaser
to pledge that Security to persons or entities that do not participate in the
Depositary's system, or to otherwise act with respect to such Security, may be
limited. See "Description of Securities - Global Securities" and "Limitations on
Issuance of Bearer Securities" and any further description contained in the
related Prospectus Supplement.
RISKS WITH RESPECT TO CURRENCY, EXCHANGE RATES AND EXCHANGE CONTROLS MAY
EXIST. The Securities of any given Series (or Class within such Series) may be
denominated in a currency other than U.S. dollars to the extent specified in the
applicable Prospectus Supplement. An investment in a Security 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 Company 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 Security.
Depreciation of the Specified Currency for a Security against the U.S. dollar
would decrease the effective yield of such Security below its Note Interest Rate
or Pass-Through Rate, as the case may be, 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 and the availability of a
Specified Currency for making distributions in respect of Securities denominated
in such currency. 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 Security,
the currency in which amounts then due to be distributed in respect of such
Security would not be available.
IT IS STRONGLY RECOMMENDED THAT PROSPECTIVE PURCHASERS CONSULT THEIR OWN
FINANCIAL AND LEGAL ADVISORS AS TO THE RISKS ENTAILED BY AN INVESTMENT IN
SECURITIES DENOMINATED IN A CURRENCY OTHER THAN U.S. DOLLARS. SUCH SECURITIES
ARE NOT AN APPROPRIATE INVESTMENT FOR PERSONS WHO ARE UNSOPHISTICATED WITH
RESPECT TO FOREIGN CURRENCY TRANSACTIONS. See "Currency Risks".
TRUST MAY INCLUDE DERIVATIVES WHICH COULD AFFECT THE VALUE OF THE SECURITIES. A
Trust may include various derivative instruments, including interest rate,
currency, securities, commodity and credit 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 (i.e., 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.
6
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.
Credit derivatives involve swap and option contracts designed to assume or lay
off credit risk on loans, debt securities or other assets, or in relation to a
particular reference entity or country, in return for either swap payments or
payment of premium. Credit derivatives may also be embedded in other instruments
such as notes or warrants. Credit derivatives give one party to a transaction
the right to dispose of or acquire an asset (or group of assets), or the right
to receive or make a payment from the other party, upon the occurrence of
specified credit events.
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.
PUBLICLY AVAILABLE INFORMATION CONCERNING TERM ASSETS ISSUERS SHOULD BE
REVISED; RISK OF LOSS IF PUBLIC INFORMATION NOT AVAILABLE. It is strongly
recommended that each prospective purchaser of Securities obtain and evaluate
the same information concerning each Term Assets Issuer (as defined herein) as
it would obtain and evaluate if it were investing directly in the Term Assets or
in other securities issued by the Term Assets Issuer. The publicly-available
information concerning a Term Assets Issuer is important in considering whether
to invest in or sell Securities. To the extent such information ceases to be
available, an investor's ability to make an informed decision to purchase or
sell Securities could be impeded. The information in this Prospectus and any
Prospectus Supplement concerning the Term Assets and the Term Assets Issuers has
been obtained from publicly available documents, and none of the Company, the
Trustee or any of their affiliates has undertaken, or will undertake, any
investigation of the accuracy or completeness of such documents (whether or not
filed with the Commission) or the financial condition or creditworthiness of any
Term Assets Issuer. The issuance of Certificates of any Series should not be
construed as an endorsement by the Company or the Trustee or any of their
affiliates of the financial condition or business prospects of any Term Assets
Issuer.
REMEDIES AVAILABLE TO HOLDERS OF THE SECURITIES ARE LIMITED DUE TO PASSIVE
NATURE OF THE TRUST. The remedies available to a Trustee of a relevant Trust are
predetermined and therefore an investor in the Securities has less discretion
over the exercise of remedies than if such investor directly invested in the
Term Assets. Each Trust will generally hold the related Deposited Assets to
maturity and not dispose of them, regardless of adverse events, financial or
otherwise, which may affect any Term Assets Issuer or the value of the Deposited
Assets. Except as indicated below, a holder will not be able to dispose of or
take other actions with respect to any Deposited Assets. Under certain
circumstances described in the applicable Prospectus Supplement, the Trustee
will (or will at the direction of a specified percentage of Securityholders of
the relevant Series) dispose of, or take certain other actions in respect of,
the Deposited Assets. In certain limited circumstances, such as a mandatory
redemption of Term Assets or the exercise by a third party of the right to
purchase Term Assets (as described below under "Description of Trust Agreement -
Termination"), the Trustee may dispose of the Deposited Assets prior to
maturity. The applicable Prospectus Supplement will describe the particular
circumstances, if any, under which a Deposited Asset may be disposed of prior to
maturity.
OPTIONAL EXCHANGE FOR DEPOSITED ASSETS WILL GENERALLY BE UNAVAILABLE.
Although the Prospectus Supplement for a Series of Securities may designate such
Series as an Exchangeable Series (as defined herein) and may provide that a
7
Securityholder may exchange Securities of the Exchangeable Series for a pro rata
portion of Deposited Assets of the related Trust, any such Optional Exchange
Right will be exercisable only to the extent that the exercise of such right
would not be inconsistent with the Company's and any SPV or Trust'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. See "Description of Securities
Optional Exchange.". Accordingly, the optional exchange right described in this
Prospectus under the heading "Description of Securities - Optional Exchange" and
further described in the relevant Prospectus Supplement may be available only to
the Company and its affiliates and designees. Other Securityholders will
generally not be able to exchange their Securities of an Exchangeable Series for
a pro rata portion of the Deposited Assets of the related Trust. In addition,
the exercise of an optional exchange right will decrease the outstanding
aggregate amount of Securities of the applicable Exchangeable Series.
---------------------------------
The Prospectus Supplement for each Series of Securities will set forth
information regarding any additional material risk factors applicable to such
Series (and each Class within such Series).
THE COMPANY
The Company was incorporated in the State of Delaware on November 23, 1992,
as an indirect, wholly-owned, limited-purpose finance subsidiary of Salomon Inc.
The Company will not engage in any business or other activities other than
issuing and selling securities from time to time and acquiring, owning, holding,
pledging and transferring assets (including Deposited Assets and Credit Support)
in connection therewith or with the creation of an SPV or a Trust and in
activities related or incidental thereto. The Company does not have, nor is it
expected to have, any significant unencumbered assets. The Company's principal
executive offices are located at Room 33-126, 32nd Floor, Seven World Trade
Center, New York, New York 10048 (telephone (212) 783-6645).
In the event that the Company establishes an SPV for purposes of the
issuance of Securities, the SPV applicable to any Series will be described in
the related Prospectus Supplement. Each SPV will be a special purpose,
bankruptcy-remote entity and may take the form of a business trust, an owner
trust or a limited liability company.
USE OF PROCEEDS
The net proceeds to be received from the sale of each Series or Class of
Securities (whether or not offered hereby) will be used by the Company and/or an
SPV for such purposes as may be specified in the applicable Prospectus
Supplement. Such purposes may include, without limitation, purchasing the
related Deposited Assets (or providing a Trust with funds to purchase such
Deposited Assets) and arranging certain Credit Support including, if specified
in the related Prospectus Supplement, making required deposits into any reserve
account or other account for the benefit of the Securityholders of such Series
or Class. Any remaining net proceeds will be used by the Company for general
corporate purposes.
ASSIGNMENT OF DEPOSITED ASSETS;
FORMATION OF TRUST
The Company or an SPV will assign or transfer the Deposited Assets for each
Series of Certificates to the Certificate Trustee for the benefit of the
Certificateholders of such Series, and the applicable SPV will pledge the
Deposited Assets for each Series of Notes to the Indenture Trustee for the
benefit of the Noteholders of such Series. The Deposited Assets will consist of
[SELECT ONE OF THE BRACKETED SECTIONS][Alternative 1: a publicly issued, fixed
income debt security or asset backed security or 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) organized
8
under the laws of the United States of America or any state, which are subject
to the informational requirements of the Exchange Act and which in accordance
therewith file reports and other information with the Commission] [Alternative
2: a publicly issued, fixed income debt security or pool of such debt securities
which represent obligations of one or more foreign private issuers (as such term
is defined in Rule 405 of the Securities Act) subject to the informational
requirements of the Exchange Act and which in accordance therewith file reports
and other information with the Commission] [Alternative 3: a publicly issued,
fixed income debt security or pool of such debt securities which represent
obligations of 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, or a United States governmental sponsored organization created pursuant
to a federal statute] [Alternative 4: a publicly issued, fixed income debt
security or pool of such debt securities which represent obligations issued by
or guaranteed by a foreign government, political subdivision or agency or
instrumentality thereof]. See "Description of Deposited Assets and Credit
Support." The term "Trustee," as used herein, refers to the Indenture Trustee or
the Certificate Trustee, as applicable. The Trustee named in the applicable
Prospectus Supplement will administer the Deposited Assets pursuant to the
Indenture or the Trust Agreement and will receive a fee for such services (the
"Trustee's Fee"). Any Administrative Agent named in the applicable Prospectus
Supplement will perform such tasks as are specified therein and in the Indenture
or the Trust Agreement and will receive a fee for such services (the
"Administration Fee") as specified in the Prospectus Supplement.
The pledge, transfer or assignment of the Deposited Assets to the Trustee
will be without recourse. To the extent provided in the applicable Prospectus
Supplement, the obligations of an Administrative Agent, if any, so named therein
with respect to the Deposited Assets will consist primarily of its contractual
administrative obligations, if any, under the Indenture or the Trust Agreement,
its obligation, if any, to make certain cash advances in the event of
delinquencies in payments on or with respect to any Deposited Assets and its
obligations, if any, to purchase Deposited Assets as to which there has been a
breach of certain representations and warranties or as to which the
documentation is materially defective. The obligations of an Administrative
Agent, if any, named in the applicable Prospectus Supplement to make advances
will be limited to amounts which any such Administrative Agent believes
ultimately would be recoverable under any Credit Support, insurance coverage,
the proceeds of liquidation of the Deposited Assets or from other sources
available for such purposes.
To the extent provided in the related Prospectus Supplement, each Series
of Notes will be secured by, and each Series of Certificates will represent a
beneficial interest in, (i) the applicable Deposited Assets, or interests
therein, exclusive of any interest in such assets (the "Retained Interest")
retained by the Company, any SPV or any previous owner thereof, as from time to
time are specified in the applicable Indenture or Trust Agreement; (ii) such
collections as from time to time are identified as deposited in the related
Certificate Account; (iii) property, if any, acquired on behalf of
Securityholders by foreclosure or repossession and any revenues received
thereon; (iv) those elements of Credit Support, if any, provided with respect to
any Class within such Series that are specified as such in the applicable
Prospectus Supplement,as described therein and under "Description of
Deposited Assets and Credit Support - Credit Support": (v) the rights of the
Company or an SPV under the agreement or agreements entered into by the Trustee
on behalf of the Securityholders which constitute, or pursuant to which the
Trustee has acquired, such Deposited Assets; and (vi) the rights of the Trustee
in any cash advance, reserve fund or surety bond, if any.
In addition, to the extent provided in the applicable Prospectus
Supplement, the Company will obtain Credit Support for the benefit of the
Securityholders of any related Series (or Class within such Series) of
Securities.
MATURITY AND YIELD CONSIDERATIONS
Each Prospectus Supplement will, to the extent applicable, contain
information with respect to the type and, if applicable, maturities of the
related Term Assets and the terms, if any, upon which such Term Assets 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),
amortization or extension of maturity or amortization. The provisions of the
Term Assets with respect to the foregoing may affect the weighted average life
of the related Series of Securities.
9
The effective yield to holders of the Securities of any Series (and Class
within such Series) may be affected by various features of the Deposited Assets
or any Credit Support or the manner and priorities of allocations of collections
with respect to such Deposited Assets between the Classes of a given Series. The
yield to maturity of any Series (or Class within such Series) may be affected by
any optional or mandatory redemption, repayment, amortization or extension of
maturity of the related Term Assets. A variety of tax, accounting, economic, and
other factors will influence whether any applicable party exercises any right of
redemption, repurchase or extension in respect of its Securities. The rate of
redemption may also be influenced by prepayments on the obligations a Term
Assets Issuer holds for its own account. All else remaining equal, if prevailing
interest rates fall significantly below the interest rates on the related Term
Assets, the likelihood of redemption would be expected to increase. There can be
no certainty as to whether any Term Asset redeemable at the option of a Term
Assets Issuer will be repaid prior to its stated maturity.
To the extent specified in the related Prospectus Supplement, each of the
Term Assets will be subject to acceleration upon the occurrence of certain Term
Assets Events of Default (as defined herein). The maturity and yield on the
Securities will be affected by any early repayment of the Term Assets as a
result of the occurrence of the acceleration of the Term Assets. See
"Description of Deposited Assets".
The extent to which the yield to maturity of such Securities 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 Securities will also be
affected by variations in the interest rates applicable to, and the
corresponding payments in respect of, such Securities, to the extent that the
applicable Note Interest Rate or Pass-Through Rate for such Series (or Class) is
based on variable or adjustable interest rates. With respect to any Series of
Securities, disproportionate principal payments (whether resulting from
differences in amortization schedules, payments due on scheduled maturity or
upon early redemption or amortization) on the related Term Assets having
interest rates higher or lower than the then applicable Note Interest Rates or
Pass-Through Rates applicable to such Securities may affect the yield thereon.
The Prospectus Supplement for each Series of Securities 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, including the applicable Term Assets.
DESCRIPTION OF SECURITIES
Each Series (or, if more than one Class exists, the Classes within such
Series) of Notes will be issued pursuant to an Indenture. A form of Indenture is
attached as an exhibit to the Registration Statement. The provisions of the
applicable Indenture may vary depending upon the nature of the Notes to be
issued thereunder and the nature of the Deposited Assets and the Credit Support
of a Series.
Each Series (or, if more than one Class exists, the Classes within such
Series) of Certificates representing beneficial interests in a Trust
will be issued pursuant to a Trust Agreement. A form of Trust Agreement is
attached as an exhibit to the Registration Statement. The provisions of the
applicable Trust Agreement may vary depending on the nature of the Deposited
Assets and the Credit Support of a Series.
The following summaries describe material provisions of the Indenture and
Trust Agreement which may be applicable to each Series of Securities. The
applicable Prospectus Supplement for a Series of Securities will describe any
material provision of the Indenture or Trust Agreement or the applicable
Securities that is not described in this Prospectus. The following summaries do
not purport to be complete and are subject to the detailed provisions of the
forms of Indenture and Trust Agreement to which reference is hereby made for a
full description of such provisions, including the definition of certain
terms used, and for other information regarding the Securities. As used
herein with respect to any Series, the term "Security" refers to all the
Securities of that
10
Series, whether or not offered hereby and by the related Prospectus Supplement,
unless the context otherwise requires.
GENERAL
There is no limit on the amount of Securities that may be issued under the
Indenture or the Trust Agreement, and the Indenture and the Trust Agreement will
provide that Securities 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 such Series created pursuant to the Trust Agreement
and each such Class will be entitled to certain relative priorities to receive
specified collections from, and a certain percentage ownership interest of the
assets deposited in, such Trust, all as identified and described in the
applicable Prospectus Supplement. The Series (or Classes within such Series) of
Notes to be issued under the Indenture will represent the entire indebtedness of
the applicable Trust secured by the Deposited Assets with respect to such Series
and each such Class will be entitled to certain relative priorities to receive
specified collections from the assets securing the Notes, as described in the
applicable Prospectus Supplement.
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 Securities in respect of which this Prospectus and such Prospectus
Supplement are being delivered: (i) the title of such Securities; (ii) the
Series of such Securities and, if applicable, the number and designation of
Classes of such Series; (iii) certain information concerning the type,
characteristics and specifications of the Deposited Assets being deposited into
the related Trust by the Company or the applicable SPV (and, with respect to any
Term Assets which at the time of such deposit represents a significant portion
of all such Deposited Assets and any related Credit Support, certain information
concerning the terms of each such Term Assets, the identity of the issuer
thereof and where publicly available information regarding such issuer may be
obtained); (iv) the limit, if any, upon the aggregate principal amount or
notional amount, as applicable, of each Class thereof, (v) the dates on which or
periods during which such Series or Classes within such Series may be issued
(each, an "Original Issue Date"), the offering price thereof and the applicable
Distribution Dates on which the principal, if any, of (and premium, if any, on)
such Series or Classes within such Series will be distributable; (vi) if
applicable, the relative rights and priorities of each such Class (including the
method for allocating collections from and defaults or losses on the Deposited
Assets to the Securityholders of each such Class); (vii) whether the Securities
of such Series or each Class within such Series are Fixed Rate Securities or
Floating Rate Securities (each as defined below) and the applicable interest
rate (the "Note Interest Rate," in the case of Notes, or the "Pass-Through
Rate," in the case of Certificates) for each such Class, including the
applicable rate, if fixed (a "Fixed Rate"), or the terms relating to the
particular method of calculation thereof applicable to such Series or each Class
within such Series, if variable (a "Variable Rate"); the date or dates from
which such interest will accrue; the applicable Distribution Dates on which
interest, principal and premium, in each case as applicable, on such Series or
Class will be distributable and the related Record Dates, if any; (viii) the
option, if any, of any Securityholder of such Series or Class to withdraw a
portion of the assets of the Trust in exchange for surrendering such
Securityholder's Security or to put such Security to the Company, an SPV or a
third party, or of the Company, an SPV or Administrative Agent, if any, or
another third party to purchase or repurchase any Deposited Assets or Securities
(in each case to the extent not inconsistent with the Company's or the SPV or
Trust's continued satisfaction of the applicable requirements for exemption
under Rule 3a-7 under the Investment Company Act of 1940 and all applicable
rules, regulations and interpretations thereunder) 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; (ix) the rating of such Series or each
Class within such Series offered hereby (PROVIDED, HOWEVER, that one or more
Classes within such Series not offered hereunder may be unrated or may be rated
below investment grade); (x) if other than denominations of $1,000 and any
integral multiple thereof, the denominations in which such Series or Class
within such Series will be issuable; (xi) whether the Securities 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 Securities"), and the applicable terms thereof; (xii) whether the
Securities of such Series or of any Class within such Series are to be issued as
Registered Securities or Bearer Securities or both and, if Bearer Securities are
to be issued, whether coupons ("Coupons") will be attached thereto; whether
Bearer Securities of such Series or Class may be exchanged for Registered
Securities of such Series or Class and the circumstances under which and the
place or places at
11
which any such exchanges, if permitted, may be made; (xiii) whether the
Securities 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 herein), if other than The Depository Trust Company, for
such Global Security or Securities; (xiv) if a temporary Security is to be
issued with respect to such series or any Class within such Series, whether any
interest thereon distributable on a Distribution Date prior to the issuance of a
definitive Security of such Series or Class will be credited to the account of
the Persons entitled thereto on such Distribution Date; (xv) if a temporary
Global Security is to be issued with respect to such Series or Class, the terms
upon which beneficial interests in such temporary Global Security may be
exchanged in whole or in part for beneficial interests in a definitive Global
Security or for individual Definitive Securities (as defined herein) of such
Series or Class and the terms upon which beneficial interests in a definitive
Global Security, if any, may be exchanged for individual Definitive Securities
of such Series or Class; (xvi) if other than U.S. dollars, the Specified
Currency applicable to the Securities of such Series or Class for purposes of
denominations and distributions on such Series or each Class within such Series
and the circumstances and conditions, if any, when such Specified Currency may
be changed, at the election of the Company, an SPV or a Securityholder and the
currency or currencies in which any principal of or any premium or any interest
on such Series or Class are to be distributed pursuant to such election; (xvii)
any additional Administrative Agent Termination Events (as defined herein), if
applicable, provided for with respect to such Class; (xviii) all applicable
Required Percentages and Voting Rights (each as defined below) relating to the
manner and percentage of votes of Securityholders of such Series and each Class
within such Series required with respect to certain actions by the Company, an
SPV or the applicable Administrative Agent, if any, or the Trustee; and (xix)
any other terms of such Series or Class within such Series of Securities not
inconsistent with the provisions of the Indenture or the Trust Agreement
relating to such Series.
