As filed with the Securities and Exchange Commission on September 30, 1998.
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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MERRILL LYNCH DEPOSITOR, INC.
(Exact name of registrant as specified in its charter)
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Delaware 13-3891329
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
World Financial Center
New York, New York 10281
(Address, including zip code, and telephone
number, including area code, of
registrant's principal executive offices)
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Frank D. Ronan
Merrill Lynch & Co.
World Financial Center
New York, New York 10281
(212) 449-1000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Copies to:
Robert Evans III
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
(212) 848-4000
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Approximate date of commencement of proposed sale to the public: From time
to time after the effective date of this Registration Statement as determined by
market conditions.
If the only securities being registered on this Form are 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, please check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
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CALCULATION OF REGISTRATION FEE
===============================================================================
Proposed
Maximum Amount of
Title of Aggregate Offering Registration
Securities to be Registered(1) Price Fee
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STEERS(R)
Trust Certificates $500,000,000 $147,500.00
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(1) This registration statement also registers an indeterminate amount of
Trust Certificates to be sold by the Underwriter in connection with
market-making activities.
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 hereafter 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 Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
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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 THE REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH
STATE.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED September 30, 1998
PROSPECTUS
STEERS(R) TRUST CERTIFICATES
(ISSUABLE IN SERIES)
Merrill Lynch Depositor, Inc.
DEPOSITOR
The Public STEERS(R) 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"), denominated in
U.S. dollars or in one or more foreign or composite currencies, including the
European Currency Unit or any successor currency (the "ECU"). Certificates of
each respective Series will be offered in amounts, at prices and on terms to be
determined at the time of sale as described in the Prospectus Supplement
accompanying this Prospectus. Unless otherwise specified in the applicable
Prospectus Supplement, each Series of Certificates will represent in the
aggregate the entire beneficial ownership interest in a publicly traded debt or
other eligible security or a pool of such securities (the "Underlying
Securities"), together with certain other assets, if applicable, described
herein or in the applicable Prospectus Supplement (such assets, together with
the Underlying Securities, the "Deposited Assets," to be deposited in a trust
(the "Trust") for the benefit of holders of Certificates of such Series
("Certificateholders") by Merrill Lynch Depositor, Inc., a Delaware corporation
that is an indirect, wholly-owned, limited-purpose subsidiary of Merrill Lynch &
Co., Inc. (the "Depositor"), pursuant to the Standard Terms for Trust Agreements
(the "Standard Terms") and a supplement thereto with respect to a Series (the
"Series Supplement" and, together with the Standard Terms, the "Trust
Agreement") among the Depositor, the trustee (the "Trustee") and the securities
intermediary (the "Securities Intermediary") named in the applicable Prospectus
Supplement. If so specified in the applicable 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 (as defined below), Reserve Accounts (as defined below) 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"). The Underlying Securities will represent debt securities
issued by the Government of the United States of America ("Government
Securities") or senior or subordinated publicly traded debt obligations of one
or more corporations, general or limited partnerships, preferred securities of
trusts organized by such issuers to issue certain trust-originated preferred
securities (each, an "Underlying Securities Issuer"). As a condition to the
deposit into a Trust of Underlying Securities (other than Government Securities)
constituting 10% or more of the total Underlying Securities with respect to the
related Series of Certificates ("Concentrated Underlying Securities"), as of the
date of the issuance of such Series, the issuer of such Underlying Securities
will be subject to the periodic reporting requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith will file reports and other information with the Securities and
Exchange Commission (the "Commission"). See "Description of Deposited
Assets--Underlying Securities Issuer." Except for Government Securities, the
Underlying Securities will be purchased in the secondary market; they will not
be acquired from the issuer thereof. No such issuer will participate in the
offering of the Certificates, nor will such issuer receive any of the proceeds
from the sale of the Underlying Securities to the Depositor or from the issuance
of the Certificates. See "Description Deposited Assets--General." Except as
otherwise provided herein and in the applicable Prospectus Supplement, the
Depositor's only obligations with respect to each Series of Certificates will be
to assign and deliver the Deposited Assets and certain related documents to the
applicable Trustee and, in certain cases, to arrange for Credit Support, if any.
An administrative agent (the "Administrative Agent"), if any is named in the
applicable Prospectus Supplement with respect to a Series of Certificates, may
assume certain contractual administrative obligations of the Trustee, to the
extent provided in the applicable Prospectus Supplement, including certain cash
advances in the event of payment delinquencies on the Deposited Assets. See
"Description of the Trust Agreement--Advances in Respect of Delinquencies." The
Certificates of each Series will not represent an obligation of or interest in
the Depositor or Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch & Co.") or any of their respective affiliates.
Neither the Certificates nor the Deposited Assets will be guaranteed or insured
by the Depositor or Merrill Lynch & Co. or their respective affiliates.
Application will be made to list certain Series of Certificates on the
New York Stock Exchange ("NYSE"). At the time of issue, each Series of
Certificates offered hereby will be rated in one of the investment grade
categories recognized by one or more nationally recognized rating agencies.
There can be no assurance that an active public market for any Series of
Certificates will develop or, if a public market develops, as to the liquidity
of the trading market for such Certificates. Unless otherwise specified in the
applicable Prospectus Supplement, each Series of Certificates initially will be
represented by one or more global securities (each, a "Global Security")
registered in the name of Cede & Co. ("Cede"), 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 in registered form without coupons will be
available only under the limited circumstances described herein under the
heading "Description of the Certificates--Global Securities."
See "Risk Factors" beginning on page 8 for a discussion of certain
factors that should be considered by prospective purchasers of the Certificates
offered hereby.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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The Certificates may be offered and sold to or through underwriters,
dealers or agents or directly to purchasers, as more fully described under
"Underwriting" and in the applicable Prospectus Supplement. This Prospectus may
not be used to consummate sales of Certificates offered hereby unless
accompanied by a Prospectus Supplement.
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Merrill Lynch & Co.
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The date of this Prospectus is September 30, 1998.
<PAGE>
PROSPECTUS SUPPLEMENT
The Prospectus Supplement relating to a Series of Certificates to be
offered hereby will set forth with respect to such Series: (a) the specific
designation and aggregate principal amount thereof, (b) the currency or
currencies in which the principal, premium, if any, and any interest are
distributable (the "Specified Currency"), (c) a description of the material
terms of the Deposited Assets, including the Underlying Securities, and Credit
Support, if any, (d) the number of Classes and, with respect to each such Class,
its designation, aggregate principal amount or, if applicable, Notional Amount
(as defined below), and the minimum denomination of the Certificates, (e) the
relative rights and priorities of each Series or Class (including the type,
characteristics and specifications of the Deposited Assets and Credit Support,
if any, for such Series or Class), (f) the identity of each issuer of the
Underlying Securities and each obligor with respect to any of the other
Deposited Assets, (g) the name of the Trustee and the Administrative Agent, if
any, (h) the Certificate Rate (as defined below) or the applicable method of
calculation thereof, (i) the date of distribution (each, a "Distribution Date")
of any interest, premium (if any) and/or principal, (j) the date of issue, (k)
the final scheduled Distribution Date (the "Final Scheduled Distribution Date"),
if applicable, (l) the offering price or prices, (m) remedies upon the
occurrence of a payment default on the Underlying Securities, (n) applicable
Required Percentages and Voting Rights (as defined below) with regard to certain
actions by the Depositor or the Trustee under the Trust Agreement or with regard
to the applicable Trust and (o) any other material terms of the Certificates
(including terms relating to the rights of the Trust or any third party to call,
redeem or purchase such Certificates or the Underlying Securities prior to the
Final Scheduled Distribution Date). See "Description of the
Certificates--General" for a listing of other terms that may be specified in the
applicable Prospectus Supplement.
AVAILABLE INFORMATION
The Depositor has filed with the Securities and Exchange Commission
(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. The Depositor will be subject to the periodic
reporting requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and in accordance therewith will file reports and other
information with the Commission. Such reports and other information concerning
the Depositor may 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 following Regional Offices of the Commission: New York
Regional Office, Room 1100, 7 World Trade Center, New York, New York 10048 and
Chicago Regional Office, Suite 1400, Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511, and copies of such
material can be obtained from the Public Reference Section of the Commission,
Washington, D.C. 20549, at prescribed rates. Such material may also be accessed
electronically by means of the Commission's home page on the Internet at
http://www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents filed by the Depositor pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act 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. Such documents may include,
without limitation, Annual Reports on Form 10-K and Current Reports on Form 8-K.
Any statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus. The Depositor will
provide without charge to each person to whom a copy of this Prospectus is
delivered, on the written or oral request of any such person, a copy of any or
all of the documents incorporated herein by reference, except the exhibits to
such documents (unless such exhibits are specifically incorporated by reference
in such documents). Written requests for such copies should be directed to
Merrill Lynch Depositor, Inc., c/o Merrill Lynch & Co., Inc., World Financial
Center, New York, New York 10281, Attention: Secretary. Telephone requests for
such copies should be directed to Merrill Lynch Depositor, Inc. at 212-449-1000.
REPORTS TO CERTIFICATEHOLDERS
Except as otherwise specified in the applicable Prospectus Supplement,
unless and until Definitive Certificates (as defined below) are issued,
unaudited reports containing information concerning the related Trust will be
prepared annually by the related Trustee and sent on behalf of the related Trust
only to Cede, as nominee of DTC and registered holder of the Certificates. If
Definitive Certificates are issued, such reports will be prepared by the related
Trustee and sent on behalf of the related Trust directly to the
Certificateholders in accordance with the Trust Agreement. See "Description of
the Certificates--Global Securities" and "Description of the Trust
Agreement--Reports to Certificateholders; Notices." Such reports will not
constitute financial statements prepared in accordance with generally accepted
accounting principles. The Depositor, on behalf of each Trust, will cause to be
filed with the
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Commission such periodic reports as are required under the Exchange Act. The
Depositor does not intend to send any financial reports to Certificateholders.
References herein to "U.S. dollars," "US$," "dollar" or "$" are to the
lawful currency of the United States.
For definitions of certain terms used herein, refer to "Index of
Defined Terms," beginning on page I-1.
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PROSPECTUS SUMMARY
The following summary does not purport to be complete and is qualified
in its entirety by reference to the detailed information appearing elsewhere in
this Prospectus. Certain capitalized terms used herein are defined elsewhere in
this Prospectus. See "Index to Defined Terms."
SECURITIES OFFERED.............. Public STEERS(R)Trust Certificates, to be
offered from time to time in one or more
Series and in one or more Classes within
each such Series, will be denominated in
U.S. dollars or in one or more foreign or
composite currencies, including the ECU.
Certificates of each respective Series will
be offered in amounts, at prices and on
terms to be determined at the time of sale
as described in the applicable Prospectus
Supplement. For a description of the kinds
of terms which will be set forth in the
applicable Prospectus Supplement, see
"Description of the Certificates--General."
DEPOSITED ASSETS................ Each Series of Certificates will represent
in the aggregate the entire beneficial
ownership interest in the Underlying
Securities, together with certain other
assets, if applicable. Such other assets may
include cash, cash equivalents, guarantees,
Letters of Credit, financial insurance,
interest rate, currency, equity, commodity
and credit-linked
swaps, caps, floors,
collars and options, forward contracts,
structured securities and other instruments
and transactions that credit enhance, hedge
or otherwise support the Underlying
Securities designed to assure the servicing
or timely distribution of payments to
holders of the Certificates. Such assets
will be described in the applicable
Prospectus Supplement. See "Description of
Deposited Assets."
UNDERLYING SECURITIES........... The Underlying Securities will represent
debt securities issued by the Government of
the United States of America or senior or
subordinated publicly traded debt
obligations of one or more corporations,
general or limited partnerships, or
preferred securities of trusts organized by
such issuers to issue certain
trust-originated preferred securities. As a
condition to the deposit into a Trust of
Underlying Securities (other than Government
Securities) constituting 10% or more of the
total Underlying Securities with respect to
the related Series of Certificates
("Concentrated Underlying Securities"), as
of the date of the issuance of such Series,
the issuer of such Underlying Securities
will be subject to the periodic reporting
requirements of the Exchange Act, and in
accordance therewith will file reports and
other information with the Commission. See
"Description of Deposited Assets--Underlying
Securities Issuer." Except for Government
Securities, the Underlying Securities will
be purchased in the secondary market; they
will not be acquired from the issuer
thereof. No such issuer will participate in
the offering of the Certificates, nor will
such issuer receive any of the proceeds from
the sale of the Underlying Securities to the
Depositor or from the issuance of the
Certificates. See "Description Deposited
Assets--General."
CREDIT SUPPORT.................. If so specified in the applicable Prospectus
Supplement, the Trust for a Series of
Certificates may also include, or the
Certificateholders of such Series may have
the benefit of, any combination of Letters
of Credit, Limited Guaranties, Surety Bonds,
Swap Agreements, Swap Guaranties and other
types of rights or assets intended to
support or ensure the timely or ultimate
distribution of amounts due in respect of a
Series (or a Class within such Series). See
"Description of the Deposited Assets--Credit
Support."
THE DEPOSITOR................... The Depositor, a Delaware corporation, is an
indirect, wholly-owned, limited-purpose
subsidiary of Merrill Lynch & Co., Inc. The
principal office of the Depositor is c/o
Merrill Lynch & Co., Inc., World Financial
Center, New York, New York 10281. The
Certificate of Incorporation of the
Depositor provides that the Depositor may
conduct any lawful activities necessary or
incidental to serving as depositor of one or
more trusts that may issue and sell
Certificates.
THE TRUST....................... The Depositor will assign and deliver the
Deposited Assets for each Series of
Certificates to the Trustee named in the
applicable Prospectus Supplement, in its
capacity as Trustee, for the benefit of the
Trustee and the Certificateholders of such
Series. See "Description of the Trust
Agreement--Assignment of Deposited Assets."
The Trustee named in the applicable
Prospectus Supplement will administer the
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Deposited Assets pursuant to the Trust
Agreement and will receive a fee for such
services (the "Trustee Fee").
FEDERAL INCOME TAX
CONSEQUENCES.................... The arrangement pursuant to which the
Certificates will be created and sold and
the Underlying Securities will be
administered will be treated as a grantor
trust under subpart E, part I of subchapter
J of the Code. Each Certificateholder will
be treated as the owner of a pro rata
undivided interest in the ordinary income
and corpus of the Underlying Securities in
the grantor trust. See "Federal Income Tax
Consequences."
ERISA
CONSIDERATIONS.................. An employee benefit plan subject to the
Employee Retirement Income Security Act of
1974, as amended ("ERISA"), an individual
retirement account, or an entity whose
underlying assets include plan assets by
reason of a plan's investment in the entity
(each, a "Plan") may purchase Certificates
provided that either (a) the offering has
been structured so that participation by
"benefit plan investors" is not
"significant" or so that there are at least
100 independent purchasers of the class of
Certificates being offered, or (b) the Plan
can represent that its purchase of
Certificates would not be prohibited under
ERISA or the Internal Revenue Code of 1986,
as amended (the "Code"). See "ERISA
Considerations."
RATINGS......................... At the time of issuance, the Certificates of
a Series (or Class of such Series) will be
rated in one of the investment grade
categories by one or more nationally
recognized Rating Agencies. Any rating
issued with respect to a Certificate is not
a recommendation to purchase, sell or hold a
Certificate and there can be no assurance
that the ratings will remain for any given
period of time or that any rating will not
be revised or withdrawn by the related
Rating Agency. See "Risk Factors--Ratings of
the Certificates Subject to Change."
LISTING......................... Application may be made to list certain
Series of Certificates on the New York Stock
Exchange.
FORM OF SECURITY................ Unless otherwise specified in the applicable
Prospectus Supplement, each Series of
Certificates will be initially represented
by one or more Global Securities registered
in the name of Cede as nominee of the DTC.
The interests of beneficial owners of
Certificates will be represented by book
entries of participating members of DTC.
Definitive Certificates in registered form
without coupons will be available only under
the limited circumstances described under
the heading "Description of the
Certificates--Global Securities."
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RISK FACTORS
In connection with an investment in the Certificates of any Series,
prospective purchasers should consider, among other things, (1) the risk factors
set forth below and (2) any additional risk factors set forth in the applicable
Prospectus Supplement.
Limited Liquidity
There can be no assurance that an active public market for any Series
(or Class within such Series) of Certificates will develop or, if a public
market develops, as to the liquidity of the trading market for such
Certificates. Merrill Lynch & Co. has advised the Depositor that it intends to
make a market in the Certificates, as permitted by applicable laws and
regulations, after the issuance thereof. Merrill Lynch & Co. is not obligated,
however, to make a market in the Certificates of any Series or Class within such
Series and any such market-making activity may be discontinued at any time
without notice at the sole discretion of Merrill Lynch & Co. If an active public
market for the Certificates does not develop or continue, the market prices and
liquidity of the Certificates may be adversely affected.
Limited Recourse
The Certificates will not represent a recourse obligation of or
interest in the Depositor, any Administrative Agent, Merrill Lynch & Co., the
Underlying Securities Issuer or any of their respective affiliates. Certificates
will not be insured or guaranteed by the Depositor, Merrill Lynch & Co. or any
of their respective affiliates. The obligations, if any, of the Depositor with
respect to the Certificates of any Series will only be pursuant to certain
limited representations and warranties with respect to an Underlying Security or
other Deposited Assets, and recourse with respect to the satisfaction of any
such obligations will be limited to any recourse for a breach of a corresponding
representation or warranty that the Depositor may have against the seller of
such Underlying Security or other Deposited Assets to the Depositor. The
Depositor does not have, and is not expected in the future to have, any assets
with which to satisfy any claims arising from a breach of any representation or
warranty.
Limited Assets
The only material assets expected to be in a Trust are Underlying
Securities and any other Deposited Assets corresponding to the related Series
(or Class within such Series) of Certificates being offered. The Certificates do
not represent obligations of the Depositor, any Administrative Agent, Merrill
Lynch & Co. or any of their respective affiliates and, unless otherwise
specified in the applicable Prospectus Supplement, are not insured or guaranteed
by the Depositor, any Administrative Agent or Merrill Lynch & Co. 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.
