<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
Subject to Completion Dated ____, 1996
Prospectus Supplement
(To Prospectus Dated ____, 1996)
Trust Certificates, Series 1996 -- [ ]
$ [Notional Amount] [(Approximate)], Class Certificates,
[______%] [Variable] Pass Through Rate
$ [Notional Amount] [(Approximate)], Class Certificates,
[______%] [Variable] Pass Through Rate
Southpoint Structured Assets, Inc.
Depositor
Each Trust Certificate Series 1996 -- [__________] offered hereby 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]] (collectively, the
"Certificates") and will represent a fractional undivided beneficial interest in
the Series 1996 -- [_________] Trust (the "Trust") to be formed pursuant to the
Trust Agreement dated as of [ ], between Southpoint Structured Assets, Inc. (the
"Depositor") and [_________], as trustee (the "Trustee"), as supplemented by the
Series 1996 -- [________] Supplement dated as of [_______], (collectively, the
"Trust Agreement"). The property of the Trust will consist in part of
[$][_______] aggregate principal amount of [a (______%) [floating rate] [specify
publicly issued debt security] due of [specify issuer]] [a pool of [________%]
[floating rate] publicly issued debt securities having a term of [not less than
years and not more than years] issued by one or more corporations, banking
organizations, or insurance companies organized under the laws of the United
States or any State [(other than the Retained Interest referred to herein)]
(collectively, the "Underlying Securities"), and having the characteristics
described herein under "Description of the Deposited Assets." Terms used but not
otherwise defined herein are defined in the Prospectus attached hereto (the
"Prospectus").
The Underlying Securities will be acquired by the Depositor and, pursuant
to the Trust Agreement, deposited into the Trust for the benefit of
Certificateholders. [The Underlying Securities were issued and sold as part of
an underwritten public offering in [________].] The Underlying Securities are
obligations of the Underlying Securities Issuer and [explain whether senior or
subordinate, whether secured or unsecured and whether subject to any redemption
or put rights]. [Describe any required principal payments of Underlying
Securities.]
Distributions on the Certificates will be made [monthly] [quarterly]
[semi-annually] on [[______] of each year] [to be conformed to interest payment
dates for Underlying Securities], or, if any such date is not a business day,
then on the immediately following business day (each, a "Distribution Date")
commencing [_______]. The last day on which distributions are scheduled to be
made on the Certificates is [________] (the "Final Distribution Date"), by which
date the holders of the Certificates will receive a distribution of all amounts
allocable to principal on such Certificates or, to the extent specified herein,
a pro rata share of any remaining Underlying Securities.
[The Certificates are redeemable in whole on any Distribution Date on or
after the _________, 19__ Distribution Date at a price equal to par (the
"Redemption Price") plus accrued and unpaid interest, upon exercise of the
optional redemption right by the holder of the Call Warrant. See
"RISK FACTORS--MATURITY AND YIELD CONSIDERATIONS" and "DESCRIPTION OF THE
CERTIFICATES--OPTIONAL REDEMPTION" herein.]
[The Certificates have been authorized for listing, upon official notice of
issuance, with the [name of exchange].]
SEE "RISK FACTORS" HEREIN ON PAGES [_] TO [_] AND IN THE PROSPECTUS ON
PAGES [*] TO [*].
______________________________________________
THE CERTIFICATES REPRESENT INTERESTS IN THE TRUST ONLY AND DO NOT REPRESENT
AN OBLIGATION OF OR INTEREST IN THE DEPOSITOR OR ANY OF ITS RESPECTIVE
AFFILIATES. THE CERTIFICATES DO NOT REPRESENT A DIRECT OBLIGATION OF THE
UNDERLYING SECURITIES ISSUER OR ANY OF ITS 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 SUPPLEMENT OR THE PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
_____________________________________________
The Underwriter has agreed to purchase the Certificates from the Depositor
at [______]% of the Certificate Principal Balance thereof ($[__________]
aggregate proceeds to the Depositor, before deducting expenses estimated at
$[__________]) plus accrued interest, if any, at the Pass-Through Rate
calculated from [__________], 1996 (the "Expected Settlement Date"), subject to
the terms and conditions set forth in the Underwriting Agreement referred to
herein under "PLAN OF DISTRIBUTION."
The Underwriter proposes to offer the Certificates from time to time for
sale in negotiated transactions, at prices determined at the time of sale. For
further information with respect to the plan of distribution and any discounts,
commissions or profits that may be deemed underwriting discounts or commissions,
see "PLAN OF DISTRIBUTION."
The 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.
[NAME OF UNDERWRITER]
__________, 1996
<PAGE>
As and to the extent described herein, collections received by the Trustee
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 Offered 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 the Certificates--Subordination."
The Underlying Securities 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" in the Prospectus.
[If and to the extent required by applicable law or regulation, this
Prospectus Supplement and the Prospectus will also be used by the Underwriter
after the completion of the offering in connection with offers and sales related
to market-making transactions in the Offered Certificates in which the
Underwriter acts as principal. The Underwriter may also act as agent in such
transactions. Sales will be made at negotiated prices determined at the time of
sale.]
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 interests 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 the
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 DEPOSITOR PURSUANT TO ITS
PROSPECTUS DATED _______________, 1996, 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
S-2
<PAGE>
AND THIS PROSPECTUS SUPPLEMENT IN FULL. IN PARTICULAR, INVESTORS SHOULD CONSIDER
CAREFULLY THE FACTORS SET FORTH UNDER "RISK FACTORS" IN THE PROSPECTUS AND IN
THIS PROSPECTUS SUPPLEMENT.