The United States federal income tax consequences and ERISA consequences
relating to any Series or any Class within such Series of Securities will be
described in this Prospectus and the applicable Prospectus Supplement. 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 Securities
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. The U.S. dollar
equivalent of the public offering price or purchase price of a Security having a
Specified Principal Currency other than U.S. dollars will be determined on the
basis of the noon buying rate in New York City for cable transfers in foreign
currencies as certified for customs purposes by the Federal Reserve Bank of New
York (the "Market Exchange Rate") for such Specified Principal Currency on the
applicable issue date. As specified in the applicable prospectus Supplement,
such determination will be made by the Company, the applicable SPV, the Trustee,
the Administrative Agent, if any, or an agent thereof as exchange rate agent for
each Series of Securities (the "Exchange Rate Agent").
Registered Securities may be transferred or exchanged for like Securities
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, as applicable, subject to
the limitations provided in the Indenture or the Trust Agreement, without the
payment of any service charge, other than any tax or governmental charge payable
in connection therewith. Bearer Securities will be transferable by delivery.
Provisions with respect to the exchange of Bearer Securities will be described
in the applicable Prospectus Supplement. Registered Securities may not be
exchanged for Bearer Securities. The Company or the applicable SPV may at any
time purchase Securities at any price in the open market or otherwise.
Securities so purchased by the Company or the applicable SPV may, at the
discretion of the Company or the applicable SPV, be held or resold or
surrendered to the Trustee for cancellation of such Securities.
DISTRIBUTIONS
Distributions allocable to principal, premium (if any) and interest on the
Securities of each Series (and Class within such Series) will be made in the
Specified Currency for such Securities 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 Security of such
Series or Class into
12
U.S. dollars in the manner described in the following paragraph. The
Securityholder of a Registered Security 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 such Security so indicate) elect to receive
all distributions in respect of such Security 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. 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.
In the case of a Registered Security 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 Security 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 Securities. All currency exchange costs will be borne by the
Securityholders of such Registered Securities 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 Company'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
Securities.
Except as provided in the succeeding paragraph, distributions with respect
to Securities will be made (in the case of Registered Securities) at the
corporate trust office or agency of the Trustee specified in the applicable
Prospectus Supplement; PROVIDED, HOWEVER, that any such amounts distributable on
the final Distribution Date of a Security will be distributed only upon
surrender of such Security at the applicable location set forth above. No
distribution on a Bearer Security will be made by mail to an address in the
United States or by wire transfer to an account maintained by the Securityholder
thereof in the United States.
Distributions on Registered Securities in U.S. dollars will be made, except
as provided below, by check mailed to the Registered Securityholders of such
Securities (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 Securities issued between a Record Date (as defined herein) 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 interest accrual
period ending immediately prior to or coincident with such Distribution Date
will be distributed on the next succeeding Distribution Date to the Registered
Securityholders of the Registered Securities of such Series or Class on the
related Record Date. A Securityholder of $10,000,000 (or the equivalent thereof
in a Specified Principal Currency other than U.S. dollars) or more in aggregate
principal amount of Registered Securities 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 Securityholder to receive payments in a Specified Currency other than U.S.
dollars (as provided above), such Securityholder 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.
"Business Day" with respect to any Security means any day, other than a
Saturday or Sunday, that is (i) not a day on which banking institutions are
authorized or required by law or regulation to be closed in (a) The City of New
York or (b) if the Specified Currency for such Security 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 (ii) if the Note
Interest Rate or Pass-Through Rate for such Security is based on LIBOR, a London
Banking Day. "London Banking Day" with respect to any Security means any day on
which dealings in deposits in the Specified Currency
13
of such Security are transacted in the London interbank market. The Record Date
with respect to any Distribution Date for a Series or Class of Registered
Securities shall be specified as such in the applicable Prospectus Supplement.
INTEREST ON THE SECURITIES
GENERAL. Each Class of Securities (other than certain Classes of Strip
Securities) of a given Series may have a different Note Interest Rate or
Pass-Through Rate, as the case may be, which may be a fixed or variable rate, as
described below. In the case of Strip Securities with no or, in certain cases, a
nominal Security 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 Securities with no or, in certain cases, a nominal
Security Principal Balance will be made on each Distribution Date. Reference to
the Notional Amount of a Class of Strip Securities herein or in a Prospectus
Supplement does not indicate that such Securities 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 SECURITIES. Each Series (or, if more than one Class exists, each
Class within such Series) of Securities with a fixed Note Interest Rate or
Pass-Through Rate ("Fixed Rate Securities") will bear interest, on the
outstanding Security Principal Balance (or Notional Amount, if applicable), from
its Original Issue Date, or from the last date to which interest has been paid,
at the fixed rate stated on the face thereof and in the applicable Prospectus
Supplement until the principal amount thereof is distributed or made available
for payment (or in the case of Fixed Rate Securities 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 Note Interest
Rate or 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 Securities by one or more rating agencies, in accordance
with a schedule or otherwise, all as described in such Prospectus Supplement.
Interest on each Series or Class of Fixed Rate Securities will be distributable
in arrears on each Distribution Date specified in such Prospectus Supplement.
Each such distribution of interest shall include interest accrued through the
day specified in the applicable Prospectus Supplement. Interest on Fixed Rate
Securities will be computed on the basis of a 360-day year of twelve 30-day
months.
FLOATING RATE SECURITIES. Each Series (or, if more than one Class exists,
each Class within such Series) of Securities with a variable Note Interest Rate
or Pass-Through Rate ("Floating Rate Securities") will bear interest, on the
outstanding Security Principal Balance (or Notional Amount, if applicable), from
its Original Issue Date to the first interest Reset Date (as defined herein) for
such Series or Class at the Initial Note Interest Rate or Pass-Through Rate set
forth on the face thereof and in the applicable Prospectus Supplement.
Thereafter, the Note Interest Rate or the Pass-Through Rate on such Series or
Class for each Interest Reset Period (as defined herein) will be determined by
reference to an interest rate basis (the "Base Rate"), plus or minus the Spread,
if any, or multiplied by the Spread Multiplier, if any. The "Spread" is the
number of basis points (one basis point equals one one-hundredth of a percentage
point) that may be specified in the applicable Prospectus Supplement as being
applicable to such Series or Class, and the "Spread Multiplier" is the
percentage that may be specified in the applicable Prospectus Supplement as
being applicable to such Series or Class, except that if so specified in the
applicable Prospectus Supplement, the Spread or Spread Multiplier on such Series
or any such Class or Classes of Floating Rate Securities may be subject to
adjustment from time to time in response to designated changes in the rating
assigned to such Securities by one or more rating agencies, 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
Security: (i) LIBOR (a "LIBOR Reference Rate Security"), (ii) the Commercial
Paper Rate (a "Commercial Paper Reference Rate Security"), (iii) the Treasury
Rate (a "Treasury Reference Rate Security"), (iv) the Federal Funds Rate (a
"Federal Funds Reference Rate Security"), (v) the CD Rate (a "CD Reference Rate
Security") or (vi) such other Base Rate (which may be based on, among other
things, one or more market indices or the interest and/or other payments
(whether scheduled or otherwise) paid, accrued or available with respect to a
designated asset, pool of assets or type
14
of asset) as is set forth in such Prospectus Supplement and in such Security.
The "Index Maturity" for any Series or Class of Floating Rate Securities is the
period of maturity of the instrument or obligation from which the Base Rate is
calculated. "H.15(519)" means the publication entitled "Statistical Release
H.15(519), Selected Interest Rates," or any successor publication, published by
the Board of Governors of the Federal Reserve System. "Composite Quotations"
means the daily statistical release entitled "Composite 3:30 p.m. Quotations for
U.S. Government Securities" published by the Federal Reserve Bank of New York.
As specified in the applicable Prospectus Supplement, Floating Rate
Securities 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 Rate") and (ii) a minimum limitation, or floor, on the rate
at which interest may accrue during any such interest accrual period ("Minimum
Rate"). In addition to any Maximum Rate that may be applicable to any Series or
Class of Floating Rate Securities, the Note Interest Rate or Pass-Through Rate
applicable to any Series or Class of Floating Rate Securities will in no event
be higher than the maximum rate permitted by applicable law, as the same may be
modified by United States law of general application. The Floating Rate
Securities will be governed by the law of the State of New York and, under such
law as of the date of this Prospectus, the maximum rate of interest, with
certain exceptions, is 25% per annum on a simple interest basis.
The Company will appoint, and enter into agreements with, agents (each a
"Calculation Agent") to calculate Note Interest Rates or Pass-Through Rates on
each Series or Class of Floating Rate Securities. The applicable Prospectus
Supplement will set forth the identity of the Calculation Agent for each Series
or Class of Floating Rate Securities. 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 Securities of a given
Series or Class.
The Note Interest Rates or Pass-Through Rate on each Class of Floating Rate
Securities will be reset daily, weekly, monthly, quarterly, semiannually or
annually (such period being the "Interest Reset Period" for such Class, and the
first day of each Interest Reset Period being an "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
Securities will be specified in the applicable Prospectus Supplement; PROVIDED,
HOWEVER, that the Note Interest Rates or Pass-Through Rate in effect for the ten
days immediately prior to the Scheduled Final Distribution Date will be that in
effect on the tenth day preceding such Scheduled Final Distribution Date. If an
Interest Reset Date for any Class of Floating Rate Securities would otherwise be
a day that is not a Business Day, such Interest Reset Date will occur on a prior
or succeeding Business Day specified in the applicable Prospectus Supplement.
Interest payable in respect of Floating Rate Securities 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 Security, accrued interest shall be
calculated by multiplying the Security Principal Balance of such Security (or,
in the case of a Strip Security with no or a nominal Security 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. The interest factor (expressed as a decimal
calculated to seven decimal places without rounding) for each such day is
computed by dividing the Note Interest Rate or Pass-Through Rate is in effect on
such day by 360, in the case of LIBOR Reference Rate Securities, Commercial
Paper Reference Rate Securities, Federal Funds Reference Rate Securities and CD
Reference Rate Securities or by the actual number of days in the year, in the
case of Treasury Reference Rate Securities. For purposes of making the foregoing
calculation, the variable Note Interest Rate or Pass-Through Rate in effect on
any Interest Reset Date will be the applicable rate as reset on such date.
15
All percentages resulting from any calculation of the Note Interest Rate or
Pass-Through Rate on a Floating Rate Security 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 Securities 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
Securities 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 Security of a given
Series or Class, the Calculation Agent for such Series or Class will provide the
Note Interest Rate or Pass-Through Rate then in effect and, if determined, the
Note Interest Rate or Pass-Through Rate that will become effective on the next
Interest Reset Date with respect to such Floating Rate Security.
(1) CD REFERENCE RATE SECURITIES. Each CD Reference Rate Security will
bear interest for each Interest Reset Period at the Note Interest Rate or
Pass-Through Rate calculated with reference to the CD Rate and the Spread or
Spread Multiplier, if any, specified in such Security and in the applicable
Prospectus Supplement.
The "CD Rate" for each Interest Reset Period shall be the rate as of the
second Business Day prior to the Interest Reset Date for such Interest Reset
Period (a "CD Rate Determination Date") for negotiable certificates of deposit
having the Index Maturity designated in the applicable Prospectus Supplement as
published in H. 15(519) under the heading "CDs (Secondary Market)." In the event
that such rate is not published prior to 3:00 p.m., New York City time, on the
Calculation Date (as defined herein) pertaining to such CD Rate Determination
Date, then the "CD Rate" for such Interest Reset Period will be the rate on such
CD Rate Determination Date for negotiable certificates of deposit of the Index
Maturity designated in the applicable Prospectus Supplement as published in
Composite Quotations under the heading "Certificates of Deposit." If by 3:00
p.m., New York City time, on such Calculation Date such rate is not yet
published in either H. 15(519) or Composite Quotations, then the "CD Rate" for
such Interest Reset Period will be calculated by the Calculation Agent for such
CD Reference Rate Security 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 Reference Rate Security 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 Reset Period will be the same
as the CD Rate for the immediately preceding Interest Reset Period (or, if there
was no such Interest Reset Period, the Initial Note Interest Rate or
Pass-Through Rate).
The "Calculation Date" pertaining to any CD Rate Determination Date shall
be the first to occur of (a) the tenth calendar day after such CD Rate
Determination Date or, if such day is not a Business Day, the next succeeding
Business Day or (b) the second Business Day preceding the date any distribution
of interest is required to be made following the applicable Interest Reset Date.
(2) COMMERCIAL PAPER REFERENCE RATE SECURITIES. Each Commercial Paper
Reference Rate Security will bear interest for each Interest Reset Period at the
Note Interest Rate or Pass-Through Rate calculated with reference to the
Commercial Paper Rate and the Spread or Spread Multiplier, if any, specified in
such Security and in the applicable Prospectus Supplement.
The "Commercial Paper Rate" for each Interest Reset Period will be
determined by the Calculation Agent for such Commercial Paper Reference Rate
Security as of the second Business Day prior to the Interest Reset Date for such
Interest Reset Period (a "Commercial Paper Rate Determination Date") and shall
be the Money Market Yield (as defined herein) 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
16
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 Calculation Date
(as defined herein) pertaining to such Commercial Paper Rate Determination Date,
then the "Commercial Paper Rate" for such Interest Reset Period shall be the
Money Market Yield on such Commercial Paper Rate Determination Date of the rate
for commercial paper of the specified Index Maturity as published in Composite
Quotations under the heading "Commercial Paper." If by 3:00 p.m., New York City
time, on such Calculation Date such rate is not yet published in either H.
15(519) or Composite Quotations, then the "Commercial Paper Rate" for such
Interest Reset Period shall be the Money Market Yield of the arithmetic mean of
the offered rates, as of 11:00 a.m., New York City time, on such Commercial
Paper Rate Determination Date of three leading dealers of commercial paper in
The City of New York selected by the Calculation Agent for such Commercial Paper
Reference Rate Security for commercial paper of the specified Index Maturity
placed for an industrial issuer whose bonds are rated "AA" or the equivalent by
a nationally recognized rating agency; PROVIDED, HOWEVER, that if the dealers
selected as aforesaid by such Calculation Agent are not quoting offered rates as
mentioned in this sentence, the "Commercial Paper Rate" for such Interest Reset
Period will be the same as the Commercial Paper Rate for the immediately
preceding Interest Reset Period (or, if there was no such Interest Reset Period,
the Initial Note Interest Rate or Pass-Through Rate).
"Money Market Yield" shall be a yield calculated in accordance with the
following formula:
Money Market Yield = D x 360 x 100
------------
360 - (D X M)
where "D" refers to the applicable per annum rate for commercial paper quoted on
a bank discount basis and expressed as a decimal, and "M" refers to the actual
number of days in the specified Index Maturity.
The "Calculation" 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 REFERENCE RATE SECURITIES. Each Federal Funds Reference
Rate Security will bear interest for each Interest Reset Period at the Note
Interest Rate or Pass-Through Rate calculated with reference to the Federal
Funds Rate and the Spread or Spread Multiplier, if any, specified in such
Security and in the applicable Prospectus Supplement.
The "Federal Funds Rate" for each Interest Reset Period shall be the
effective rate on the Interest Reset Date for such Interest Reset Period (a
"Federal Funds Rate Determination Date") for Federal Funds as published in H.
15(519) under the heading "Federal Funds (Effective)." In the event that such
rate is not published prior to 3:00 p.m. New York City time, on the Calculation
Date (as defined herein) pertaining to such Federal Funds Rate Determination
Date, the "Federal Funds Rate" for such Interest Reset Period shall be the rate
on such Federal Funds Rate Determination Date as published in Composite
Quotations under the heading "Federal Funds/Effective Rate." If by 3:00 p.m.,
New York City time, on such Calculation Date such rate is not yet published in
either H. 15(519) or Composite Quotations, then the "Federal Funds Rate" for
such Interest Reset Period shall be the rate on such Federal Funds Rate
Determination Date made publicly available by the Federal Reserve Bank of New
York which is equivalent to the rate which appears in H. 15(519) under the
heading "Federal Funds/Effective Rate"; PROVIDED, HOWEVER, that if such rate is
not made publicly available by the Federal Reserve Bank of New York by 3:00
p.m., New York City time, on such Calculation Date, the "Federal Funds Rate" for
such Interest Reset Period will be the same as the Federal Funds Rate in effect
for the immediately preceding Interest Reset Period (or, if there was no such
Interest Reset Period, the Initial Note Interest Rate or Pass-Through Rate).
Unless otherwise specified in the applicable Prospectus Supplement, in the case
of a Federal Funds Reference Rate Security that resets daily, the Note Interest
Rate or Pass-Through Rate on such Security for the period from and including a
Monday to but excluding the succeeding Monday will be reset by the Calculation
Agent for such Security on such second Monday (or, if not a Business Day, on the
next succeeding Business Day) to a rate equal to the average of the Federal
Funds Rates in effect with respect to each such day in such week.
17
The "Calculation Date" pertaining to any Federal Funds Rate Determination
Date shall be the next succeeding Business Day.
(4) LIBOR REFERENCE RATE SECURITIES. Each LIBOR Reference Rate Security
will bear interest for each Interest Reset Period at the Pass-Through Rate
calculated with reference to LIBOR and the Spread or Spread Multiplier, if any,
specified in such Security and in the applicable Prospectus Supplement.
With respect to LIBOR indexed to the offered rates for U.S. dollar
deposits, "LIBOR" for each Interest Reset Period will be determined by the
Calculation Agent for any LIBOR Reference Rate Security as follows:
(i) On the second London Banking Day prior to the Interest Reset Date for
such Interest Reset Period (a "LIBOR Determination Date"), the Calculation Agent
for such LIBOR Reference Rate Security 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 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 Reset Period will be the arithmetic mean of such offered rates as
determined by the Calculation Agent for such LIBOR Reference Rate Security
(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 Reference
Rate Security 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 Reset Period will be
the arithmetic mean of such quotations. If fewer than two such quotations are
provided, "LIBOR" for such Interest Reset Period will be the arithmetic mean of
rates quoted by three major banks in The City of New York selected by the
Calculation Agent for such LIBOR Reference Rate Security 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 mentioned in this sentence, "LIBOR" for such Interest Reset Period will
be the same as LIBOR for the immediately preceding Interest Reset Period (or, if
there was no such Interest Reset Period, the Initial Note Interest Rate or
Pass-Through Rate).
If LIBOR with respect to any LIBOR Reference Rate Security 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 REFERENCE RATE SECURITIES. Each Treasury Reference Rate
Security will bear interest for each Interest Reset Period at the Pass-Through
Rate calculated with reference to the Treasury Rate and the Spread or Spread
Multiplier, if any, specified in such Security and in the applicable Prospectus
Supplement.
The "Treasury Rate" for each Interest Reset Period will be the rate for the
auction held on the Treasury Rate Determination Date (as defined herein) for
such Interest Reset Period of direct obligations of the United States ("Treasury
bills") having the Index Maturity specified in the applicable Prospectus
Supplement, as such rate shall be published in H. 15(519) under the heading
"U.S. Government Certificates-Treasury bills-auction average
18
(investment)" or, in the event that such rate is not published prior to 3:00
p.m., New York City time, on the Calculation Date (as defined herein) pertaining
to such Treasury Rate Determination Date, the auction average rate (expressed as
a bond equivalent on the basis of a year of 365 or 366 days, as applicable, and
applied on a daily basis) on such Treasury Rate Determination Date as otherwise
announced by the United States Department of the Treasury. In the event that the
results of the auction of Treasury bills having the specified Index Maturity are
not published or reported as provided above by 3:00 p.m., New York City time, on
such Calculation Date, or if no such auction is held on such Treasury Rate
Determination Date, then the "Treasury Rate" for such Interest Reset Period
shall be calculated by the Calculation Agent for such Treasury Reference Rate
Security and shall be a yield to maturity (expressed as a bond equivalent on the
basis of a year of 365 or 366 days, as applicable, and applied on a daily basis)
of the arithmetic mean of the secondary market bid rates, as of approximately
3:30 p.m., New York City time, on such Treasury Rate Determination Date, of
three leading primary United States government securities dealers selected by
such Calculation Agent for the issue of Treasury bills with a remaining maturity
closest to the specified Index Maturity; PROVIDED, HOWEVER, that if the dealers
selected as aforesaid by such Calculation Agent are not quoting bid rates as
mentioned in this sentence, then the "Treasury Rate" for such Interest Reset
Period will be the same as the Treasury Rate for the immediately preceding
Interest Reset Period (or, if there was no such Interest Reset Period, the
Initial Note Interest Rate or Pass-Through Rate).