Reinvestment Risk; Reduction in Yield to Maturity: Redemption, Repayment or
Call Right
Several factors affect the timing of distributions on any Series (or
Class within such Series) of Certificates. In particular, provisions in an
Underlying Securities indenture for optional or mandatory redemption or
repayment prior to stated maturity, if exercised, will reduce the weighted
average life of such Underlying Securities and the related Series (or Class
within such Series) of Certificates. A variety of tax, accounting, economic, and
other factors will influence whether an Underlying Securities Issuer exercises
any right of redemption in respect of its securities. All else remaining equal,
if prevailing interest rates are below the interest rates on the related
Underlying Securities, the likelihood of redemption would be expected to
increase. There can be no assurance that any Underlying Security redeemable at
the option of the Underlying Security Issuer will remain outstanding until its
stated maturity. In addition, the effective yield to holders of the Certificates
of any Series (and Class within such Series) may be affected by certain terms of
the Deposited Assets or the manner and priorities of allocations of collections
with respect to such Deposited Assets between Classes of a given Series. The
applicable Prospectus Supplement will discuss any calls, puts or other
redemption options, and certain other terms applicable to such Underlying
Securities and any other Deposited Assets.
If an Underlying Securities Issuer becomes subject to a bankruptcy or
similar insolvency proceeding, the timing and amount of payments with respect to
the principal of, premium on, if any, and any interest to be distributed in
respect of such Certificates may be materially and adversely affected. Several
factors influence the performance of issuers that are corporations or other
business entities; these factors may affect an Underlying Securities Issuer's
ability to satisfy its obligations with respect to the Underlying Securities,
including the Underlying Securities Issuer's operating and financial condition,
its capital structure and other economic, geographic, legal and social factors.
Certain Series of Certificates may be subject to a Call Right (as
defined below) by Merrill Lynch & Co., the Depositor or others, as specified in
the applicable Supplement. See "Description of the Certificates--Call Right."
There is no assurance that an investment in the Certificates of a Callable
Series (as defined below) may be held to maturity. In particular, if a Call
Right is exercised by the holder thereof, the investment represented by the
Certificates will have a shorter maturity than if such right were not exercised.
The likelihood that Call Right will be exercised increases as interest rates
generally prevailing in the market for debt securities fall relative to those in
effect on the Original Issue Date (as defined below). Any such reduction in
interest rates would increase the value of the Underlying Securities, making the
exercise of a Call Right more likely. Given a reduction in interest rates, the
interest rates at
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which proceeds received by Certificateholders from the exercise of a Call Right
may be reinvested may be lower than the return that would have been earned over
the remaining life of the Certificates if those Certificates had not been
called.
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 also 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.
To the extent that the Certificate Rate for a Series is based on
variable or adjustable interest rates, variations in the interest rates
applicable to, and the corresponding payments in respect of, such Certificates,
will affect the yield to maturity of such Series. There may be disproportionate
principal payments (whether resulting from differences in amortization
schedules, payments due on scheduled maturity or upon early redemption) on
Certificates backed by a pool of Underlying Securities having interest rates
higher or lower than the then applicable Certificate Rate, which may adversely
affect the yield on such Series of Certificates.
The applicable Prospectus Supplement for a Series of Certificates will
set forth additional information regarding yield and maturity considerations
applicable to such Series and the related Deposited Assets, including the
related Underlying Securities.
Currency Risk: 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 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
Depositor has no control, such as economic and political events and the supply
of and demand for the relevant currencies. In recent years, rates of exchange
between the U.S. dollar and certain currencies have been highly volatile, and
such volatility may be expected in the future. 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 Certificate 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.
PROSPECTIVE PURCHASERS SHOULD CONSULT THEIR OWN FINANCIAL AND LEGAL
ADVISORS AS TO THE RISKS ENTAILED BY AN INVESTMENT IN CERTIFICATES DENOMINATED
IN A CURRENCY OTHER THAN U.S. DOLLARS. SUCH CERTIFICATES ARE NOT AN APPROPRIATE
INVESTMENT FOR PERSONS WHO ARE UNSOPHISTICATED WITH RESPECT TO FOREIGN CURRENCY
TRANSACTIONS.
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.
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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 come 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.
Information Concerning Underlying Securities Issuers; Risk of Loss if Public
Information Not Available
A prospective purchaser of Certificates should obtain and evaluate the
same information concerning each Underlying Securities Issuer as it would obtain
and evaluate if it were investing directly in the Underlying Securities or in
other securities issued by the Underlying Securities Issuer. The publicly
available information concerning an Underlying Securities 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. None of the
Depositor, the Trustee, the Securities Intermediary, Merrill Lynch & Co. or any
of their respective affiliates assumes any responsibility for the continued
availability, accuracy or completeness of any information concerning any
Underlying Securities Issuer (including, without limitation, investigation as to
its financial condition or creditworthiness) or concerning the Underlying
Securities (whether or not such information is filed with the Commission) or
otherwise considered by a purchaser of the Certificates in making its investment
decision in connection therewith; provided that the foregoing shall not apply to
any information concerning the Underlying Securities and any Underlying
Securities Issuer that is expressly set forth in this Prospectus or an
applicable Prospectus Supplement. The issuance of Certificates of any Series
should not be construed as an endorsement by the Depositor, Merrill Lynch & Co.,
the Trustee or the Securities Intermediary of the financial condition or
business prospects of any Underlying Securities Issuer.
If an issuer of Concentrated Underlying Securities ceases to file
periodic reports under the Exchange Act, then the Trustee of the relevant Trust
will exercise one of the following remedies: (i) sell all of such Concentrated
Underlying Securities and distribute the proceeds from such sale to the
Certificateholders in accordance with the Allocation Ratio (as defined below)
(any such sale will result in a loss to the Certificateholders of the relevant
Series if the sale price is less than the purchase price for such Concentrated
Underlying Securities), (ii) distribute such Concentrated Underlying Securities
in kind to the Certificateholders in accordance with the Allocation Ratio, or
(iii) elect either (i) or (ii) based upon a majority of votes cast by the
affected Certificateholders or (iv) in the case of an Underlying Securities
Issuer who has a class of common equity registered under the Exchange Act at the
applicable Closing Date, take no action. The choice of remedies will be set
forth for a given Series in the Prospectus Supplement, and the Trustee,
Securities Intermediary, Depositor and Certificateholders will have no
discretion in this respect.
Ratings of the Certificates Subject to Change
At the time of issuance, the Certificates of a Series (or each Class of
such Series) will be rated in one of the investment grade categories by one or
more nationally recognized rating agencies (each, a "Rating Agency"). The Rating
Agencies may rate a Series or Class of Certificates on the basis of several
factors, including the related Deposited Assets, 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 Agencies are solely
responsible for selecting the criteria for rating the Certificates.
Any rating issued with respect to the Certificates is not a
recommendation to purchase, sell or hold a security; such ratings do not comment
on the market price of the Certificates or their suitability for a particular
investor. There can be no assurance that the ratings will remain for any given
period of time or that any rating will not be revised or withdrawn entirely by
the related Rating Agency if, in its judgment, circumstances (including, without
limitation, the rating of the Underlying Securities) so warrant. A revision or
withdrawal of such rating may have an adverse effect on the market price of the
Certificates.
Global Securities Limit Direct Voting; Pledge of Certificates
Unless otherwise specified in the applicable Prospectus Supplement, the
Certificates of each Series will initially be represented by one or more Global
Securities deposited with, or on behalf of, a Depositary (as defined below) 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 are issued, such purchasers will not be
recognized as Certificateholders under the Trust Agreement. Until such time,
such purchasers will only be able to exercise the rights of Certificateholders
indirectly through the Depositary and its respective Participants (as defined
below) 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 otherwise to act with respect to such Certificate, may be limited.
See "Description of the Certificates--Global Securities" and any further
description contained in the applicable Prospectus Supplement.
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Limitation on Remedies 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
Underlying Securities. 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 Underlying Securities 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 Underlying Securities or the exercise by a
third party of the right to purchase Underlying Securities (as described below
under "Description of Deposited Assets--Principal Terms of Underlying
Securities"), 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.
Amendment of Trust Agreement Without Unanimous Consent
The Prospectus Supplement may indicate that the Trust Agreement may be
amended or otherwise modified with less than unanimous consent of the
Certificateholders (in no event, however, will the percentage required for
consent be less than a majority). Any such amendment or other modification could
have a material adverse effect on those Certificateholders of the relevant
Series that do not consent to such amendment or other modification. However, the
Trust Agreement will provide that any amendment or other modification that would
reduce the amount of, or defer the date of, distributions to Certificateholders
of a Series (or Class within such Series) may become effective only with the
consent of each affected Certificateholder of that Series (or Class within such
Series) and that, if so specified in the applicable Prospectus Supplement, any
such amendment or other modification that would result in the reduction or
withdrawal of the then current rating assigned to the Certificates of a Series
(or Class within such Series) by a Rating Agency would require the consent of
all of the Certificateholders of that Series (or Class within such Series).
General Unavailability Of Optional Exchange
Although the Prospectus Supplement for a Series of Certificates may
designate such Series as an Exchangeable Series (as defined below) 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 (i) would not affect the Trust's ability to be exempt under Rule
3a-7 under the Investment Company Act of 1940, as amended, and all applicable
rules, regulations and interpretations thereunder and (ii) would not affect the
characterization of the Trust as a "grantor trust" under the Code. See
"Description of the Certificates--Optional Exchange." Accordingly, the Optional
Exchange Right described in this Prospectus under the heading "Description of
the Certificates--Optional Exchange" and further described in the relevant
Prospectus Supplement will be available only to the Depositor, Merrill Lynch &
Co., the Trustee and their respective affiliates and designees. Other
Certificateholders generally will 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 aggregate amount of Certificates of the applicable Exchangeable
Series outstanding.
------------------
The Prospectus Supplement for each Series of Certificates will set
forth information regarding additional risk factors, if any, applicable to such
Series (and each Class within such Series).
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THE DEPOSITOR
The Depositor, a Delaware corporation, is an indirect, wholly-owned,
limited-purpose subsidiary of Merrill Lynch & Co., Inc. The principal office of
the Depositor is c/o Merrill Lynch & Co., Inc., World Financial Center, New
York, New York 10281. The Certificate of Incorporation of the Depositor provides
that the Depositor may conduct any lawful activities necessary or incidental to
serving as depositor of one or more trusts that may issue and sell Certificates.
USE OF PROCEEDS
If the related Deposited Assets are to be purchased by the Depositor,
the net proceeds to be received from the sale of each Series of Certificates
(whether or not offered hereby) will be used for such purchase. In addition, the
Depositor will use such net proceeds to arrange certain Credit Support, if any,
including, if specified in the applicable Prospectus Supplement, required
deposits into any Reserve Account or the applicable Certificate Account (as
defined below) for the benefit of the Certificateholders of such Series or
Class. The remaining net proceeds, if any, will be used by the Depositor for
purposes related to the deposit of Deposited Assets into one or more Trusts and
the preparation, distribution and filing by the Depositor of periodic reports
and other information, including, but not limited to, the fees and expenses of
the Depositor incurred in connection with the ongoing activities of the
Trust(s).
FORMATION OF THE TRUST
The Depositor will assign and deliver the Deposited Assets for each
Series of Certificates to the Trustee named in the applicable Prospectus
Supplement, in its capacity as Trustee, for the benefit of the Trustee and the
Certificateholders of such Series. See "Description of the Trust
Agreement--Assignment of Deposited Assets." The Trustee named in the applicable
Prospectus Supplement will administer the Deposited Assets pursuant to the Trust
Agreement and will receive the Trustee Fee. The Trustee or an Administrative
Agent, if applicable, will either cause the assignment of the Deposited Assets
to be recorded on the books and records of DTC or any other depositary specified
in the applicable Prospectus Supplement (DTC or any such other depositary each a
"Depositary") 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 Depositor's assignment of the Deposited Assets to the Trustee will
be without recourse to the Depositor (except as to certain limited
representations and warranties, if any).
The applicable Prospectus Supplement will set forth the property of
each Trust, which may consist of (i) such Deposited Assets, or interests
therein, exclusive of any interest in such assets (the "Retained Interest")
retained or acquired by the Depositor, or any previous owner thereof or any
other person or entity, as from time to time are specified in the Trust
Agreement, (ii) such assets as from time to time are identified as deposited in
the related Certificate Account, (iii) rights under the agreement or agreements
pursuant to which the Trustee has acquired such Deposited Assets, (iv) those
elements of Credit Support, if any, provided with respect to any Series (or
Class within such Series) within such Series that are specified as being part of
the related Trust in the applicable Prospectus Supplement, as described therein
and under "Description of Deposited Assets--Credit Support" and (v) any cash or
other property received upon the sale, exchange, collection or other disposition
of any of the foregoing.
MATURITY AND YIELD CONSIDERATIONS
Each Prospectus Supplement will, to the extent applicable, contain
information with respect to the types and maturities of the related Underlying
Securities and the terms, if any, upon which such Underlying Securities may be
subject to early redemption or repayment. Provisions for optional or mandatory
redemption or repayment prior to stated maturity, if exercised, will reduce the
weighted average life of Underlying Securities and the related Series (or Class
within such Series) of Certificates. A variety of tax, accounting, economic, and
other factors will influence whether an Underlying Securities Issuer exercises
any right of redemption in respect of its securities. All else remaining equal,
if prevailing interest rates are below the interest rates on the related
Underlying Securities, the likelihood of redemption would be expected to
increase. There can be no assurance that any Underlying Security redeemable at
the option of the Underlying Security Issuer will remain outstanding until its
stated maturity.
In addition, the effective yield to holders of the Certificates of any
Series (and Class within such Series) may be affected by certain terms of the
Deposited Assets or the manner and priorities of allocations of collections with
respect to such Deposited Assets between Classes of a given Series.
As specified in the applicable Prospectus Supplement, each of the
Underlying Securities may be subject to acceleration upon the occurrence of
certain events of default under the terms of the Underlying Securities. The
maturity and yield on the Certificates will be affected by any early repayment
of the Underlying Securities as a result of the acceleration of the Underlying
Securities by or on behalf of the holders thereof. See "Description of Deposited
Assets--Underlying Securities Indenture." If an Underlying Securities Issuer
becomes subject to a bankruptcy proceeding, the timing and amount of payments
with respect to the principal of, the premium
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on, if any, and the interest to be distributed in respect of the Certificates
may be materially and adversely affected. Several factors influence the
performance of issuers that are corporations or other business entities; these
factors may affect an Underlying Securities Issuer's ability to satisfy its
obligations under the Underlying Securities, including the company's operating
and financial condition, leverage, and economic, geographic, legal and social
factors.
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
Certificate Rate, if any, for such Series (or Class) is based on variable or
adjustable interest rates. With respect to any Series of Certificates
representing an interest in a pool of debt, or other eligible securities,
disproportionate principal payments (whether resulting from differences in
amortization schedules, payments due on scheduled maturity or upon early
redemption) on the related Underlying Securities having interest rates higher or
lower than the then applicable Certificate Rates, if any, 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 Underlying Securities.
DESCRIPTION OF THE CERTIFICATES
Each Series (or, if more than one Class exists, the Classes within such
Series) of Certificates will be issued pursuant to the Standard Terms and the
Series Supplement among the Depositor, the Trustee and the Securities
Intermediary named in the applicable Prospectus Supplement; a form of which
Trust Agreement is attached as an exhibit to the Registration Statement. The
provisions of the Trust Agreement may vary depending upon the terms of both the
Certificates to be issued thereunder and the Deposited Assets, the Credit
Support, if any, and related Trust. The following summaries describe material
provisions of the Trust Agreement that 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 that is not
described herein or the description of which is materially different from the
description herein. 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. Wherever particular 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. As used herein with respect to any Series, the term "Certificate"
refers to all the Certificates of that Series (and each Class within such
Series), whether or not offered hereby and by the applicable Prospectus
Supplement, unless the context otherwise requires.
A copy of the Series Supplement relating to each Series of Certificates
issued from time to time will be filed by the Depositor as an exhibit to a
Current Report on Form 8-K, which will be filed with the Commission following
the issuance of such Series.
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--Collections."
Reference is made to the applicable Prospectus Supplement for a description of
the following terms of the 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) material information concerning the type,
characteristics and specifications of the Deposited
Assets being deposited into the related Trust by the
Depositor (including, with respect to any Underlying
Security which at the time of such deposit represents
a significant portion of all such Deposited Assets
and any related Credit Support, if any, information
concerning the material terms of each such Underlying
Security, the identity of the issuer thereof and
where publicly available information regarding such
issuer may be obtained),
(iv) the dates on which, or periods during which, such
Series of Certificates may be issued (each, an
"Original Issue Date") and the offering price
thereof,
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(v) the limit, if any, upon the aggregate principal
amount or Notional Amount, as applicable, of each
Class thereof,
(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 are Fixed
Rate Certificates or Floating Rate Certificates
(each, as defined below) and the applicable interest
rate (the "Certificate Rate"), or the method of
calculation thereof applicable to such Series, if
variable (a "Floating Certificate 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 (as defined below), if any,
(viii) the circumstances and conditions under which any of
the Depositor, Merrill Lynch & Co. or the Trustee, or
their respective affiliates and designees, may
exercise an Optional Exchange Right (to the extent
that the exercise of such right (a) would not affect
the Trust's ability to be exempt under Rule 3a-7
under the Investment Company Act of 1940, as amended,
and all applicable rules, regulations and
interpretations thereunder and (b) would not affect
the treatment of the Trust as a "grantor trust" under
the Code) and the periods within which or the dates
on which, and the terms and conditions upon which any
such Optional Exchange may be exercised, in whole or
in part,
(ix) the option, if any, of any specified third party
(which may include one or more of the Depositor,
Merrill Lynch & Co. or their respective affiliates)
to purchase Certificates held by a Certificateholder
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,
(x) the rating of each Series or each Class within such
Series offered hereby,
(xi) the denominations in which such Series or each Class
within such Series will be issuable,
(xii) 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,
(xiii) the identity of the Depositary, if other than DTC,
for such Certificates,
(xiv) 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 Depositor or a Certificateholder,
and the currency or currencies in which any principal
of or any premium or any interest on such Series or
Class are to be distributed pursuant to such
election,
(xv) all applicable Required Percentages and Voting Rights
relating to the manner and percentage of votes of
Certificateholders of such Series and each Class
within such Series required with respect to certain
actions by the Depositor or the Trustee under the
Trust Agreement or with respect to the applicable
Trust,
(xvi) remedies upon the occurrence of a payment default on
the Underlying Securities on an acceleration of the
Underlying Securities, and
(xvii) all other material terms of such Series or Class
within such Series of Certificates.