UNTIL ________, 1996, 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
<PAGE>
TABLE OF CONTENTS
HEADING PAGE
SUMMARY OF PRINCIPAL ECONOMIC TERMS............................ S-6
The Certificates............................................ S-6
The Underlying Securities................................... S-8
SUMMARY OF PROSPECTUS SUPPLEMENT............................... S-9
FORMATION OF THE TRUST......................................... S-13
RISK FACTORS................................................... S-14
DESCRIPTION OF THE DEPOSITED ASSETS............................ S-14
General..................................................... S-14
Underlying Securities Indenture............................. S-17
[DESCRIPTION OF CREDIT SUPPORT]................................ S-19
[The Letter of Credit....................................... S-19
[The Surety Bond............................................ S-20
[Reserve Account............................................ S-20
YIELD ON THE CERTIFICATES...................................... S-21
DESCRIPTION OF THE CERTIFICATES................................ S-21
General..................................................... S-21
Definitive Certificates..................................... S-22
Distributions............................................... S-22
[Optional Redemption........................................ S-25
[Advances................................................... S-25
Allocation of Losses........................................ S-25
[Restrictions on Transfer of the Class [ ] Certificates..... S-26
DESCRIPTION OF THE TRUST AGREEMENT............................. S-26
General..................................................... S-26
The Trustee................................................. S-27
Events of Default........................................... S-27
Voting Rights............................................... S-28
Voting of Underlying Securities, Modification of Indenture.. S-28
Termination................................................. S-29
S-4
<PAGE>
CERTAIN LEGAL ASPECTS OF THE DEPOSITED ASSETS.................. S-30
FEDERAL INCOME TAX CONSEQUENCES................................ S-30
Grantor Trust Certificates.................................. S-31
Income of Certificate Owners................................ S-31
Bond Premium................................................ S-35
Election to Treat All Interest as Original Issue Discount... S-35
Modification or Exchange of Underlying Securities........... S-35
Deductibility of Trust's Fees and Expenses.................. S-35
Purchase and Sale of a Certificate.......................... S-36
Backup Withholding.......................................... S-37
Foreign Certificate Owners.................................. S-37
Partnership Certificates.................................... S-37
Partnership Taxation........................................ S-38
Discount and Premium........................................ S-39
Modification or Exchange of Underlying Securities........... S-39
Tax Consequences of Other Assets Held by Trust.............. S-39
Section 708 Termination..................................... S-39
Disposition of Certificates................................. S-40
Allocations Between Transferors and Transferees............. S-41
Section 754 Election........................................ S-41
Administrative Matters...................................... S-41
Tax Consequences to Foreign Certificate Owners.............. S-42
[STATE TAX CONSEQUENCES........................................ S-43
ERISA CONSIDERATIONS........................................... S-43
PLAN OF DISTRIBUTION........................................... S-45
RATINGS........................................................ S-46
LEGAL OPINIONS................................................. S-47
INDEX OF TERMS................................................. S-48
S-5
<PAGE>
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 headings "Description of the Certificates," "Description of the Underlying
Securities" and "Description of Credit Support." Certain capitalized terms used
herein are defined elsewhere in this Prospectus Supplement on the pages
indicated in the "Index of Terms" or, to the extent not defined herein, have the
meanings assigned to such terms in the Prospectus.
The Certificates
The Trust.................... Series 1996-[_]Trust. The Trust will be formed
pursuant to the Trust Agreement dated as of
[__________] (the "Base Trust Agreement"),
between the Depositor and the Trustee, as
supplemented by the Series 1996-[ ] Supplement
dated as of the Expected Settlement Date (the
"Series Supplement" and, together with the Base
Trust Agreement, the "Trust Agreement").
Certificates Offered.......... Trust Certificates, Series 1996-[ ], consisting
of Class [ ] Certificates [,] [and] Class [ ]
Certificates [and specify others] (collectively,
the "Certificates").
[Initial Certificate Principal
Balance] [Notional Amount].... Class [ ]: [$][ ]. Class [ ]: [$][ ].
Final Distribution Date....... Class [ ]. Class [ ]. [The actual maturity of
each Class may be longer or shorter than the
Final Distribution Date.]
Pass-Through Rates............ [The Variable Pass-Through Rates applicable to
the calculation of the interest distributable on
any Distribution Date on the Certificates [(other
than the Class [ ] Certificates)] are equal
to [describe method for determining
variable rates]. The initial Variable Pass-
Through Rates for the Class [ ] Certificates [,]
and [and] the Class [ ] Certificates [and
specify others] are approximately % [,] [and]
% [and %] per annum, respectively.] [The
Pass-Through Rate applicable to the calculation
of the interest distributable on any Distribution
Date on the
S-6
<PAGE>
[specify classes] Certificates is fixed
at ___% [and ___%, respectively,] per
annum.]
Deposited Assets...................... The Deposited Assets shall consist of the
Underlying Securities [and describe any
assets which are ancillary or incidental
to the Underlying Securities]. See
"--THE UNDERLYING SECURITIES" [, "--OTHER
DEPOSITED ASSETS"] and "DESCRIPTION OF
THE DEPOSITED ASSETS" below.
Original Issue Date................... [ ].
Cut-off Date.......................... [ ].
Distribution Date..................... [ ], commencing [ ].
Record Date........................... The [ ] day immediately preceding each
Distribution Date.
Denominations......................... The Class [ ] Certificates [,] [and]
Class [ ] Certificates [and specify
others] will be available for purchase in
minimum denominations of [$][ ] and
[integral multiples thereof] [multiples
of [$][ ] in excess thereof].
Interest Accrual Periods.............. [Monthly] [Quarterly] [Semi-annually]
(or, in the case of the first Interest
Accrual Period, from and including the
[Original Issue Date] or [Cut-off Date]
to but excluding the first Distribution
Date).
[Optional Redemption.................. On any Distribution Date occurring on or
after Distribution Date occurring in
____________, 19__, the Certificates may
be redeemed by the Depositor, in whole
only, at a price equal to the Redemption
Price.]
[Redemption Price..................... _____________________.]
Form of Security...................... Book-entry Certificates with The
Depository Trust Company ("DTC"), except
in certain limited circumstances. See
"DESCRIPTION OF THE CERTIFICATES--
DEFINITIVE CERTIFICATES." Distributions
thereon will be settled in [immediately
available (same-day)] [clearinghouse
(next-day)] funds.
S-7
<PAGE>
Trustee......................... [ ], as trustee.
Trustee Fee..................... [$] payable by the Depositor on the Original
Issue Date.
Administrative Agent............ [ ], as Administrative Agent.
Administrative Agent Fee........ [$], payable by the Depositor on the Original
Issue Date.
Ratings......................... [ ] by [ ][and [ ] by [ ]]. [Specify specific
ratings requirements for particular classes,
including the extent to which the issuance of
the Certificates of a given class is
conditioned upon satisfaction of the ratings
of each other class of Certificates.] See
"RATINGS."
THE UNDERLYING SECURITIES
Underlying Securities........... [A [ ]%] [floating rate] [publicly issued debt
security due [ ] [A pool of publicly issued
debt securities of various issuers, exclusive
of the Retained Interest] [in/having] an
aggregate principal amount of [$][ ].
Underlying Securities Issuer.... [Specify issuer] [Pool of various domestic
corporations, banking organizations and
insurance companies.]
Underlying Securities
Original Issue Date............. [ ].
Underlying Securities
Final Payment Date.............. [ ].
Amortization.................... [Describe amortization schedule, if any].
Denominations................... The Underlying Securities are available in
minimum denominations of [$][ ] and [integral
multiples thereof] [multiples of [$][ ] in
excess thereof].
Underlying Securities
Payment Dates................... [ ], commencing [ ].
Underlying Securities Rate...... [ % per annum.] [A [Weighted Average] rate per
annum equal to [specify interest rate formula
for debt security].]