The "Treasury Rate Determination Date" for each Interest Reset Period will
be the day of the week in which the Interest Reset Date for such Interest Reset
Period falls on which Treasury bills would normally be auctioned. Treasury bills
are normally sold at auction on Monday of each week, unless that day is a legal
holiday, in which case the auction is normally held on the following Tuesday,
except that such auction may be held on the preceding Friday. If, as the result
of a legal holiday, an auction is so held on the preceding Friday, such Friday
will be the Treasury Rate Determination Date pertaining to the Interest Reset
Period commencing in the next succeeding week. If an auction date shall fall on
any day that would otherwise be an Interest Reset Date for a Treasury Reference
Rate Security, then such Interest Reset Date shall instead be the Business Day
immediately following such auction date.
The "Calculation Date" pertaining to any Treasury Rate Determination Date
shall be the first to occur of (a) the tenth calendar day after such Treasury
Rate Determination Date or, if such a day is not a Business Day, the next
succeeding Business Day or (b) the second Business Day preceding the date any
distribution of interest is required to be made following the applicable
Interest Reset Date.
PRINCIPAL OF THE SECURITIES
Each Security (other than certain Classes of Strip Securities) will have a
"Security Principal Balance" which, at any time, will equal the maximum amount
that the holder thereof will be entitled to receive in respect of principal out
of the future cash flow on the Deposited Assets and other assets securing such
Note or included in the related Trust. Distributions generally will be applied
to undistributed accrued interest on, then to principal of, and then to premium
(if any) on, each such Security of the Class or Classes entitled thereto (in the
manner and priority specified in such Prospectus Supplement) until the aggregate
Security Principal Balance of such Class or Classes has been reduced to zero.
The outstanding Security Principal Balance of a Security will be reduced to the
extent of distributions of principal thereon, and, if applicable pursuant to the
terms of the related Series, by the amount of any net losses realized on any
Deposited Asset ("Realized Losses") allocated thereto. The initial aggregate
Security Principal Balance of a Series and each Class thereof will be specified
in the related Prospectus Supplement. Distributions of principal of any Class of
Securities will be made on a pro rata basis among all the Securities of such
Class. Strip Securities with no Security Principal Balance will not receive
distributions of principal.
OPTIONAL EXCHANGE
If a holder may exchange Securities of any given Series for a pro rata
portion of the Deposited Assets, the applicable Prospectus Supplement will
designate such Series as an "Exchangeable Series". The terms upon which a holder
may exchange Securities of any Exchangeable Series for a pro rata portion of the
Deposited Assets will be specified in the related Prospectus Supplement;
PROVIDED, HOWEVER, that any right of exchange shall be exercisable
19
only to the extent that such exchange would not be inconsistent with the
Company's and any SPV's or Trust's continued satisfaction of the applicable
requirements for exemption under Rule 3a-7 under the Investment Company Act of
1940 and all applicable rules, regulations and interpretations thereunder. Such
terms may relate to, but are not limited to, the following:
(a) a requirement that the exchanging holder tender to the Trustee
Securities of each Class within such Exchangeable Series;
(b) a minimum Security Principal Balance or Notional Amount, as applicable,
with respect to each Security being tendered for exchange;
(c) a requirement that the Security Principal Balance or Notional Amount,
as applicable, of each Security tendered for exchange be an integral multiple of
an amount specified in the Prospectus Supplement;
(d) specified dates during which a holder may effect such an exchange
(each, an "Optional Exchange Date");
(e) limitations on the right of an exchanging holder to receive any benefit
upon exchange from any Credit Support or other non-Term Assets deposited in the
applicable Trust; and
(f) 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.
In order for a Security of a given Exchangeable Series (or Class within such
Exchangeable Series) to be exchanged by the applicable Securityholder, the
Trustee for such Security must receive, at least 30 (or such shorter period
acceptable to the Trustee) but not more than 45 days prior to an Optional
Exchange Date (i) such Security with the form entitled "Option to Elect
Exchange" on the reverse thereof duly completed, or (ii) in the case of
Registered Securities, a telegram, telex, facsimile transmission or letter from
a member of a national securities exchange or the National Association of
Securities Dealers, Inc., the Depositary (in accordance with its normal
procedures) or a commercial bank or trust company in the United States setting
forth the name of the holder of such Registered Security, the Security Principal
Balance or Notional Amount of such Registered Security to be exchanged, the
certified number or a description of the tenor and terms of such Registered
Security, a statement that the option to elect exchange is being exercised
thereby and a guarantee that the Registered Security to be exchanged with the
form entitled "Option to Elect Exchange" on the reverse of the Registered
Security duly completed will be received by such Trustee not later than five
Business Days after the date of such telegram, telex, facsimile transmission or
letter. If the procedure described in clause (ii) of the preceding sentence is
followed, then such Registered Security and form duly completed must be received
by such Trustee by such fifth Business Day. Any tender of Security by the holder
for exchange shall be irrevocable. The exchange option may be exercised by the
holder of a Security for less than the entire Security Principal Balance of such
Security provided that the Security Principal Balance or Notional Amount, as
applicable, of such Security 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
Security shall be cancelled and a new Security or Securities for the remaining
Security Principal Balance thereof shall be issued (which, in the case of any
Registered Security, shall be in the name of the holder of such exchanged
Security).
Because initially and unless and until Definitive Securities are issued
each Security will be represented by a Global Security, the Depositary's nominee
will be the Securityholder of such Security 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 Security, the beneficial owner of such Security must instruct the
broker or other direct or indirect participant through which it holds an
interest in such Security 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
20
other direct or indirect participant through which it holds an interest in a
Security 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.
Upon the satisfaction of the foregoing conditions and any applicable
conditions with respect to the related Deposited Assets, as described in the
applicable Prospectus Supplement, the applicable Securityholder will be entitled
to receive a distribution of a pro rata share of the Deposited Assets related to
the Exchangeable Series (and Class within such Exchangeable Series) of the
Security being exchanged, in the manner and to the extent described in such
Prospectus Supplement, and would therefore own the Deposited Assets and have the
ability to enforce their rights directly as owners of the Deposited Assets.
Alternatively, to the extent so specified in the applicable Prospectus
Supplement, the applicable Securityholder, upon satisfaction of such conditions,
may direct the related Trustee to sell, on behalf of such Securityholder, such
pro rata share of the Deposited Assets, in which event the Securityholder shall
be entitled to receive the net proceeds of such sale, less any costs and
expenses incurred by such Trustee in facilitating such sale, subject to any
additional adjustments set forth in the Prospectus Supplement.
PUT OPTION
If specified in the applicable Prospectus Supplement, a holder may put
Securities of a given Series to the Company, an SPV or a third party. The terms
upon which a holder may put its Securities (including the price) will be
specified in the related Prospectus Supplement; PROVIDED, HOWEVER, the any put
option shall be exercisable only to the extent that such put would not be
inconsistent with the Company's and any SPV's or Trust's continued satisfaction
of the applicable requirements for exemption under Rule 3a-7 under the
Investment Company Act of 1940 and all applicable rules, regulations and
interpretations thereunder.
GLOBAL SECURITIES
All Securities of a given Series (or, if more than one Class exists, any
given Class within that Series) will, upon issuance, be represented by one or
more Global Securities that will be deposited with, or on behalf of, The
Depository Trust Company, New York, New York (for Registered Securities
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 definitive form. See
"Limitations on Issuance of Bearer Securities" for provisions applicable to
Securities issued in bearer form. Unless and until it is exchanged in whole or
in part for the individual Securities represented thereby (each a "Definitive
Security"), 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 has advised the Company as follows: 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 participants and to facilitate the clearance and settlement of
securities transactions among the institutions that have accounts with such
Depositary ("participants") in such securities through electronic book-entry
changes in accounts of the participants, thereby eliminating the need for
physical movement of securities certificates. Such Depositary's participants
include securities brokers and dealers (including the Offering Agent), banks,
trust companies, clearing corporations, and certain other organizations, some of
whom (and/or their representatives) own such Depositary. Access to such
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. The Depository
Trust Company has confirmed to the Company that it intends to follow such
procedures.
Upon the issuance of a Global Security, the Depositary for such Global
Security will credit, on its book-entry registration and transfer system, the
respective principal amounts of the individual Securities represented by
21
such Global Security to the accounts of its participants. The accounts to be
accredited shall be designated by the underwriters of such Securities, or, if
such Securities are offered and sold directly through one or more agents, by the
Company, or such agent or agents. Ownership of beneficial interests in Global
Security will be limited to participants or Persons that may hold beneficial
interests through participants. Ownership of beneficial interests in a Global
Security will be shown on, and the transfer of that ownership will be effected
only through, records maintained by the Depositary for such Global Security or
by participants or Persons that hold through participants. The laws of some
states require that certain purchasers of securities take physical delivery of
such securities. Such limits and such laws may limit the market for beneficial
interests in a Global Security.
So long as the Depositary for a Global Security, or its nominee, is the
owner of such Global Security, such Depositary or such nominee, as the case may
be, will be considered the sole Securityholder of the individual Securities
represented by such Global Security for all purposes. Except as set forth below,
owners of beneficial interests in a Global Security will not be entitled to have
any of the individual Securities represented by such Global Security registered
in their names, will not receive or be entitled to receive physical delivery of
any such Securities and will not be considered the Securityholder thereof.
Because the Depositary can only act on behalf of its participants, the ability
of a holder of any Security to pledge that Security to persons or entities that
do not participate in the Depositary's system, or to otherwise act with respect
to such Security, may be limited due to the lack of a physical certificate for
such Security.
Subject to the restrictions discussed under "Limitations on Issuance of
Bearer Securities" below, distributions of principal of (and premium, if any)
and any interest on individual Securities represented by a Global Security will
be made to the Depositary or its nominee, as the case may be, as the
Securityholder of such Global Security. None of the Company, the applicable SPV,
the Administrative Agent, if any, the Trustee for such Securities, any Paying
Agent or the Security Registrar for such Securities will have any responsibility
or liability for any aspect of the records relating to or payments made on
account of beneficial interests in such Global Security or for maintaining,
supervising or reviewing any records relating to such beneficial interests.
The Company expects that the Depositary for Securities of a given Class and
Series, upon receipt of any distribution of principal, premium or interest in
respect of a definitive Global Security representing any of such Securities,
will credit immediately participants' accounts with payments in amounts
proportionate to their respective beneficial interests in the principal amount
of payments by participants to owners of beneficial interests in such Global
Security as shown on the records of such Depositary. The Company also expects
that payments by participants to owners of beneficial interests in such Global
Security held through such participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in "street name", and
will be the responsibility of such participants. Receipt by owners of beneficial
interests in a temporary Global Security of payments of principal, premium or
interest in respect thereof will be subject to the restrictions discussed below
under "Limitations on Issuance of Bearer Securities".
If the Depositary for Securities 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 Company within 90 days, the Company will issue individual
Definitive Securities in exchange for the Global Security or Securities
representing such Securities. In addition, the Company may at any time and in
its sole discretion determine not to have any Securities of a given Class
represented by one or more Global Securities and, in such event, will issue
individual Definitive Securities of such Class in exchange for the Global
Security or Securities representing such Securities. Further, if the Company so
specifies with respect to the Securities of a given Class, an owner of a
beneficial interest in a Global Security representing Securities of such Class
may, on terms acceptable to the Company and the Depositary for such Global
Security, receive individual Definitive Securities 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
Securities of the Class represented by such Global Security equal in principal
amount to such beneficial interest and to have such Definitive Securities
registered in its name (if the Securities of such Class are issuable as
Registered Securities). Individual Definitive Securities of such Class so issued
will be issued (a) as Registered Securities in denominations, unless otherwise
specified by the Company, of $1,000 and integral multiples thereof if the
Securities or such Class are issuable as Registered Securities, (b) as Bearer
22
Securities in the denomination or denominations specified by the Company if the
Securities of such Class are issuable as Bearer Securities or (c) as either
Registered or Bearer Securities, if the Securities of such Class are issuable in
either form. See, however, "Limitations on Issuance of Bearer Securities" below
for a description of certain restrictions on the issuance of individual Bearer
Securities in exchange for beneficial interests in a Global Security.
The applicable Prospectus Supplement will set forth any material terms of
the depositary arrangement with respect to any Class or Series of Securities
being offered thereby to the extent not set forth above.
DESCRIPTION OF DEPOSITED ASSETS AND CREDIT SUPPORT
GENERAL
[SELECT ONE OF THE BRACKETED SECTIONS]
[Alternative 1] [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 ownership interest, subject to the interests of
the Noteholders, specified for such Series (or Class) of Certificates in a
designated, publicly issued, fixed income debt security or asset backed security
or a pool of such debt securities or asset backed securities (the "Term Assets")
issued by one or more issuers (the "Term Assets Issuers"), purchased by a Trust
with proceeds from, and at the direction of, the Company or purchased by the
Company (or an affiliate thereof) in the secondary market and assigned to a
Trust as described in the applicable Prospectus Supplement. The Term Assets
Issuers will be one or more corporations, banking organizations, insurance
companies or special purpose vehicles (including trusts, limited liability
companies, partnerships or other special purpose entities) organized under the
laws of the United States or any state, which are subject to the informational
requirements of the Exchange Act and which, in accordance therewith, file
reports and other information with the Commission. Based on information
contained in the offering document pursuant to which any Term Assets Issuer's
securities were originally offered (a "Term Assets Prospectus"), the applicable
Prospectus Supplement shall set forth certain information with respect to the
public availability of information with respect to any Term Assets Issuer the
securities of which constitute more than ten percent of the Term Assets for any
series of Securities as of the date of such Prospectus Supplement ("Concentrated
Term Assets"). Material terms of the Term Assets will be set forth in the
related Prospectus Supplement.]
[Alternative 2] [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 ownership interest, subject to the interests of
the Noteholders, specified for such Series (or Class) of Certificates in a
designated, publicly issued, fixed income debt security or a pool of such debt
securities (the "Term Assets"), purchased by the Company (or an affiliate
thereof) in the secondary market and assigned to a Trust as described in the
applicable Prospectus Supplement. Each Term Asset will represent an obligation
issued or guaranteed by a foreign government, political subdivision or agency or
instrumentality thereof (the "Term Assets Issuers"). Any pool of such publicly
offered foreign government debt securities may include both registered and
unregistered offerings. To the extent any such Term Asset is unregistered, the
applicable Prospectus Supplement will describe the applicable exemption from the
registration requirements of the Securities Act. Each Term Asset, or Term Assets
in the case of debt securities with a common obligor, that represents ten
percent or more of the total Term Assets with respect to any Series of
Securities as of the date of the related Prospectus Supplement ("Concentrated
Term Assets") will represent an obligation issued or guaranteed by a foreign
government or a political subdivision or agency or instrumentality thereof which
has offered debt securities in the United States pursuant to a registration
statement filed with the Commission containing information required by Schedule
B of the Securities Act ("Schedule B"), which qualifies as a "seasoned" issuer
under Commission practice and which issuer or guarantor the Company reasonably
believes (based on publicly available information) is eligible to use Schedule B
as of the time of any offering of Securities hereunder. The Term Assets may
include obligations of any or all of the following Foreign Governments (which
may include obligations guaranteed by the following): Austria, Australia,
Canada, Canadian Provinces, Denmark, Finland, France, Germany, Ireland, Japan,
Norway, Italy, Spain, Sweden and the United Kingdom. The
23
Prospectus Supplement for any series will set forth the Foreign Government
obligations included in the related Trust.]
[Alternative 3] [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 ownership interest, subject to the interests of
the Noteholders, specified for such Series (or Class) of Certificates in a
designated, publicly issued, fixed income debt security or pool of such debt
securities (the "Term Assets"), purchased by the Company (or an affiliate
thereof) in the secondary market and assigned to a Trust as described in the
applicable Prospectus Supplement. The Term Assets will represent direct
obligations of one or more foreign private issuers (as such term is defined in
Rule 405 of the _ Securities _ Act) (the "Term Assets Issuers")subject to the
informational requirements of the Exchange Act and which in accordance therewith
file reports and other information with the Commission.]
[Alternative 4] [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 ownership interest, subject to the interests of
the Noteholders specified for such Series (or Class) of Certificates in a
designated, publicly issued, fixed income debt security or a pool of such debt
securities (the "Term Assets"), purchased by the Company (or an affiliate
thereof) in the secondary market and assigned to a Trust as described in the
applicable Prospectus Supplement. The respective issuer of any Term Asset is
referred to herein as a "Term Assets Issuer". Each Term Asset will represent an
obligation (i) 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") or (ii) of a U.S.
governmental sponsored organization created pursuant to federal statute (a
"GSE"). 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 Association
("Freddie Mae"), Student Loan Marketing Association ("Sallie Mae"), Resolution
Funding Corporation ("REFCORP"), Federal Home Loan Banks ("FHLB") (to the extent
such obligations represent the joint and several obligation of the twelve
Federal Home Loan Banks), Tennessee Valley Authority ("TVA") and Federal Farm
Credit Banks ("FFCB"). The Trusts may also include securities guaranteed by the
United States Agency for International Development ("AID") and government trust
certificates. Debt securities of such GSEs may be exempt from registration under
the Securities Act pursuant to Section 3(a)(2) of the Securities Act (or deemed
by statute to be so exempt) and are not required to be registered under the
Exchange Act. The securities of any such 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) such organization makes publicly available its annual
report which shall include financial statements or similar financial information
with respect to such organization (any such GSE, a "GSE Issuer"). Based on
information contained in the offering document pursuant to which any GSE
Issuer's securities were originally offered (a "Term Assets Prospectus"), the
applicable Prospectus Supplement shall set forth certain information with
respect to the public availability of information with respect to any GSE Issuer
the securities of which constitute more than ten percent of the Term Assets for
any series of Securities as of the date of such Prospectus Supplement
("Concentrated Term Assets").]
The following is a general description of the Deposited Assets which the
Company is permitted to include in a Trust and does not purport to be a complete
description of any such Deposited Asset. This description is qualified in its
entirety by reference to the applicable Prospectus Supplement, the Term Assets
Prospectus and the Term Assets themselves. Material information regarding the
actual Deposited Assets, as of the Cut-off Date (as defined herein), will be
provided in the Prospectus Supplement used to offer a Series of Notes or
Certificates. A maximum of 5% of the aggregate principal balance of the
Deposited Assets included with respect to a Series of Securities as described in
this Prospectus and the related Prospectus Supplement as of the relevant Cut-off
Date will deviate from the characteristics of the assets as of the date of
issuance of such Series.
TERM ASSETS
[INCLUDE FOR ALTERNATIVES 1 AND 3 ONLY]
[GENERAL. As specified in the related Prospectus Supplement each Term Asset
will have been issued pursuant to an agreement (each, a "Term Assets Indenture")
between the Term Assets Issuer and the Term Assets
24
Trustee. Unless otherwise specified, the Term Assets Indenture and the Term
Assets Trustee will be qualified under the Trust Indenture Act of 1939 (the
"TIA") and the Term Assets Indenture will contain certain provisions required by
the TIA.
CERTAIN COVENANTS. Indentures generally contain covenants intended to
protect security holders against the occurrence or effects of certain specified
events, including restrictions limiting the issuer's, and in some cases any
subsidiary's, ability to: (i) consolidate, merge, or transfer or lease assets;
(ii) incur or suffer to exist any lien, charge, or encumbrance upon any of its
property or assets, or to incur, assume, guarantee or suffer to exist any
indebtedness for borrowed money if the payment of such indebtedness is secured
by the grant of such a lien; (iii) declare or pay any cash dividends, or make
any distribution 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 reserves. Subject to certain
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 Term Assets Indenture related to one or more Term Assets 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
Term Assets 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 or Trustee as a holder of the Term Assets
against losses. The Prospectus Supplement used to offer any Series of Securities
will describe material covenants in relation to any Concentrated Term Asset and,
as applicable, will describe material covenants which are common to any pool of
Term Assets.