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 the applicable Prospectus Supplement. In
addition, any special considerations, 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. The U.S. dollar equivalent of the
public offering price or purchase price of a Certificate having a Specified
Currency other than U.S. dollars will be determined on the basis of the noon
buying rate in New York City for cable transfers in foreign currencies as
certified for customs purposes by the Federal Reserve Bank of New York for such
Specified Currency on the applicable issue date. As specified in the applicable
Prospectus Supplement, such determination will be made by the Depositor, the
Trustee, the Administrative Agent, if any, or an agent thereof as exchange rate
agent for each Series of Certificates. If a noon buying rate is not published
for a Specified Currency, the applicable Prospectus Supplement will set forth
another source for all exchange rate calculations.
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Transfers of beneficial ownership interests in any Global Security will
be effected in accordance with the normal procedures of DTC or any other
specified Depositary. If Definitive Certificates are issued in the limited
circumstances described herein, they may be transferred or exchanged for like
Certificates of the same Series at the corporate trust office or agency of the
applicable Trustee in the City and State of New York, subject to the limitations
set forth in the Trust Agreement, without the payment of any service charge,
other than any tax or governmental charge payable in connection therewith.
Distributions
Distributions allocable to principal, premium (if any) and interest on
the Certificates of each Series (and each Class within such Series) will be made
by or on behalf of the Trustee on each Distribution Date as specified in the
applicable Prospectus Supplement, and the amount of each distribution will be
determined as of the close of business on the date specified in the applicable
Prospectus Supplement (the "Record Date").
Except as provided in the succeeding paragraph, distributions with
respect to Certificates will be made at the corporate trust office or agency of
the Trustee specified in the applicable Prospectus Supplement in The City of New
York; provided that any such amounts distributable on the Final Scheduled
Distribution Date of a Certificate will be distributed only upon surrender of
such Certificate at the applicable location set forth above.
Distributions on Certificates will be made, except as provided below,
by check mailed to the Certificateholders listed on the relevant Record Date in
the ownership register maintained for that purpose under the Trust Agreement
(which, in the case of Global Securities, will be a nominee of the Depositary).
A Certificateholder of $10,000,000 or more in aggregate principal amount of
Certificates of a given Series, and any holder of a Global Security, shall be
entitled to receive such 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 10 calendar days prior to
the applicable Distribution Date.
"Business Day" with respect to any Certificate means any day other than
(i) a Saturday, a Sunday or a legal holiday or a day on which banking
institutions or trust companies in the City of New York are authorized or
obligated by law, regulation or executive order to close or (ii) a business day,
as such term is used in the indenture for the Underlying Securities (the
"Underlying Securities Indenture").
Interest on the Certificates
Each Class of Certificates (other than certain Classes of Strip
Certificates) of a given Series may have a different Certificate Rate, which may
be a fixed or floating Certificate Rate, as described below. In the case of
Strip Certificates with a nominal or no Certificate Principal Balance, such
distributions of interest will be in an amount described in the applicable
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 a nominal or no 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 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 applicable
Prospectus Supplement. The Certificate Rate will be described in the applicable
Prospectus Supplement and will be based upon the rate of interest received on
the Underlying Securities, Credit Support, if any, and any payments payable in
respect of the Retained Interest (if any). The Certificate Rate may be either a
fixed rate or a floating rate.
Fixed Rate Certificates. Each Series of Certificates with a fixed
Certificate Rate ("Fixed Rate Certificates") will bear interest, on the
outstanding Certificate Principal Balance, from its Original Issue Date, or from
the last date to which interest has been paid, at the fixed Certificate Rate
stated on the face thereof and in the applicable Prospectus Supplement until the
principal amount thereof is distributed or made available for repayment (or, in
the case of Fixed Rate Certificates with a nominal or no principal amount, until
the Notional Amount thereof is reduced to zero), except that, if so specified in
the applicable Prospectus Supplement, the Certificate 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. Unless otherwise set forth in the
applicable Prospectus Supplement, interest on each Series or Class of Fixed Rate
Certificates will be distributable in arrears on each Distribution Date
specified in such Prospectus Supplement. Each such distribution of interest
shall include interest accrued through the day specified in the applicable
Prospectus Supplement. Unless otherwise specified in the applicable Prospectus
Supplement, interest on Fixed Rate Certificates will be computed on the basis of
a 360-day year of twelve 30-day months.
Floating Rate Certificates. Each Series of Certificates with a variable
Certificate Rate ("Floating Rate Certificates") will bear interest, on the
outstanding Certificate Principal Balance, from its Original Issue Date to but
excluding the first Interest Reset Date (as defined below) for such Series at
the Initial Certificate Rate set forth on the face thereof and in the applicable
Prospectus Supplement. Thereafter, the Certificate Rate on such Series for each
Interest Reset Period (as defined below) will be determined by reference to an
interest rate basis (the "Base Rate"), plus or minus the Spread, if any, or
multiplied by the Spread Multiplier, if any. The Base Rate for any Series of
Certificates will, as described in greater detail below, be a fluctuating rate
of interest that is publicly available and is
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established by reference to quotations provided by third parties of the interest
rate from time to time prevailing on loans or other extensions of credit in a
specified credit market. 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, and the
"Spread Multiplier" is the percentage that may be specified in the applicable
Prospectus Supplement as being applicable to such Series, except that if so
specified in the applicable Prospectus Supplement, the Spread or Spread
Multiplier on such Series 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) the CD Rate ("CD Rate Certificate"), (ii) the Commercial Paper
Rate ("Commercial Paper Rate Certificate"), (iii) the Federal Funds Rate
("Federal Funds Rate Certificate"), (iv) LIBOR ("LIBOR Certificate"), (v) the
Prime Rate ("Prime Rate Certificate"), (vi) the Treasury Rate ("Treasury Rate
Certificate") or (vii) another Base Rate, as set forth in the applicable
Prospectus Supplement. The "Index Maturity" for any Series 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 of 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," or any successor publication,
published by the Federal Reserve Bank of New York. Interest will be payable only
from cash received by the Trustee from the Deposited Assets or other assets
deposited in the Trust and available for application to such payment,
notwithstanding the accrual of interest on the Certificate Principal Balance at
a higher rate.
As specified in the applicable Prospectus Supplement, Floating Rate
Certificates of a given Series 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 Certificate Rate") and (ii) a minimum limitation, or floor, on the
rate at which interest may accrue during any such interest accrual period
("Minimum Certificate Rate"). In addition to any Maximum Certificate Rate that
may be applicable to any Series of Floating Rate Certificates, the Certificate
Rate applicable to any Series of Floating Rate Certificates will in no event be
higher than the maximum rate permitted by applicable New York and United States
federal law. Under applicable New York and United States federal 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 Depositor will appoint, and enter into agreements with, agents
(each, a "Calculation Agent") to calculate Floating Certificate Rates on each
Series of Floating Rate Certificates. The applicable Prospectus Supplement will
set forth the identity of the Calculation Agent for each Series of Floating Rate
Certificates. All determinations of interest by the Calculation Agent shall, if
made on a commercially reasonable basis and in good faith, be conclusive for all
purposes and binding on the holders of Floating Rate Certificates of a given
Series.
The Floating Certificate Rate will be reset daily, weekly, monthly,
quarterly, semiannually or annually (such period being the "Interest Reset
Period," 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 will be specified in the applicable
Prospectus Supplement; provided that, unless otherwise specified in such
Prospectus Supplement, the Certificate Rate in effect for the 10 days
immediately prior to the Final Scheduled Distribution Date will be that in
effect on the tenth day preceding such Final Scheduled Distribution Date. If an
Interest Reset Date for any Series of Floating Rate Certificates would otherwise
be a day that is not a Business Day, such Interest Reset Date will occur on the
next Business Day, except that, in the case of a LIBOR Certificate, if such
Business Day would fall in the next calendar month, such Interest Reset Date
will be the immediately preceding Business Day.
Unless otherwise specified in the applicable Prospectus Supplement,
interest payable in respect of Floating Rate Certificates shall be the accrued
interest from and including the Original Issue Date of such Series or 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 by an accrued
interest factor. Such accrued interest factor will be computed by adding the
interest factors calculated for each day in the period for which accrued
interest is being calculated. Unless otherwise specified in the applicable
Prospectus Supplement, the interest factor (expressed as a decimal calculated to
seven decimal places without rounding) for each such day is computed by dividing
the Certificate Rate in effect on such day by 360, in the case of LIBOR
Certificates, Commercial Paper Rate Certificates, Federal Funds Rate
Certificates, Prime Rate Certificates and CD Rate Certificates or by the actual
number of days in the year, in the case of Treasury Rate Certificates. For
purposes of making the foregoing calculation, the variable Certificate Rate in
effect on any Interest Reset Date will be the applicable rate as reset on such
date.
Unless otherwise specified in the applicable Prospectus Supplement, all
percentages resulting from any calculation of the Certificate 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 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.
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The "Calculation Date," where applicable, pertaining to a Record Date
will be the earlier of (i) the tenth calendar day after such Record Date or, if
any such day is not a Business Day, the next succeeding Business Day or (ii) the
Business Day preceding the applicable Distribution Date.
Upon the request of the holder of any Floating Rate Certificate of a
given Series, the Calculation Agent for such Series will provide the Certificate
Rate then in effect and, if determined, the Certificate Rate that will become
effective on the next Interest Reset Date with respect to such Floating Rate
Certificate.
CD Rate Certificates. CD Rate Certificates will bear interest at the
interest rates (calculated with reference to the CD Rate and the Spread and/or
the Spread Multiplier, if any) specified in the applicable Prospectus
Supplement.
The "CD Rate" means, with respect to any Record Date, the rate on such
date for negotiable certificates of deposit having the applicable Index
Maturity, as published by the Board of Governors of the Federal Reserve System
in H.15(519) under the heading "CDs (Secondary Market)." If such rate is not
published by 9:00 a.m., New York City time, on the Calculation Date pertaining
to such Record Date, the CD Rate will be the rate on such Record Date for
negotiable certificates of deposit of the applicable Index Maturity, as
published by the Federal Reserve Bank of New York in Composite Quotations, under
the heading "Certificates of Deposit." If such rate is not published in
Composite Quotations by 3:00 p.m., New York City time, on the Calculation Date
pertaining to such Record Date, then the CD Rate for such Record Date will be
calculated by the Calculation Agent and will be the arithmetic mean of the
secondary market offered rates as of 10:00 a.m., New York City time, on such
Record 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 after consultation with the Depositor, 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 applicable Index Maturity in a denomination of $5,000,000;
provided that, if the dealers selected as aforesaid by the Calculation Agent are
not quoting such rates, the interest rate for the period commencing on the
Interest Reset Date following such Record Date will be the interest rate borne
by such CD Rate Certificates on such Record Date.
CD Rate Certificates, like other Certificates, are not deposit
obligations of a bank and are not insured by the Federal Deposit Insurance
Corporation.
Commercial Paper Rate Certificates. Commercial Paper Rate Certificates
will bear interest at the interest rates (calculated with reference to the
Commercial Paper Rate and the Spread and/or the Spread Multiplier, if any)
specified in the applicable Prospectus Supplement.
The "Commercial Paper Rate" means, with respect to any Record Date, the
Money Market Yield (as defined below) on such date of the rate for commercial
paper having the applicable Index Maturity, as published in H.15(519) under the
heading "Commercial Paper." If such rate is not published prior to 9:00 a.m.,
New York City time, on the Calculation Date pertaining to such Record Date, the
Commercial Paper Rate will be the Money Market Yield on such Record Date of the
rate for commercial paper of the applicable Index Maturity, as published by the
Federal Reserve Bank of New York in Composite Quotations under the heading
"Commercial Paper." If such rate is not published in Composite Quotations by
3:00 p.m., New York City time, on the Calculation Date pertaining to such Record
Date, then the Commercial Paper Rate for such Record Date will be calculated by
the Calculation Agent and will 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 Record Date
of three leading dealers of commercial paper in The City of New York, selected
by the Calculation Agent after consultation with the Depositor, for commercial
paper of the applicable Index Maturity, placed for industrial issuers whose bond
rating (as determined by a nationally recognized rating agency) is "AA" or the
equivalent; provided that, if the dealers selected as aforesaid by the
Calculation Agent are not quoting such rates, the interest rate for the period
commencing on the Interest Reset Date following such Record Date will be the
interest rate borne by such Commercial Paper Rate Certificates on such Record
Date.
"Money Market Yield" will 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 applicable period for which interest is being calculated.
Federal Funds Rate Certificates. Federal Funds Rate Certificates will
bear interest at the interest rates (calculated with reference to the Federal
Funds Rate and the Spread and/or the Spread Multiplier, if any) specified in the
applicable Prospectus Supplement.
The "Federal Funds Rate" means, with respect to any Record Date, the
rate on such date for federal funds, as published in H.15(519) under the heading
"Federal Funds (Effective)." If such rate is not published by 9:00 a.m., New
York City time, on the Calculation Date pertaining to such Record Date, the
Federal Funds Rate will be the rate on such Record Date, as published by the
Federal Reserve Bank of New York in Composite Quotations under the heading
"Federal Funds/Effective Rate." If such rate is not
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<PAGE>
published in Composite Quotations by 3:00 p.m., New York City time, on the
Calculation Date pertaining to such Record Date, then the Federal Funds Rate for
such Record Date will be calculated by the Calculation Agent and will be the
arithmetic mean of the rates for the last transaction in overnight federal funds
arranged by three leading brokers of federal funds transactions in The City of
New York, selected by the Calculation Agent after consultation with the
Depositor, as of 9:00 a.m., New York City time, on such Record Date; provided
that, if the brokers selected as aforesaid by the Calculation Agent are not
arranging such transactions, the interest rate for the period commencing on the
Interest Reset Date following such Record Date will be the interest rate borne
by such Federal Funds Certificates on such Record Date.
LIBOR Certificates. LIBOR Certificates will bear interest at the
interest rates (calculated with reference to LIBOR and the Spread and/or the
Spread Multiplier, if any) specified in the applicable Prospectus Supplement.
"LIBOR" means, with respect to any Record Date, the rate determined by
the Calculation Agent in accordance with either clause (1) or clause (2) below,
as specified in the applicable Prospectus Supplement:
(1) The rate for deposits in U.S. dollars of the Index
Maturity specified in the applicable Prospectus
Supplement, commencing on the second London Banking
Day immediately following such Record Date, that
appears on the Telerate Page 3750 as of 11:00 a.m.,
London time, on such Record Date ("LIBOR Telerate").
"Telerate Page 3750" means the display designated as
page "3750" on the Telerate Service (or such other
page as may replace the page 3750 on that service or
such other service or services as may be designated
by the British Bankers' Association for the purpose
of displaying London interbank offered rates for U.S.
dollar deposits).
(2) The arithmetic mean of the offered rates for deposits
in U.S. dollars having the Index Maturity specified
in the applicable Prospectus Supplement, commencing
on the second London Banking Day immediately
following such Record Date, that appear on the
Reuters Screen LIBO Page as of 11:00 a.m., London
time, on such Record Date, if at least two such
offered rates appear on the Reuters Screen LIBO Page
("LIBOR Reuters"). "Reuters Screen LIBO Page" means
the display designated as Page "LIBO" on the Reuters
Monitor Money Rate Service (or such other page as may
replace the LIBO page on that service for the purpose
of displaying London interbank offered rates of major
banks).
If neither LIBOR Telerate nor LIBOR Reuters is specified in the
applicable Prospectus Supplement, LIBOR will be determined as if LIBOR Telerate
had been specified.
If (i) in the case where paragraph (1) above applies, no rate appears
on the Telerate Page 3750 or (ii) in the case where paragraph (2) above applies,
fewer than two offered rates appear on the Reuters Screen LIBO Page, LIBOR in
respect of such Record Date will be determined by the Calculation Agent on the
basis of the rates at which deposits in U.S. dollars of the Index Maturity
specified in the applicable Prospectus Supplement are offered to prime banks in
the London interbank market at approximately 11:00 a.m., London time, on such
Record Date by four major banks ("Reference Banks") in the London interbank
market, selected by the Calculation Agent, commencing on the second London
Banking Day immediately following such Record Date in a principal amount of not
less than $1,000,000 that is representative for a single transaction in such
market at such time. The Calculation Agent will request the principal London
office of each of the Reference Banks to provide a quotation of its rate. If at
least two such quotations are provided, LIBOR for such Record Date will be the
arithmetic mean of such quotations. If fewer than two quotations are provided,
LIBOR for such Record Date will be the arithmetic mean of the rates quoted at
approximately 11:00 a.m., New York City time, on such Record Date by three major
commercial or investment banks (which may include Merrill Lynch & Co. or any of
its affiliates) in The City of New York, selected by the Calculation Agent, for
U.S. dollar loans of the applicable Index Maturity to leading European banks,
commencing on the second London Banking Day immediately following such Record
Date, in a principal amount of not less than $1,000,000 that is representative
for a single transaction in such market at such time; provided that, if the
banks selected as aforesaid by the Calculation Agent are not quoting such rates,
the interest rate for the period commencing on the Interest Reset Date following
such Record Date will be the interest rate borne by such LIBOR Notes on such
Record Date.
If any LIBOR Certificate is indexed to the offered rates for deposits
in a Specified Currency other than U.S. dollars, the applicable Prospectus
Supplement will set forth the method for determining such rates.
Prime Rate Certificates. Prime Rate Certificates will bear interest at
the interest rates (calculated with reference to the Prime Rate and the Spread
and/or the Spread Multiplier, if any) specified in the applicable Prospectus
Supplement.