S-8
<PAGE>
Underlying Securities
Interest Accrual Periods.............[Monthly] [Quarterly] [Semi-annually].
Priority.............................[Describe senior or subordinated status of
Underlying Securities].
Security.............................[Describe existence of any security for
obligations or state that Underlying
Securities are unsecured].
Redemption/Put/Other Features........[Describe existence of any redemption, put
or other material features applicable to
the Underlying Securities].
Form of Underlying Securities........Book-entry debt securities with DTC [listed
on the [New York] [American] Stock Exchange
[specify other listing]].
Underlying Securities Trustee
[Fiscal and Paying Agent]............[ ]. The Underlying Securities have been
issued pursuant to [an indenture dated as
of [ ], 19[ ] (the "Indenture"), between
the Underlying Securities Trustee and the
Underlying Securities Issuer].
Ratings of the Underlying
Securities...........................[ ] by [ ] [and [ ] by [ ]]. See
"DESCRIPTION OF THE UNDERLYING SECURITIES--
RATINGS OF UNDERLYING SECURITIES."
Other Deposited Assets
[Provide similar tabular summary description of the principal economic
terms of any credit support or other ancillary or incidental asset]
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............................Southport Structured Assets, Inc. (the
"Depositor"), an indirect wholly-owned
subsidiary of Morgan Keegan, Inc. See "THE
DEPOSITOR" 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
consist of [ ] classes, designated as
S-9
<PAGE>
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 Depositor to an affiliate on or about
____________, 1996 (the "Closing Date"), and may be
sold at any time in accordance with any restrictions
in the Trust Agreement.]]
The Underlying Securities...Interest on the Underlying Securities accrues at the
Underlying Securities Rate for each Underlying
Securities Accrual Period and is payable on each
Underlying Securities Payment Date. The entire
principal amount of the Underlying Securities will
be
S-10
<PAGE>
payable on the Underlying Securities Final
Payment Date. [The Underlying Securities have
a remaining term to maturity of approximately
years.] [As of the Cut-off Date, the pool of
Underlying Securities has a weighted average
interest rate of [%] and a weighted average
remaining term to maturity of approximately
___ years. Approximately [%] [specify if
greater than 10%] of such Underlying
Securities consist of debt securities of
[U.S. corporate issuers].]
[Name such obligor] is a U.S. corporation
whose principal executive offices are located
at [specify address]. The obligor is subject
to the informational requirements of the
Exchange Act and in accordance therewith
files reports and other information (including
financial information) with the Commission.
See "DESCRIPTION OF THE DEPOSITED ASSETS."
[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 Underlying Securities, including
hedging contracts such as puts, calls,
interest rate swaps, currency swaps, floors,
caps and collars] (such assets, together with
the Underlying Securities, the "Deposited
Assets"). See "DESCRIPTION OF THE DEPOSITED
ASSETS."
The Certificateholders of the [specify
particular classes] Certificates 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
Trustee and its respective agents up to the
Allowable Expense Amount, (i) [in the case of
each class of Certificates other than the
Class [ ] Certificates,] distributions
allocable to interest at the applicable Pass-
Through Rate on the applicable Certificate
Principal Balance, (ii) [in the case of each
class of Certificates other than the Class
[ ]
S-11
<PAGE>
Certificates,] distributions allocable to
principal and (iii) [in the case of each class of
Certificates other than the Class [_]
Certificates,] distributions allocable to premium
(if any) in an amount equal to all payments of
premium (if any) received on the Underlying
Securities for the applicable Collection Period.
Distributions will be made to Certificateholders
only if, and to the extent that, payments are made
with respect to the Deposited Assets 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 THE CERTIFICATES--DISTRIBUTIONS."
Special Distribution Dates....If a payment with respect to the Underlying
Securities is made to the Trustee after the
Underlying Securities Payment Date on which such
payment was due, then the Trustee shall distribute
any such amount received on the next occurring
Business Day (a "Special Distribution Date") as if
such funds had constituted Available Funds on the
Distribution Date immediately preceding such
Special Distribution Date; provided, however, that
the Record Date for such Special Distribution Date
shall be [five Business Days (as such term is
defined in the Prospectus, "Business Day") prior
to the day on] which the related payment was
received from the Underlying Securities Trustee.
[Subordination................As and 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
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
THE CERTIFICATES--ALLOCATION OF LOSSES;
SUBORDINATION."]
[Optional Termination.........At its option, the [Depositor] may purchase all
the Deposited Assets in the Trust, and thereby
cause the
S-12
<PAGE>
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 is less
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 Depositor.] See "DESCRIPTION OF THE TRUST
AGREEMENT--TERMINATION" herein and in the
Prospectus.]
Federal Income
Tax Consequences..............In the opinion of tax counsel to the Trust, the
Trust will be classified for Federal income tax
purposes [as a grantor trust] [as a partnership]
and not as an association taxable as a
corporation. See "FEDERAL INCOME TAX
CONSEQUENCES."
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 any
time by the assigning rating agency. A security
rating does not address the occurrence or
frequency of redemptions or prepayments on, or
extensions of the maturity of, the 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..........An employee benefit plan subject to the Employee
Retirement Income Security Act of 1974, as amended
("ERISA"), and an individual retirement account
(each, a "Plan") may purchase Certificates of any
class if either (i) the Depositor is able to
confirm the existence of at least 100 independent
purchasers of such class or (ii) the Plan can
represent that its purchase of the Certificates
would not be prohibited under ERISA or the Code.
See "ERISA CONSIDERATIONS."
FORMATION OF THE TRUST
The Trust will be formed pursuant to the Trust Agreement (including the
Series [ ] Supplement) between the Depositor and the Trustee. Concurrently with
the execution and
S-13
<PAGE>
delivery of the Series [ ] Supplement, the Depositor will deposit the Underlying
Securities in the Trust. The Trustee, on behalf of the Trust, will accept such
Underlying Securities and will deliver the Certificates to or upon the order of
the Depositor.
The Underlying Securities will be purchased by the Depositor in the
secondary market (either directly or through an affiliate of the Depositor). The
Underlying Securities will not be acquired from the Underlying Securities Issuer
as part of any distribution by or pursuant to any agreement with the Underlying
Securities Issuer. The Underlying Securities Issuer is not participating in this
offering and will not receive any of the proceeds of the sale of the Underlying
Securities to the Depositor or the issuance of the Certificates. [Neither the
Depositor nor any of its affiliates participated in the initial public offering
of the Underlying Securities] [Morgan Keegan & Company, Inc., an affiliate of
the Depositor, participated in the initial public offering of the Underlying
Securities as a [co-underwriter] [underwriter]].