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 typically include the
following or variations thereof: (i) failure by the issuer to pay an installment
of interest or principal on the securities at the time required (subject to any
specified grace period) or to redeem any of the securities when required
(subject to any specified grace period); (ii) failure by the issuer to observe
or perform any covenant, agreement, or condition contained in the securities or
the indenture which 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; (iii) failure by the issuer to make any required
payment of principal (and premium, if any) or interest with respect to certain
of the other outstanding debt obligations of the issuer or the acceleration by
or on behalf of the holders thereof of such securities, and (iv) certain events
of insolvency or bankruptcy with respect to the Term Assets Issuer.
REMEDIES. Indentures 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 as it may deem appropriate to protect and enforce the
rights of the security holders. Certain indentures provide that the indenture
trustee 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.
Generally, an indenture will contain a provision entitling the trustee
thereunder to be indemnified by the security holders prior to proceeding to
exercise any right or power under such indenture with respect to such securities
at the request of such security holders. An indenture is also likely to limit a
security holder's right to institute certain actions or proceedings to pursue
any remedy under the indenture unless certain conditions are satisfied,
including consent of the indenture trustee, that the proceeding be brought for
the ratable benefit of all holders of the security, and/or the indenture
trustee, after being requested to institute a proceeding by the owners of at
least a specified minimum percentage of the securities, shall have refused or
neglected to comply with such request within a reasonable time.
Each Term Assets Indenture may include some, all or none of the foregoing
provisions or variations thereof or additional events of default not discussed
herein. The Prospectus Supplement with respect to any Series
25
of Securities will describe the events of default under the Term Assets
Indenture with respect to any Concentrated Term Asset ("Term Asset Events of
Default") 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 Term Asset Events of Default with respect to such
pool. There can be no assurance that any such provision will protect the Trust,
as a holder of the Term Assets, against losses. If a Term Asset Event of Default
occurs and the Trustee as a holder of the Term Assets is entitled to vote or
take such other action to declare the principal amount of a Term Assets and any
accrued and unpaid interest thereon to be due and payable, _ the
Securityholders' objectives may differ from those of holders of other securities
of the same series and class as any Term Asset ("outstanding debt securities")
in determining whether to declare the acceleration of the Term Assets.
SUBORDINATION. As set forth in the applicable Prospectus Supplement,
certain of the Term Assets with respect to any Trust may be either senior
("Senior Term Assets") or subordinated ("Subordinated Term Assets") in right to
payment to other existing or future indebtedness of the Term Assets Issuer. With
respect to Subordinated Term Assets, 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
Term Assets, if any, may be entitled to receive payment of the full amount due
thereon before the holders of any subordinated debt securities are entitled to
receive payment on account of the principal (and premium, if any) or any
interest on such securities. Consequently, the Trust or Trustee as a holder of
subordinated debt may suffer a greater loss than if it held unsubordinated debt
of the Term Assets Issuer. There can be no assurance, however, that in the event
of a bankruptcy or similar proceeding the Trust or Trustee as a holder of Senior
Term Assets 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 Securities for a description of any subordination provisions with
respect to any Concentrated Term Assets and the percentage of Senior Term Assets
and Subordinated Term Assets, if any, in a Trust comprised of a pool of
securities.
SECURED OBLIGATIONS. Certain of the Term Assets with respect to any Trust
may represent secured obligations of the Term Assets Issuer ("Secured Term
Assets"). Generally, unless an event of default shall have occurred, or with
respect to certain collateral or as otherwise set forth in the indenture
pursuant to which such securities were offered and sold, an issuer of secured
obligations generally has the right to remain in possession and retain exclusive
control of the collateral securing a security and to collect, invest and dispose
of any income related to the collateral. The indenture pursuant to which any
secured indebtedness is issued may also contain certain provisions for release,
substitution or disposition of collateral under certain circumstances with or
without the consent of the indenture trustee or upon the direction of not less
than a specified percentage of the security holders. The indenture pursuant to
which any secured indebtedness is issued will also provide for the disposition
of the collateral upon the occurrence of certain events of default with respect
thereto. In the event of a default in respect of any secured obligation,
security holders may experience a delay in payments on account of principal (and
premium, if any) or any interest on such securities pending the sale of any
collateral and prior to or during such period the related collateral may decline
in value. If proceeds of the sale of collateral following an indenture event of
default are insufficient to repay all amounts due in respect of any secured
obligations, the holders of such securities (to the extent not repaid from the
proceeds of the sale of the collateral) would have only an unsecured claim
ranking PARI PASSU with the claims of all other general unsecured creditors.
The Term Assets Indenture with respect to any Secured Term Asset may
include, some, or all or none of the foregoing provisions or variations thereof.
The Prospectus Supplement used to offer any Series of Securities which includes
Concentrated Term Assets which are Secured Term Assets, will describe the
security provisions of such Term Assets and the related collateral. With respect
to any Trust comprised of a pool of securities, a substantial portion of which
are Secured Term Assets, the applicable Prospectus Supplement will disclose
certain general information with respect to such security provisions and the
collateral.]
[INCLUDE FOR ALTERNATIVE 2 ONLY]
GENERAL. None of the Term Assets will have been issued pursuant to an
indenture and no trustee is provided for with respect to any Term Asset.
Generally, there will be a fiscal agent (each a "Fiscal Agent") for the Foreign
Government Issuer with respect to the Term Asset whose actions will be governed
by a fiscal agency
26
agreement. A Fiscal Agent does not have the same responsibilities or duties to
act on behalf of the holders of a Foreign Government's debt securities as would
a trustee.
CONTRACTUAL RESTRICTIONS. There will generally be few, if any, contractual
restrictions on the Foreign Government Issuers or Foreign Government Guarantors
in respect of the Term Assets. The Term Assets 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 Term Asset. Certain actions in respect
of the debt securities of Foreign Governments may also be subject to proper
executive, legislative or administrative approval.
The Prospectus Supplement used to offer any Series of Securities will
describe material covenants or undertakings in relation to any Concentrated Term
Asset and, as applicable, will describe material covenants or undertakings which
are common to any pool of Term Assets. There can be no assurance that any such
provision will protect the Trust as a holder of the Term Assets 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 Term Assets 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: (i) failure by the issuer to pay an
installment of interest or principal on the securities at the time required
(subject to any specified grace period) or to redeem any of the securities when
required (subject to any specified grace period); (ii) failure by the issuer to
observe or perform any covenant, agreement, or condition contained in the
securities which failure is materially adverse to security holders and continues
for a specified period after notice thereof; (iii) the declaration of a
moratorium on payment of interest or principal in respect of external
indebtedness and (iv) failure by the issuer to make any required payment of
principal (and premium, if any) or interest with respect to certain of the other
outstanding debt obligations of the issuer (including other external
indebtedness) or the acceleration by or on behalf of the holders thereof of such
securities.
Each Term Asset may include some, all or none of the foregoing provisions
or variations thereof or additional events of default not discussed herein. The
Prospectus Supplement with respect to any Series of Securities will describe the
events of default under the Term Assets with respect to any Concentrated Term
Asset ("Term Asset Events of Default") 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 Term Asset Events
of Default with respect to such pool. There can be no assurance that any such
provision will protect the Trust, as a holder of the Term Assets, against
losses. If a Term Asset Event of Default occurs and the Trustee as a holder of
the Term Assets is entitled to vote or take such other action to declare the
principal amount of a Term Assets and any accrued and unpaid interest thereon to
be due and payable, the Securityholders' objectives may differ from those of
holders of other outstanding debt securities in determining whether to declare
the acceleration of a Term Asset.
REMEDIES. Generally, upon the occurrence of an event of default, the
holders of not less than a specified percentage of the outstanding securities of
a Foreign Government may enforce their rights under the securities including, in
some cases, the right to declare all or a portion of the principal and accrued
interest on the outstanding securities immediately due and payable, subject to
the issuer's right to cure, if applicable. A fiscal agency agreement will not
typically provide for the agent to enforce the rights of the security holders as
would an indenture trustee. Consequently, any rights in respect of the Term
Assets must be pursued through the Trustee as a holder thereof in the manner
prescribed with respect to the Term Assets. There can be no assurance that the
Trustee will be able to enforce any contractual obligation against a Foreign
Government. Additionally, where action may be taken in respect of the Term
Assets only by a specified percentage of the holders of the outstanding debt
securities, the Trustee's ability to influence such action will be limited by
the proportion of such securities held by the Trust.]
27
[INCLUDE FOR ALTERNATIVE 4 ONLY]
[GENERAL. None of the Term Assets will have been issued pursuant to an
indenture, and no trustee is provided for with respect to any Term Asset. There
will generally be a fiscal agent ("Fiscal Agent") for a GSE Issuer with respect
to any related Term Asset whose actions will be governed by a fiscal agency
agreement. A Fiscal Agent is not a trustee for the holders of the Term Assets
and does not have the same responsibilities or duties to act for the holders of
a GSE's securities as would a trustee.
CONTRACTUAL AND STATUTORY RESTRICTIONS. A GSE Issuer and the related Term
Assets may be subject to certain contractual and statutory restrictions which
may provide some protection to securityholders against the occurrence or effects
of certain specified events. In general, each GSE is limited to such activities
as will promote its statutory purposes as set forth in the publicly available
information with respect to such issuer. See "Description of Term Assets
- -Available Information" in the related Prospectus Supplement. A GSE's promotion
of its statutory purposes, as well as its statutory, structural and regulatory
relationships with the federal government, may cause or require such GSE to
conduct its business in a manner that differs from that an enterprise which is
not a GSE might employ.
Neither the United States or 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. Term Assets issued by a GSE Issuer may provide that any
one of a number of specified events will constitute an event of default with
respect thereto. Such events of default typically include the following or
variations thereof: (i) failure by the issuer to pay an installment of interest
or principal on the securities at the time required (subject to any specified
grace period) or to redeem any of the securities when required (subject to any
specified grace period); (ii) failure by the issuer to observe or perform any
covenant, agreement or condition contained in the securities or authorizing
legislation or regulation, as the case may be, which failure is materially
adverse to security holders and continues for a specified period after notice
thereof; and (iii) certain events of insolvency or bankruptcy with respect to
the GSE Issuer. The Term Assets will generally provide that upon the occurrence
of an event of default the holders of not less than a specified percentage of
the outstanding securities may declare all or a portion of the principal and
accrued interest on the outstanding securities immediately due and payable,
subject to the issuer's right to cure, if applicable.
Each Term Asset may include some, all or none of the foregoing provisions
or variations thereof or additional events of default not discussed herein. The
Prospectus Supplement with respect to any Series of Securities will describe the
events of default under the Term Assets with respect to any Concentrated Term
Asset ("Term Asset Events of Default") 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 Term Asset Events
of Default with respect to such pool. There can be no assurance that any such
provision will protect the Trust, as a holder of the Term Assets, against
losses. If a Term Asset Event of Default occurs and the Trustee as a holder of
the Term Assets is entitled to vote or take such other action to declare the
principal amount of a Term Asset and any accrued and unpaid interest thereon to
be due and payable, the Securityholders' objectives may differ from those of
holders of other securities of the same series and class as any Term Asset in
determining whether to declare the acceleration of a Term Assets.]
PRINCIPAL ECONOMIC TERMS OF TERM ASSETS
The applicable Prospectus Supplement will disclose the name of each Term
Assets Issuer with respect to the applicable Series of Securities. In addition,
reference is made to the applicable Prospectus Supplement with respect to each
Series of Securities for a description of the following terms, as applicable, of
any Concentrated Term Asset: (i) the title and series of such Term Assets, the
aggregate principal amount, denomination and form thereof; (ii) whether such
securities are senior or subordinated to any other obligations of the issuer;
(iii) whether any of the obligations are secured or unsecured and the nature of
any collateral; (iv) the limit, if any, upon the
28
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 Term Assets will bear interest, if any
("Term Assets Rate"); the date or dates from which such interest will accrue
("Term Assets Interest Accrual Periods"); and the dates on which such interest
will be payable ("Term Assets Payment Dates"); (vii) the obligation, if any, of
the Term Assets Issuer to redeem the Term Assets pursuant to any sinking fund or
analogous provisions, or at the option of a holder thereof, and the periods
within which or the dates on which, the prices at which and the terms and
conditions upon which such debt securities may be redeemed or repurchased, in
whole or in part, pursuant to such obligation; (viii) the periods within which
or the dates on which, the prices at which and the terms and conditions upon
which such debt securities may be redeemed, if any, in whole or in part, at the
option of the Term Assets Issuer; (ix) whether the Term Assets were issued at a
price lower than the principal amount thereof; (x) 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 Term Assets will be made (the "Term Assets Currency"), and
the circumstances, if any, when such currency of payment may be changed; (xi)
material events of default or restrictive covenants provided for with respect to
such Term Assets; (xii) the rating thereof, if any; and (xiii) any other
material terms of such Term Assets.
With respect to a Trust comprised of a pool of Term Assets, the related
Prospectus Supplement will, to the extent applicable, describe the composition
of the Term Assets pool [as of the Cut-off Date], certain material events of
default or restrictive covenants common to the Term Assets, and, on an
aggregate, percentage or weighted average basis, as applicable, the
characteristics of the pool with respect to certain terms set forth above in the
preceding paragraph and any other material terms regarding such pool of
securities.
PUBLICLY AVAILABLE INFORMATION
In addition to the foregoing, the applicable Prospectus Supplement will
describe, with respect to each Concentrated Term Assets Issuer, the existence
and type of certain information that is made publicly available by such Term
Assets Issuer regarding such Term Asset or Term Assets and will disclose where
and how prospective purchasers of the Securities may obtain such publicly
available information with respect to such Term Assets Issuer. Such information
will typically consist of such Term Assets Issuer's annual report, which
contains financial statements or similar financial information, and can be
obtained from the Commission, if so specified in the applicable Prospectus
Supplement, or from the office of such Term Assets Issuer identified in the
related Prospectus Supplement. However, the precise nature of such publicly
available information and where and how it may be obtained with respect to any
given Term Assets Issuer will vary, and, as described above, will be set forth
in the applicable Prospectus Supplement.
OTHER DEPOSITED ASSETS
In addition to the Term Assets, the Company may also deposit into a given
Trust, or the Trustee on behalf of the Securityholders 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 Term Assets or to some other asset deposited
in the Trust, including hedging contracts and other similar arrangements (such
as puts, calls, interest rate swaps, currency swaps, credit swaps, default
swaps, floors, caps and collars), cash and assets ancillary or incidental to the
foregoing or to the Term Assets (including assets obtained through foreclosure
or in settlement of claims with respect thereto) (all such assets for any given
Series, together with the related Term Assets, the "Deposited Assets"). The
applicable Prospectus Supplement will, to the extent appropriate, contain
analogous disclosure with respect to the foregoing assets as referred to above
with respect to the Term Assets.
The Deposited Assets for a given Series of Securities will not constitute
Deposited Assets for any other Series of Securities and the Securities of each
Class of a given Series will possess an equal and ratable 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
29
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
security or beneficial ownership interest in those specified assets constituting
a part of the Deposited Assets.
CREDIT SUPPORT
As specified in the applicable Prospectus Supplement for a given Series of
Securities, such Series may include, or the Securityholders of such Series (or
any Class or group of Classes within such Series) may have the benefit of,
Credit Support for any Class or group of Classes within such Series. Such Credit
Support may be provided by any combination of the following means described
below. The applicable Prospectus Supplement will set forth whether any Class or
group of Classes of Securities of a Series includes, or the Securityholders of
such Securities have the benefit of, Credit Support and, if so, the amount, type
and other relevant terms of each element of Credit Support with respect to any
such Class or Classes and certain information with respect to the obligors of
each such element. In addition, the applicable Prospectus Supplement will
include (or incorporate by reference, as applicable) audited financial
statements for any obligor providing Credit Support for 20% or more of the
cashflow of the relevant Series and information required by Item 301 of
Regulation SK for any obligor providing Credit Support for between 10 and 20% of
the cashflow of such Series.
SUBORDINATION. As discussed below under "-- Collections," the rights of the
Securityholder of any given Class within a Series of Securities to receive
collections payable to such Series and any Credit Support obtained for the
benefit of the Securityholders of such Series (or Classes within such Series)
may be subordinated to the rights of the Securityholders or one or more other
Classes of such Series to the extent described in the related Prospectus
Supplement. Such subordination accordingly provides some additional credit
support to those Securityholders of those other Classes. For example, if losses
are realized during a given period on the Deposited Assets relating to a Series
of Securities such that the collections received thereon are insufficient to
make all distributions on the Securities of such Series, those realized losses
would be allowed to the Securityholders of any Class of such Series that is
subordinated to another Class, to the extent and in the manner provided in the
related Prospectus Supplement. If a Series includes both Notes and Certificates,
the Certificates will generally be subordinated to the Notes to the extent
described in the Prospectus Supplement. In addition, if so provided in the
applicable Prospectus Supplement, certain amounts otherwise payable to
Securityholders 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 Securities 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
Securityholders 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 Securities of such Series.
LETTER OF CREDIT; SURETY BOND. The Securityholders of any Series (or Class
or group of Classes of Securities within such Series) may, if specified in the
applicable Prospectus Supplement, have the benefit of a letter or letters of
credit (a "Letter of Credit") issued by a bank (a "Letter of Credit Bank") or a
surety bond or bonds (a "Surety Bond") issued by a surety company (a "Surety").
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
30
the Surety Bond will be reduced to the extent of any prior unreimbursed draws
thereunder. _ The applicable Prospectus Supplement will describe the manner,
priority and source of funds by which any such draws are to be repaid.
In the event that the Letter of Credit Bank or the Surety, 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, 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, the 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
Trustee or such other person specified in the Prospectus Supplement will deposit
or cause to be deposited into an account maintained with an eligible institution
(which may be the Trustee) (a "Reserve Account") any combination of cash or
permitted investments in specified amounts, which will be applied and maintained
in the manner and under the conditions specified in such Prospectus Supplement.
In the alternative or in addition to such deposit, a Reserve Account may be
funded through application of a portion of collections received on the Deposited
Assets for a given Series of Securities, in the manner and priority specified in
the applicable Prospectus Supplement. Amounts may be distributed to
Securityholders of such Class or group of Classes within such Series, or may be
used for other purposes, in the manner and to the extent provided in the related
Prospectus Supplement. Amounts deposited in any Reserve Account will be invested
in certain permitted investments by, or at the direction of, the Trustee, the
Company, the applicable SPV or such other person named in the related Prospectus
Supplement.
OTHER CREDIT SUPPORT. If so provided in the related Prospectus Supplement,
_ the Trust may include, or the Securityholders of any Series (or any Class or
group of Classes within such Series) may have the benefit of, one or more
interest rate, currency, securities, commodity or credit swaps, caps, floors,
collars or options. The Prospectus Supplement will identify the counterparty to
any such instrument and will provide a description of the material terms
thereof.
COLLECTIONS
The Trust Agreement will establish procedures by which the Trustee or such
other person specified in the Prospectus Supplement is obligated, for the
benefit of the Securityholders of each Series of Securities, to administer the
related Deposited Assets, including making collections of all payments made
thereon, depositing from time to time prior to any applicable Distribution Date
such collections into a segregated account maintained or controlled by the
applicable Trustee for the benefit of such Series (each a "Certificate
Account"). An Administration 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 any administrative fee) and
certain 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 Securities 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 given Series of Securities
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. There can be no assurance that amounts
received from the Deposited Assets and any Credit Support obtained for the
benefit of Securityholders for a particular Series or Class of Certificates over
a specified period will 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 Loss will be allocated among the
Classes of any Series of Securities, if applicable.
31
The relative priorities of distributions with respect to collections from
the assets of the Trust assigned to Classes of a given Series of Securities 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 INDENTURE
GENERAL
The following summary of material provisions of the Indenture and the Notes
does not purport to be complete and such summary is qualified in its entirety by
reference to the detailed provisions of the form of Indenture filed as an
exhibit to the Registration Statement. The applicable Prospectus Supplement for
a Series of Notes will describe any applicable material provision of the
Indenture or the Notes that is not described herein. Wherever defined terms of
the Indenture are referred to, such defined terms are incorporated herein by
reference as part of the statement made, and the statement is qualified in its
entirety by such reference.