The "Prime Rate" means, with respect to any Record Date, the rate on
such date, as published in H.15(519) under the heading "Bank Prime Loan." If
such rate is not published by 9:00 a.m., New York City time, on the Calculation
Date pertaining to such Record Date, the Prime Rate will be determined by the
Calculation Agent and will be the arithmetic mean of the rates of interest
publicly announced by each bank named on the "Reuters Screen NYMF Page" as such
bank's prime rate or base lending rate as in effect for such Record Date.
"Reuters Screen NYMF Page" means the display designated as page "NYMF" on the
Reuters Monitor Money Rates Service (or such other page as may replace the NYMF
page on that service for the purpose of displaying prime rates or base lending
rates of major U.S. banks). If fewer than four but more than one such rate
appears on the Reuters Screen NYMF Page for such Record Date, the Prime Rate
will be determined by the Calculation Agent and will be the arithmetic mean of
the prime rates, quoted on the basis
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of the actual number of days in the year divided by 360, as of the close of
business on such Record Date by four major money center banks in The City of New
York, selected by the Calculation Agent after consultation with the Depositor.
If fewer than two such rates appear on the Reuters Screen NYMF Page, the Prime
Rate will be calculated by the Calculation Agent and will be the arithmetic mean
of the prime rates in effect for such Record Date as furnished in The City of
New York by at least three substitute banks or trust companies organized and
doing business under the laws of the United States, or any state thereof, in
each case having total equity capital of at least $500,000,000 and subject to
supervision or examination by federal or state authority, selected by the
Calculation Agent after consultation with the Depositor; provided that, if the
banks or trust companies selected as aforesaid by the Calculation Agent are not
quoting such rates, the interest rate for the period commencing on the Interest
Reset Date following such Record Date will be the interest rate borne by such
Prime Rate Certificates on such Record Date.
Treasury Rate Certificates. Treasury Rate Certificates will bear
interest at the interest rates (calculated with reference to the Treasury Rate
and the Spread and/or the Spread Multiplier, if any) specified in the applicable
Prospectus Supplement.
The "Treasury Rate" means, with respect to any Record Date, the rate
for the auction held on such Record Date of treasury bills of the Index Maturity
specified in the applicable Prospectus Supplement, as published in H.15(519)
under the heading "U.S. Government Securities--Treasury bills-auction average
(investment)." If such rate is not published by 9:00 a.m., New York City time,
on the Calculation Date pertaining to such Record Date, the Prime Rate will be
the auction average rate for such Record Date (expressed as a bond equivalent,
rounded to the nearest one-hundredth of one percent, with five one-thousandths
of a percent rounded upward, on the basis of a year of 365 or 366 days, as
applicable, and applied on a daily basis) as otherwise announced by the United
States Department of the Treasury. If the results of the auction of treasury
bills having the applicable 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 Record Date, then the Treasury Rate will be
calculated by the Calculation Agent and will 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 Record Date,
of three leading primary United States government securities dealers, selected
by the Calculation Agent after consultation with the Depositor, for the issue of
treasury bills with a remaining maturity closest to the applicable Index
Maturity; provided that, if the dealers selected as aforesaid by the Calculation
Agent are not quoting such rates, the interest rate for the period commencing on
the Interest Reset Date following such Record Date will be the interest rate
borne by such Treasury Rate Certificates on such Record 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 flows on the Deposited Assets. The applicable
Prospectus Supplement will include a section entitled "Description of the
Certificates--Collections and Distributions" which will set forth the priority
of distributions on each Class of Certificates in a given Series. The
outstanding Certificate Principal Balance of a Certificate 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
Certificate Principal Balance of Certificates of a Series will equal the
outstanding aggregate principal balance of the related Deposited Assets as of
the applicable Cut-off Date. The initial aggregate Certificate Principal Balance
of a Series will be specified in the applicable Prospectus Supplement.
Optional Exchange
The applicable Prospectus Supplement may provide that any of the
Depositor, Merrill Lynch & Co. or the Trustee, or their respective affiliates
and designees, may exchange Certificates of any given Series (an "Exchangeable
Series") for a pro rata portion of the Deposited Assets (an "Optional Exchange
Right"). The applicable Prospectus Supplement will specify the terms upon which
an Optional Exchange Right may be exercised; provided that (a) any Optional
Exchange Right shall be exercisable only to the extent that the exercise of such
right (i) would not affect the Trust's ability to be exempt under Rule 3a-7
under the Investment Company Act of 1940, as amended, and all applicable rules,
regulations and interpretations thereunder and (ii) would not affect the
characterization of the Trust as a "grantor trust" under the Code, and (b) if
the Deposited Assets constitute a pool of Underlying Securities, any exercise of
the Optional Exchange Right will be effected so that, with respect to each
series or issue of Underlying Securities included in such pool (together with
any related assets that credit enhance or otherwise support that series or issue
of Underlying Securities), the proportion that the principal amount of such
series or issue of Underlying Securities (together with such related assets)
bears to the aggregate principal amount of Certificates immediately prior to
such exercise will be equal to the proportion that the principal amount of such
series or issue of Underlying Securities (together with such related assets)
bears to the aggregate principal amount of Certificates immediately after such
exercise. In addition, the exercise of an Optional Exchange Right will decrease
the aggregate amount of Certificates of the applicable Exchangeable Series
outstanding. See "Risk Factors--General Unavailability of Optional Exchange."
While the exercise of an Optional Exchange will decrease the aggregate
amount of Certificates of the applicable Exchangeable Series outstanding, the
availability of the Optional Exchange Right may increase liquidity for the
Certificateholders. The ability to exchange Certificates for Underlying
Securities enables the Depositor, Merrill Lynch & Co. or the Trustee, or any of
their respective affiliates or designees, to sell the Underlying Security, which
may be part of a more liquid issue than the Certificates, at a better price for
the holder than the sale of the less liquid Certificates.
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Default and Remedies
If there is a payment default on or acceleration of the Underlying
Securities, then the Trustee of the relevant Trust will exercise one of the
following remedies: (i) direct the Market Agent to sell all of such Underlying
Securities and a pro rata portion of the Related Assets and distribute the
proceeds from such sale to the Certificateholders in accordance with the
Allocation Ratio (any such sale may result in a loss to the Certificateholders
of the relevant Series if the sale price is less than the purchase price for
such Underlying Securities), (ii) distribute such Underlying Securities and a
pro rata portion of the Related Assets in kind to the Certificateholders in
accordance with the Allocation Ratio, or (iii) elect either (i) or (ii) based
upon a majority of votes cast by the affected Certificateholders. The choice of
remedies will be set forth for a given Series in the Prospectus Supplement, and
the Trustee, Depositor and Certificateholders will have no discretion in this
respect.
The "Allocation Ratio" is the allocation between Classes of a given
Series of the total expected cash flows from the Deposited Assets of that
Series. The Prospectus Supplement for any Series with more than one Class will
set forth the Allocation Ratio for that Series. In addition to default or
acceleration on Underlying Securities, the Allocation Ratio relates to voting
rights held by owners of Underlying Securities because such rights will be
allocated among the Certificateholders of different Classes of a given Series in
accordance with their economic interests. Further, the Allocation Ratio applies
in the event of a sale or distribution of Underlying Securities once an issuer
of Concentrated Underlying Securities ceases to file periodic reports under the
Exchange Act, as discussed below under "Description of Deposited
Assets--Principal Terms of Underlying Securities."
Call Right
Merrill Lynch & Co. or the Depositor or, if so specified in the
relevant Prospectus Supplement, a transferee as a result of a private placement
to eligible investors, may hold the right to purchase all or some of the
Certificates of a given Series or Class from the holders thereof (the "Call on
Certificates") or all or some of the Underlying Securities of a given Series
from the Trust (the "Call on Underlying Securities" and, together with the Call
on Certificates, the "Call Right"). If one or more specified persons holds a
Call Right, the applicable Prospectus Supplement will designate such Series as a
"Callable Series."
The terms upon which any such specified person or entity may exercise a
Call Right will be specified in the applicable Prospectus Supplement. Such terms
may relate to, but are not limited to, the following:
(a) the initial holder of the Call Right,
(b) whether the Certificate Principal Balance or Notional
Amount of each Certificate being purchased pursuant
to the Call Right must be an Authorized Denomination;
(c) the Call Date or Dates; and
(d) the Call Price.
After receiving notice of the exercise of a Call Right, the Trustee
will provide notice thereof as specified in the Standard Terms. Upon the
satisfaction of any applicable conditions to the exercise of a Call Right, each
Certificateholder will be entitled to receive (in the case of a purchase of less
than all of the Certificates) payment of a pro rata share of the Call Price paid
in connection with such exercise. In addition, in conjunction with the exercise
of a Call on Underlying Securities in respect of all or a portion of the
Underlying Securities, the Certificates will be redeemed in whole, pro rata or
in accordance with the Allocation Ratio, as applicable and as specified in the
related Prospectus Supplement. A Call Right is not expected to be exercised
unless the value of the Underlying Securities exceeds the Call Price payable
upon exercise of the Call Right.
Put Right
Certificates may be issued with Underlying Securities that permit the
holder thereof to require the Underlying Securities Issuer to repurchase or
otherwise repay (in each case, a "Put Option") such Underlying Securities
("Puttable Underlying Securities") on or after a fixed date. In such cases, the
Trustee for such Series of Certificates will exercise the Put Option on the
first date such option is available to be exercised (the "Put Date") and the Put
Date will also be the Final Scheduled Distribution Date with respect to such
Series; provided, however, if the holder of a Call Right has exercised that
right prior to the Final Scheduled Distribution Date, then the Certificates of
the Callable Series will be redeemed as described in "Description of the
Certificates--Call Right." The Depositor will not issue a Series of Certificates
with Puttable Underlying Securities if it would either (i) cause the Trust or
Depositor to fail to satisfy the applicable requirements for exemption under
Rule 3a-7 under the Investment Company Act of 1940 or (ii) affect the
characterization of the Trust as a "grantor trust" under the Code.
Global Securities
Unless otherwise specified in the applicable Prospectus Supplement, all
Certificates of a given Series will, upon issuance, be represented by one or
more Global Securities that will be deposited with, or on behalf of, DTC, and
registered in the name of Cede,
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as nominee of DTC. 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.
DTC has advised the Depositor as follows: DTC is a limited-purpose
trust company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code, and a "Clearing Agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC 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 DTC
("Participants") in such securities through electronic book-entry changes in
accounts of the Participants, thereby eliminating the need for physical movement
of securities certificates. DTC's Participants include securities brokers and
dealers (including Merrill Lynch & Co.), banks, trust companies, clearing
corporations and certain other organizations, some of which (and/or their
representatives) own DTC. Access to DTC'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. DTC has confirmed to the Depositor 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 credited
shall be designated by the underwriters of such Certificates, or, if such
Certificates are offered and sold directly through one or more agents, by the
Depositor or such agent or agents. Ownership of beneficial interests in a Global
Security will be limited to Participants or persons or entities 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 or entities 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 Certificateholder of the individual Certificates
represented by such Global Security for all purposes under the Trust Agreement
governing such Certificates. Except as set forth below, owners of beneficial
interests in a Global Security will not be entitled to have 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 Certificateholders thereof under the Trust
Agreement governing such Certificates. Because the Depositary can act only on
behalf of its Participants, the ability of a holder of any Certificate to pledge
that Certificate to persons or entities that do not participate in the
Depositary's system, or to otherwise act with respect to such Certificate, may
be limited due to the lack of a physical certificate for such Certificate.
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 Depositor, the Trustee or Securities Intermediary
for such Certificates, any Paying Agent or the Certificate Registrar for such
Certificates will have responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial interests in such Global
Security or for maintaining, supervising or reviewing any records relating to
such beneficial interests.
The Depositor expects that the Depositary for Certificates of a given
Series, upon receipt of any distribution of principal, premium or interest in
respect of a definitive Global Security representing any of such Certificates,
will immediately credit 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
Depositary also expects that payments by Participants to owners of beneficial
interests in such Global Security held through such Participants will be
registered in "street name" and will be the responsibility of such Participants.
If the Depositary for Certificates of a given Series is at any time
unwilling or unable to continue as depository and a successor depository is not
appointed by the Depositor within 90 days, the Depositor will issue individual
Definitive Certificates in exchange for the Global Security or Securities
representing such Certificates. In addition, the Depositor may at any time and
in its sole discretion determine not to have any Certificates of a given Series
represented by one or more Global Securities and, in such event, will issue
Definitive Certificates of such Series in exchange for the Global Security or
Securities representing such Certificates. Further, if the Depositor so
specifies with respect to the Certificates of a given Series, an owner of a
beneficial interest in a Global Security representing Certificates of such
Series may, on terms acceptable to the Depositor 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 Series represented by such Global Security equal in
principal amount to such beneficial interest and to have such Definitive
Certificates registered in its name.
The applicable Prospectus Supplement will set forth any specific terms
of the depository arrangement with respect to any Series of Certificates being
offered thereby to the extent not set forth or different from the description
set forth above.
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DESCRIPTION OF THE 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. Wherever particular sections
or defined terms of the Standard Terms 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 any Series of Certificates is issued, the Depositor will
cause the Underlying Securities and the other Deposited Assets specified in the
Prospectus Supplement, if any, to be assigned and delivered to the Trustee to be
deposited in the related Trust, together with all principal, premium (if any)
and interest received by or on behalf of the Depositor on or with respect to
such Underlying Securities and other 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. Concurrently with such assignment, the
Depositor will execute, and the Trustee will authenticate and deliver, the
Certificates to the Depositor in exchange for the Underlying Securities and
other Deposited Assets, if any. Each Deposited Asset will be identified in a
schedule to the Trust Agreement. Such schedule will include certain summary
identifying information with respect to each Underlying Security and each other
Deposited Asset as of the Cut-off Date. Such schedule will include, to the
extent applicable, information regarding the payment terms of any Concentrated
Underlying Security, the Retained Interest, if any, with respect thereto, the
maturity or terms thereof, the rating, if any, thereof and any other material
information with respect thereto.
In addition, the Depositor will, with respect to each Deposited Asset,
deliver or cause to be delivered to the Trustee (or to the custodian hereinafter
referred to) all documents necessary to transfer ownership of such Deposited
Asset to the Trustee. The Trustee (or such custodian) will hold such documents
in trust for the benefit of the Certificateholders.
The Depositor will make certain representations and warranties
regarding its authority to enter into, and its ability to perform its
obligations under, the Trust Agreement. Upon a breach of any such representation
of the Depositor which materially and adversely affects the interests of the
Certificateholders, the Depositor 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
administrative agents, will establish and maintain certain accounts for the
benefit of the holders of the relevant Certificates and will deposit in such
accounts all amounts received by it in respect of the Deposited Assets. The
Trustee on behalf of the Trust may direct any depository institution maintaining
such accounts to invest the funds in such accounts in one or more Eligible
Investments (as defined in the Trust Agreement) bearing interest or sold at a
discount. Any earnings with respect to such investments will be paid to, and any
losses with respect to such investments will be solely for the account of, the
Certificateholders (and, if applicable, the holder of the Retained Interest) in
accordance with the Allocation Ratio. Further, the Trustee or such other person
specified in the Prospectus Supplement, 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 and provided further 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.
Realization upon Defaulted Deposited Assets. The Trustee, as
administrator with respect to the Deposited Assets, 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 under any Credit Support
instrument are to be deposited in the Certificate Account for the related Trust,
subject to withdrawal as described above.
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 any defaulted Deposited Asset; provided that the Trustee will be required
to expend or risk its own funds or otherwise incur financial liability if and
only to the extent specified in the applicable Prospectus Supplement. 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 but unpaid thereon at the applicable interest rate and
(iii) the aggregate amount of expenses incurred by the Trustee in connection
with such proceedings to the extent reimbursable from the assets of the Trust
under the Trust Agreement, the Trust for the applicable Series will realize a
loss in the amount of such difference. To the extent provided in the applicable
Prospectus Supplement, the Trustee 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
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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. A Retained Interest in a Deposited Asset represents a
specified ownership interest therein and a right to a portion of the payments
thereon. 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. After the Trustee deducts all applicable fees (as provided for in the
Trust Agreement) from any partial recovery on an Underlying Security, the
Trustee will allocate any such partial recovery between the holder of the
Retained Interest (if any) and the Certificateholders of the applicable Series.
Advances in Respect of Delinquencies
Unless otherwise specified in the applicable Prospectus Supplement, the
Trustee 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, the Trustee 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 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 Record Date, subject to (i) the Trustee's good faith
determination that such advances will be reimbursable from Related Proceeds (as
defined below) and (ii) such other conditions as may be specified in the
Prospectus Supplement.
Advances are intended to maintain a regular flow of scheduled interest,
premium (if any) and principal payments to holders of the Class or Classes of
Certificates entitled thereto, rather than to guarantee or insure against
losses. Unless otherwise provided in the applicable Prospectus Supplement,
advances of the Trustee'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 Accounts
for such Series to the extent that the Trustee shall determine, in its sole
judgment, that such advance is not ultimately recoverable from Related Proceeds.
If advances have been made by the Trustee from excess funds in the Certificate
Account for any Series, the Trustee 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 applicable
Prospectus Supplement, the obligations, if any, of the Trustee to make advances
may be secured by a cash advance reserve fund or a Surety Bond. If applicable,
information regarding the characteristics of, and the identity of any obligor
on, any such Surety Bond will be set forth in the applicable Prospectus
Supplement.
Certain Matters Regarding the Trustee, the Administrative Agent, and the
Depositor
The Trustee may enter into agreements ("Administration Agreements")
with one or more Administrative Agents in order to delegate certain of its
administrative obligations with respect to a related Series under the Trust
Agreement; provided, however, that
(i) such delegation shall not release the Trustee from the duties,
obligations, responsibilities or liabilities arising under the
Trust Agreement,
(ii) such Administrative Agreement shall not affect the rating of
any Class of Certificates of such Series,
(iii) such agreements are consistent with the terms of the Trust
Agreement,
(iv) the Trustee will remain solely liable for all fees and
expenses it may owe to such Administrative Agent,
(v) the Administrative Agent shall give representations and
warranties in such Administration Agreement which are the same
in substance as those required of the Trustee and
(vi) such Administrative Agent shall meet the eligibility
requirements of the Trustee pursuant to the Trust Agreement.