RISK FACTORS
[Describe risk factors applicable to the specific Underlying Securities,
other Deposited Assets and the particular structure of the Certificates being
offered, including factors relating to the yield on the Certificates, risks
associated with any concentration of credit, and risks associated with the
Deposited Assets and the terms thereof, as described elsewhere herein.] See
"RISK FACTORS" and "MATURITY AND YIELD CONSIDERATIONS" in the Prospectus.
DESCRIPTION OF THE DEPOSITED ASSETS
GENERAL
This Prospectus Supplement sets forth certain relevant terms with respect
to the Underlying Securities, but does not provide detailed information with
respect to the Underlying Securities or the Underlying Securities Issuer. This
Prospectus Supplement relates only to the Certificates offered hereby and does
not relate to the Deposited Assets. All disclosure contained herein with respect
to the Underlying Securities and the Underlying Securities Issuer is derived
from publicly available documents. [Describe publicly available documents.]
[The] [Each] Underlying Securities Issuer is subject to the information
reporting requirements of the Exchange Act.
Although the Depositor has no reason to believe the information concerning
the Underlying Securities, [the] [each] Underlying Securities Issuer or each
Underlying Securities Prospectus related to the Underlying Securities is not
reliable, neither the Depositor 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. There can be no assurance that
events affecting the Underlying Securities or the Underlying Securities 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.
S-14
<PAGE>
[The Underlying Securities will be deposited into the Trust subject to the
right of the holder of the Retained Interest to receive on each Distribution
Date from payments received on the Underlying Securities, a distribution equal
to [%] per annum multiplied by the principal amount of the Underlying Securities
(the "Interest Strip"). The right of the holder of the Retained Interest to
receive the Interest Strip is of equal priority with the rights of the
Certificateholders to receive distributions of interest on the Certificates.]
[Use the following where the Underlying Securities consist of a pool of
obligations of multiple obligors.]
[The Deposited Assets will consist primarily of the Underlying Securities,
which are a pool of publicly issued debt securities of [domestic corporations,
banking organizations and insurance companies]. The Underlying Securities will
be purchased by the Depositor in the secondary market (either directly or
through an affiliate of the Depositor) and will be deposited into the Trust. The
Underlying Securities will not be acquired either from the respective obligors
on the Underlying Securities or pursuant to any distribution by or agreement
with such obligors.
The composition of the Underlying Securities pool and the distribution by
ratings, remaining term to maturity and interest rate of the Underlying
Securities as of the Cut-off Date are as set forth below:
COMPOSITION OF THE UNDERLYING SECURITIES POOL
AS OF THE CUT-OFF DATE
<TABLE>
<S> <C> <C>
Number of Underlying Securities:
Aggregate Principal Balance: [$]
Average Principal Balance: [$]
Largest Balance: [$]
Weighted Average Interest Rate: %
Weighted Average Original Term to years
Maturity:
Weighted Average Remaining Term to years
Maturity:
Longest Remaining Term to Maturity: years
</TABLE>
DISTRIBUTION BY INDUSTRY CLASSIFICATION
OF THE UNDERLYING SECURITIES POOL AS OF THE CUT-OFF DATE
<TABLE>
<CAPTION>
AGGREGATE PERCENT OF
INDUSTRY PRINCIPAL AGGREGATE
CLASSIFICATION NUMBER BALANCE PRINCIPAL BALANCE
_____________ _____________ _____________
<S> <C> <C> <C>
Total ============= ============= =============
</TABLE>
S-15
<PAGE>
DISTRIBUTION BY RATINGS OF THE
UNDERLYING SECURITIES POOL AS OF THE CUT-OFF DATE
<TABLE>
<CAPTION>
AGGREGATE PERCENT OF
PRINCIPAL AGGREGATE
RATING NUMBER BALANCE PRINCIPAL BALANCE
<S> <C> <C> <C>
Total _____________ ______________ _____________
Total
============= ============== =============
</TABLE>
DISTRIBUTION BY REMAINING TERM TO MATURITY OF THE
UNDERLYING SECURITIES POOL AS OF THE CUT-OFF DATE
<TABLE>
<CAPTION>
AGGREGATE PERCENT OF
REMAINING TERM PRINCIPAL AGGREGATE
TO MATURITY NUMBER BALANCE PRINCIPAL BALANCE
<S> <C> <C> <C>
_____________ ______________ _____________
Total
============= ============== =============
</TABLE>
DISTRIBUTION BY INTEREST RATE OF THE
UNDERLYING SECURITIES POOL AS OF THE CUT-OFF DATE
<TABLE>
<CAPTION>
AGGREGATE PERCENT OF
INTEREST PRINCIPAL AGGREGATE
RATE RANGE NUMBER BALANCE PRINCIPAL BALANCE
<S> <C> <C> <C>
% to % [$] %
Greater than % ____________ ____________ ____________
Total [$] 100%
============ ============ ============
</TABLE>
The Underlying Securities consist of debt securities of [domestic corporate
issuers [specify other]]. As of the Cut-off Date, [all of] [approximately % of]
such Underlying Securities were rated [investment grade] [specify particular
rating] by at least one nationally recognized rating agency, and no obligor on
any Underlying Security was in default in the payment of any installments of
principal, interest or premium (if any) with respect thereto. Any such rating of
any of the Underlying Securities is not a recommendation to purchase, hold or
sell such Underlying Security 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. See "RATINGS" herein and "RISK FACTORS--
RATINGS OF THE CERTIFICATES" in the accompanying Prospectus regarding certain
considerations applicable to the ratings of the Certificates.
S-16
<PAGE>
UNDERLYING SECURITIES INDENTURE
The Underlying Securities have been issued pursuant to [an] agreement[s]
([each,] an "Indenture") between the [various] Underlying Securities Issuer[s]
and Underlying Securities Trustee[s]. The following summary describes certain
general terms of such Indenture[s], but investors should refer to the
Indenture[s] [itself] [themselves] for all terms governing the Underlying
Securities.
Each of the Indenture[s] limits the [respective] Underlying Securities
Issuer's ability to engage in certain activities and transactions and requires
that the Underlying Securities Issuer perform certain obligations with respect
to the Underlying Securities. [Describe common restrictive, financial and other
covenants on the Underlying Securities Issuer contained in the Indentures.]
[The following is a summary of the typical Underlying Security Events of
Default for each series of Outstanding Debt Securities. [Any additional
Underlying Security Events of Default unique to a Concentrated Underlying
Security have been described following the summary]:
(a) failure to make payments of principal (and premium, if any) and
interest to holders of the Outstanding Debt Securities in the time periods
given in the Indentures;
(b) material breaches of certain representations, warranties or
covenants or failure to observe or perform in any material respect any
covenant or agreement under an Indenture continuing for a specified period
of time after notice thereof is given to the Underlying Securities Issuer
by the Underlying Securities Trustee or the holders of not less than a
specified percentage of the Outstanding Debt Securities;
(c) failure by the Underlying Securities Issuer to make any
required payment of principal (and premium, if any) or interest with
respect to certain of the other outstanding debt obligations of the
Underlying Securities Issuer or the acceleration by or on behalf of the
holders thereof of such securities; [and]
(d) certain events of bankruptcy or insolvency relating to the
Underlying Securities [Issuer]; and
[(e) describe any additional common events of default with respect
to the pool of Underlying Securities].]