CERTAIN COVENANTS
The applicable SPV (the "Issuer") may not liquidate or dissolve, without
the consent of the holders of at least 66 2/3 % of the Voting Rights of each
Series of Notes. The Issuer also may not consolidate or merge with or into any
other Person or convey or transfer its properties and assets substantially as an
entirety unless (i) such consolidation or merger shall have been consented to by
holders of at least 66 2/3% of the Voting Rights or each Series of Notes, (ii)
the Person (if other than the Issuer) formed in or surviving such transaction or
acquiring such assets is a Person organized under the laws of the United States
of America or any State and shall have expressly assumed, by supplemental
indenture in form satisfactory to the Indenture Trustee, the due and punctual
payment of principal of and interest on all Notes and the performance of every
applicable covenant of the Indenture to be performed by the Issuer, (iii)
immediately after giving effect to such transaction, no Default or Event of
Default shall have occurred and be continuing, (iv) the Indenture Trustee shall
have received a letter from each Rating Agency rating any outstanding Notes to
the effect that the rating issued with respect to such Notes is confirmed
notwithstanding the consummation of such transaction and (v) the Indenture
Trustee shall have received from the Issuer an Officer's Certificate and an
Opinion of Counsel, each to the effect that, among other things, such
transaction complies with the foregoing requirements. "Voting Rights" evidenced
by any Note will be the portion of the voting rights of all the Notes in the
related Series allocated in the manner described in the related Prospectus
Supplement.
The Issuer may not incur, assume, have outstanding or guarantee any
indebtedness except pursuant to the Indenture and subject to the conditions and
limitations set forth therein.
MODIFICATION OF INDENTURE
Except as set forth below, with the consent of the holders of not less than
a majority of the Voting Rights of each Series or Class of such Series of Notes
to be affected, the Indenture Trustee and the Issuer may amend the Indenture or
execute a supplemental indenture to add provisions to or change or eliminate any
provisions of the Indenture relating to such Series or modify the rights of the
holders of the Notes of that Series.
Without the consent of the holder of each outstanding Note affected, except
as provided below, no such amendment or supplemental indenture may (i) change
any Distribution Date or the Final Scheduled Distribution Date of any Note or
reduce the principal amount thereof, the Note Interest Rate for any Note or the
Redemption Price with respect thereto, or change the provisions of the Indenture
relating to the application of the Trust Estate to payment of principal of or
interest on the affected Notes, or change any place of payment where, or the
coin or currency in which, any affected Note or any interest thereon is payable,
or impair the right to institute suit
32
for the enforcement of the provisions of the Indenture regarding payment,
(ii) reduce the percentage of Voting Rights of the Notes of the affected Series
(or Class of such Series), the consent of the holders of which is required for
the authorization of any amendment or supplemental indenture or for any waiver
of compliance with certain provisions of the Indenture or certain defaults
thereunder and their consequences, (iii) modify or alter the provisions of the
Indenture defining the term "Outstanding", (iv) permit the creation of any lien
ranking prior to or on a parity with the lien of the Indenture with respect to
any part of the property subject to the lien of the Indenture or terminate the
lien of the Indenture on any property at any time subject thereto or deprive the
holder of any Note of the security afforded by the lien of the Indenture, (v)
reduce the percentage of the Voting Rights of the Notes of any Series (or Class
of such Series), the consent of the holders of which is required to direct the
Indenture Trustee to liquidate the Deposited Assets for such Series (or Class of
such Series), (vi) modify any of the provisions of the Indenture if such
modification affects the calculation of the amount of any payment of interest or
principal due and payable on any Note on any Distribution Date or to affect the
rights of the holders of Notes of any Series (or Class of such Series) to the
benefit of any provisions for the mandatory redemption of Notes of such Series
(or Class of such Series) to the benefit of any provisions for the mandatory
redemption of Notes of such Series (or Class of such Series) contained therein,
or (vii) modify the provisions of the Indenture regarding any modifications of
such Indenture requiring consent of the holders of Notes, except to increase the
percentage or number of holders required to consent to such modification of such
Indenture or to provide that additional provisions of the Indenture cannot be
modified or waived without the consent of the holder of each Note affected
thereby.
The Issuer and the Indenture Trustee may also amend the Indenture or enter
into supplemental indentures, without obtaining the consent of holders of any
Series, to cure any ambiguity or to correct or supplement any provision of the
Indenture or any supplemental indenture which may be defective or inconsistent
with any other provision, or to make or to amend any other provisions with
respect to matters or questions arising under the Indenture or any supplemental
indenture, provided that such action shall not materially adversely affect the
interests of the holders of the Notes. Such amendments may also be made and such
supplemental indenture may also be entered into without the consent of
Noteholders to set forth the terms of and security for additional Series, to
evidence the succession of another person to the Issuer, to add to the
conditions, limitations and restrictions on certain terms of any Series and to
covenants of the Issuer, to surrender any right or power conferred on the
Issuer, to convey, transfer, assign, mortgage or pledge any property to the
Indenture Trustee, to correct or amplify the description of any property subject
to the lien of the Indenture, to modify the Indenture to the extent necessary to
effect the Indenture Trustee's qualification under the Trust Indenture Act of
1939, as amended (the "TIA") or comply with the requirements of the TIA, to
provide for the issuance of Notes of any Series, to make any amendment necessary
or desirable to maintain the federal income tax status of the Issuer and to
amend the provisions of the Indenture relating to authentication and delivery of
a Series with respect to which a supplemental indenture has not theretofore been
authorized or to evidence and provide for the acceptance of appointment by a
successor trustee.
EVENTS OF DEFAULT
An "Event of Default" with respect to any Series is defined in the
Indenture as being: (i) a continuing default for five days in the payment of
interest on any Note of such Series; (ii) a continuing default for five days in
the payment of principal when due of any Note of such Series; (iii) the
impairment of the validity or effectiveness of the Indenture or any grant
thereunder, or the subordination, termination or discharge of the lien of the
Indenture with respect to such Series, or the release of any Person from any
covenants or obligations under the Indenture with respect to such Series, unless
otherwise expressly permitted, or the creation of any lien, charge, security
interest, mortgage or other encumbrance with respect to any part of the property
subject to the lien of the Indenture, or any interest in or proceeds of such
property, unless otherwise expressly permitted, or the failure of the lien of
the Indenture to constitute a valid first priority security interest in the
property subject to the lien of the Indenture and the continuation of any of
such defaults for a period of 30 days after notice to the Issuer by the
Indenture Trustee or to the Issuer and the Indenture Trustee by the holders of
at least 25% of the Voting Rights of such Series; (iv) a default in the
observance of, or breach of, any covenant or negative covenant of the Issuer
made in the Indenture, or a material breach of any representation or warranty of
the Issuer made in the Indenture or in any certificate or other document
delivered pursuant thereto or in connection therewith as of the time when the
same shall have been made, and the continuation of any such default or breach
for a period of 60 days after notice to the Issuer by the
33
Indenture Trustee or to the Issuer and the Indenture Trustee by the holders of
at least 25% of the Voting Rights of such Series (unless the default or breach
is with respect to certain covenants specified in the Indenture not requiring
such continuation or notice); and (v) certain events of bankruptcy, insolvency,
receivership or reorganization of the Issuer. Notwithstanding the foregoing, if
a Series includes a Class of subordinated Notes, the Indenture for such a Series
may provide that certain defaults which relate only to such subordinated Notes
will not constitute an Event of Default with respect to the Notes, under certain
circumstances, and it may limit the rights of holders of subordinated Notes to
direct the Indenture Trustee to pursue remedies with respect to such defaults,
or other Events of Default. Such limitations, if any, will be specified in the
related Prospectus Supplement.
If an Event of Default with respect to any Series occurs and is
continuing, the Indenture Trustee may, and on the written request of the holders
of at least 25% of the Voting Rights of such Series shall, declare all Notes of
such Series to be due and payable, together with accrued and unpaid interest
thereon. Such declaration may in certain circumstances be rescinded by the
holders of a majority of the Voting Rights of such Series.
The Indenture provides that the Indenture Trustee shall, within 90 days
after the occurrence of an Event of Default with respect to a Series, mail to
the holders of such Series of all uncured or unwaived defaults known to it,
PROVIDED, HOWEVER, that (a) except in the case of an Event of Default in the
payment of the principal or purchase price of or interest on any Note, the
Indenture Trustee shall be protected in withholding such notice if it determines
in good faith that the withholding of such notice is in the interest of the
Noteholders of such Series, and (b) in the case of default specified in clause
(iv) of the first paragraph of this "Events of Default" subsection, the
Indenture Trustee is not required to give such notice until at least 30 days
after the occurrence of such default or breach and that, in the case of any
default or breach specified in clause (v) of the first paragraph of this "Events
of Default" subsection, the Indenture Trustee is not required to give notice
until at least 60 days after the occurrence of such default or breach.
An Event of Default with respect to one Series will not necessarily be an
Event of Default with respect to any other Series, but an Event of Default with
respect to one Class of a Series shall be an Event of Default with respect to
all Classes of such Series.
If, following an Event of Default with respect to any Series, the Notes of
such Series have been declared to be due and payable, the Indenture Trustee in
its sole discretion may, but shall not be obligated to refrain from liquidating
the related Deposited Assets if (i) the Indenture Trustee determines that the
amounts receivable with respect to such Deposited Assets will be sufficient to
pay (a) all principal of and interest on the Notes in accordance with their
terms without regard to the declaration of acceleration and (b) all sums due the
Indenture Trustee and any other administrative amounts required to be paid under
the Indenture and (ii) holders of the requisite percentage of the Notes of such
Series have not directed the Indenture Trustee to sell the related Deposited
Assets as so specified in the Indenture. In addition, the Indenture Trustee is
prohibited from selling the Trust Estate following certain Events of Default
unless (a) the amounts receivable with respect to the Deposited Assets are not
sufficient to pay in full the principal of and accrued interest on the Notes of
such Series, and to pay sums due the Indenture Trustee and other administrative
expenses specified in the Indenture and the Indenture Trustee obtains the
consent of holders of 66-2/3 % of the Voting Rights of such Series or (b) the
Indenture Trustee obtains the consent of 100% of the Voting Rights of such
Series. The proceeds of a sale of assets will be applied to the payment of
amounts due the Indenture Trustee and other administrative expenses specified in
the Indenture and then distributed pro rata among the Noteholders of such Series
(without regard to Class, provided that subordinated notes will be subordinate
to senior Notes of the Series to the extent provided in the related Prospectus
Supplement) according to the amounts due and payable on the Notes for principal
and interest at the time such proceeds are distributed by the Indenture Trustee.
The Indenture Trustee will not deemed to have knowledge of any Event of
Default or default described in clauses (iv) through (vi) of the first paragraph
of this "Events of Default" subsection unless an officer in the Indenture
Trustee's corporate trust department has actual knowledge thereof. Subject to
the provisions of the Indenture relating to the duties of the Indenture Trustee,
in case an Event of Default shall occur and be continuing, the Indenture Trustee
will be under no obligation to exercise any of the rights or powers under the
Indenture at the request or direction of any of the Noteholders of a Series,
unless such Noteholders shall have offered to the
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Indenture Trustee reasonable security or indemnity. Subject to such provisions
for indemnification and certain limitations contained in the Indenture the
holders of a majority of the Voting Rights of a Series (or of such Classes
specified in the related Prospectus Supplement) will have the right to direct
the time, method and place of conducting any proceeding for any remedy available
to the Indenture Trustee or exercising any trust or power conferred on the
Indenture Trustee with respect to the Series. In addition, the holders of a
majority of the Voting Rights of a Series (or of such Classes specified in the
related Prospectus Supplement) may, in certain cases, waive any default with
respect to such Series, except a default in payment of principal or interest or
in respect of a covenant or provision which cannot be modified without the
consent of all Noteholders affected.
REMEDIES OF NOTEHOLDERS
Any holder of Notes of a Series will have the right to institute any
Proceeding with respect to the applicable Indenture, subject to the following
conditions: (i) such holder previously has given to the Indenture Trustee
written notice of a continuing Event of Default with respect to such Series and
has offered the Indenture Trustee satisfactory indemnity, (ii) the holders of
not less than 25 % of the Voting Rights of such Series have made written request
on the Indenture Trustee to institute such Proceeding and have offered
satisfactory indemnity, (iii) the Indenture Trustee has, for 60 days after
receipt of such notice, request and offer of indemnity, failed to institute any
such Proceeding, and (iv) no direction inconsistent with such written request
has been given to the Indenture Trustee during such 60-day period by the holders
of a majority of the Voting Rights of such Series; PROVIDED, HOWEVER, that if
the Indenture Trustee receives conflicting requests and indemnities from two or
more groups of Noteholders each representing less than a majority of the Voting
Rights of such Series, the Indenture Trustee may in its sole discretion
determine what action with respect to the Proceeding, if any, shall be taken;
and PROVIDED, FURTHER, that the right of any Noteholder to institute suit for
the enforcement of any payment with respect to its Note, on or after the date on
which such payment is due, shall not be impaired without the consent of such
holder.
REPORTS TO NOTEHOLDERS
The Indenture Trustee will prepare and forward to each Noteholder on each
Distribution Date (whether or not such Noteholder receives a payment on such
date), or as soon thereafter as is practicable, a statement setting forth, to
the extent applicable to any Series, among other things:
(i) with respect to a Series, the amount of such distribution allocable to
principal on the Deposited Assets, separately identifying the aggregate amount
of any redemptions or prepayments included therein;
(ii) with respect to a Series, the amount of such distribution allocable to
interest on the Deposited Assets;
(iii) the aggregate outstanding principal balance of the Deposited Assets
as of the opening of business on the immediately following date, after giving
effect to distributions allocated to principal reported under (i) above;
(iv) the aggregate outstanding principal amount of the Notes of such Series
as of the immediately following date, after giving effect to distributions
allocated to principal reported under (i) above and the payment on such
Distribution Date;
(v) in the case of Floating Rate Securities, the Note Interest Rate
applicable to the distribution being made;
(vi) if applicable, the amount of any shortfall (I.E., the difference
between the aggregate amounts of principal and interest which Noteholders would
have received if there were sufficient available funds to distribute and the
amounts actually distributed);
(vii) in the case of any Credit Support described in the related Prospectus
Supplement, the amount of coverage of such Credit Support as of the close of
business on the applicable Distribution Date;
35
(viii) in the case of any Series which includes subordinated Notes, the
subordinated amount, if any, determined as of the related Distribution Date and
if the distribution of the holders of senior Notes is less than their required
distribution, the amount of the shortfall;
(ix) the amount of any withdrawal from any applicable Reserve Account
included in amounts actually distributed to Noteholders and the remaining
balance of the Reserve Account, if any, on such Distribution Date, after giving
effect to distributions made on such date; and
(x) such other information as may be specified in the Indenture.
In addition, within a reasonable period of time after the end of each
calendar year, the Indenture Trustee will furnish to each Noteholder of record
at any time during such calendar year: (A) the aggregate of amounts reported
pursuant to (i) through (iii), (vi), and (xi) above for such calendar year and
(B) such information specified in the Indenture to enable Noteholders to prepare
their tax returns, including the amount of original issue discount accrued on
the Notes, if applicable. Information in the Distribution Date reports and
annual reports provided to the Noteholders will not have been examined and
reported upon by an independent public accountant.
AUTHENTICATION AND DELIVERY OF NOTES
The Issuer may from time to time deliver Notes executed by it to the
Indenture Trustee and order that the Indenture Trustee authenticate such Notes.
On the receipt of such Notes and such order and subject to the Issuer's
compliance with certain conditions specified in the Indenture, the Indenture
Trustee will authenticate and deliver such Notes as the Issuer may direct. The
Indenture Trustee will be authorized to appoint an Authenticating Agent for
purposes of authenticating and delivering the Series of Notes.
SATISFACTION AND DISCHARGE OF THE INDENTURE
The Indenture will be discharged as to a Series (except with respect to
certain continuing rights specified in the Indenture), (i)(a) on the delivery to
the Indenture Trustee for cancellation of all of the Notes of such Series other
than Notes which have been mutilated, lost or stolen and have been replaced or
paid and Notes for which money has been deposited in trust for the full payment
thereof (and thereafter repaid to the Issuer and discharged from such trust) as
provided in the Indenture, or (b) at such time as all Notes of such Series not
previously cancelled by the Indenture Trustee have become, or, within one year
will become, due and payable or called for redemption and the Issuer shall have
deposited with the Indenture Trustee an amount sufficient to repay all of the
Notes and (ii) the Issuer shall have paid all other amounts payable under the
Indenture with respect to such Series.
ANNUAL COMPLIANCE STATEMENTS
The Issuer will be required to file annually with the Indenture Trustee a
written statement as to fulfillment of its obligations under the Indenture.
If so provided in the applicable Prospectus Supplement, the Indenture will
provide that on or before a specified date in each year, a firm of independent
public accountants will furnish a statement to the Indenture 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 accounting
and auditing procedures considered appropriate under the circumstances, such
firm is of the opinion that such administration was conducted in compliance with
the terms of the Indenture, except for such exceptions as such firm shall
believe to be immaterial and such other exceptions as shall be set forth in such
report.
The Indenture will also provide for delivery to the Issuer, on or before a
specified date in each year, of an annual statement signed by two officers of
the Indenture Trustee to the effect that the Indenture Trustee has fulfilled its
obligations under the Indenture throughout the preceding year with respect to
any Series of Notes.
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Copies of the annual issuer's statement, accountants' statement and the
statement of officers of the Indenture Trustee may be obtained by Noteholders
without charge upon written request to either the Indenture Trustee, at the
address set forth in the related Prospectus Supplement.
PASS THROUGH OF VOTING RIGHTS
The Indenture Trustee shall seek instructions from Noteholders of a Series
in connection with any vote, consent or waiver required in respect of any
related Deposited Asset. The Indenture Trustee shall direct any action or cast
any vote as the holder of such Deposited Asset in proportion to the aggregate
outstanding principal amount of Notes held by Noteholders of such Series taking
the corresponding position. The Prospectus Supplement will specify whether and
under what circumstances voting in such cases will be by Class.
LIST OF NOTEHOLDERS
Three or more holders of a Series that have each owned the Notes for at
least six months may, by written application to the Indenture Trustee, request
access to the list maintained by the Indenture Trustee of all holders of the
same Series or of all Notes, as specified in the request, for the purpose of
communicating with other Noteholders with respect to their rights under the
Indenture. The Indenture Trustee may choose not to give such Noteholders access
to the list of Noteholders if it wishes to mail the communication on behalf of
the requesting Noteholders, at their expense, to all Noteholders. If the
Indenture Trustee objects to the proposed mailing on the grounds that it would
be contrary to the best interests of the Noteholders or a violation of
applicable law, it may request permission from the Commission not to make the
proposed mailing.
MEETINGS OF NOTEHOLDERS
Meetings of Noteholders may be called at any time and from time to time to
(i) give any notice to the Issuer or to the Indenture Trustee, give directions
to the Indenture Trustee, consent to the waiver of any Default or Event of
Default under the Indenture, or to take any other action authorized to be taken
by Noteholders in connection therewith, (ii) remove the Indenture Trustee and to
appoint a successor Indenture Trustee, (iii) consent to the execution of
supplemental indentures or (iv) take any other action authorized to be taken by
or on behalf of the Noteholders of any specified percentage of the Voting Rights
of the Notes. Such meetings may be called by the Indenture Trustee, the Issuer
or by the holders of 10% in Voting Rights of any such Series.
INDENTURE TRUSTEE'S ANNUAL REPORT
The Indenture Trustee will be required to mail each year to all Noteholders
a brief report relating to its eligibility and qualification to continue as the
Indenture Trustee under the Indenture, any amounts advanced by it under the
Indenture which remain unpaid on the date of the report, the amount, interest
rate and maturity date of certain indebtedness owing by the Issuer (or any other
obligor on such Series) to the Indenture Trustee in its individual capacity, the
property and funds physically held by the Indenture Trustee as such, any release
or releases and substitution of property subject to the lien of the Indenture
which has not been previously reported, any additional issuance of Notes not
previously reported and any action taken by it which materially affects the
Notes and which has not been previously reported.