An Administrative Agent, if any, for each Series of Certificates under the Trust
Agreement will be named in the applicable Prospectus Supplement. The entity
serving as Administrative Agent for any such Series may be the Trustee, the
Securities Intermediary, the Depositor, an affiliate of any of the foregoing, or
any third party and may have other business relationships with the Trustee, the
Securities Intermediary, the Depositor or their respective affiliates. The
applicable Prospectus Supplement will specify the Administrative Agent's
compensation, if any, and the source, manner and priority of payment thereof,
with respect to a given Series of Certificates.
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
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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
Administrative Agent, the Depositor, the Trustee nor any director, officer,
employee, or agent of the Trustee, the Administrative Agent or the Depositor
will incur any liability to the related Trust or Certificateholders for any
action taken, or for refraining from taking any action, in good faith pursuant
to the Trust Agreement or for errors in judgment; provided, however, that none
of the Trustee, the Administrative Agent, the Depositor nor any such director,
officer, employee or agent will be protected against any liability that would
otherwise be imposed by reason of willful misfeasance, bad faith or gross
negligence in the performance of duties thereunder or by reason of reckless
disregard of obligations and duties thereunder. The Trust Agreement will further
provide that the Trustee, an Administrative Agent, the Depositor and any
director, officer, employee or agent of any of them will be entitled to
indemnification by the related Trust and will be held harmless against any loss,
liability or expense incurred in connection with any legal action relating to
the Trust Agreement or the Certificates, other than any loss, liability or
expense incurred by reason of willful misfeasance, bad faith or gross negligence
in the performance of duties thereunder or by reason of reckless disregard of
obligations and duties thereunder. In addition, the Trust Agreement will provide
that the Trustee, an Administrative Agent, and the Depositor are under no
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 their respective opinions may involve it in any expense or liability.
Each of the Trustee, an Administrative Agent, and the Depositor may, 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.
The Trustee, Depositor, and any Administrative Agent shall have no
obligations with respect to the Underlying Securities. The Depositor is not
authorized to proceed against the Underlying Securities Issuer in the event of a
default. Except as expressly provided in the Trust Agreement, the Trustee is not
authorized to proceed against the Underlying Securities Issuer or to assert the
rights and privileges of Certificateholders.
Any person into which the Trustee, the Depositor, or an Administrative
Agent may be merged or consolidated, or any person resulting from any merger of
consolidation to which the Trustee, Depositor, or an Administrative Agent is a
part, or any person succeeding to the business of the Trustee, Depositor, or an
Administrative Agent, will be the successor of the Trustee, Depositor, or such
Administrative Agent (as the case may be) under the Trust Agreement with respect
to the Certificates of a 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 Depositor, or to the Administrative Agent, the Depositor
and the Trustee by the holders of such Certificates evidencing not less than 25%
of the Voting Rights, (ii) any failure by an Administrative Agent duly to
observe or perform in any material respect any of its other covenants or
obligations under its agreement with the Trustee with respect to such Series
which continues unremedied for 30 days after the giving of written notice of
such failure to the Administrative Agent by the Trustee or the Depositor, or to
the Administrative Agent, the Depositor and the Trustee by the holders of such
Certificates evidencing not less than 25% of the Voting Rights and (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 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 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 of the aggregate Voting Rights of Certificates of such
Series applicable to such matter. "Voting Rights" are the portion of the
aggregate voting rights of Underlying Securities allocated to Certificateholders
of each Class within a given Series (and to the holder of the Retained Interest)
in direct proportion to the Allocation Ratio, as set forth in the applicable
Prospectus Supplement.
Upon the occurrence of an Administrative Agent Termination Event, the
Trustee may terminate the relevant Administration Agreement and the rights and
obligations of any such Administrative Agent under any Administration Agreement
in accordance with the terms and conditions of any such Administration
Agreement. In the event of a termination of any such Administration Agreement,
the Trustee shall simultaneously reassume direct responsibility for all
obligations delegated in such Administration Agreement without any act or deed
on the part of the applicable Administrative Agent, and the Trustee shall
administer directly the related Underlying Securities or shall enter into an
Administration Agreement with a successor Administrative Agent which so
qualifies under the requirements set forth above. If the Trustee is unwilling or
unable to act, it may appoint, or petition a court of competent jurisdiction for
the appointment of, an Administrative Agent which so qualifies under the
requirements set forth above. Pending such appointment, the Trustee must 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).
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Trustee Compensation and Payment of Expenses
The applicable Prospectus Supplement will specify the Trustee's
compensation, and the source, manner and priority of payment thereof, with
respect to a given Series of Certificates.
The applicable Series Supplement may provide for the payment by the
Depositor of certain Prepaid Ordinary Expenses (as defined below) of the
Trustee. If the Prepaid Ordinary Expenses set forth in the Series Supplement are
greater than zero, the Trustee will be deemed to agree that the payment of such
amount constitutes full and final satisfaction of and payment for all Ordinary
Expenses. If the Prepaid Ordinary Expenses set forth in the Series Supplement
are zero, the Series Supplement may indicate that Ordinary Expenses will be paid
for by the Trust, in which case the Trustee will be paid on a periodic basis by
the Trust or the Retained Interest at the rate or amount and on the terms
provided for in the Series Supplement. The Trustee has agreed, pursuant to the
Trust Agreement, that its right to receive such payments from the Trust will
constitute full and final satisfaction of and payment for all Ordinary Expenses
and that the Trustee will have no claim on payment of Ordinary Expenses from any
other source, including the Depositor. If the Prepaid Ordinary Expenses set
forth in the Series Supplement are zero, the Series Supplement may provide that
the Depositor will pay to the Trustee from time to time a fee for its services
and expenses as trustee as set forth in the Series Supplement payable at the
times set forth therein. The Trustee will agree, pursuant to the Trust
Agreement, that its right to receive such payments from the Depositor will
constitute full and final satisfaction of and payment for all Ordinary Expenses
and that the Trustee will have no claim for payment of Ordinary Expenses from
the Trust. The Trustee has further agreed that, notwithstanding any failure by
the Depositor to make such periodic payments of Ordinary Expenses, the Trustee
will continue to perform its obligations under the Trust Agreement. The
Depositor's obligations to pay Ordinary Expenses under the Trust Agreement will
be extinguished and of no further effect upon he payment of Ordinary Expenses
due and owing on the termination of the Trust pursuant to the terms of the Trust
Agreement.
Subject to the terms of the Trust Agreement, all Extraordinary
Expenses, to the extent not paid by a third party, are obligations of the Trust,
and when due and payable will be satisfied solely by the Trust. "Extraordinary
Expenses" are any and all costs, expenses or liabilities arising out of the
establishment, existence or administration of the Trust, other than (i) Ordinary
Expenses and (ii) costs and expenses payable by a particular Certificateholder,
the Trustee or the Depositor pursuant to the Trust Agreement. "Ordinary
Expenses" are defined in the Series Supplement and generally will consist of the
Trustee's ordinary expenses and overhead in connection with its services as
Trustee, including (a) the costs and expenses of preparing, sending and
receiving all reports, statements, notices, returns, filings, solicitations of
consent or instructions, or other communications required by the Trust
Agreement, (b) the costs and expenses of holding and making ordinary collection
or payments on the assets of the Trust and of determining and making payments of
interest or principal, (c) the costs and expenses of the Trust's or Trustee's
counsel, accountants and other experts for ordinary or routine consultation or
advice in connection with the establishment, administration and termination of
the Trust, and (d) any other costs and expenses that are or reasonably should
have been expected to be incurred in the ordinary course of administration of
the Trust. If and to the extent specified in the applicable Series Supplement,
in addition to amounts payable to any Administrative Agent, 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 applicable Prospectus Supplement.
The Trustee will not take any action, including appearing in,
instituting or conducting any action or suit under the Trust Agreement or in
relation thereto which is not indemnifiable under the Trust Agreement which, in
the Trustee's opinion, would or might cause it to incur costs, expenses or
liabilities that are Extraordinary Expenses unless (i) the Trustee is satisfied
that it will have adequate security or indemnity in respect of such costs,
expenses and liabilities, (ii) the Trustee has been instructed to do so by
Certificateholders representing not less than the Required Percentage-Remedies,
and (iii) the Certificateholders, pursuant to the instructions given under
clause (ii) above, have agreed that such costs, expenses or liabilities will
either be (x) paid by the Trustee from the Trust, in the case of a vote of 100%
of the aggregate principal amount of Certificates then outstanding, or (y) paid
by the Trustee (which payment will be made out of its own funds and not from
monies on deposit in the Trust), in which case the Trustee will be entitled to
receive, upon demand, reimbursement from those Certificateholders who have
agreed to bear the entire amount of such costs, expenses or liabilities on a pro
rata basis among such Certificateholders.
Optional Exchange
The terms and conditions, if any, upon which Certificates of any Series
may be exchanged for a pro rata portion of the Deposited Assets of the related
Trust will be specified in the related Series Supplement; provided that any such
Optional Exchange Right will be exercisable only to the extent that the
Depositor provides upon the Trustee's request an opinion of counsel that (i)
such exchange would not be inconsistent with continued satisfaction of the
applicable requirements under the Investment Company Act of 1940, as amended,
and (ii) such exchange would not affect the characterization of the Trust as a
"grantor trust" under the Code; provided further that no Certificate may be
exchanged unless the Trustee has received at least 30 days' but not more than 45
days' notice prior to an Optional Exchange Date (as defined in the Supplement),
as more particularly described in the Trust Agreement.
Any tender of a Certificate by the holder thereof for exchange will be
irrevocable. Unless otherwise provided in the applicable Series Supplement, the
Optional Exchange Right may be exercised by the holder of a Certificate for less
than the aggregate principal amount of such Certificate as long as the aggregate
principal amount outstanding after such exchange is a multiple of the minimum
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denomination of such Certificate and all other exchange requirements set forth
in the related Series Supplement are satisfied. Upon such partial exchange, such
Certificate will be canceled and a new Certificate or Certificates for the
remaining principal amount of the Certificate will be issued (which, in the case
of any Certificate issued in registered form, will be in the name of the holder
of such exchanged Certificate).
Voting Rights with Respect to Underlying Securities
Within five Business Days after receipt of notice of any meeting of, or
other occasion for the exercise of Voting Rights or the giving of consents by,
owners of any of the Underlying Securities, the Trustee will give notice to the
Certificateholders, setting forth (i) such information as is contained in such
notice to owners of Underlying Securities, (ii) a statement that the
Certificateholders will be entitled, subject to any applicable provision of law
and any applicable provisions of such Underlying Securities, to instruct the
Trustee as to the exercise of Voting Rights, if any, pertaining to such
Underlying Securities and (iii) a statement as to the manner in which
instructions may be given to the Trustee to give a discretionary proxy to a
person designated in the notice received by the Trustee. The Trustee will give
such notice to the Certificateholders of record on the relevant record date.
Upon the written request of the applicable Certificateholder, received
on or before the date established by the Trustee for such purpose, the Trustee
will endeavor, insofar as practicable and permitted under any applicable
provision of law and any applicable provision of or governing the Underlying
Securities, to vote in accordance with any nondiscretionary instruction set
forth in such written request. The Trustee will not vote except as specifically
authorized and directed in written instructions from the applicable
Certificateholder entitled to give such instructions. Notwithstanding the
foregoing, if the Trustee determines (based upon advice furnished by nationally
recognized independent tax counsel, whether at the request of any
Certificateholder or otherwise) that the exercise of voting rights with respect
to any Underlying Securities could result in a "sale or other disposition" of
such Underlying Securities within the meaning of Section 1001(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), the Trustee will exercise such
voting rights in a manner that would not result in any such sale or other
disposition. The Trustee will have no responsibility to make any such
determination.
By accepting delivery of a Certificate, whether upon original issuance
or subsequent transfer, exchange or replacement thereof, and without regard to
whether ownership is beneficial or otherwise, the Certificateholder agrees so
long as it is an owner of such Certificate that it will not grant any consent
(i) to any conversion of the timing of payment of, or the method or rate of
accruing, interest on the Underlying Securities underlying the Certificates held
by such Certificateholder or (ii) to any redemption or prepayment of the
Underlying Securities underlying the Certificates held by such
Certificateholder. The Trustee will not grant any consent solicited from the
owners of the Underlying Securities underlying the Certificates with respect to
the matters set forth under this section, "Description of the Trust
Agreement--Voting Rights with Respect to Underlying Securities," nor will it
accept or take any action in respect of any consent, proxy or instructions
received from any Certificateholder in contravention of the provisions of such
Section.
Limitations on Rights of Certificateholders
No Certificateholder of a given Series will have the right under the
Trust Agreement to institute any proceeding with respect thereto unless (i) such
Certificateholder previously has given to the Trustee written notice of a
continuing breach, (ii) Certificateholders evidencing not less than the Required
Percentage-Remedies of the aggregate Voting Rights have made written request
upon the Trustee to institute such proceeding in its own name as Trustee, (iii)
such Certificateholder or Certificateholders have offered the Trustee reasonable
indemnity, (iv) the Trustee for 15 days has failed to institute any such
proceeding and (v) no direction inconsistent with such written request has been
given to the Trustee during such 15 day period by Certificateholders evidencing
not less than the Required Percentage-Remedies of the aggregate Voting Rights.
The Trustee, however, is under no obligation to exercise any of the trusts or
powers vested in it by the Trust Agreement, to make any investigation into the
facts of matters arising under the Trust Agreement or stated in any document
believed by it to be genuine, unless requested in writing to do so by
Certificateholders of the Required Percentage-Direction of Trustee (as defined
in the Trust Agreement) 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
Unless otherwise specified in the applicable Prospectus Supplement, the
Trust Agreement may be amended from time to time by the Depositor and the
Trustee without notice to or the consent of any of the Certificateholders for
any of the following purposes:
(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,
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(iii) to appoint a change in Trustee for a Series of
Certificates subsequent to the Closing Date (as
defined in the applicable Supplement) for such
Series,
(iv) to provide for administration of separate Trusts by
more than one trustee,
(v) to provide for a successor Trustee with respect to
Certificates of one or more Series,
(vi) to provide for the issuance of a new Series of
Certificates pursuant to a Supplement,
(vii) 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,
(viii) to add to the covenants, restrictions or obligations
of the Depositor, the Administrative Agent, if any,
or the Trustee for the benefit of the
Certificateholders,
(ix) to comply with any requirements imposed by the Code,
or
(x) to add, change or eliminate any other provisions with
respect to matters or questions arising under this
Trust Agreement; provided, however, that in the case
of any amendment the Rating Agency Condition shall be
satisfied with respect to such amendment and that no
such amendment shall cause any Trust created
hereunder to fail to qualify as a fixed investment
trust or "grantor trust") under the Code.
Without limiting the generality of the foregoing, unless otherwise
specified in the applicable Prospectus Supplement, the Trust Agreement also may
be modified or amended from time to time by the Depositor, the Trustee and the
Securities Intermediary, with the consent of the holders of Certificates
evidencing the Required Percentage-Amendment of the aggregate 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 if
such modification or amendment would materially adversely affect the rating of
any Series or Class by each Rating Agency, the Required Percentage specified in
the related Series Supplement shall include an additional specified percentage
of the Certificates of such Series or Class, and provided further that no such
amendment will (i) reduce in any manner the amount of, or delay the timing of,
payments received on Deposited Assets which are required to be distributed on
any Certificate without the consent of the holders of such Certificates or (ii)
reduce the percentage of aggregate Voting Rights required to take any action
specified in the Trust Agreement, without the consent of the holders of all
Certificates of such Series or Class then Outstanding.
Unless otherwise specified in the applicable Prospectus Supplement,
holders of Certificates evidencing not less than the Required Percentage to
waive 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 Depositor or the Trustee with certain restrictive
provisions, if any, of the Trust Agreement before the time for such compliance
and (ii) waive any past default under the Trust Agreement with respect to
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.
Reports to Certificateholders; Notices
Reports to Certificateholders. With each distribution to
Certificateholders of a Series, the Trustee will forward or cause to be
forwarded to each such Certificateholder, to the Depositor and to such other
parties as may be specified in the Trust Agreement, a statement setting forth:
(i) the amounts received by the Trustee as of the last
such statement in respect of principal, interest and
premium on the Underlying Securities and any amounts
received by the Trustee with respect to any
derivatives transaction entered into by the Trust
pursuant to the terms of the Trust Agreement,
(ii) any amounts payable by the Trust as of such date
pursuant to any derivatives transaction entered into
by the Trust pursuant to the terms of the Trust
Agreement,
(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 (or that such
Certificateholder reasonably requests in writing) to
enable Certificateholders to prepare their tax
returns,
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(iv) the amount of the distribution on such Distribution
Date to Certificateholders of each Class of such
Series allocable to principal of and premium, if any,
and interest on the Certificates of each such Class,
and the amount of aggregate unpaid interest accrued
as of such Distribution Date,
(v) in the case of Certificates bearing interest on a
floating rate basis, the respective floating rate
applicable to such Certificates on such Distribution
Date, as calculated in accordance with the method
specified in such Certificates and the related Series
Supplement,
(vi) if the Series Supplement provides for Advances (as
defined in the Trust Agreement), the aggregate amount
of Advances, if any, included in such distribution,
and the aggregate amount of unreimbursed Advances, if
any, at the close of business on such Distribution
Date,
(vii) the aggregate stated principal amount and, if
applicable, Notional Amount of the Underlying
Securities related to such Series, the current
interest rate or rates thereon at the close of
business on such Distribution Date and, if such
rating has changed since the last Distribution Date,
the current rating assigned thereon by the applicable
Rating Agency,
(viii) the aggregate principal amount (or Notional Amount,
if applicable) of each Class of such Series at the
close of business on such Distribution Date,
separately identifying any reduction in such
aggregate principal amount (or Notional Amount) due
to the allocation of certain Realized Losses on such
Distribution Date or otherwise, as provided in the
Trust Agreement,
(ix) as to any Series (or Class within such Series) for
which Credit Support has been obtained, the amount or
notional amount of coverage of each element of Credit
Support (and rating, if any, thereof) included
therein as of the close of business on such
Distribution Date, and
(x) any other information appropriate for a Series, as
specified in the applicable Prospectus Supplement.