As of the Cut-off Date, [all of] [approximately __% of] the Underlying
Securities were [subject to [describe any put, call or other conversion or
redemption options applicable to the Underlying Securities as well as the nature
of the obligation represented by such Underlying Securities (i.e., senior,
subordinate, secured) and describe commonalities with respect to any
subordination or security provisions or collateral].]
S-17
<PAGE>
The [pool of] Underlying Securities, together with any other assets
described below and any Credit Support described under "Description of Credit
Support," represent the sole assets of the Trust that are available to make
distributions in respect of the Certificates.]
[Use the following with respect to each obligor the Underlying Securities
of which represent more than 10% of the total Underlying Securities available to
make distributions in respect of the Certificates--only a single obligor is
referred to for purposes of this section of the form of Prospectus Supplement.]
[A significant portion of] [Virtually all of] [All of] the Deposited Assets
of the Trust will consist of the [___%] [floating rate] [specify publicly issued
debt security] due of [specify issuer] [, exclusive of the interest therein
retained by [the Depositor] as described below (the "Retained Interest")],
having an aggregate principal amount outstanding as of the Cut-off Date of
approximately [$] (the "Underlying Securities"). The Underlying Securities will
be purchased by the Depositor in the secondary market (either directly or
through an affiliate of the Depositor) and will be deposited into the Trust.
The Underlying Securities will not be acquired either from [name such obligor]
or pursuant to any distribution by or agreement with [name such obligor].
[Describe any put, call or other conversion or redemption options applicable to
the Underlying Securities, as well as the nature of the obligation represented
by such Underlying Securities (i.e., senior, subordinate, secured)]. As of the
Cut-off Date, the foregoing debt security comprising [ %] of the Underlying
Securities was rated [specify investment grade rating] [investment grade] by
[specify nationally recognized rating agency or agencies], and the obligor
thereon was not in default in the payment of any installments of principal,
interest or premium (if any) with respect thereto. Any such rating of such
Underlying Securities is not a recommendation to purchase, hold or sell such
Underlying Securities 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. See "RATINGS" herein and "RISK FACTORS
- --Ratings of the Certificates" in the accompanying Prospectus regarding certain
considerations applicable to the ratings of the Certificates.
According to [name such obligor]'s publicly available documents, [name such
obligor] is a [identify form of domestic corporation, banking organization or
insurance company] whose principal executive offices are located at [specify
address]. The Depositor is not an affiliate of [name such obligor]. [Name such
obligor] is subject to the informational requirements of the Exchange Act and in
accordance therewith files reports and other information (including financial
information) with the Commission [and makes available to the public upon request
certain annual reports containing financial and other information]. Copies of
such reports and other information [may be inspected and copied at the
Commission locations listed under "AVAILABLE INFORMATION" in the accompanying
Prospectus and may be obtained from the Public Reference Section of the
Commission at Washington, D.C. 20549, at prescribed rates. In addition, such
reports and other information [can be inspected at the offices of the [New York
Stock Exchange at 20 Broad Street, New York, New York 10005] [American Stock
Exchange, 86 Trinity Place, New
S-18
<PAGE>
York, New York 10013]] [may be obtained from [name such obligor], according to
its most recent annual report, upon written or oral request to [name such
obligor]].
The Trust will have no other significant assets [other than any Credit
Support or those assets referred to below] from which to make distributions of
amounts due in respect of the Certificates. Consequently, the ability of
Certificateholders to receive distributions in respect of the Certificates will
depend [almost] entirely on the Trust's receipt of payments on the foregoing
Underlying Securities from [name such obligor]. Prospective purchasers of the
Certificates should consider carefully [name such obligor]'s financial condition
and its ability to make payments in respect of such Underlying Securities. This
Prospectus Supplement relates only to the Certificates being offered hereby and
does not relate to the Underlying Securities of [name such obligor]. All
information contained in this Prospectus Supplement regarding [name such
obligor] is derived from the publicly available documents described in the
preceding paragraph.
The Deposited Assets will also include [direct obligations of the United
States of America][describe any assets which are ancillary or incidental to the
Underlying Securities, 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 Underlying Securities; include the financial
information of any counterparty to such agreements; and, describe any risk
associated therewith] (such assets, together with the Underlying Securities, the
"Deposited Assets").
[DESCRIPTION OF CREDIT SUPPORT]
For the benefit [solely] of the [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.
[THE LETTER OF CREDIT
Simultaneously with the Depositor's assignment of the Deposited Assets to
the Trust, the Depositor will obtain the Letter of Credit from [ ] (the "Letter
of Credit Bank") in favor of the Trustee on behalf of the Certificateholders.
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 the Trustee may draw under the Letter of Credit will
initially be equal to [$]. The initial amount of the Letter of Credit will be
[$]. Thereafter, the amount of the Letter of Credit with respect to any
Distribution Date will equal [the lesser of (i) [%] of the aggregate Certificate
Principal Balance outstanding on the preceding Distribution Date (after giving
effect to any payment of principal made on the preceding Distribution Date) but
in any event not less than [$], and (ii)] the amount of the
S-19
<PAGE>
Letter of Credit on the preceding Distribution Date, plus [(a) reimbursement of
certain advances under the Letter of Credit and (b) recoveries on defaulted
Deposit Assets] [describe other methods]. The Letter of Credit expires on
_______, 19__. The Trustee will be obligated, in the event of a drawing on the
Letter of Credit, to pursue appropriate remedies against the 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 10% or more of the
aggregate principal amount of the Certificates covered thereby, provided
information of financial and other matters with respect to the Letter of Credit
Bank and audited financial statements to the extent that it covers 20%
or more]].
[THE SURETY BOND
Simultaneously with the Depositor's assignment of the Deposited Assets to
the Trust, the Depositor will obtain the Surety Bond from [ ] (the "Surety")
in favor of the Trustee on behalf of the Certificateholders. The Surety Bond
will guaranty [timely] [ultimate] distributions of the principal of and premium
(if any) and interest with respect to the [Offered] [Class[ ]] Certificates.
The Surety Bond expires on ________, 19__. The Trustee will be obligated, in
the event of a drawing on the Surety Bond, to pursue appropriate remedies
against the Deposited Assets and other collateral, and any realization thereon
shall be paid to the Surety to the extent of any amounts owing, in the manner
and priority specified herein.