THE INDENTURE TRUSTEE
The Indenture Trustee will be a bank or trust company qualified under the
TIA and named in the Prospectus Supplement related to a Series. The Issuer may
maintain other banking relationships in the ordinary course of business with the
Indenture Trustee. The Indenture Trustee's "Corporate Trust Office" will be
specified in the Prospectus Supplement, or at such other addresses as the
Indenture Trustee may designate from time to time by notice to the Noteholders
and the Issuer. With respect to the presentment and surrender of Notes for final
payment of principal in retirement thereof on any Distribution Date (or any
redemption date, special distribution date or special redemption date) and, with
respect to any other presentment and surrender of such Notes and for all
37
other purposes such Notes may be presented at the Corporate Trust Office of the
Indenture Trustee or at the office of the Issuer's paying agent, which will be
specified in the Prospectus Supplement.
DESCRIPTION OF TRUST AGREEMENT
GENERAL
The following summary of material provisions of the Trust Agreement does
not purport to be complete and such summary 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. The applicable Prospectus Supplement for
a Series of Certificates will describe any applicable material provision of the
Trust Agreement or the Certificates that is not described herein. Wherever
defined terms of the Trust Agreement are referred to, such defined terms are
incorporated herein by reference as part of the statement made, and the
statement is qualified in its entirety by such reference.
ASSIGNMENT OF DEPOSITED ASSETS
At the time of issuance of any Series of Certificates, the Company will
cause the Term Assets to be included in the related Trust, and any other
Deposited Asset specified in the Prospectus Supplement, to be assigned to the
related Trustee, together with all principal, premium (if any) and interest
received by or on behalf of the Company on or with respect to such Deposited
Assets after the cut-off date specified in the Prospectus Supplement (the
"Cut-off Date"), other than principal, premium (if any) and interest due on or
before the Cut-off Date, and other than the Retained Interest, if specified in
the Prospectus Supplement. The Trustee will, concurrently with such assignment,
deliver the Certificates to the Company in exchange for certain assets to be
deposited in the Trust. Each Deposited Asset will be identified in a schedule
appearing as an exhibit to the Series Supplement to the Trust Agreement. Such
schedule will include certain statistical information with respect to each of
the Term Assets and each other Deposited Asset as of the Cut-off Date, and in
the event any Term Asset represents ten percent or more of the total Term Assets
with respect to any Series of Certificates, 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, the Company 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 a custodian or the Administrator (defined
below)) will review (or cause to be reviewed) such documents upon receipt
thereof or within such period as is permitted in the Prospectus Supplement, and
the Trustee (or such custodian) will hold such documents in trust for the
benefit of the Certificateholders.
With respect to certain types of Deposited Assets specified in the
applicable Prospectus Supplement (only if and to the extent provided therein) if
any such document is found to be missing or defective in any material respect,
the Trustee (or such custodian or the Administrator) shall immediately notify
the Administrative Agent, if any, and the Company and the Administrative Agent,
if any, and otherwise the Trustee shall immediately notify the relevant person
who sold the applicable Deposited Asset to the Company (a "Deposited Asset
Provider"). To the extent specified in the applicable Prospectus Supplement, if
the Deposited Asset Provider cannot cure such omission or defect within 60 days
after receipt of such notice, the Deposited Asset Provider will be obligated,
within 90 days of receipt of such notice, to repurchase the related Deposited
Asset from the Trust at the Purchase Price (as defined herein) or provide a
substitute for such Deposited Asset. There can be no assurance that a Deposited
Asset Provider will fulfill its repurchase or substitution obligation. Although
the Administrative Agent, if any, or otherwise an Administrator, on behalf of
the Trustee is obligated to use its best efforts to enforce such obligation,
neither such Administrative Agent nor the Company will be obligated to
repurchase or substitute for such Deposited Asset if the Deposited Asset
Provider defaults on its obligation. 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, and the Trust and the
Securityholders shall
38
not have any continuing direct or indirect liability under the Trust Agreement
as sellers of the assets of the Trust in enforcing such obligation.
Each of the Company 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 Company or any such Administrative Agent, as the
case may be, which materially and adversely affects the interests of the
Certificateholders, the Company 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 an
Administrator, will make reasonable efforts to collect all scheduled payments
under the Deposited Assets and will follow or cause to be followed 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 any related instrument governing any
Credit Support (collectively, the "Credit Support 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, an "Administrator"), but the
Trustee or Administrative Agent will remain obligated with respect to such
obligations under the Trust Agreement. Each Administrator 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 Administration Agreement (as defined herein).
The agreement between any Administrative Agent or Trustee and an
Administrator (an "Administration Agreement") will be consistent with the terms
of the Trust Agreement and such assignment to the Administrator by itself will
not result in a withdrawal or downgrading of the rating of any Class of
Certificates issued pursuant to the Trust Agreement. With respect to any
Administration Agreement between an Administrative Agent and an Administrator,
although such Administration Agreement will be a contract solely between such
Administrative Agent and the Administrator, the Trust Agreement pursuant to
which a Series of Certificates is issued will provide that, if for any reason
such Administrative Agent for such Series of Certificates is no longer acting in
such capacity, the Trustee or any successor Administrative Agent must recognize
the Administrator's rights and obligations under each Administration Agreement.
The Administrative Agent or Trustee, as applicable, will be solely liable
for all fees owed by it to any Administrator, 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. To the extent set forth in the Prospectus
Supplement and the related Administration Agreement, each Administrator 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, as applicable, may require any
Administrator _ to agree to indemnify the Administrative Agent or Trustee, as
applicable, for any liability or obligation sustained by the Administrative
Agent or Trustee, as applicable, in connection with any act or failure to act by
the Administrator.
REALIZATION UPON DEFAULTED DEPOSITED ASSETS. As administrator with respect
to the Deposited Assets, the Trustee (or an Administrator on its behalf), on
behalf of the Certificateholders of a given Series (or any Class or
39
Classes within such Series), will present claims under each applicable Credit
Support Instrument and will take such reasonable steps as are necessary to
receive payment or to permit recovery thereunder with respect to defaulted
Deposited Assets. All collections by or on behalf of the Trustee or
Administrative Agent under any Credit Support Instrument are to be deposited in
the Security Account for the related Trust, subject to withdrawal as described
above.
If recovery on a defaulted Deposited Asset under any related Credit Support
Instrument is not available, the Trustee (or an Administrator on its behalf)
will be obligated to follow or cause to be followed such normal practices and
procedures as it deems necessary or advisable to realize upon the defaulted
Deposited Asset, provided that 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 the defaulted Deposited Asset are less than the sum of (i)
the outstanding principal balance of the defaulted Deposited Asset, (ii)
interest accrued thereon at the applicable interest rate and (iii) the aggregate
amount of expenses incurred by the Administrative Agent and the Trustee, as
applicable, in connection with such proceedings to the extent reimbursable from
the assets of the Trust under the Trust Agreement, the Trust will realize a loss
in the amount of such difference. 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
Security Account out of the net proceeds recovered on any defaulted Deposited
Asset, prior to the distribution of such proceeds to Certificateholders, amounts
representing its normal administrative compensation on the Deposited Asset,
unreimbursed administrative expenses incurred with respect to the Deposited
Asset and any unreimbursed advances of delinquent payments made with respect to
the Deposited Asset.
RETAINED INTEREST; ADMINISTRATIVE AGENT COMPENSATION AND PAYMENT OF EXPENSES
The Prospectus Supplement for a Series of Certificates will specify whether
there will be any Retained Interest in the Deposited Assets, and, if so, the
owner thereof. If so provided, the Retained Interest will be established on an
asset-by-asset basis and will be specified in an exhibit to the applicable
series supplement to the Trust Agreement. A Retained Interest in a Deposited
Asset represents a specified interest therein. Payments in respect of the
Retained Interest will be deducted from payments on the Deposited Assets as
received and, in general, will not be deposited in the applicable Security
Account or become a part of the related Trust. Unless otherwise provided in the
applicable Prospectus Supplement, any partial recovery of interest on a
Deposited Asset, 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.
The applicable Prospectus Supplement will specify the Administrative
Agent's, if any, and the Trustee's compensation, and the source, manner and
priority of payment thereof, with respect to a given Series of Certificates.
If and to the extent specified in the applicable Prospectus Supplement, in
addition to amounts payable to any Administrator, the Administrative Agent, if
any, 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
The Administrative Agent, if any, specified in the applicable Prospectus
Supplement will have no obligation to make any advances with respect to
collections on the Deposited Assets or in favor of the Certificateholders of the
related Series of Certificates. However, to the extent provided in the
applicable Prospectus Supplement, any such Administrative Agent will advance on
or before each Distribution Date its own funds or funds held in the Security
Account for such Series that are not part of the funds available for
distribution for such Distribution Date, in an amount equal to the aggregate of
payments of principal, premium (if any) and interest (net of related
administration fees and any Retained Interest) with respect to the Deposited
Assets that were due during the related Collection Period and were delinquent on
the related Determination Date, subject to (i) any such
40
Administrative Agent's good faith determination that such advances will be
reimbursable from Related Proceeds (as defined herein) and (ii) such other
conditions as may be specified in the Prospectus Supplement.
Advances, if any, 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. Advances of an Administrative Agent's funds, if any, will be
reimbursable only out of related recoveries on the Deposited Assets (and amounts
received under any form of Credit Support) for such Series with respect to which
such advances were made (as to any Deposited Assets, "Related Proceeds");
PROVIDED, HOWEVER, that any such Advance will be reimbursable from any amounts
in the Security Account for such Series to the extent that such Administrative
Agent shall determine, in its sole judgment, that such advance (a
"Nonrecoverable Advance") is not ultimately recoverable from Related Proceeds.
If advances have been made by such Administrative Agent from excess funds in the
Security Account for any Series, such Administrative Agent will replace such
funds in such Security Account on any future Distribution Date to the extent
that funds in such Security Account on such Distribution 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 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 COMPANY
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
Company, an affiliate of either thereof, the Deposited Asset Provider or any
third party and may have other normal business relationships with the Trustee,
the Company, their affiliates or the Deposited Asset Provider.
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 such resignation will become effective until a
successor has assumed the Administrative Agent's obligations under the Trust
Agreement with respect to such Series.
The Trust Agreement will further provide that neither such an
Administrative Agent, the Company nor any director, officer, employee, or agent
of the Administrative Agent or the Company 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 Company nor any such person will be protected against any liability that
would otherwise be imposed by reason of willful misfeasance, bad faith or
negligence in the performance of duties thereunder or by reason of reckless
disregard of obligations and duties thereunder. The Trust Agreement may further
provide that, unless otherwise provided in the applicable series supplement
thereto, such an Administrative Agent, the Company and any director, officer,
employee or agent of the Administrative Agent or the Company will be entitled to
the 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 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 such an Administrative Agent nor the Company 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 involve it in any expense or liability. Each of such
Administrative Agent or the Company any, however, in its discretion undertake
any such 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 such legal expenses and costs of such action and
any liability resulting therefrom will be allocated.
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Any person into 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
"Administrative Agent Termination Events" under the Trust Agreement with
respect to any given Series of Certificates will consist of the following: (i)
any failure by an Administrative Agent to remit to the Trustee any funds in
respect of collections on the Deposited Assets and Credit Support, if any, 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 Company, or to the Administrative Agent, the Company and
the Trustee by the holders of such Certificates evidencing not less than 25% of
the Voting Rights (as defined herein); (ii) 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 Company, or the
Administrative Agent, the Company and the Trustee by the holders of such
Certificates evidencing not less than 25% of the Voting Rights; and (iii)
certain events of insolvency, readjustment of debt, marshalling 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 herein) applicable to each such 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 Security 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 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
Company or the Trustee may, and at the direction of holders of such Certificates
evidencing not less than the "Required Percentage Administrative Agent
Termination" of the Voting Rights, the Trustee will, terminate all the rights
and obligations of such 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), whereupon the Trustee, or
the Administrator on its behalf, will succeed to all the responsibilities,
duties and liabilities of such 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 Deposited Assets,
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
so 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 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 Deposited Assets, 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.
42
REMEDIES OF CERTIFICATEHOLDERS
Any Certificateholder may institute any proceeding with respect the
applicable Trust Agreement subject to the following conditions: (i) such holder
previously has given to the Trustee written notice of breach; (ii) the holders
of Certificates evidencing not less that the "Required Percentage Remedies" 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 (iii) 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 such 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
The Trust Agreement for each Series of Certificates may be amended by the
Company and the Trustee with respect to such Series, without notice to or
consent of the Certificateholders, for certain purposes including (i) to cure
any ambiguity, (ii) to correct or supplement any provision therein which may be
inconsistent with any other provision therein or in the Prospectus Supplement,
(iii) to add or supplement any Credit Support for the benefit of any
Certificateholders (provided that if any such addition affects any series or
class of Certificateholders differently than any other series or class of
Certificateholders, then such addition will not, as evidenced by an opinion of
counsel, have a material adverse effect on the interests of any affected series
or class of Certificateholders), (iv) to add to the covenants, restrictions or
obligations of the Company, the Administrative Agent, if any, or the Trustee for
the benefit of the Certificateholders, (v) to add, change or eliminate any other
provisions with respect to matters or questions arising under such Trust
Agreement so long as (x) any such addition, change or elimination will not, as
evidenced by an opinion of counsel, affect the tax status of the Trust or result
in a sale or exchange of any Certificate for tax purposes and (y) the Trustee
has received written confirmation from each Rating Agency rating such
Certificates that such amendment will not cause such Rating Agency to reduce or
withdraw the then current rating thereof, or (vi) to comply with any
requirements imposed by the Code. Without limiting the generality of the
foregoing, the Trust Agreement may also be modified or amended from time to time
by the Company, and the Trustee, with the consent of the holders of Certificates
evidencing not less than the "Required Percentage -- Amendment" of the Voting
Rights of those Certificates that are materially adversely affected by such
modification or amendment for the purpose of adding any provision to or changing
in any manner or eliminating any provision of the Trust Agreement or of
modifying in any manner the rights of such Certificateholders; PROVIDED,
HOWEVER, that in the event such modification or amendment would materially
adversely affect the rating of any Series or Class by the Rating Agency, the
"Required Percentage -- Amendment" specified in the related series supplement to
the Trust Agreement shall include an additional specified percentage of the
Certificates of such Series or Class.
No such modification or amendment may, however, (i) reduce in any manner
the amount of or alter the timing of, distributions or payments which are
required to be made on any Certificate without the consent of the holder of such
Certificate or (ii) reduce the aforesaid Required Percentage of Voting Rights
required for the consent to any such amendment without the consent of the
holders of all Certificates covered by the Trust Agreement then outstanding.
Holders of Certificates evidencing not less than the "Required Percentage -
Waiver" of the Voting Rights of a given Series may, on behalf of all
Certificateholders of that Series, (i) waive, insofar as that Series is
concerned, compliance by the Company, the Trustee or the Administrative Agent,
if any, with certain restrictive provisions, if any, of the Trust Agreement
before the time for such compliance and (ii) waive any past default under the
Trust Agreement with respect to Certificates of that Series, except a default in
the failure to distribute amounts received as principal of (and premium, if any)
or any interest on any such Certificate and except a default in respect of a
covenant or provision the modification or amendment of which would require the
consent of the holder of each outstanding Certificate affected thereby.
43
REPORTS TO CERTIFICATEHOLDERS; NOTICES
REPORTS TO CERTIFICATEHOLDERS. 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 Company and to such other
parties as may be specified in the Trust Agreement, a statement setting forth:
(i) 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;
(ii) 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;
(iii) the amount of compensation received by the Administrative Agent, if
any, and the Trustee for the period relating to such Distribution Date, 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;
(iv) 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;
(v) the aggregate stated principal amount or, if applicable, notional
principal amount of the Deposited Assets and the current interest rate thereon
at the close of business on such Distribution Date;
(vi) the aggregate Security 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 Security Principal
Balance or aggregate Notional Amount due to the allocation of any Realized
Losses or otherwise;
(vii)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 pursuant to subclauses (i) and (iii)
above, 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, shall furnish to each person who at any time during the calendar
year was a Certificateholder a statement containing the information set forth in
subclauses (i) and (iii) above, 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, shall
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. Any notice required to be given to a holder of a Registered
Security will be mailed to the last address of such holder set forth in the
applicable Security Register. Any notice required to be given to a holder of a
Bearer Security will be published in a newspaper of general circulation in the
city or cities specified in the Prospectus Supplement relating to such Bearer
Security.
44
EVIDENCE AS TO COMPLIANCE
If so specified in the applicable Prospectus Supplement, the Trust
Agreement will provide that on or before a specified date in each year, 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), which report should enable the
recipients to determine whether such administration was conducted in compliance
with the terms of the Trust Agreement. Such report shall identify any exceptions
found during the examination.
The Trust Agreement will also provide for delivery to the Company, 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, if any, 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.
REPLACEMENT CERTIFICATES
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 Securities) or at the
principal London office of the applicable Trustee (in the case of Bearer
Securities), 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 Security 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 Asset subject thereto or the disposition of
all property acquired upon foreclosure or liquidation of any Deposited Asset and
(ii) the purchase of all the assets of the Trust by the party entitled to effect
such termination, 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 such purchase of Deposited Assets and property acquired in respect of
Deposited Assets evidenced by a Series of Certificates shall 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, which price will not be less than the outstanding
principal amount of Certificates plus accrued interest, if any, thereon (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
45
time of purchase being not more than 10% of the aggregate principal balance of
the Deposited Assets at the Cut-off Date for that Series, or such smaller
percentage as shall be specified in the related Prospectus Supplement. The Trust
and the Securityholders shall have no continuing direct or indirect liability
under the Trust Agreement as sellers of the assets of the Trust in effecting
such termination.
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 Asset or
related document and is not accountable for the use or application by or on
behalf of any Administrative Agent of any funds paid to such Administrative
Agent or its designee in respect of such Certificates or the Deposited Assets,
or deposited into or withdrawn from the related Security Account or any other
account by or on behalf of such Administrative Agent. 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 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 Company, any
Administrative Agent and their respective affiliates.
LIMITATIONS ON ISSUANCE OF BEARER SECURITIES
In compliance with United States federal income tax laws and regulations,
the Company and any underwriter, agent or dealer participating in the offering
of any Bearer Security will agree that, in connection with the original issuance
of such Bearer Security and during the period ending 40 days after the issue
date of such Bearer Security, they will not offer, sell or deliver such Bearer
Security, directly or indirectly, to a U.S. Person or to any person within the
United States, except to the extent permitted under U.S. Treasury regulations.
Bearer Securities 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
1650(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 Securities 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
Securities.
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 Securities, as the case may be, Securities that are issuable as Bearer
Securities may initially be represented by a single temporary Global Security,
without interest coupons, to be deposited with a common depositary in London for
Morgan Guaranty Trust Company of New York, Brussels Office, as operator of the
Euroclear System ("Euroclear"), and Centrale de Livraison de Valeurs Mobilieres
S.A. ("CEDEL") 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 Securities 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 Securities,
respectively, only upon receipt of a Certificate of Non-U.S.
46
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 Security will be delivered in or to the United States. If
so specified in the applicable Prospectus Supplement, interest on a temporary
Global Security will be distributed to each of Euroclear and CEDEL with respect
to that portion of such temporary Global Security held for its account, but only
upon receipt as of the relevant Distribution Date of a Certificate of Non-U.S.
Beneficial Ownership.
CURRENCY RISKS
EXCHANGE RATES AND EXCHANGE CONTROLS
An investment in a Security 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
Company 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
Security. Depreciation of the Specified Currency for a Security against the U.S.
dollar would result in a decrease in the effective yield of such Security below
its Note Interest Rate or 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 Securities
denominated in such currency. At present, the Company has identified the
following currencies in which distributions of principal, premium and interest
on Securities may be made: Australian dollars, Canadian dollars, Danish kroner,
Italian lire, Japanese yen, New Zealand dollars, U.S. dollars and ECU. However,
Securities 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 Security,
the currency in which amounts then due to be distributed in respect of such
Security are distributable would not be available. In that event, such payments
will be made in the manner set forth above under "Description of Securities --
Distributions" or as otherwise specified in the applicable Prospectus
Supplement.
IT IS STRONGLY RECOMMENDED THAT PROSPECTIVE PURCHASERS CONSULT THEIR OWN
FINANCIAL AND LEGAL ADVISORS AS TO THE RISKS ENTAILED BY AN INVESTMENT IN
SECURITIES DENOMINATED IN A CURRENCY OTHER THAN U.S. DOLLARS. SUCH SECURITIES
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 Securities who are United States residents. The applicable
Prospectus Supplement for certain issuances of Securities 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 Securities.