Within a reasonable period of time after the end of each calendar year,
the Trustee will furnish to each person who at any time during the calendar year
was a Certificateholder a statement containing the information set forth in
subclause (iii) above, aggregated for such calendar year during which such
person was a Certificateholder. Such obligation of the Trustee will be deemed to
have been satisfied to the extent that substantially comparable information is
provided by the Trustee 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 last address of such holder set forth in the
applicable Certificate Register. Any notice so mailed within the time period
prescribed in the Trust Agreement or Series Supplement shall be conclusively
presumed to have been duly given when mailed, whether or not the
Certificateholder receives such notice.
Evidence as to Compliance
The Trust Agreement will provide that commencing on a certain date and
on or before a specified date in each year thereafter, a firm of independent
public accountants will furnish a statement to the Trustee to the effect that
such firm has examined certain documents and records relating to the
administration of the Deposited Assets during the related 12-month period (or,
in the case of the first such report, the period ending on or before the date
specified in the Prospectus Supplement, which date shall not be more than one
year after the related Original Issue Date) and that, on the basis of certain
agreed upon procedures considered appropriate under the circumstances, such firm
is of the opinion that such administration was conducted in compliance with the
terms of the Trust Agreement, except for such exceptions as such firm shall
believe to be immaterial and such other exceptions and qualifications as shall
be set forth in such report.
The Trust Agreement will also provide for delivery to the Depositor,
the Administrative Agent, if any, and the Trustee on behalf of the
Certificateholders, on or before a specified date in each year, of an annual
statement signed by two officers of the Trustee to the effect that the Trustee
has fulfilled its obligations under the Trust Agreement throughout the preceding
year with respect to any Series of Certificates.
Copies of the annual accountants' statement, 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 applicable Prospectus Supplement.
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Replacement Certificates
If a mutilated Certificate is surrendered at the corporate trust office
or agency of the Trustee in the City or State of New York or the Depositor and
the Trustee receive satisfactory evidence that such Certificate has been lost,
destroyed or stolen it may be replaced upon payment by the holder of such
expenses as may be incurred by the Trustee in connection therewith and the
furnishing of such security and indemnity as the Trustee and the Depositor may
require to hold each of them and any Paying Agent harmless; provided that
neither the Depositor nor the Trustee has received notice that such Certificate
was acquired by a bona fide purchaser.
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 and required to be
paid to them pursuant to the Trust Agreement following final payment or other
liquidation of any remaining Deposited Assets or Credit Support subject thereto
or the disposition of all property acquired upon foreclosure or liquidation of
any such Deposited Assets or Credit Support. In no event, however, will any
Trust created by the Trust Agreement continue beyond the respective date
specified in the applicable Prospectus Supplement, nor will such Trust continue
to exist if its existence would result in a violation of the common-law Rule
Against Perpetuities. 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,"
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 or Credit Support and property
acquired in respect of Deposited Assets or Credit Support 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. 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 or Credit Support for such
Series at the time of purchase being less than the percentage of the aggregate
principal balance of the Deposited Assets or the Credit Support at the Cut-off
Date (as defined in the Trust Agreement) for the Series specified in the
applicable Prospectus Supplement.
Duties of the Trustee
The Trustee makes no representations as to the validity or sufficiency
of the Trust Agreement, the recitals contained therein, the Certificates of any
Series or any Deposited Asset or related document and is not accountable for the
use or application by the Depositor of any of the Certificates or the Deposited
Assets, or the proceeds thereof. 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 applicable Prospectus Supplement. The commercial
bank, national banking association or trust company serving as Trustee will be
unaffiliated with, but may have banking relationships with or provide financial
services to, the Depositor, any Administrative Agent and their respective
affiliates.
DESCRIPTION OF DEPOSITED ASSETS
General
Each Series of Certificates (or, if more than one Class exists, each
Class within such Series) will represent in the aggregate the entire beneficial
ownership interest in the Underlying Securities (which shall be Government
Securities, senior or subordinated publicly traded debt obligations of one or
more corporations, general or limited partnerships, preferred securities of
TOPrS(sm) trusts (as defined below) organized by such issuers, or securities
that are similar to those issued by TOPrS(sm) trusts, in each case organized
under the laws of the United States of America or any state thereof or under the
laws of any foreign jurisdiction, together with other assets. Such other assets
may include cash, cash equivalents, guarantees, Letters of Credit, financial
insurance, interest rate, currency, equity, commodity and credit-linked swaps,
caps, floors, collars and options, forward contracts, structured securities and
other instruments and transactions that credit enhance, hedge or otherwise
support the Underlying Securities (also described under "Risk
Factors--Derivatives") designed to assure the servicing or timely distribution
of payments to holders of the Certificates. Such assets will be described in the
applicable Prospectus Supplement (such assets, together with the Underlying
Securities, the "Deposited Assets"). Underlying Securities will have been issued
pursuant to an effective registration statement filed with the Commission (or an
exemption
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therefrom). If the Underlying Securities represent obligations issued by one or
more Underlying Securities Issuers, such Underlying Securities will satisfy
certain eligibility criteria described below under "Underlying Securities
Issuer." Except for Government Securities, the Underlying Securities will be
purchased in the secondary market and will not be acquired from any Underlying
Securities Issuer (whether as part of any distribution by or pursuant to any
agreement with such Underlying Securities Issuer or otherwise). The Underlying
Securities will represent direct obligations of the United States Government,
one or more corporations, general or limited partnerships, preferred securities
of TOPrs Trusts organized by such issuers, or securities that are similar to
TOPrS(sm), in each case, organized under the laws of the United States or any
state thereof or under the laws of any foreign jurisdiction. No Underlying
Securities Issuer will participate in the offering of the Certificates, nor will
an Underlying Securities Issuer receive any of the proceeds from the sale of
Underlying Securities or from the issuance of the Certificates.
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 a given Series will possess an
equal and ratable undivided ownership interest in such Deposited Assets. The
applicable Prospectus Supplement may, however, specify that certain assets
constituting a part of the Deposited Assets relating to any given Series may be
beneficially owned solely by or deposited solely for the benefit of one Class or
a group of Classes within such Series. In such event, the other Classes of such
Series will not possess any beneficial ownership interest in those specified
assets constituting a part of the Deposited Assets.
This Prospectus relates only to the Certificates offered hereby and
does not relate to the Underlying Securities. The following description of the
Underlying Securities and the Underlying Securities Issuer is intended only to
summarize material characteristics of the Underlying Securities that the
Depositor is permitted to deposit in a Trust and does not purport to be a
complete description of any prospectus relating to Underlying Securities or of
any Underlying Securities Indenture.
The applicable Prospectus Supplement will describe the material terms
of the Deposited Assets, including the material terms of any derivative
instruments that are included in the Deposited Assets.
Underlying Securities Issuer
The Underlying Securities Issuers will be the United States Government,
one or more corporations, general or limited partnerships, TOPrS(sm) trusts
organized by such issuers, or by issuers of preferred securities that are
similar to TOPrS(sm), in each case organized under the laws of the United States
or any state thereof or under the laws of any foreign jurisdiction. The
applicable Prospectus Supplement will provide only limited information about
each Underlying Securities Issuer, such as its name, place of incorporation and
the address of its principal offices, unless a Trust consists of Concentrated
Underlying Securities. In that event, the applicable Prospectus Supplement will
include audited financial statements of the issuer of such Concentrated
Underlying Securities; provided that if such Underlying Securities Issuer is
eligible to use Form S-3 for a primary offering, then the applicable Prospectus
Supplement will refer only to the periodic reports filed with the Commission by
such Underlying Securities Issuer, which periodic reports should be reviewed by
any prospective Certificateholder of the Trust containing such Underlying
Securities. See "Risk Factors--Information Concerning Underlying Securities
Issuers; Risk of Loss if Public Information not Available."
Reports and information referred to in the preceding paragraph may be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
following Regional Offices of the Commission: New York Regional Office, Room
1100, 7 World Trade Center, New York, New York 10048 and Chicago Regional
Office, Suite 1400, Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511, and copies of such material can be obtained
from the Public Reference Section of the Commission, Washington, D.C. 20549, at
prescribed rates. Such material may also be accessed electronically by means of
the Commission's home page on the Internet at http://www.sec.gov.
WITH RESPECT TO ANY UNDERLYING SECURITIES, A PROSPECTIVE
CERTIFICATEHOLDER SHOULD OBTAIN AND EVALUATE THE SAME INFORMATION CONCERNING THE
RELEVANT UNDERLYING SECURITIES ISSUER AS IT WOULD OBTAIN AND EVALUATE IF IT WERE
INVESTING DIRECTLY IN THE UNDERLYING SECURITIES OR IN THE ISSUER THEREOF.
None of the Depositor, the Trustee, the Securities Intermediary,
Merrill Lynch & Co. or any of their respective affiliates assumes any
responsibility for the accuracy or completeness of any publicly available
information concerning any Underlying Securities Issuer (including, without
limitation, any investigation as to its financial condition or creditworthiness)
or concerning any Underlying Securities (whether or not such information is
filed with the Commission) or otherwise considered by a purchaser of the
Certificates in making its investment decision in connection therewith; provided
that the foregoing shall not apply to any information concerning the Underlying
Securities and any Underlying Securities Issuer that is expressly set forth in
this Prospectus or an applicable Prospectus Supplement (i.e., identifying
information, information of the type described in an applicable Prospectus
Supplement under "Description of the Underlying Securities--General" and
"Description of the Underlying Securities--Underlying Securities Indenture."
Underlying Securities Indenture
General. Except for Government Securities or unless otherwise specified
in the applicable Prospectus Supplement, each Underlying Security will have been
issued pursuant to an Underlying Securities Indenture between the Underlying
Securities Issuer and
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a trustee (the "Underlying Securities Trustee"). The Underlying Securities
Indenture and the Underlying Securities Trustee will be qualified under the
Trust Indenture Act of 1939 (the "Trust Indenture Act") and the Underlying
Securities Indenture will contain certain provisions required by the Trust
Indenture Act. Government Securities are not issued pursuant to an indenture and
are exempt from the Securities Act under Section 3(a)(2) thereof and from the
Trust Indenture Act under Section 304(a)(4) thereof.
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 one or
more of the issuer's subsidiaries', ability to: (i) consolidate, merge, or
transfer or lease assets, (ii) incur or suffer to exist any lien, charge or
encumbrance upon all or some specified portion 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 or
(iii) declare or pay any cash dividends, or make any distributions on or in
respect of, or purchase, redeem, exchange or otherwise acquire or retire for
value, any capital stock or subordinated indebtedness of the issuer or its
subsidiaries, if any. 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 or permit certain actions to be taken only
if compliance with such covenants can be demonstrated at the time the actions
are to be taken. 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 Underlying Securities Indenture for one or more Underlying
Securities included in a Trust may include some, all or none of the foregoing
provisions or variations thereof, together with additional covenants not
discussed herein. There can be no assurance that any type of Underlying
Securities will be subject to any such covenants or that any such covenants will
protect the Trust as a holder of the Underlying Securities against losses. The
Prospectus Supplement used to offer any Series of Certificates will describe
material covenants concerning any Concentrated Underlying Security and, as
applicable, will describe material covenants which are common to any pool of
Underlying Securities. Any material risk factors associated with non-investment
grade Underlying Securities deposited into a Trust will be set forth in the
applicable Prospectus Supplement.
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 and/or one or more of
its subsidiaries to make any required payment of principal (and premium, if any)
or interest with respect to other material outstanding debt obligations or the
acceleration by or on behalf of the holders of such securities, and (iv) certain
events of bankruptcy or insolvency with respect to the issuer and/or one or more
of its subsidiaries.
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
the indenture trustee 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 obtaining the consent of the indenture
trustee, that the proceeding be brought for the ratable benefit of all holders
of the security and/or that 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 Underlying Securities Indenture may include some, all or none of
the foregoing provisions or variations thereof, together with additional events
of default and/or remedies not discussed herein. The Prospectus Supplement for
any Series of Certificates will describe the events of default under the
Underlying Securities Indenture for any Concentrated Underlying Security and the
applicable remedies. The Prospectus Supplement for any Trust consisting of a
pool of Underlying Securities will describe certain common Underlying Security
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 Underlying Securities,
against losses. Furthermore, a Certificateholder will have no independent legal
right to exercise any remedies with respect to the Underlying Securities and
will be required to rely on the Trustee of the applicable Trust to pursue any
available remedies on behalf of the relevant Certificateholders in accordance
with the terms of the Trust Agreement. If an Underlying Security Event of
Default occurs and the Trustee as a holder of the Underlying Securities is
entitled to vote or take such other action to declare the principal amount of an
Underlying Security and any accrued and unpaid interest thereon to be due and
payable, the Certificateholders' objectives may differ from those of holders of
other securities of the same Series and Class as any Underlying Security in
determining whether to require the acceleration of the Underlying Securities.
See "Risk Factors--Limitation on Remedies Due to Passive Nature of the Trust."
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Subordination. If specified in the applicable Prospectus Supplement,
certain of the Underlying Securities with respect to any Trust may be either
senior ("Senior Underlying Securities") or subordinated ("Subordinated
Underlying Securities") in right to payment to other existing or future
indebtedness of the Underlying Securities Issuer. With respect to Subordinated
Underlying Securities, to the extent of the subordination provisions of such
securities, and after the occurrence of certain events, security holders and
direct creditors whose claims are senior to Subordinated Underlying Securities,
if any, may be entitled to receive payment of the full amount due thereon before
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 as a holder of subordinated debt may suffer
a greater loss than if it held unsubordinated debt of the Underlying Securities
Issuer. There can be no assurance, however, that in the event of a bankruptcy or
similar insolvency proceeding the Trust as a holder of Senior Underlying
Securities would receive all payments in respect of such securities even if
holders of subordinated securities receive no amounts in respect of such
securities. Reference is made to the Prospectus Supplement used to offer any
Series of Certificates for a description of any subordination provisions with
respect to any Concentrated Underlying Securities and the percentage of Senior
Underlying Securities and Subordinated Underlying Securities, if any, in a Trust
comprised of a pool of securities.
Secured Obligations. Certain of the Underlying Securities with respect
to any Trust may represent secured obligations of the Underlying Securities
Issuer ("Secured Underlying Securities"). 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 issued, an issuer
of secured obligations has the right to remain in possession and retain
exclusive control of the collateral 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 typically 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 Underlying Securities Indenture with respect to Secured Underlying
Securities may include some, all or none of the foregoing provisions or
variations thereof. The Prospectus Supplement used to offer any Series of
Certificates that includes Concentrated Underlying Securities which are Secured
Underlying Securities will describe the material security provisions of such
Underlying Securities and the related collateral. With respect to any Trust
composed of a pool of securities, a substantial portion of which are Secured
Underlying Securities, the applicable Prospectus Supplement will disclose
certain material information with respect to such security provisions and the
collateral.
Principal Terms of Underlying Securities
Reference is made to the applicable Prospectus Supplement for each
Series of Certificates for a description of the following terms, as applicable,
of any Concentrated Underlying Security:
(i) the title and series of such Underlying Securities,
and the aggregate principal amount, denomination and
form thereof,
(ii) whether such securities are senior or subordinated to
any other existing or future obligations of the
Underlying Securities Issuer,
(iii) whether any of the obligations are secured and the
nature of any collateral,
(iv) the limit, if any, upon the aggregate principal
amount of such securities,
(v) the dates on which, or the range of dates within
which, the principal of (and premium, if any, on)
such securities will be payable,
(vi) the rate or rates, or the method of determination
thereof, at which such Underlying Securities will
bear interest, if any ("Underlying Securities Rate"),
the date or dates from which such interest will
accrue, and the dates on which such interest will be
payable,
(vii) the obligation, if any, of the Underlying Securities
Issuer to redeem such Underlying Securities and other
securities of the same Class or Series pursuant to
any sinking fund or similar provisions, or at the
option of a holder thereof, and the periods within
which or the dates on which, the prices at which and
the terms and conditions upon which such securities
may be redeemed or repurchased, in whole or in part,
pursuant to such obligation,
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(viii) the periods within which or the dates on which, the
prices at which and the terms and conditions upon
which such securities may be redeemed, if any, in
whole or in part, at the option of the Underlying
Securities Issuer,
(ix) the periods within which or the dates on which, the
prices at which and the terms and conditions upon
which the holder of the Underlying Securities may
require the issuer of the Puttable Underlying
Securities to repurchase or otherwise repay such
Puttable Underlying Securities,
(x) whether the Underlying Securities were issued at a
price lower than the principal amount thereof,
(xi) if other than U.S. dollars, the currency in which
such securities are denominated, or in which payment
of the principal of (and premium, if any) or any
interest on such Underlying Securities will be made,
and the circumstances, if any, when such currency of
payment may be changed,
(xii) material events of default or restrictive covenants
provided for with respect to such Underlying
Securities,
(xiii) the rating thereof, if any,
(xiv) the principal United States market on which the
Underlying Securities are traded, if any, and
(xv) any other material terms of such Underlying
Securities.
With respect to a Trust comprised of a pool of Underlying Securities,
the applicable Prospectus Supplement will describe the composition of the
Underlying Securities pool as of the Cut-off Date, certain material events of
default or restrictive covenants common to the Underlying Securities, and, on an
aggregate, percentage or weighted average basis, as applicable, the
characteristics of the pool with respect to the terms set forth in subclauses
(ii), (iii), (v), (vi), (vii), (viii), (ix), (x) and (xi) of the preceding
paragraph and any other material terms regarding such pool of securities.
Other than publicly traded debt securities which satisfy the necessary
requirements set forth herein for Underlying Securities, the Underlying
Securities may consist of, or be similar in structure to, Trust Originated
Preferred Securities ("TOPrS(sm)") in respect of eligible corporations or
general or limited partnerships. (Trust Originated Preferred Securities and
TOPrS(sm) are service marks of Merrill Lynch & Co.)