[Add language regarding the issuer of the Surety Bond 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 Surety. In addition, to the
extent that the Surety Bond will cover payment of 10% or more of the aggregate
principal amount of the Certificates covered thereby, provide information of
financial and other matters with respect to the issuer of the Surety Bond and
audited financial statements to the extent that it covers over 20% or
more.]]
[RESERVE ACCOUNT
The Depositor will deposit with the 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 [$]. [Collections with
respect to the Deposited Assets not distributed with respect to the Certificates
shall be deposited in the Reserve Account.] Amounts so deposited in such
Reserve Account will be used by the Trustee to make payments of principal of and
S-20
<PAGE>
premium (if any) and interest on the Certificates to the extent that funds are
not otherwise available. Immediately after any Distribution Date, amounts in
the Reserve Account in excess of [indicate formula] [may be paid to the
Depositor].]
YIELD ON THE CERTIFICATES
[Describe factors relating to the Deposited Assets, the terms thereof and
the manner and priority in which collections thereon are allocated to the
Certificateholders of each class of the Certificates, as described elsewhere
herein.] See "Yield Considerations" and "Maturity and Prepayment
Considerations" in the Prospectus.
DESCRIPTION OF THE CERTIFICATES
GENERAL
The Certificates will consist of [ ] classes of Certificates, designated as
Class [ ][ ,] [and] Class [ ] [and Class [ ]] Certificates. The Certificates
represent in the aggregate the entire beneficial ownership interest in the
related Trust. The Class [ ] Certificates have in the aggregate an initial
[Certificate Principal Balance] [Notional Amount] of [$] (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 Depositor to an affiliate on the Closing Date, and may be
sold at any time by the Depositor in accordance with the terms of the Trust
Agreement.]
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 its Participants in minimum denominations
of [$ ] and [integral multiples thereof] [multiples 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 Balances, 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
each initially be represented by one or more global certificates registered in
the name of the nominee of DTC (together with any successor clearing agency
selected by the Depositor, the "Clearing Agency"), except as provided below.
The Depositor has been informed by DTC that DTC's
S-21
<PAGE>
nominee will be CEDE & Co. ("CEDE"). No holder of any such Certificate will be
entitled to receive a certificate representing such person's interest, except as
set forth below under "--DEFINITIVE CERTIFICATES." Unless and until Definitive
Certificates are issued under the limited circumstances described herein, all
references to actions by Certificateholders with respect to any such
Certificates shall refer to actions taken by DTC upon instructions from its
Participants. See "--DEFINITIVE CERTIFICATES" below and "DESCRIPTION OF
CERTIFICATES--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
Certificateholder under the Trust Agreement only at the direction of one or more
Participants to whose DTC account such Certificates are credited. Additionally,
DTC will take 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 Certificate Owners or their
nominees, respectively, rather than to DTC or its nominee, only if (i) the
Depositor advises the Trustee in writing that DTC is no longer willing or able
to discharge properly its responsibilities as Clearing Agency with respect to
each class of Certificates [(other than the Definitive Classes)] and the
Depositor is unable to locate a qualified successor or (ii) the Depositor, at
its option, elects to terminate the book-entry system through DTC.
Upon the occurrence of any event described in the immediately preceding
paragraph, the Trustee is required to notify all 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 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 Trustee will recognize the
holders of such Definitive Certificates as Certificateholders under the Trust
Agreement.
DISTRIBUTIONS
Collections on the Deposited Assets that are received by the Trustee for a
given Collection Period pursuant to the collection procedures described herein
and in the Prospectus and deposited from time to time into the Certificate
Account will be applied by the Trustee 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:
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<PAGE>
(i) to the Trustee, all unpaid fees and expenses of the Trustee
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 amounts 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 to 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";
[(iii)] to the Trustee, all its remaining unpaid fees and expenses
and those of its respective agents not otherwise paid pursuant to clause
(i) above;
(iv) all remaining amounts, if any, to the Depositor].
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 payment of all amounts required to be paid to the Credit Support
Providers] for such period, to make all required distributions to the
Certificateholders of 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 distributable 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
amounts received on or with respect to the Deposited Assets (including
investment income on Eligible Investments) received during the preceding
Collection Period [,] [and] (b) amounts available as of such Distribution Date
pursuant to the Credit Support described herein [and (c) any additional amount
that the [Depositor] may remit to the Trustee from time to time according to the
terms of the Trust Agreement for application as Available Funds.
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<PAGE>
"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 Rating Agency as being consistent with the rating
of such Certificates, as specified in the Trust Agreement. Generally, Eligible
Investments must be limited to obligations or securities that mature not later
than the business day prior to the next succeeding Distribution Date.
["Interest Strip" allocable to the Retained Interest for any Distribution
Date means accrued and unpaid interest on the outstanding principal balance of
the Certificates, computed at an annual rate of [%].]
"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 allocable to such 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
from the cash flow on the Underlying Securities, 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 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
S-24
<PAGE>
principal cash flow other than pursuant to subordination that is in effect from
the Closing Date].]
[OPTIONAL REDEMPTION
On each Distribution Date, or the next succeeding Business Day if such
Distribution Date is not a Business Day, on or after the Distribution Date in
[___________, 199_], the Certificates may be redeemed by the Trust at the
request of the Depositor at a price of [%] (the "Redemption Price"). In
addition, the Certificateholders shall be entitled to receive interest up to,
but not including, the Redemption 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 funds in the Certificate Account that are not included in the
Available Funds for such Distribution Date, 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 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 Advances is to
maintain a regular cash flow to the Certificateholders, 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 to the Trustee 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 Advances previously made in respect of any Deposited
Asset that are deemed by the Trustee to be nonrecoverable from related late
collections, insurance proceeds, if any, or Liquidation Proceeds may be
reimbursed to the Trustee out of any funds in the Certificate Account allocable
to any of the Deposited Assets prior to the distributions on the Certificates.
In the event that the Trustee fails in its obligation to make any such Advance,
the 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
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<PAGE>
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, including certain reimbursements to the
Depositor described in the Prospectus under "Description of Certificates--
Certain Matters Regarding the Depositor" and certain reimbursements to the
Trustee described under "Description of the Trust Agreement--The Trustee"
herein.]
[RESTRICTIONS 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 THE 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 Depositor with the Commission following the
issuance and sale of the Certificates. The Trust created under the Trust
Agreement (including the Series 1996-[ ] Supplement) 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 Depositor under the Purchase Agreement between the
Depositor and the Seller]. [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 following summaries of certain provisions of the Trust
Agreement do not purport to be complete and are subject to the detailed
provisions contained in the form of Trust Agreement, to which reference is
hereby made for a full description of such provisions, including the definition
of certain terms used herein.