Any Prospectus Supplement relating to Securities 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
47
such currency, any exchange controls affecting such currency and any other
required information concerning such currency.
PAYMENT CURRENCY
Except as set forth below, if distributions in respect of a Security 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 Company'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 Security 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 Security 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 Security 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
determination 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 Securities 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 Securityholders of such
Series.
FOREIGN CURRENCY JUDGMENTS
Unless otherwise specified in the applicable Prospectus Supplement, the
Securities 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 or 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.
48
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of material United States federal income tax
consequences of the ownership of the Notes and Certificates as of the date
hereof. (Certain minor and incidental consequences are discussed as well.) It is
based on the advice of Orrick, Herrington & Sutcliffe LLP, Special Tax Counsel
("Special Tax Counsel"), which has delivered an opinion to the Company that the
discussion below, to the extent it constitutes matters of law or legal
conclusions thereto, is true and correct in all material respects.
Special Tax Counsel has also delivered an opinion that the (i) the Notes
should be treated as indebtedness for federal income purposes and (ii) without
regard to whether the Notes are characterized as indebtedness, the Trust will be
characterized as a grantor trust or as a partnership for federal income tax
purposes and will not be characterized as an association taxable as a
corporation (or publicly traded partnership treated as an association). (If
there is only a single holder of Certificates and if no other interest in the
Trust is treated as an equity interest in the Trust, the Trust would be treated
for federal income tax purposes as a not an entity separate from that single
owner.) Special Tax Counsel has not delivered (and unless otherwise indicated in
the 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 consequences,
among other consequences, the Trust would be subject to federal income tax (and
similar state income or franchise taxes) on its income and _ distributions to
Certificateholders and Noteholders would be impaired. In light of Special Tax
Counsel's opinion, however, the balance of this discussion assumes that the
Trust will not be characterized or treated as a corporation.
This summary is based on the Internal Revenue Code of 1986 (the "Code") as
well as Treasury regulations and administrative and judicial rulings and
practice. Legislative, judicial and administrative changes may occur, possibly
with retroactive effect, that could alter or modify the continued validity of
the statements and conclusions set forth herein. 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.
Except with respect to certain withholding tax matters discussed below
under "Withholding Taxes", the discussion is limited to consequences to U.S.
Persons. For purposes of this discussion, a U.S. Person is: (i) a citizen or
resident of the United States, (ii) a corporation or partnership organized in or
under the laws of the United States, any state thereof or the District of
Columbia, or (iii) an estate or trust that is a United States Person within the
meaning of Section 7701(a)(30) of the Code. References to a holder, a Noteholder
or a Certificateholder are references to the beneficial owner of a Note or
Certificate as the case may be.
For the purposes of this discussion, the Company and Special Tax Counsel
have assumed, without inquiry, that the Term Assets will be characterized as
indebtedness for federal income tax purposes. The Prospectus Supplement may
provide additional information about the federal income tax characterization
of the Term Assets underlying any particular Series of Securities.
TAXATION OF NOTEHOLDERS
By virtue of acceptance of its Note or Certificate, each holder of a Note
or Certificate will be deemed to agree to treat the Notes as indebtedness of the
Trust for federal income tax purposes. Nonetheless, certain of the terms of the
Notes and Certificates (such as the principal amount of the Certificates and the
effective participation by the Notes in the economic risks and rewards of
ownership of the Trust's assets) may be viewed as inconsistent with the Notes'
treatment as indebtedness for federal income tax purposes. Accordingly, Special
Tax Counsel is unable to deliver an opinion that the Notes will be indebtedness
for federal income tax purposes. As discussed above, Special Tax Counsel has
delivered an
49
opinion that the Notes should be treated as indebtedness and, except as
discussed in the second following paragraph, the balance of this discussion
assumes that the Notes will be so treated.
Assuming that the Notes are treated as indebtedness for federal income tax
purposes, it is possible that they will be issued with original issue discount.
If so, original issue discount will accrue and be included in income under a
constant yield method (without regard to whether any particular holder otherwise
reports its income under a cash method). Special rules (relating to among other
things, original issue and market discount, premium and integration) apply to
debt instruments described in section 1272(a)(6)(C) of the Code, including "any
debt instrument if payments under such debt instrument may be accelerated by
reason of prepayments of other obligations securing such debt instrument." Notes
of certain Series may be subject to those rules.
If the Notes are treated as equity interests in the Trust, rather than
indebtedness, the foregoing would not apply, instead the Notes would be taxed in
a manner substantially similar to that described below under "Taxation of
Certificateholders." For a Series in which Notes are treated as equity in the
Trust, the likelihood is greater that the Trust will be a partnership rather
than a grantor trust and likelihood of an election under section 761 of the Code
not being respected is heightened.
TAXATION OF CERTIFICATEHOLDERS
TAX STATUS OF THE TRUST
The Trustee intends for tax reporting purposes to treat the Trust as a
grantor trust. Prospective investors should be aware that certain of the terms
of Certificates (for example, the allocation of the proceeds of a disposition of
the Term Assets) may be viewed by the IRS as inconsistent with the grantor trust
rules and, accordingly, unless otherwise indicated in the Prospectus Supplement,
Special Tax Counsel is not able to deliver an opinion that the Trust will be
treated as a grantor trust. Nonetheless, because treating the Trust as a grantor
trust is the more appropriate approach for tax reporting purposes, the Trustee
currently intends to treat the trust as a grantor trust and, except as
specifically indicated otherwise under "Possible Recharacterization of the Trust
as a Partnership" below, the balance of this discussion assumes that the Trust
will be so classified. (The Trust Agreement prohibits the Trust from electing to
be taxed as a corporation.)
Each Certificateholder will be treated, for federal income tax purposes, as
a holder of an equity interest in the Trust and, accordingly, (i) as if it had
purchased its pro rata interest of the Trust's underlying assets and (ii) as if
it were the obligor on its pro rata portion of the Trust's obligations,
including the Notes. Thus, each holder will be required to include in its gross
income its pro rata share of the income of the Trust and would be entitled to
deduct, subject to any applicable limitations, its pro rata share of the
expenses of the Trust, including interest on the Notes. Investors should be
aware that if income of the Trust is used (directly or indirectly) to pay
expenses of the Trust, the holders will be treated as if each had first earned
its pro rata share of that income and then paid its share of the expense.
Prospective investors should be aware that expenses of the Trust may be
subject to limitations on deductibility, which may depend on each particular
investor's circumstances, but would include, in the case of an individual (or
entity treated as an individual) section 67 of the Code that allows
miscellaneous itemized deductions only to the extent that in the aggregate they
exceed 2 percent of adjusted gross income. While not absolutely certain, the net
payment made under a notional principal contract may be treated as a
miscellaneous itemized deductions. Further, investment interest expense is
allowed as a deduction only to the extent of "net investment income". Further,
for all taxpayers, interest to carry "market discount bonds" is subject to
deferral and, if positions of the Trust are considered a "straddle", "interest
and carrying charges" properly allocable to the straddle is required to be
capitalized rather than allowed as an immediate deduction. Additional
consequences would apply if positions of the Trust are considered a straddle,
including the tolling of the holding period of certain of the Trust's assets and
the Trust or Certificateholders may be deemed to have participated in a
"conversion transaction" in which case certain gains that otherwise would be
capital gains would be treated as ordinary income. Each prospective investor
should consider whether to identify the Certificates as part of a so-called
"identified netting
50
transaction" within the meaning of Treasury Regulation section 1.1258-1(b)(2) on
or before the date on which it acquires its Certificate to reduce the amount of
gain that may be recharacterized as ordinary income.
POSSIBLE RECHARACTERIZATION OF THE TRUST AS A PARTNERSHIP
As indicated above, it is possible that the IRS will seek to recharacterize
the Trust as a partnership. If the IRS were to successfully recharacterize the
Trust as a partnership, the Trust would not be subject to federal income tax.
Under Treasury Regulation section 1.761-2, certain partnerships may "elect out"
of subchapter K of the Code (partnership tax accounting). Although subject to
uncertainty, the Trust will make this election. Assuming that it is so eligible,
each Certificateholder will be required to report its respective share of the
items of income, deductions, and credits of the organization on their respective
returns (making such elections as to individual items as may be appropriate) in
a manner consistent with the exclusion of the Trust from partnership tax
accounting. Such reporting should be substantially similar to the income tax
reporting that would be required under the grantor trust rules. In mutual
consideration for each Holder's purchase of a Certificate, each such Holder is
deemed to consent to the Trust's making of a protective election out of
subchapter K of the Code.
If the election to be excluded from the partnership tax accounting
provisions of the Code is not effective, among other consequences, (i) the Trust
would be required to account for its income and deductions at the Trust level
(not necessarily taking into account any particular holder's circumstances,
including any difference between the holder's basis in its Certificates and the
Trust's basis in its assets) and to utilize a taxable year for reporting
purposes and (ii) each Holder would be required to separately take into account
such Holder's distributive share of income and deductions of the Trust. A Holder
would take into account its distributive share of Trust income and deductions
for each taxable year of the Trust in the Holder's taxable year which ends with
or within the Trust's taxable year. A Holder's share of the income of the Trust
computed at the Trust level would not necessarily be the same if computed under
the OID rule described above under "Income of Certificateholders" and, in
particular, may not take account of any difference in the yield on the
Certificate to the Holder based on the Certificateholder's purchase price and
the yield on the Term Assets determined at the Trust level.
TAX-EXEMPT INVESTORS
Income on Certificates generally will be treated as unrelated business
taxable income ("UBTI") and will thus generally be subject to tax in the hands
of pension plans, individual retirement accounts and other tax-exempt investors
that are subject to tax on UBTI. CERTIFICATES, THUS, ARE GENERALLY NOT SUITABLE
INVESTMENTS FOR SUCH INVESTORS.
WITHHOLDING TAXES
Payments made on a Note to a person that is not a U.S. Person and has no
connection with the United States other than holding its Note generally will be
made free of United States federal withholding tax, provided that (i) the holder
is not related (directly or indirectly) to the obligor, guarantor, if any, or
sponsor of the Term Assets, the Company, the holder of any Certificate, the
holder of any Call Warrant or the counterparty on any notion principal contract
or other derivative contract of which the Trust is a party and (ii) the holder
complies with certain identification and certification requirements imposed by
the IRS.
UNLESS OTHERWISE INDICATED IN THE PROSPECTUS SUPPLEMENT, CERTIFICATES ARE
NOT A SUITABLE INVESTMENT FOR ANY PERSON THAT IS NOT A U.S. PERSON AND WILL NOT
BE PERMITTED TO BE TRANSFERRED TO ANY SUCH PERSON.
STATE AND OTHER TAX CONSEQUENCES
In addition to the federal income tax consequences described above,
potential investors should consider the state, local and foreign tax
consequences of the acquisition, ownership and disposition of the Certificates.
State, local and foreign tax law may differ substantially from federal tax law,
and this discussion does not purport to describe any aspect of the tax law of a
state or other jurisdiction (including whether the Trust, if treated as a
partnership for federal income tax purposes, would be treated as a
51
partnership under any state or local jurisdiction). Therefore, it is strongly
recommended that prospective purchasers consult their own tax advisors with
respect to such matters.
PLAN OF DISTRIBUTION
Securities 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 Securities, which may include the names of any underwriters, or
initial purchasers, the purchase price of such Securities and the proceeds to
the Company from such sale, any underwriting discounts and other items
constituting underwriters' compensation, any initial public offering price, any
discounts or concessions allowed or reallowed or paid to dealers, any securities
exchanges on which such Securities may be listed, any restrictions on the sale
and delivery of Securities in bearer form and the place and time of delivery of
the Securities to be offered thereby.
If underwriters are used in the sale, Securities will be acquired by the
underwriters for their own account and may be resold from time to time in one or
more transactions, including negotiated transactions, at a fixed public offering
price or at varying prices determined at the time of sale. Such Securities may
be offered to the public either through underwriting syndicates represented by
managing underwriters or by underwriters without a syndicate. Such managing
underwriters or underwriters in the United States will include Salomon Brothers
Inc, an affiliate of the Company. Unless otherwise set forth in the applicable
Prospectus Supplement, the obligations of the underwriters to purchase such
Securities will be subject to certain conditions precedent, and the underwriters
will be obligated to purchase all such Securities if any of such Securities 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.
Securities may also be sold through agents designated by the Company from
time to time. Any agent involved in the offer or sale of Securities will be
named, and any commissions payable by the Company to such agent will be set
forth, in the applicable Prospectus Supplement. Unless otherwise indicated in
the applicable Prospectus Supplement, any such agent will act on a best efforts
basis for the period of its appointment.
If so indicated in the applicable Prospectus Supplement, the Company will
authorize agents, underwriters or dealers to solicit offers by certain specified
institutions to purchase Securities 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
Securities may be deemed to be underwriters and any discounts or commissions
received by them on the sale or resale of Securities 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 Company to
indemnification by the Company 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 Company or its affiliates in the ordinary
course of business.
Salomon Brothers Inc is an affiliate of the Company and is an indirect
wholly owned subsidiary of Salomon Smith Barney Holdings Inc., the indirect
parent corporation of the Company. Salomon Brothers Inc's participation in the
offer and sale of Securities complies with the requirements of Rule 2720 of the
National Association of Securities Dealers, Inc. regarding underwriting
securities of an affiliate.
As to each Series of Securities, 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 Company or sold at any time to one or more purchasers.
52
Affiliates of the Underwriters may act as agents or underwriters in
connection with the sale of the Securities. 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 Securities. A Prospectus Supplement will be prepared with respect to the
Securities for use by such affiliates in connection with offers and sales
related to market-making transactions in the Securities.
LEGAL OPINIONS
Certain legal matters (including federal income tax matters) with respect
to the Securities will be passed upon for the Company and the Underwriters by
Orrick, Herrington & Sutcliffe LLP, New York, New York or other counsel
identified in the applicable Prospectus Supplement.
53
INDEX OF TERMS
Administration Agreement.........................................38
Administration Fee................................................9
Administrative Agent..............................................1
Administrator....................................................38
AID..............................................................23
Bearer Securities.................................................1
Business Day.....................................................13
Calculation Agent................................................15
Calculation Date.................................................16
CD Rate......................................................15, 16
CD Rate Determination Date.......................................15
CD Reference Rate Security.......................................14
Cede..............................................................4
CEDEL............................................................45
Certificate of Non-U.S. Beneficial Ownership.....................45
Certificate Trustee...............................................1
Certificates......................................................1
Class.............................................................1
Code.............................................................47
Commercial Paper Rate............................................16
Commercial Paper Rate Determination Date.........................16
Commercial Paper Reference Rate Security.........................14
Commission........................................................3
Company...........................................................1
Components.......................................................47
Composite Quotations.............................................14
Concentrated Term Assets.....................................23, 24
Corporate Trust Office...........................................37
Coupons..........................................................11
Credit Support....................................................1
Credit Support Instruments.......................................38
Day of Valuation.................................................46
Definitive Security..............................................21
Depositary.......................................................21
Deposited Asset Provider.........................................37
Deposited Assets..................................................1
Determination Date...............................................12
Distribution Date.................................................3
ECU...............................................................1
Euroclear........................................................45
Event of Default.................................................32
Exchange Act......................................................3
Exchange Rate Agent..............................................12
Exchangeable Series..............................................19
Fannie Mae.......................................................23
Federal Funds Rate...............................................17
Federal Funds Rate Determination Date............................17
Federal Funds Reference Rate Security............................14
FFCB.............................................................23
FHLB.............................................................23
Fiscal Agent.................................................26, 27
54
Fixed Rate.......................................................11
Fixed Rate Securities............................................13
Floating Rate Securities.........................................14
Freddie Mae......................................................23
Global Security...................................................1
GSE..............................................................23
GSE Issuer.......................................................24
H.15(519)........................................................14
Indenture.........................................................1
Indenture Trustee.................................................1
Index Maturity...................................................14
Interest Reset Date..............................................15
Interest Reset Period............................................15
IRS..............................................................47
Issuer...........................................................31
Letter of Credit.................................................30
Letter of Credit Bank............................................30
LIBOR............................................................17
LIBOR Determination Date.........................................17
LIBOR Reference Rate Security....................................14
London Banking Day...............................................13
Market Exchange Rate.............................................12
Maximum Rate.....................................................14
Minimum Rate.....................................................14
Money Market Yield...............................................16
Nonrecoverable Advance...........................................40
Note Interest Rate...............................................11
Notes.............................................................1
Notional Amount..................................................13
Offering Agent....................................................4
Optional Exchange Date...........................................19
Original Issue Date..............................................11
Outstanding......................................................32
outstanding debt securities......................................25
Pass-Through Rate................................................11
Prospectus Supplement.............................................1
Purchase Price...................................................44
Rating Agency.....................................................5
Realized Losses..................................................19
REFCORP..........................................................23
Registered Securities.............................................1
Registration Statement............................................3
Related Proceeds.................................................40
Required Percentage..............................................41
Reserve Account..................................................30
Retained Interest.................................................9
Reuters Screen LIBO Page.........................................17
Sallie Mae.......................................................23
Schedule B.......................................................23
Secured Term Assets..............................................25
Securities........................................................1
Securities Act....................................................3
Security.........................................................10
Security Principal Balance.......................................19
55
Securityholders...................................................1
Senior Term Assets...............................................25
Series............................................................1
Special Tax Counsel..............................................47
Specified Currency................................................3
Specified Interest Currency.......................................3
Specified Premium Currency........................................3
Specified Principal Currency......................................3
Spread...........................................................14
Spread Multiplier................................................14
SPV...............................................................1
Strip Securities.................................................11
Stripped Interest................................................13
Subordinated Term Assets.........................................25
Surety...........................................................30
Surety Bond......................................................30
Term Asset Events of Default.............................25, 26, 28
Term Assets...............................................1, 22, 23
Term Assets Currency.............................................28
Term Assets Indenture............................................24
Term Assets Interest Accrual Periods.............................28
Term Assets Issuer...............................................23
Term Assets Issuers..........................................22, 23
Term Assets Payment Dates........................................28
Term Assets Prospectus.......................................22, 24
Term Assets Rate.................................................28
TIA..........................................................24, 32
Treasury bills...................................................18
Treasury Rate....................................................18
Treasury Rate Determination Date.................................18
Treasury Reference Rate Security.................................14
Treasury Securities..............................................23
Trust.............................................................1
Trust Agreement...................................................1
Trustee...........................................................9
Trustee's Fee.....................................................9
TVA..............................................................23
U.S. Person......................................................45
United States....................................................45
Variable Rate....................................................11
Voting Rights....................................................31
56
[ALTERNATE COVER FOR MARKET MAKING PROSPECTUS SUPPLEMENT]
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED [ ], [ ])
STRUCTURED PRODUCTS SERIES [ ]-[ ] TRUST
$[ ] [Notional Amount] [(Approximate)], Class [ ] Certificates.
[ %] [Variable] Pass Through Rate
[Include additional Classes as applicable]
STRUCTURED PRODUCTS CORP.
DEPOSITOR
Each Structured Products Trust Certificates Series [ ]-[ ] offered hereby will
consist of [ ] class of Certificates, designated as Class [ ] Certificates(,)
[and] Class [ ] Certificates [and list others] (collectively, the
"Certificates") and will represent a fractional undivided beneficial interest in
the Structured Products Series [ ]- [ ] Trust (the "Trust") to be formed
pursuant to the Trust Agreement dated as of [ ], [ ] (the "Trust Agreement"),
between Structured Products Corp. (the "Company" and [ ], as trustee (the "Owner
Trustee"). The Certificates will be issued by the Trust. The property of the
Trust will consist [in part] of [SELECT ONE OF THE FOLLOWING BRACKETED
SELECTIONS] [Alternative 1: specify publicly issued 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)] [Alternative 2: specify
publicly issued obligations of one or more foreign private issuers] [Alternative
3: specify publicly issued debt security or 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 governmental sponsored organization created
pursuant to a federal statute] [Alternative 4: specify publicly issued debt
security or pool of such debt securities which represent obligations issued by
or guaranteed by a foreign government, political subdivision or agency or
instrumentality thereof] [maturing in ___ years] issued by [specify issuers]
(collectively, the "Term Assets"), and having the characteristics described
herein under "Description of Term Assets". Terms used but not otherwise defined
herein are defined in the Prospectus attached hereto (the "Prospectus").