If an issuer of Concentrated Underlying Securities ceases to file
periodic reports under the Exchange Act, the Depositor will continue to be
subject to the reporting requirements of the Exchange Act but certain
information with respect to such issuer may be unavailable. In such cases, the
Trustee of the relevant Trust will exercise one of the following remedies: (i)
sell all of such Concentrated Underlying Securities and distribute the proceeds
from such sale to the Certificateholders in accordance with the Allocation Ratio
(any such sale will result in a loss to the Certificateholders of the relevant
Series if the sale price is less than the purchase price for such Concentrated
Underlying Securities), (ii) distribute such Concentrated Underlying Securities
in accordance with the Allocation Ratio, or (iii) elect either (i) or (ii) based
upon a majority of votes cast by the affected Certificateholders. The applicable
Prospectus Supplement will specify which of these two remedies must be exercised
by the Trustee, and the Trustee, the Depositor and the Certificateholders will
have no discretion in this respect.
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. Credit Support directly benefits the relevant Trust
and thereby benefits Certificateholders. Such Credit Support may be provided by
any combination of the following means described below or any other means
described in the applicable Prospectus Supplement. The applicable Prospectus
Supplement will set forth whether the Trust for any Class or 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, including
financial information with respect to any such obligor providing Credit Support
for 20% or more of the aggregate principal amount of such Class or Classes.
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
applicable Prospectus Supplement. Such subordination accordingly provides some
additional Credit Support to those Certificateholders of those other Classes.
For example, if 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 Certificateholders of
any Class of any such Series that is subordinated to another Class, to the
extent and in the manner provided in the applicable Prospectus
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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.
If so provided in the applicable Prospectus Supplement, the Credit
Support for any Series or Class of Certificates may also include other forms of
Credit Support, described below. Any such other forms of Credit Support that are
solely for the benefit of a given Class will be limited to the extent necessary
to make required distributions to the Certificateholders of such Class or as
otherwise specified in the applicable 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. Further, payments to be made in respect of any
forms of Credit Support arranged for on behalf of the Certificateholders may be
required to be paid prior to any distributions that must be made to
Certificateholders.
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 (each, a "Letter of Credit") issued by a bank (a "Letter of Credit
Bank") or a surety bond or bonds (each, 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 applicable Prospectus Supplement, the payment of
such fees or premiums is otherwise provided for. The Trustee or such other
person specified in the applicable Prospectus Supplement will make or cause to
be made draws under the Letter of Credit or the Surety Bond, as the case may be,
under the circumstances and to cover the amounts specified in the applicable
Prospectus Supplement. Any amounts otherwise available under the Letter of
Credit or the Surety Bond will be reduced to the extent of any prior
unreimbursed draws thereunder. The applicable Prospectus Supplement will provide
the manner, priority and source of funds by which any such draws are to be
repaid.
Unless otherwise specified in the applicable Prospectus Supplement, if
the Letter of Credit Bank or the Surety, as applicable, ceases to satisfy any
credit rating or other applicable requirements specified in the applicable
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 applicable 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 applicable Prospectus Supplement. Amounts deposited in
any Reserve Account will be invested in certain permitted investments by, or at
the direction of, the Trustee, the Depositor or such other person as may be
specified in the applicable Prospectus Supplement.
Collections
The Trust Agreement will establish procedures by which the Trustee or
such other person as may be 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 trust account maintained or
controlled by the applicable Trustee for the benefit of such Series (each a
"Certificate Account"). An Administrative Agent, if any is appointed, will
direct the Trustee, and otherwise the Trustee will make all determinations, as
to the appropriate application of such collections and other amounts available
for distribution to the payment of any administrative or collection expenses
(such as the administrative fee) and 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 applicable 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
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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 Allocation
Ratio in respect of each Class of a given Series for purposes of payments of
certain amounts, such as principal, may be different from the Allocation Ratio
assigned to each such Class for payments of other amounts, such as interest or
premium.
CURRENCY RISKS
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
Depositor has no control, such as economic and political events and the supply
of and demand for the relevant currencies. In recent years, rates of exchange
between the U.S. dollar and certain currencies have been highly volatile, and
such volatility may be expected in the future. 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 Certificate 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. At present, the Depositor has identified the
following currencies in which distributions of principal, premium and interest
on Certificates may be made: Australian dollars, Canadian dollars, Danish
kroner, Italian lire, Japanese yen, New Zealand dollars, U.S. dollars and ECU.
However, Certificates distributable in another Specified Currency may be issued
at any time, based upon investor demand for Certificates denominated in such
currencies. 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.
PROSPECTIVE PURCHASERS SHOULD CONSULT THEIR OWN FINANCIAL AND LEGAL
ADVISORS AS TO THE RISKS ENTAILED BY AN INVESTMENT IN CERTIFICATES DENOMINATED
IN A CURRENCY OTHER THAN U.S. DOLLARS. SUCH CERTIFICATES ARE NOT AN APPROPRIATE
INVESTMENT FOR PERSONS WHO ARE UNSOPHISTICATED WITH RESPECT TO FOREIGN CURRENCY
TRANSACTIONS.
Any Prospectus Supplement relating to Certificates having a Specified
Currency other than U.S. dollars will contain 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. Such Prospectus Supplement will also discuss risk factors
relating to any such Specified Currency.
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FEDERAL INCOME TAX CONSEQUENCES
This summary is based on the Internal Revenue Code of 1986, as amended
to the date hereof (the "Code"), revenue rulings, judicial decisions and
existing and proposed Treasury regulations, including final regulations
concerning the tax treatment of debt instruments issued with original issue
discount (the "OID Regulations"), changes to any of which subsequent to the date
of the Prospectus may affect the tax consequences described herein.
This summary discusses only Certificates held by Certificateholders as
capital assets within the meaning of Section 1221 of the Code. It does not
discuss all of the tax consequences that may be relevant to a Certificateholder
in light of its particular circumstances or to Certificateholders subject to
special rules, such as certain financial institutions, insurance companies,
dealers or Certificateholders holding the Certificates as part of a hedging
transaction or straddle. Further, the tax consequences arising from the
ownership of any Series of Certificates with special characteristics will be set
forth in the applicable Prospectus Supplement and a legal opinion of tax counsel
will be filed with the Commission in connection with each such Series of
Certificates. In such opinion, tax counsel will opine as to the tax disclosure
regarding the Certificates set forth in this Prospectus and the applicable
Prospectus Supplement.
In all cases, prospective investors are advised to consult their own
tax advisors regarding the federal tax consequences to them of holding, owning
and disposing of Certificates, including the advisability of making any of the
elections described below, as well as any tax consequences arising under the law
of any state or other taxing jurisdiction.
For purposes of this discussion "U.S. Person" means an individual who,
for federal income tax purposes, is a citizen or resident of the United States
or a corporation, partnership or other entity created or organized in or under
the laws of the United States, any state thereof, or an estate that is subject
to U.S. federal income tax regardless of the source of its income, or a trust if
a court within the United States is able to exercise primary supervision of the
administration of the trust and one or more U.S. persons have the authority to
control all substantial decisions of the trust. "U.S. Owner" means a
Certificateholder that is a U.S. Person and "Non-U.S. Owner" means a
Certificateholder that is not a U.S. Person.
Classification of Investment Arrangement
The arrangement pursuant to which the Certificates will be created and
sold and the Underlying Securities will be administered will be treated as a
grantor trust under subpart E, part I of subchapter J of the Code. Each
Certificateholder will be treated as the owner of a pro rata undivided interest
in the ordinary income and corpus of the Underlying Securities in the grantor
trust.
U.S. Owners
In General
Each Certificateholder will be required to report on its federal income
tax return its pro rata share of the entire income from the Underlying
Securities, including gross interest income at the interest rate on the
Underlying Securities, in accordance with its method of accounting.
Original Issue Discount
The Underlying Securities may have originally been sold at a discount
below their principal amount. As provided in the Code and the OID Regulations,
the excess of the "stated redemption price" (as defined below) of each such
Underlying Security over its "issue price" (defined as the initial offering
price to the public, excluding bond houses and brokers, at which a substantial
amount of such Underlying Securities has been sold) will be original issue
discount if such excess equals or exceeds a de minimis amount (i.e., one-quarter
of one percent of such Underlying Security's stated redemption price multiplied
by the number of complete years to its maturity). An Underlying Security having
more than a de minimis amount of original issue discount is referred to herein
as an "OID Underlying Security." A U.S. Owner of an Underlying Security with a
de minimis amount of original issue discount will include any de minimis
original issue discount in income, as capital gain, on a pro rata basis as
principal payments are made on the Underlying Security. The "stated redemption
price" of an Underlying Security is equal to the sum of all payments on the
Underlying Security other than interest based on a fixed rate (or a variable
rate, unless an applicable Prospectus Supplement otherwise states) and payable
unconditionally at least annually.
U.S. Owners are required to include original issue discount in income
as it accrues, which may be before the receipt of the cash attributable to such
income, based on a compounding of interest at a constant rate (using the yield
to maturity of the Underlying Security as originally issued). Under these rules,
U.S. Owners generally must include in income increasingly greater amounts of
original issue discount in successive accrual periods, unless payments that are
part of the stated redemption price at maturity of an Underlying Security are
made before its final maturity. The OID Regulations permit U.S. Owners to use
accrual periods of any length up to one year (including daily accrual periods)
to compute accruals of original issue discount, provided each scheduled payment
of principal or interest occurs either on the first or the last day of an
accrual period.
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Acquisition Premium and Market Discount
In the event that a U.S. Owner purchases an OID Underlying Security at
an acquisition premium (i.e., at a price in excess of its "adjusted issue price"
but less than its stated redemption price), the amount includible in income in
each taxable year as original issue discount is reduced by that portion of the
excess properly allocable to such year. The adjusted issue price is defined as
the sum of the issue price of the Underlying Security and the aggregate amount
of previously accrued original issue discount, less any prior payments of
amounts included in its stated redemption price. Unless a U.S. Owner makes the
accrual method election described below, acquisition premium is allocated on a
pro rata basis to each accrual of original issue discount, so that the U.S.
Owner is allowed to reduce each accrual of original issue discount by a constant
fraction.
A U.S. Owner that purchases at a "market discount" (i.e., at a price
less than the stated redemption price or, in the case of an OID Underlying
Security, the adjusted issue price) will be required (unless such difference is
less than a de minimis amount) to treat any principal payments on, or any gain
realized upon the disposition or retirement of, the Underlying Security as
interest income to the extent of the market discount that accrued while such
U.S. Owner held such Underlying Security, unless the U.S. Owner elects to
include such market discount in income on a current basis. Market discount is
considered to be de minimis if it is less than one-quarter of one percent of
such Underlying Security's stated redemption price multiplied by the number of
complete years to maturity after the U.S. Owner acquired the Certificate. If an
Underlying Security with more than a de minimis amount of market discount is
disposed of in a nontaxable transaction (other than a nonrecognition transaction
described in Section 1276(d) of the Code), accrued market discount will be
includible as ordinary income to the U.S. Owner as if such U.S. Owner had sold
the Certificate at its then fair market value. A U.S. Owner that acquired at a
market discount and that does not elect to include market discount in income on
a current basis also may be required to defer the deduction for a portion of the
interest expense on any indebtedness incurred or continued to purchase or carry
the Certificate until the deferred income is realized.
Premium
Except as noted below, a U.S. Owner that purchases for an amount in
excess of the principal amount, or in the case of an OID Underlying Security,
the remaining stated redemption price, will be treated as having premium with
respect to the Underlying Security in the amount of such excess. A U.S. Owner
that purchases an OID Underlying Security at a premium is not required to
include in income any original issue discount with respect to such Underlying
Security. If such a U.S. Owner makes an election under Section 171(c)(2) of the
Code to treat such premium as "amortizable bond premium," the amount of interest
that must be included in such U.S. Owner's income for such accrual period (where
such Underlying Security is not optionally redeemable prior to its maturity
date) will be reduced by the portion of the premium allocable to such period
based on the Underlying Security's yield to maturity. If such Underlying
Security may be called prior to maturity after the U.S. Owner has acquired it,
the U.S. Owner generally may not assume that the call will be exercised and must
amortize premium to the maturity date. If the Underlying Security is in fact
called, any unamortized premium may be deducted in the year of the call. If a
U.S. Owner makes the election under Section 171(c)(2), the election also shall
apply to all bonds the interest on which is not excludible from gross income
("Fully Taxable Bonds") held by the U.S. Owner at the beginning of the first
taxable year to which the election applies and to all such Fully Taxable Bonds
thereafter acquired by it, and is irrevocable without the consent of the IRS. If
such an election is not made, such a U.S. Owner must include the full amount of
each interest payment in income in accordance with its regular method of
accounting and will receive a tax benefit from the premium only in computing its
gain or loss upon the sale or other disposition or retirement of the Underlying
Security.
Accrual Method Election
Under the OID Regulations, a U.S. Owner is permitted to elect to
include in gross income its entire return on an Underlying Security (i.e., the
excess of all remaining payments to be received on the Underlying Security over
the amount paid for the Certificate by such U.S. Owner) based on the compounding
of interest at a constant rate. Such an election for an Underlying Security with
amortizable bond premium (or market discount) will result in a deemed election
for all of the U.S. Owner's debt instruments with amortizable bond premium (or
market discount) and may be revoked only with permission of the IRS.
Disposition or Retirement of Certificates
Upon the sale, exchange or other disposition of a Certificate, or upon
the retirement of a Certificate, a U.S. Owner will recognize gain or loss equal
to the difference, if any, between the amount realized upon the disposition or
retirement and the U.S. Owner's tax basis in the Certificate. A U.S. Owner's tax
basis for determining gain or loss on the disposition or retirement of a
Certificate will be the cost of such Certificate to such U.S. Owner, increased
by the amount of original issue discount and any market discount includible in
such U.S. Owner's gross income with respect to the Underlying Security, and
decreased by the amount of any payments under the Underlying Security that are
part of its stated redemption price and by the portion of any premium applied to
reduce interest payments as described above.
Gain or loss upon the disposition or retirement of a Certificate will
be capital gain or loss, except to the extent the gain represents accrued stated
interest, original issue or market discount on the Certificate not previously
included in gross income, to which extent such gain or loss would be treated as
ordinary income. Any capital gain or loss will be long-term capital gain or loss
if at the time of disposition or retirement the Certificate has been held for
more than one year.
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Non-U.S. Owners
Interest
A Non-U.S. Owner will be subject to a 30 percent federal income and
withholding tax on interest (including original issue discount) on an Underlying
Security, unless an exemption is established.
Disposition or Retirement of Certificates
A Non-U.S. Owner that does not have certain present or former
connections with the United States (e.g., holding such Non-U.S. Owner's
Certificate in connection with the conduct of a trade or business within the
United States or being present in the United States for 183 days or more during
a taxable year) generally will not be subject to federal income tax, and no
withholding of such tax will be required, with respect to any gain realized upon
the disposition or retirement of a Certificate.
Information Reporting and Backup Withholding
Payments made on the Underlying Securities and proceeds from the sale
of the Certificates will not be subject to a "backup" withholding tax of 31
percent unless, in general, the Certificateholder fails to comply with certain
reporting procedures and is not an exempt recipient under applicable provisions
of the Code.
New Withholding Regulations
The Treasury Department has issued new regulations that make certain
modifications to the withholding, backup withholding and information reporting
rules. The regulations generally are effective for payments made after December
31, 1999. Investors should consult their tax advisors regarding such
regulations.
THE FEDERAL TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A CERTIFICATEHOLDER'S
PARTICULAR SITUATION. CERTIFICATEHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS
WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE OWNERSHIP AND DISPOSITION OF
THE CERTIFICATES, INCLUDING THE TAX CONSEQUENCES UNDER THE TAX LAWS OF THE
UNITED STATES, STATES, LOCALITIES, COUNTRIES OTHER THAN THE UNITED STATES AND
ANY OTHER TAXING JURISDICTIONS AND THE POSSIBLE EFFECTS OF CHANGES IN SUCH TAX
LAWS.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and 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)(i) of the Code or (c) any entity whose underlying assets include Plan
Assets (as defined below) by reason of a plan's investment in the entity (each,
a "Plan").
In accordance with ERISA's general fiduciary standards, before
investing in a Certificate, a Plan fiduciary should determine whether such an
investment is permitted under the governing Plan instruments and appropriate for
the Plan in view of the Plan's overall investment policy and the composition and
diversification of its portfolio. Other provisions of ERISA and the Code
prohibit certain transactions involving the assets of a Plan and persons who
have certain specified relationships to the Plan ("Parties in Interest" within
the meaning of ERISA or "Disqualified Persons" within the meaning of the Code).
Thus, a Plan fiduciary considering an investment in Certificates should also
consider whether such an investment might constitute or give rise to a
prohibited transaction under ERISA or the Code.
An investment in Certificates by a Plan might result in the assets of
the Trust being deemed to constitute Plan Assets, which in turn might mean that
certain aspects of such investment, including the operation of the Trust, might
be prohibited transactions under ERISA and the Code. Neither ERISA nor the Code
defines the term "Plan Assets." Under Section 2510.3-101 of the United States
Department of Labor regulations (the "Regulation"), "Plan Assets" may include an
interest in the underlying assets of an entity (such as a trust) for certain
purposes, including the prohibited transaction provisions of ERISA and the Code,
if the Plan acquires an "equity interest" in such entity. Thus, if a Plan
acquired a Certificate, for certain purposes under ERISA and the Code (including
the prohibited transaction provisions) the Plan would be considered to own its
share of the underlying assets of the Trust unless (1) such Certificate is a
"publicly-offered security" or (2) equity participation by "benefit plan
investors" is not "significant."
Under the Regulation, a publicly offered security is a security that is
(1) freely transferable, (2) 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 (3) 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
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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.
Participation by benefit plan investors in the Certificates would not
be significant if immediately after the most recent acquisition of a
Certificate, whether or not from the Depositor or Merrill Lynch & Co., less than
25% of (1) the value of such Class of Certificates and (2) the value of any
other Class of Certificates that is not a publicly offered security under the
Regulation, were held by benefit plan investors, which are defined as Plans and
employee benefit plans not subject to ERISA (for example, governmental plans).