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THE TRUSTEE
[ ], a [ ] corporation, will act as trustee for the Certificates and the
Trust pursuant to the Trust Agreement. The Trustee's offices are located at [ ]
and its telephone number is [ ].
The Trust Agreement will provide that the Trustee and any director,
officer, employee or agent of the Trustee will be indemnified by the Trust and
will be held harmless against any loss, liability or expense incurred in
connection with any legal action relating to the Trust Agreement or the
Certificates or the performance of the Trustee's duties under the Trust
Agreement, other than any loss, liability or expense (i) that constitutes a
specific liability of the Trustee under the Trust Agreement or (ii) incurred by
reason of willful misfeasance, bad faith or negligence in the performance of the
Trustee's duties under the Trust Agreement or as a result of a breach, or by
reason of reckless disregard, of the Trustee's obligations and duties under the
Trust Agreement.
EVENTS OF DEFAULT
An event of default with respect to any class of Certificates under the
Trust Agreement (an "Event of Default") will consist of [(i) a default in the
payment of any interest on any Underlying Security after the same becomes due
and payable (subject to any applicable grace period); (ii) a default in the
payment of the principal of or any installment of principal of any Underlying
Security when the same becomes due and payable; and (iii) the occurrence and
continuance of such other events specified in the applicable Series Supplement.]
[Describe remedies available to Certificateholders upon the occurrence and
continuance of an Event of Default, including, as applicable, directing the
Trustee to vote the Underlying Securities in favor of declaring the principal
balance of and any accrued interest on the Outstanding Debt Securities to be
immediately due and payable].
The Trust Agreement will provide that, within 30 days after the occurrence
of an Event of Default in respect of the Certificate of any class, the Trustee
will give notice to the holders of such Certificates [and the holder of the
Retained Interest], transmitted by mail, of all such uncured or unwaived Events
of Default known to it. However, except in the case of an Event of Default
relating to the payment of principal of or premium, if any, or interest on any
of the Underlying Securities, the Trustee will be protected in withholding such
notice if in good faith it determines that the withholding of such notice is in
the interest of the holders of the Certificates of such class [and the holder of
the Retained Interest].
No holder of any Certificate will have the right to institute any
proceeding with respect to the Trust Agreement, unless, (i) such holder
previously has given to the Trustee written notice of a continuing breach, (ii)
the holders of Certificates of such Series evidencing not less than the
"Required Percentage--Remedies" specified in the applicable series supplement of
the aggregate Voting Rights of such Series have requested in writing that the
Trustee institute such proceeding in its own name as Trustee, (ii) such holder
or holders have offered the trustee reasonable indemnity, (iv) the trustee has
for 15 days failed to institute such proceeding and (v) no direction
inconsistent with such written
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request has been given to the Trustee during such 15-day period by the holders
of Cetificates of such Series evidencing not less than the Required Percentage--
Remedies of the aggregate Voting Rights of such Series.
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 then 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 under what circumstances voting
will be class-by-class.]
[Specify conditions, if any, under which allocation of Voting Rights might
change from the foregoing percentages.]
[Specify the rights, if any, of the holder of the Retained Interest to
consent to certain actions.]
VOTING OF UNDERLYING SECURITIES, MODIFICATION OF INDENTURE
The Trustee, as holder of the Underlying Securities, has the right to vote
and give consents and waivers in respect of such Underlying Securities as
permitted by DTC and except as otherwise limited by the Trust Agreement. In the
event that the Trustee receives a request from DTC, the Underlying Securities
Trustee or the Underlying Securities Issuer for its consent to any amendment,
modification or waiver of the Underlying Securities, the Indenture or any other
document thereunder or relating thereto, or receives any other solicitation for
any action with respect to the Underlying Securities, the Trustee shall mail a
notice of such proposed amendment, modification, waiver or solicitation to each
Certificateholder of record as of such date. The Trustee shall request
instructions from the Certificateholders as to whether or not to consent to or
vote to accept such amendment, modification, waiver or solicitation. The
Trustee shall consent or vote, or refrain from consenting or voting, in the same
proportion (based on the relative Certificate Principal Balances and Notional
Amounts of the Certificates, as applicable) as the Certificates of the Trust
were actually voted or not voted by the Certificateholders thereof as of a date
determined by the Trustee prior to the date on which such consent or vote is
required; provided, however, that, notwithstanding anything to the contrary, the
Trustee shall at no time vote or consent to any matter (i) unless such vote or
consent would not (based on an opinion of counsel) alter the status of the Trust
as a grantor trust for Federal income tax purposes, (ii) which would alter the
timing or amount of any payment on the Underlying Securities, including, without
limitation, any demand to accelerate the Underlying Securities, except in the
event of a Underlying Security Event of Default or an event which with the
passage of time would become a Underlying Security Event of Default and with the
unanimous consent of all holders of Outstanding Certificates or (iii) which
would result in
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the exchange or substitution of any of the outstanding Underlying Securities
pursuant to a plan for the refunding or refinancing of such Underlying
Securities except in the event of a default under the Indenture and only with
the consent of Certificateholders representing 100% of the aggregate voting
rights of each outstanding Class of the Certificates and the holder of the
Retained Interest]. The Trustee shall have no liability for any failure to act
resulting from Certificateholders' late return of, or failure to return,
directions requested by the Trustee from the Certificateholders.
In the event that an offer is made by the Underlying Securities Issuer to
issue new obligations in exchange and substitution for any of the Underlying
Securities, pursuant to a plan for the refunding or refinancing of the
Outstanding Debt Securities or any other offer is made for the Underlying
Securities, the Trustee shall notify the Certificateholders and the holder of
the Retained Interest] of such offer as promptly as practicable. The Trustee
must reject any such offer unless an event of default under the Indenture has
occurred, the Trustee is directed by the affirmative vote of all of the
Certificateholders [and the holder of the Retained Interest] to accept such
offer and the Trustee has received the tax opinion described above.
If an event of default under the Indenture 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, [and the holder of the Retained Interest,]
the Trustee shall vote the Underlying Securities in favor of directing, or take
such other action as may be appropriate to direct, the Underlying Securities
Trustee to declare the unpaid principal amount of the Underlying Securities and
any accrued and unpaid interest thereon to be due and payable. In connection
with a vote concerning whether to declare the acceleration of the Underlying
Securities, the Certificateholders' interests of each Class may differ and the
interests of either Class may differ from holders of other Outstanding Debt
Securities.