The Term Assets will be acquired by the Company and, pursuant to the Trust
Agreement, deposited into the Trust for the benefit of Certificateholders. [The
Term Assets were issued and sold as part of an underwritten public offering in [
].] [The Term Assets are obligations of the Term Assets Issuer[s] and] [explain
whether senior or subordinate, and whether subject to any redemption or put
rights]. [Describe any required principal payments or amortization or
accumulation of Term Assets.]
(COVER CONTINUED ON NEXT PAGE)
PROSPECTIVE INVESTORS SHOULD CONSIDER, AMONG OTHER THINGS, THE INFORMATION SET
FORTH UNDER "RISK FACTORS" HEREIN ON PAGES S-[ ] TO S-[ ] AND IN THE PROSPECTUS
ON PAGES [ ] TO [ ].
------------
THE CERTIFICATES REPRESENT INTERESTS IN OR OBLIGATIONS OF THE TRUST ONLY AND DO
NOT REPRESENT AN OBLIGATION OF OR INTEREST IN THE COMPANY OR ANY OF ITS
AFFILIATES. THE CERTIFICATES DO NOT REPRESENT A DIRECT OBLIGATION OF ANY TERM
ASSETS ISSUER OR ANY OF THEIR RESPECTIVE AFFILIATES.
THESE CERTIFICATES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-----------
This Prospectus Supplement is to be used by the Underwriter in connection with
offers and sales related to market making transactions in the Certificates in
which the Underwriter acts as principal. The Underwriter may also act as agent
in such transactions. Sales will be made at prices related to prevailing prices
at the time of sale.
- -----------------
SALOMON SMITH BARNEY
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS [ ], [ ].
(COVER PAGE CONTINUED) [ALTERNATE PAGE]
Distributions on the Certificates will be made[[monthly] [quarterly]
[semi-annually] or[[ ] of each year] [to be conformed to interest payment dates
for Term Assets], or, if any such date is not a business day, then on the
immediately following business day (each, a "Distribution Date") commencing [ ],
[ ]. The last day on which distributions are scheduled to be made on the
Certificates is [ ], [ ] (the "Final Distribution Date"), by which date the
holders of the Certificates will receive a distribution of all amounts allocable
to principal of such Certificates or, to the extent specified herein, a pro rata
share of any remaining Term Assets.
As and to the extent described herein, collections received with respect to the
Deposited Assets will be distributed to Certificateholders [of each class] in
the manner and priority described herein. [The rights of the holders of the
Class Certificates [and specify other classes] to receive distributions of such
collections are subordinated to the rights of the holders of the Class [ ]
Certificates [and specify other classes]. As and to the extent described herein,
losses realized on the Deposited Assets will be borne by the holders of the
Class [ ] Certificates [and specify other classes] before such losses will be
borne by the holders of the other classes of Certificates [and the Class
Certificates ([and specify other classes)]. To the extent described herein, the
relative priorities of each class of Certificates with respect to collections
from and losses on the Deposited Assets may each change over time, either
permanently or temporarily, upon the occurrence of certain circumstances
specified herein. See "Description of Certificates-Allocation of Losses;
Subordination".
The Term Assets Issuer is not participating in, and will not receive any
proceeds in connection with, this offering.
There is currently no secondary market for the Certificates, and there can be no
assurance that a secondary market for the Certificates will develop or, if it
does develop, that it will continue. See "Risk Factors" herein and in the
Prospectus.
The [specify applicable classes] Certificates initially will be represented by
certificates registered in the name of Cede & Co., as nominee of The Depository
Trust Company ("DTC"). The interest of beneficial owners of such Certificates
will be represented by book entries on the records of participating members of
DTC. Definitive certificates will be available for such Certificates only under
the limited circumstances described herein. See "Description of
Certificates-Definitive Certificates".
THE CERTIFICATES OFFERED BY THIS PROSPECTUS SUPPLEMENT WILL CONSTITUTE A
SEPARATE SERIES OF CERTIFICATES BEING OFFERED BY THE COMPANY PURSUANT TO ITS
PROSPECTUS DATED [ ], [ ], OF WHICH THIS PROSPECTUS SUPPLEMENT IS A PART AND
WHICH ACCOMPANIES THIS PROSPECTUS SUPPLEMENT. THE PROSPECTUS CONTAINS IMPORTANT
INFORMATION REGARDING THIS OFFERING WHICH IS NOT CONTAINED HEREIN, AND
PROSPECTIVE INVESTORS ARE URGED TO READ THE PROSPECTUS AND THIS PROSPECTUS
SUPPLEMENT IN FULL. IN PARTICULAR, INVESTORS SHOULD CAREFULLY CONSIDER THE
FACTORS SET FORTH UNDER "RISK FACTORS" IN THE PROSPECTUS AND IN THIS PROSPECTUS
SUPPLEMENT.
UNTIL [ ], [ ], ALL DEALERS EFFECTING TRANSACTIONS IN THE OFFERED CERTIFICATES,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS TO WHICH IT RELATES. THIS DELIVERY
REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS
SUPPLEMENT AND PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
This Prospectus Supplement is to be used by the Underwriter in connection with
offers and sales related to market making transactions in the Certificates in
which the Underwriter acts as principal. The Underwriter may also act as agent
in such transactions. Sales will be made at prices related to prevailing prices
at the time of sale.
S-2
[ALTERNATE SECTION FOR MARKET MAKING PROSPECTUS SUPPLEMENT]
METHOD OF DISTRIBUTION
This Prospectus Supplement is to be used by Salomon Brothers Inc (the
"Underwriter") in connection with offers and sales related to market making
transactions in the Certificates in which the Underwriter acts as principal. The
Underwriter may also act as agent in such transactions. Sales will be made at
prices related to prevailing prices at the time of sale.
[ALTERNATE COVER FOR MARKET MAKING PROSPECTUS SUPPLEMENT]
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED [ ], [ ])
STRUCTURED PRODUCTS SERIES [ ] - [ ] TRUST
$[ ] Class [ ] Notes, [ ]% [Variable] Note Interest Rate
$[ ] [Notional Amount (Approximate)], Class [ ]
Certificates, [ %] [Variable] Pass-Through Rate
STRUCTURED PRODUCTS CORP.
DEPOSITOR
Each Structured Products Trust Certificate Series [ ]-[ ] will represent a
fractional undivided beneficial interest in the Structured Products Series [ ]-
[ ] Trust (the "Trust") to be formed pursuant to the Trust Agreement dated as of
[ ], [ ] (the "Trust Agreement"), between Structured Products Corp. (the
"Company")and [ ], as trustee (the "Owner Trustee"). The Certificates will
consist of [ ] classes of Certificates, designated as Class [ ] Certificates(,)
[and] Class [ ] Certificates [and list others], [all] of which [only the Class [
] Certificates(,) [and] Class [ ] Certificates [and list others]] are being
offered hereby (collectively, the "Certificates"). The Certificates will be
issued by the Trust. The Structured Products Trust Series [ ]-[ ] Notes (the
"Notes")and, collectively with the Certificates, the "Securities") are also
being offered hereby and will be issued pursuant to an indenture dated as of [
], [ ] (the "Indenture"), between the Trust and [ ], as trustee (the "Indenture
Trustee"). The property of the Trust will consist [in part] of [SELECT ONE OF
THE FOLLOWING BRACKETED SELECTIONS] [Alternative 1: specify publicly issued 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)]
[Alternative 2: specify publicly issued obligations of one or more foreign
private issuers] [Alternative 3: specify publicly issued debt security or 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 governmental
sponsored organization created pursuant to a federal statute] [Alternative 4:
specify publicly issued debt security or pool of such debt securities which
represent obligations issued by or guaranteed by a foreign government, political
subdivision or agency or instrumentality thereof] [maturing in ___ years] issued
by [specify issuers] (collectively, the "Term Assets"), and having the
characteristics described herein under "Description of Term Assets". Terms used
but not otherwise defined herein are defined in the Prospectus attached hereto
(the "Prospectus").
The Term Assets will be acquired by the Company and, pursuant to the Trust
Agreement, deposited into the Trust for the benefit of Certificateholders,
subject to the pledge of the Indenture. The Trust's rights in, to and under the
Term Assets will be pledged to the Indenture Trustee pursuant to the Indenture.
[The Term Assets were issued and sold as part of an underwritten public offering
in [ ].] [The Term Assets are obligations of the Term Assets Issuer[s] and]
[explain whether senior or subordinate, and whether subject to any redemption or
put rights]. [Describe any required principal payments or amortization or
accumulation of Term Assets.]
(COVER CONTINUED ON NEXT PAGE)
PROSPECTIVE INVESTORS SHOULD CONSIDER, AMONG OTHER THINGS, THE INFORMATION SET
FORTH UNDER "RISK FACTORS" HEREIN ON PAGES S-[ ] TO S-[ ] AND IN THE PROSPECTUS
ON PAGES [ ] TO [ ].
------------
THE SECURITIES REPRESENT INTERESTS IN OR OBLIGATIONS OF THE TRUST ONLY AND DO
NOT REPRESENT AN OBLIGATION OF OR INTEREST IN THE COMPANY OR ANY OF ITS
AFFILIATES. THE SECURITIES DO NOT REPRESENT A DIRECT OBLIGATION OF ANY TERM
ASSETS ISSUER OR ANY OF THEIR RESPECTIVE AFFILIATES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-----------
This Prospectus Supplement is to be used by the Underwriter in connection
with offers and sales related to market making transactions in the Securities in
which the Underwriter acts as principal. The Underwriter may also act as agent
in such transactions. Sales will be made at prices related to prevailing prices
at the time of sale.
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SALOMON SMITH BARNEY
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS [ ], [ ].
(COVER PAGE CONTINUED) [ALTERNATE PAGE]
Distributions on the Certificates will be made[[monthly] [quarterly]
[semi-annually] or[[ ] of each year] [to be conformed to interest payment dates
for Term Assets], or, if any such date is not a business day, then on the
immediately following business day (each, a "Distribution Date") commencing [ ],
[ ]. The last day on which distributions are scheduled to be made on the
Certificates is [ ], [ ] (the "Final Distribution Date"), by which date the
holders of the Certificates will receive a distribution of all amounts allocable
to principal of such Certificates or, to the extent specified herein, a pro rata
share of any remaining Term Assets.
Distribution on the Notes will be made on each Distribution Date. The last day
on which payments on the Notes are scheduled to be made is [ ], [ ] (the
"Scheduled Maturity Date").
As and to the extent described herein, collections received with respect to the
Deposited Assets will be distributed to Noteholders and Certificateholders [of
each class] in the manner and priority described herein. [The rights of the
holders of the Class [ ] Certificates [and specify other classes] to receive
distributions of such collections are subordinated to the rights of the holders
of the Notes and the Class [ ] Certificates [specify other classes]. As and to
the extent described herein, losses realized on the Deposited Assets will be
borne by the holders of the Class [ ] Certificates [specify other classes]
before such losses will be borne by the holders of the other classes of
Certificates [and the Class [ ] Certificates ([specify other classes)] and the
holders of the Notes. To the extent described herein, the relative priorities of
each class of Certificates and Notes with respect to collections from and losses
on the Deposited Assets may each change over time, either permanently or
temporarily, upon the occurrence of certain circumstances specified herein. See
"Description of Securities-Allocation of Losses; Subordination".
The Term Assets Issuer is not participating in, and will not receive any
proceeds in connection with, this offering.
There is currently no secondary market for the Securities, and there can be no
assurance that a secondary market for the Securities will develop or, if it does
develop, that it will continue. See "Risk Factors" herein and in the Prospectus.
The [specify applicable classes] Securities initially will be represented by
certificates registered in the name of Cede & Co., as nominee of The Depository
Trust Company ("DTC"). The interest of beneficial owners of such Securities will
be represented by book entries on the records of participating members of DTC.
Definitive certificates will be available for such Securities only under the
limited circumstances described herein. See "Description of
Securities-Definitive Securities".
THE SECURITIES OFFERED BY THIS PROSPECTUS SUPPLEMENT WILL CONSTITUTE A SEPARATE
SERIES OF SECURITIES BEING OFFERED BY THE COMPANY PURSUANT TO ITS PROSPECTUS
DATED [ ], [ ], OF WHICH THIS PROSPECTUS SUPPLEMENT IS A PART AND WHICH
ACCOMPANIES THIS PROSPECTUS SUPPLEMENT. THE PROSPECTUS CONTAINS IMPORTANT
INFORMATION REGARDING THIS OFFERING WHICH IS NOT CONTAINED HEREIN, AND
PROSPECTIVE INVESTORS ARE URGED TO READ THE PROSPECTUS AND THIS PROSPECTUS
SUPPLEMENT IN FULL. IN PARTICULAR, INVESTORS SHOULD CAREFULLY CONSIDER THE
FACTORS SET FORTH UNDER "RISK FACTORS" IN THE PROSPECTUS AND IN THIS PROSPECTUS
SUPPLEMENT.
UNTIL [ ], [ ], ALL DEALERS EFFECTING TRANSACTIONS IN THE OFFERED SECURITIES,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS TO WHICH IT RELATES. THIS DELIVERY
REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS
SUPPLEMENT AND PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
This Prospectus Supplement is to be used by the Underwriter in connection with
offers and sales related to market making transactions in the Securities in
which the Underwriter acts as principal. The Underwriter may also act as agent
in such transactions. Sales will be made at prices related to prevailing prices
at the time of sale.
S-2
[ALTERNATE SECTION FOR MARKET MAKING PROSPECTUS SUPPLEMENT]
METHOD OF DISTRIBUTION
This Prospectus Supplement is to be used by Salomon Brothers Inc (the
"Underwriter") in connection with offers and sales related to market making
transactions in the Securities in which the Underwriter acts as principal. The
Underwriter may also act as agent in such transactions. Sales will be made at
prices related to prevailing prices at the time of sale.
PART II
Item 14. Other Expenses of Issuance and Distribution
The following is an itemized list of the estimated expenses to be incurred
in connection with the offering of the securities being offered hereunder other
than underwriting discounts and commissions.
Registration Fee........................... $295.00
Printing and Engraving Expenses............ $100,000.00
Trustee's Fees............................. $600,000.00
Legal Fees and Expenses.................... $800,000.00
Blue Sky Fees and Expenses................. $20,000.00
Accountants' Fees and Expenses............. $150,000.00
Rating Agency Fees......................... $400,000.00
Miscellaneous.............................. $50,000.00
Total................................... $2,120,295.00
Item 15....Indemnification of Directors and Officers
The Company's By-laws provide for indemnification of directors and
officers of the Company to the fullest extent permitted by Delaware law.
Section 145 of the Delaware General Corporation Law provides, in
substance, that Delaware corporations shall have the power, under specified
circumstances, to indemnify their directors, officers, employees and agents in
connection with actions, suits or proceedings brought against them by a third
party or in the right of the corporation, by reason of the fact that they were
or are such directors, officers, employees or agents, against expenses incurred
in any such action, suit or proceeding.
Salomon Smith Barney Holdings Inc. carries directors' and
officers' liability insurance that covers certain liabilities and
expenses of the Company's directors and officers.
Item 16....Exhibits
1.1 Form of proposed Underwriting Agreement for Trust Certificates/
Notes to be distributed in the United States.*
3.1 Certificate of Incorporation of Structured Products
Corp.*
3.2 By-laws of Structured Products Corp.*
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4.1 Form of Trust Agreement, with forms of Trust Certificates/Notes
attached thereto.*
4.2 Form of qualified Trust Agreement.*
4.3 Form of Indenture.*
4.4 Alternate form of qualified Trust Agreement.*
5.1 Opinion of Orrick, Herrington & Sutcliffe LLP with respect to
legality.
8.1 Opinion of Orrick, Herrington & Sutcliffe LLP with respect to
tax matters.
23.1 Consents of Orrick, Herrington & Sutcliffe LLP (included in its
Opinions filed as Exhibits 5.1 and 8.1).
24.1 Powers of Attorney. **
25.1 Statement of eligibility of Trustee (U.S. Bank Trust
National Association).**
- ---------------------
* Incorporated by reference from the Registration Statement on
Form S-3 (File No. 33-55860)
** Previously filed as part of Registration Statement on Form
S-3 (File No. 333-57357) filed on June 19, 1998.
Item 17....Undertakings
The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being
made of the securities registered hereby, 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 (the "Act"), as amended; (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 hereof)
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 and of the estimated maximum
offering range may be reflected in the form of Prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than 20 percent 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 the undertakings set forth in
clauses (i) and (ii) above do not apply if the information required to be
II-2
included in a post-effective amendment by those clauses is contained in periodic
reports filed by the registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934, as amended, that are incorporated by reference
in this registration statement.
(b) That, for the purpose of determining any liability under the 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.
(c) 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.
(d) That, for purposes of determining any liability under the Act,
each filing of the registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934, as amended, that is
incorporated by reference in this registration statement shall be deemed to be a
new registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(e) That insofar as indemnification for liabilities arising under the
Act may be permitted to directors, officers and controlling person of the
registrant pursuant to the provisions above, or otherwise, the registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(f) That, for purposes of determining any liability under the Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in the form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Act shall be deemed to be part of the registration statement as of the
time it was declared effective.
(g) That, for the purpose of determining any liability under the Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at the time shall be deemed to be the
initial bona fide offering thereof.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
the requirements for filing on Form S-3, reasonably believes that the security
rating requirement contained in Transaction Requirement B.5. of Form S-3 will be
met by the time of the sale of the securities registered hereunder and has duly
caused this Amendment No. 3 to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York, State of New York, on this
21st day of December, 1998.
STRUCTURED PRODUCTS CORP.
By: /s/ Matthew R. Mayers
----------------------
Name: Matthew R. Mayers
Title: Assistant Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 3 has been signed by the following persons in the capacities and
on the dates indicated.
*
December 21, 1998 By:----------------------
Date Name: Thomas W. Jasper
Title: Director and Treasurer and Finance Officer
(Principal Financial and Accounting Officer)*
December 21, 1998 By:----------------------
Date Name: Martin J. Gruber
Title: Director
*
December 21, 1998 By:----------------------
Date Name: Nathanial H. Leff
Title: Director
*
December 21, 1998 By:----------------------
Date Name: Marcey Engel
Title: Director
*
December 21, 1998 By:----------------------
Date Name: Timothy Beaulac
Title: President (Principal Executive Officer)
* The undersigned, by signing his name hereto, does hereby sign this Amendment
No. 3 on behalf of each of the persons indicated above pursuant to a power of
attorney filed as Exhibit 24.1 of Registration Statement on Form S-3 (File No.
333-57357) filed on June 19, 1998.
December 21, 1998 By: /s/ Matthew R. Mayers
Date -------------------------
Name: Matthew R. Mayers
Title: Attorney-in-Fact
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EXHIBIT INDEX
Description of Exhibit
Exhibit
No.
1.1 Form of proposed Underwriting
Agreement for Trust
Certificates/Notes to be
distributed in the United States.*
3.1 Certificate of Incorporation of
Structured Products Corp.*
3.2 By-laws of Structured Products
Corp.*
4.1 Form of Trust Agreement, with forms of Trust Certificates/Notes
attached thereto.*
4.2 Form of qualified Trust Agreement*
4.3 Form of Indenture.*
4.4 Alternate form of qualified Trust
Agreement.*
5.1 Opinion of Orrick, Herrington &
Sutcliffe LLP with respect to legality.
8.1 Opinion of Orrick, Herrington & Sutcliffe LLP with respect to tax
matters.
23.1 Consents of Orrick, Herrington & Sutcliffe LLP (included in its
opinions filed as Exhibits 5.1 and 8.1).
24.1 Powers of Attorney. **
25.1 Statement of eligibility of Trustee (U.S. Bank Trust National
Association). **
- -----------------------
* Incorporated by reference from the Registration Statement on
Form S-3 (File No. 33-55860).
** Incorporated by reference from the Registration Statement on
Form S-3 (File No. 333-57357) filed on June 19, 1998
II-5