It is anticipated that certain offerings of Certificates will be
structured so that assets of the Trust will not be deemed to constitute Plan
Assets. In such cases, the relevant Prospectus Supplement will indicate either
that the Certificates will be considered publicly offered securities under the
Regulation or that participation by benefit plan investors will not be
significant for purposes of the Regulation.
In other instances, however, the offering of Certificates may not be so
structured. Thus, the assets of the Trust may be deemed to be Plan Assets and
transactions involving the Depositor, an underwriter, the Trustee, any trustee
with respect to Underlying Securities, any obligors with respect to Underlying
Securities or affiliates of such obligors might constitute prohibited
transactions with respect to a Plan holding a Certificate unless (i) one or more
prohibited transaction exemptions ("PTEs") applies or (ii) in the case of an
issuer of Underlying Securities, it is not a Disqualified Person or party in
interest with respect to such Plan. Plans maintained or contributed to by the
Depositor, an underwriter, the Trustee, a trustee with respect to Underlying
Securities, any issuer of underlying securities, or any of their affiliates,
should not acquire or hold any Certificate.
If the Trust is deemed to hold Plan Assets, the Underlying Securities
would appear to be an indirect loan between the issuer of the Underlying
Securities and any Plan owning Certificates; however, such loan, by itself,
would not constitute prohibited transaction unless such issuer is a party in
interest or Disqualified Person with respect to such Plan.
If the underwriter with respect to an offering of Certificates is a
broker-dealer registered under the Exchange Act, and customarily purchases and
sells securities for its own account in the ordinary course of its business as a
broker-dealer, sales of Certificates by such underwriter to Plans may be exempt
under PTE 75-1 if the following conditions are satisfied: (i) the underwriter is
not a fiduciary with respect to the Plan and is party in interest or
Disqualified Person solely by reason of Section 3(14)(B) of ERISA or Section
4975(e)(2)(B) of the Code or a relationship to a person described in such
Sections, (ii) the transaction is at least as favorable to the Plan as an
arms-length transaction with an unrelated party and is not a prohibited
transaction within the meaning of Section 503(b) of the Code, and (iii) the Plan
maintains for at least six years such records as are necessary to determine
whether the conditions)s of PTE 75-1 have been met.
The custodial and other services tendered by the Trustee and any
trustee with respect to Underlying Securities might be exempt pursuant to
Section 408(b)(2) of ERISA and Section 4975(d)(2) of the Code, which exempt
services necessary for the establishment or operation of a Plan under a
reasonable contract or arrangement and for which no more than reasonable
compensation is paid. An arrangement would not be treated as reasonable unless
it can be terminated upon reasonably short notice under the circumstances
without penalty. The statutory exemption for services noted above does not
provide exemptive relief from prohibited transactions described in Section
406(b) of ERISA or Section 4975(c)(1)(E) or (F) of the Code.
Other prohibited transaction exemptions could apply to the acquisition
and holding of Certificates by Plans, and the operation of the Trust, including,
but not limited to: PTE 84-14 (an exemption for certain transaction determined
by An independent qualified professional asset manager), PTE 91-38 (an exemption
for certain transactions involving bank collective investment funds), PTE 90-1
(an exemption for certain transactions involving insurance company pooled
separate accounts) or PTE 95-60 (an exemption for certain transactions involving
insurance company pooled general accounts).
The Prospectus Supplement relating to any offering of Certificates that
will result in the Trust Assets being deemed to constitute Plan Assets will
provide that, by acquiring and holding a Certificate, a Plan shall be deemed to
have represented and warranted to the Depositor, Trustee, and underwriter that
such acquisition and holding of a Certificate does not involve a non-exempt
prohibited transaction with respect to such Plan, including with respect to the
activities of the Trust.
ANY PLAN OR INSURANCE COMPANY INVESTING ASSETS OF ITS GENERAL ACCOUNT
PROPOSING TO ACQUIRE CERTIFICATES SHOULD CONSULT WITH ITS COUNSEL.
UNDERWRITING
Certificates may be offered in any of three ways: (i) through
underwriters or dealers, (ii) directly to one or more purchasers or (iii)
through agents. The applicable Prospectus Supplement will set forth the material
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 Depositor from such sale, any underwriting
discounts and other items constituting underwriters' compensation, any initial
38
<PAGE>
public offering price, any discounts or concessions allowed or reallowed or paid
to dealers, any securities exchanges on which such Certificates may be listed,
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 at a fixed price 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 Merrill Lynch & Co. The obligations of such 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
Depositor from time to time. Any agent involved in the offer or sale of
Certificates will be named, and any commissions payable by the Depositor to such
agent will be set forth, in the applicable Prospectus Supplement. Unless
otherwise indicated in the applicable Prospectus Supplement, any such agent will
act on a best-efforts basis for the period of its appointment.
If so indicated in the applicable Prospectus Supplement, the Depositor
will authorize agents, underwriters or dealers to solicit offers by certain
specified institutions to purchase Certificates at the public offering price
described in such Prospectus Supplement pursuant to delayed delivery contracts
providing for payment and delivery on a future date specified in such Prospectus
Supplement. Such contracts will be subject only to those conditions set forth in
the applicable Prospectus Supplement and such Prospectus Supplement will set
forth the commissions payable for solicitation of such contracts. Any
underwriters, dealers or agents participating in the distribution of
Certificates may be deemed to be underwriters and any discounts or commissions
received by them on the sale or resale of Certificates may be deemed to be
underwriting discounts and commissions under the Securities Act. Agents and
underwriters may be entitled under agreements entered into with the Depositor to
indemnification by the Depositor against certain civil liabilities, including
liabilities under the Securities Act, or to contribution with respect to
payments that the agents or underwriters or their affiliates may be required to
make in respect thereof. Agents and underwriters and their affiliates may be
customers of, engage in transactions with, or perform services for, the
Depositor or its affiliates in the ordinary course of business.
Only Certificates rated in one of the investment grade rating
categories by a Rating Agency will be offered hereby. 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 applicable Prospectus
Supplement. The underwriters or their affiliates may act as principals or agents
in connection with market-making transactions relating to the Certificates. The
original Prospectus Supplement related to the Certificates for which a market is
being made will be delivered with respect to the Certificates for use by such
underwriters or affiliates in connection with offers and sales related to
market-making transactions in the Certificates.
The Depositor is an affiliate of Merrill Lynch & Co.
LEGAL MATTERS
The validity of the Certificates will be passed upon for the Depositor
and the underwriters by Shearman & Sterling, New York, New York or other counsel
identified in the applicable Prospectus Supplement.
39
<PAGE>
INDEX OF DEFINED TERMS
Page
----
adjusted issue price.........................................................36
Administration Agreements....................................................22
Administrative Agent..........................................................1
Administrative Agent Termination Events......................................23
Allocation Ratio..............................................................9
Available Funds..............................................................14
Base Rate....................................................................15
benefit plan investors........................................................6
Business Day.................................................................14
Calculation Agent............................................................15
Calculation Date.............................................................16
Call On Certificates.........................................................19
Call On Underlying Securities................................................19
Call Price...................................................................19
Call Right....................................................................7
Callable Series...............................................................7
CD Rate......................................................................15
CD Rate Certificate..........................................................15
Cede..........................................................................1
Certificate Account..........................................................11
Certificate Principal Balance................................................14
Certificate Rate..............................................................2
Certificateholders............................................................1
Certificates..................................................................1
Class.........................................................................1
Clearing Agency..............................................................20
clearing corporation.........................................................20
Closing Date.................................................................26
Code..........................................................................6
Commercial Paper Rate........................................................15
Commercial Paper Rate Certificate............................................15
Commission....................................................................1
Composite Quotations.........................................................15
Concentrated Underlying Securities............................................1
Credit Support................................................................1
Cut-off Date.................................................................28
Depositary....................................................................9
Deposited Assets..............................................................1
Depositor.....................................................................1
Disqualified Persons.........................................................37
Distribution Date.............................................................2
DTC...........................................................................1
ECU...........................................................................1
Eligible Investments.........................................................21
ERISA ........................................................................6
Event of Default.............................................................31
Exchangeable Series..........................................................10
Exchange Act..................................................................1
Extraordinary Expenses.......................................................24
Federal Funds Rate...........................................................15
Federal Funds Rate Certificate...............................................15
Final Scheduled Distribution Date.............................................2
Fixed Rate Certificates......................................................13
Floating Rate Certificates...................................................13
Floating Certificate Rate....................................................13
Fully Taxable Bonds..........................................................36
Global Security...............................................................1
Government Securities.........................................................1
grantor trust.................................................................6
H.15(519)....................................................................15
Indenture....................................................................30
Index Maturity...............................................................15
Interest Reset Date..........................................................14
Interest Reset Period........................................................15
issue price..................................................................35
Letter of Credit.............................................................33
Letter of Credit Bank........................................................33
LIBOR........................................................................15
LIBOR Reuters................................................................17
LIBOR Telerate...............................................................17
LIBOR Certificate............................................................15
market discount..............................................................36
Maximum Certificate Rate.....................................................15
Merrill Lynch & Co............................................................1
Minimum Certificate Rate.....................................................15
Money Market Yield...........................................................16
Non-U.S. Owner...............................................................35
Notional Amount...............................................................2
NYSE..........................................................................1
OID..........................................................................35
OID Regulations..............................................................35
OID Underlying Security......................................................35
Optional Exchange Right......................................................10
I-1
<PAGE>
Page
----
Ordinary Expenses............................................................24
Original Issue Date...........................................................7
Participants..................................................................9
Parties in Interest..........................................................37
Plan..........................................................................6
Plan Assets..................................................................37
Prepaid Ordinary Expenses....................................................24
Prime Rate...................................................................15
Prime Rate Certificate.......................................................15
Prospectus Supplement.........................................................1
PTEs.........................................................................38
publicly offered security....................................................37
Put Date.....................................................................19
Put Option...................................................................19
Puttable Underlying Securities...............................................19
Rating Agency.................................................................6
Realized Losses..............................................................18
Record Date..................................................................13
Reference Banks..............................................................17
Registration Statement........................................................2
Regulation...................................................................37
Related Proceeds.............................................................22
Required Percentage...........................................................2
Required Percentage-Amendment................................................26
Required Percentage-Remedies.................................................24
Reserve Account...............................................................1
Retained Interest............................................................11
Reuters Screen LIBO Page.....................................................17
Reuters Screen NYMF Page.....................................................17
Secured Underlying Securities................................................31
Securities Act................................................................2
Securities Intermediary.......................................................1
Senior Underlying Securities.................................................31
Series........................................................................1
Series Supplement.............................................................1
Specified Currency............................................................2
Spread.......................................................................14
Spread Multiplier............................................................14
Standard Terms................................................................1
stated redemption price......................................................35
Strip Certificates...........................................................13
Subordinated Underlying Securities...........................................31
Surety.......................................................................33
Surety Bond...................................................................5
Telerate Page 3750...........................................................17
TOPrS(sm)....................................................................28
Treasury Rate................................................................15
Treasury Rate Certificate....................................................15
Trust.........................................................................1
Trust Agreement...............................................................1
Trust Certificates............................................................1
Trust Indenture Act..........................................................30
Trustee.......................................................................1
Trustee Fee...................................................................6
U.S. dollars, US$, dollar or $................................................3
U.S. Owner...................................................................35
U.S. Person..................................................................35
Underlying Securities.........................................................1
Underlying Securities Indenture..............................................11
Underlying Securities Issuer..................................................1
Underlying Securities Rate...................................................31
Underlying Securities Trustee................................................30
Underwriter...................................................................1
Voting Rights.................................................................2
I-2
<PAGE>
================================================================================
No dealer, sales person or other person has been authorized to give any
information or make any representation not contained in this Prospectus and if
given or made, such information or representation must not be relied upon as
having been authorized by the Depositor or Merrill Lynch & Co. This Prospectus
does not constitute an offer to sell or a solicitation of an offer to buy, any
of the Trust Certificates offered hereby in any jurisdiction to any person to
whom it is unlawful to make such offer in such jurisdiction. Neither the
delivery of this Prospectus nor any sale hereunder shall, under any
circumstances, create any implication that the information herein is correct as
of any time subsequent to the date hereof or that there has been no change in
the affairs of the Company since such date.
------------------
TABLE OF CONTENTS
Page
----
PROSPECTUS
PROSPECTUS SUPPLEMENT....................................................... 2
AVAILABLE INFORMATION....................................................... 2
INCORPORATION OF CERTAIN DOCUMENTS
BY REFERENCE.............................................................. 2
REPORTS TO CERTIFICATEHOLDERS............................................... 3
PROSPECTUS SUMMARY.......................................................... 5
RISK FACTORS................................................................ 7
THE DEPOSITOR............................................................... 11
USE OF PROCEEDS............................................................. 11
FORMATION OF THE TRUST...................................................... 11
MATURITY AND YIELD CONSIDERATIONS........................................... 11
DESCRIPTION OF THE CERTIFICATES............................................. 12
DESCRIPTION OF THE TRUST AGREEMENT.......................................... 21
DESCRIPTION OF DEPOSITED ASSETS............................................. 28
CURRENCY RISKS.............................................................. 34
FEDERAL INCOME TAX CONSEQUENCES............................................. 35
ERISA CONSIDERATIONS........................................................ 37
UNDERWRITING................................................................ 38
LEGAL MATTERS............................................................... 39
INDEX OF DEFINED TERMS...................................................... I-1
Until 25 days after the date of this Prospectus, all dealers affecting
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 requirement is in addition to the
obligations of dealers to deliver a Prospectus Supplement and Prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
================================================================================
<PAGE>
================================================================================
STEERS(R) TRUST CERTIFICATES
----------
PROSPECTUS
----------
Merrill Lynch & Co.
[____], 1998
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses expected to be incurred in connection with the issuance and
distribution of the securities being registered, other than underwriting
compensation, are as set forth below. Except for the registration fee payable to
the Securities and Exchange Commission, all such expenses are estimated:
Securities and Exchange Commission registration fee.................. $ 151,517
Fees and expenses of Trustee (including legal fees).................. 30,000
Printing and engraving expenses...................................... 10,000
Legal fees and expenses.............................................. 300,000
Rating agency fees................................................... 100,000
Miscellaneous........................................................ 33,483
---------
Total..................................... $ 625,000
=========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law provides, in
summary, that directors and officers of Delaware corporations are entitled,
under certain circumstances, to be indemnified against all expenses and
liabilities (including attorney's fees) incurred by them as a result of suits
brought against them in their capacity as directors or officers, if they acted
in good faith and in a manner they reasonably believed to be in or not opposed
to the best interests of the company, and, with respect to any criminal action
or proceeding, if they had no reasonable cause to believe their conduct was
unlawful; provided that no indemnification may be made against expenses in
respect of any claim, issue or matter as to which they shall have been adjudged
to be liable to the company, unless and only to the extent that the court in
which such action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all the circumstances of
the case, they are fairly and reasonably entitled to indemnity for such expenses
which the court shall deem proper. Any such indemnification may be made by the
company only as authorized in each specific case upon a determination by the
stockholders of disinterested directors that indemnification is proper because
the indemnitee has met the applicable standard of conduct.
The Registrant's Amended and Restated Certificate of Incorporation
provides that no director of the Registrant shall be personally liable to the
Registrant or its stockholders for monetary damages for breach of fiduciary duty
as a director, except for liability: (i) for any breach of the director's duty
of loyalty to the Registrant or its stockholders; (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law; (iii) in respect of certain unlawful dividend payments or stock redemptions
or purchases; or (iv) for any transaction from which the director derived an
improper personal benefit.
The Registrant's Amended and Restated Certificate of Incorporation and
By-Laws provide for indemnification of its directors and officers to the fullest
extent permitted by Delaware law, as the same may be amended from time to time.
Reference is made to Section 6 of the form of Underwriting Agreement
filed as Exhibit 1.1 hereto for provisions relating to the indemnification of
directors, officers and controlling persons against certain liabilities
including liabilities under the Securities Act of 1933, as amended.
II-1
<PAGE>
ITEM 16. EXHIBITS.
1.1 Underwriting Agreement*
3.1 Amended and Restated Certificate of Incorporation of Merrill Lynch
Depositor, Inc.*
3.2 By-laws of Merrill Lynch Depositor, Inc.*
4.1 Standard Terms of Trust Agreement*
5.1 Opinion of Shearman & Sterling as to legality (including consent
of such firm)*
23.1 Consent of Shearman & Sterling (included in Exhibit 5.1)*
24.1 Power of Attorney*
26.1 Form T-1 Statement of Eligibility and Qualification under the
Trust Indenture Act of 1939, of United States Trust Company
of New York*
- ------------------
* Previously filed.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any material information with respect to the
plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in the Registration
Statement shall be deemed to be a new registration statement relating to the
securities offered therein and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant hereby certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of New York, on the 29th day of September, 1998.
MERRILL LYNCH DEPOSITOR, INC.
By:/s/ Frank D. Ronan
--------------------------
Name: Frank D. Ronan
Title: President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
/s/ Frank D. Ronan Chairman of the Board, September 29, 1998
- ------------------------- Principal Executive Officer
Frank D. Ronan and Director
/s/ Barry N. Finkelstein Principal Accounting Officer, September 29, 1998
- ------------------------- Principal Financial Officer
Barry N. Finkelstein and Director
<PAGE>
INDEX TO EXHIBITS
Sequential page
Exhibits numbers
1.1 Underwriting Agreement*
3.1 Amended and Restated Certificate of Incorporation of
Merrill Lynch Depositor, Inc.*
3.2 By-laws of Merrill Lynch Depositor, Inc.*
4.1 Standard Terms of Trust Agreement*
5.1 Opinion of Shearman & Sterling as to legality
(including consent of such firm)*
23.1 Consent of Shearman & Sterling (included in Exhibit 5.1)*
24.1 Power of Attorney (included on the signature page of the
Registration Statement)
25.1 Form T-1 Statement of Eligibility and Qualification under the
Trust Indenture Act of 1939, of United States Trust Company
of New York*
- ------------------
* To be filed by amendment.
III-1