TERMINATION
The circumstances under which the obligations created by the Trust
Agreement will terminate in respect of the Certificates are described in
"Description of Certificates--Termination" in the Prospectus. The Depositor 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 less than [10%] of the aggregate principal amount of the
Deposited Assets as of the Cut-off Date [and (b) at the option of the Depositor
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 Depositor's continued satisfaction of the
applicable requirements for exemption under Rule 3a-7 under the Investment
Company Act of 1940 and all applicable rules, regulations and interpretations
thereunder. In the event the Depositor 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
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<PAGE>
[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 allocation
method if different from above.] In no event will the Trust created by the Trust
Agreement for the Certificates continue beyond the expiration of 21 years from
the death of the survivor of the person or persons named in the Trust Agreement.
See "Description of Certificates--Termination in the Prospectus.
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.]
FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of material Federal income tax
consequences of the purchase, ownership and disposition of the Certificates by
an initial holder of Certificates. This summary is based upon laws, regulations,
rulings and decisions currently in effect, all of which are subject to change,
possibly on a retroactive basis. The discussion does not deal with all Federal
tax consequences applicable to all categories of investors, some of which may be
subject to special rules. In addition, this summary is generally limited to
investors who will hold the Certificates as "capital assets" (generally,
property held for investment) within the meaning of Section 1221 of the Internal
Revenue Code of 1986, as amended (the "Code"), and who do not hold their
Certificates as part of a "straddle," a "hedge" or a "conversion transaction"
Investors should consult their own tax advisors to determine the Federal, state,
local and other tax consequences of the purchase, ownership and disposition of
the Certificates.
The Trust has been provided with an opinion of Chapman and Cutler, Chicago,
Illinois, special Federal tax counsel to the Depositor ("Federal Tax Counsel")
regarding certain Federal income tax matters discussed below. An opinion of
Federal Tax Counsel, however, is not binding on the Internal Revenue Service
(the "Service") or the courts. Prospective
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<PAGE>
investors should note that no rulings have been or will be sought from the
Service with respect to any of the Federal income tax consequences discussed
below, and no assurance can be given that the Service will not take contrary
positions.
[GRANTOR TRUST CERTIFICATES
In the opinion of Federal Tax Counsel, the Trust will be classified as a
grantor trust and not as an association taxable as a corporation for Federal
income tax purposes. Accordingly, in the opinion of Federal Tax Counsel, each
owner of a Certificate (a "Certificate Owner) will be subject to Federal income
taxation as if it owned directly the portion of the Deposited Assets allocable
to such Certificates, and as if it paid directly its share of reasonable
expenses paid by the Trust. The following discussion assumes that the Underlying
Securities were not issued with original issue discount ("OID") and,
accordingly, the Certificate owners will not realize OID except with respect to
a "stripped interest" (as defined below).
INCOME OF CERTIFICATE OWNERS
In General. A Certificate Owner will allocate the amount it pays for its
Certificate among each Underlying Security and each of the Deposited Assets in
the Trust in proportion to their relative fair market values on the date of
purchase of the Certificate in order to determine its initial tax basis for the
pro rata portion of each Underlying Security and Deposited Asset held by the
Trust. A Certificate Owner would calculate separately its income, gain, loss or
deduction realized with respect to each such asset.
The Federal income tax treatment of a holder of Certificates will depend
upon whether the interest in the Underlying Securities represented by a
Certificate will be considered to be a "stripped bond" or "stripped coupon"
(together a "stripped interest") within the meaning of Section 1286 of the Code.
A Certificate will not be considered to represent a stripped interest in the
Underlying Securities to the extent the Certificate is entitled to receive a
proportionate amount of all principal of a particular maturity represented by
the Underlying Securities and all interest relating thereto. A Certificate will
be considered to represent a stripped interest in the Underlying Securities if
the Certificate is entitled to receive less than all of the interest on a
particular maturity represented by the Underlying Securities or if the
Certificate is entitled to receive all or parts of the interest on a particular
maturity represented by the Underlying Securities but no principal on the
Underlying Securities. In addition, if a Certificate is entitled to receive
interest and principal on a particular maturity represented by the Underlying
Securities, but the interest it is entitled to receive on a particular maturity
represented by the Underlying Securities is disproportionately more than the
principal it is entitled to receive on a particular maturity represented by the
Underlying Securities, it could be argued (based on the preamble to Treas. Reg.
Section 1.1286-1 discussed below under "Tax Treatment of Certificates to the
Extent They are Stripped Interests") that the Certificates represents (a) an
interest in a particular maturity represented by the Underlying Securities that
is not a stripped interest to
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No dealer, salesperson or other person has been authorized to give any
information or make any representations not contained in this Prospectus
Supplement and the Prospectus and, if given or made, such information or
representations must not be relied upon as having been authorized by the
Depositor or by the Underwriter. This Prospectus Supplement and the Prospectus
do not constitute an offer to sell, or a solicitation of an offer to buy, the
securities offered hereby to anyone in any jurisdiction in which the person
making such offer or solicitation is not qualified to do so or to anyone to whom
it is unlawful to make any such offer or solicitation. Neither the delivery of
this Prospectus Supplement and the Prospectus nor any sale made hereunder shall,
under any circumstances, create an implication that information herein or
therein is correct as of any time since the date of this Prospectus Supplement.
_________________
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
Page
Summary of Principal Economic Terms.........................................
Summary of Prospectus Supplement............................................
Formation of the Trust......................................................
Risk Factors................................................................
Description of the Deposited Assets.........................................
[Description of Credit Support].............................................
Yield on the Certificates...................................................
Description of the Certificates.............................................
Description of the Trust Agreement..........................................
Certain Legal Aspects of the Deposited Assets...............................
Federal Income Tax Consequences.............................................
State Tax Consequences......................................................
ERISA Considerations........................................................
Plan of Distribution........................................................
Ratings.....................................................................
Legal Opinions..............................................................
Index of Terms..............................................................
PROSPECTUS
Prospectus Supplement.......................................................
Available Information.......................................................
Incorporation of Certain Information by Reference...........................
Reports to Certificateholders...............................................
Risk Factors................................................................
The Depositor...............................................................
Use of Proceeds.............................................................
Formation of the Trust......................................................
Maturity and Yield Considerations...........................................
Description of Certificates.................................................
Description of Deposited Assets and Credit Support..........................
Description of the Trust Agreement..........................................
Plan of Distribution........................................................
Legal Opinions..............................................................
Index of Terms..............................................................
_________________
Until 90 days after the date of each Prospectus Supplement, all dealers
effecting transactions in the related Certificates, whether or not participating
in the distribution thereof, may be required to deliver this Prospectus and the
related Prospectus Supplement. 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.
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$______________________
SOUTHPOINT STRUCTURED
ASSETS, INC.
TRUST CERTIFICATES, SERIES ___
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PROSPECTUS SUPPLEMENT
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[UNDERWRITER]
_____________, 199__
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