As filed with the Securities and Exchange Commission on __________, 1998
Registration No. 33-39333
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
AMERICAN CORPORATE RECEIPTS, INC.
---------------------------------
(Originator of the Trusts described herein)
(Exact name of registrant as specified in its Charter)
NEW JERSEY 22-3545150
---------- ----------
(State or other (IRS employer
jurisdiction of identification
incorporation) Number)
c/o Rickel Securities, Inc.
45 Essex Street
Millburn, New Jersey 07041
973-379-0300
------------
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
----------------
John C. Sabo, President
American Corporate Receipts, Inc.
c/o Rickel Securities, Inc.
45 Essex Street
Millburn, New Jersey 07041
973-379-0300
------------
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
David F. Broderick, Esq.
McCarter & English, LLP
Four Gateway Center
100 Mulberry Street
Newark, New Jersey 07102
Approximate date of commencement of proposed sale to the public: From time to
time after the effective date of this Registration Statement as determined by
market conditions.
If the only securities being registered on this Form are to be offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, please check the following box. [X]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
====================================================================================================================================
Title of securities Amount to Proposed maximum Proposed maximum Amount of
Being registered be registered(1) Offering price per unit(2) aggregate offering price(2) registration fee
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
American Corporate Receipts $60,000,000 100% $60,000,000 $18,181.82(3)
====================================================================================================================================
(1) Represents the face amount of Principal and/or Callable Principal Receipts to be Offered.
(2) Estimated solely for the purpose of calculating the registration fee.
(3) Previously paid.
----------
</TABLE>
<PAGE>
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
PROSPECTUS
AMERICAN CORPORATE RECEIPTS
-----
AMERICAN CORPORATE RECEIPTS, INC.
DEPOSITOR
-----
The American Corporate Receipts (the "Receipts") described herein
may be sold from time to time in one or more series, in amounts, at prices and
on terms to be determined at the time of sale and to be set forth in a
supplement to this Prospectus (each a "Prospectus Supplement"). Each series of
Receipts will include two classes of Receipts.
The Receipts of each series will be issued by a newly formed,
limited purpose trust to be formed with respect to such series (each, a
"Trust"). The property of each Trust will be limited to a portion of one
discrete issue of taxable debt securities (the "Bonds") issued by a corporation
or other issuer that is eligible to offer and sell securities pursuant to a
registration statement on Form S-3 promulgated under the Securities Act of 1933,
and which issuer has a class of equity securities registered under Section 12 of
the Securities Exchange Act of 1934 and is therefore subject to the
informational requirements of the Securities Exchange Act of 1934 and in
accordance therewith will be obligated to file reports and other information
with the Securities and Exchange Commission. The Bonds will have been previously
publicly issued pursuant to an offering registered under the Securities Act, and
at the time that the Receipts are offered the Bonds shall have been rated by a
nationally recognized statistical rating organization (such as Moody's Investor
Service, Inc. ("Moody's") or Standard & Poor's Corporation ("S&P")) (each, a
"Rating Agency") in one of its generic rating categories which signifies
investment grade. The identity of and material terms of the Bonds held by a
particular Trust will be described in the related Prospectus Supplement. No
credit enhancement (in the form of over-collateralization, insurance or
guarantees) will be available to supplement payments made on the Bonds.
Each Trust will be formed pursuant to a Trust Agreement (the "Trust
Agreement") to be entered into between American Corporate Receipts, Inc. as
Depositor (the "Depositor") and the Trustee specified in the related Prospectus
Supplement (the "Trustee").
Each series of Receipts will represent fractional undivided
interests in all of the interest and principal payments on the Bonds in the
related Trust. Each class of Receipts of any series will represent the right to
receive a specified payment of principal and/or interest on the related Bonds in
the manner described herein and in the related Prospectus Supplement, to the
extent that such payment has been actually received by the Trustee. The amounts,
rates and dates of such payments will be set forth in the related Prospectus
Supplement, and will correspond to the payments on the related Bonds. In the
event of a payment default on the underlying Bonds which is not cured within ten
days, Receiptholders will obtain the right to proceed directly against the
issuer of the Bonds.
There will be no secondary market for the Receipts prior to the
offering thereof. While Rickel Securities, Inc., an affiliate of the Depositor,
intends to make a secondary market in the Receipts, it is not obligated to do
so. There can be no assurance that a secondary market for the Receipts will
develop or, if it does develop, that it will continue. The Receipts may or may
not be listed on a securities exchange. If the Receipts are listed on a
securities exchange, the name of such exchange will be disclosed in the related
Prospectus Supplement.
Receipts will be issued in book-entry form. Each class of Receipts
initially issued in book-entry form will be represented by a single physical
certificate registered in the name of Cede & Co., the nominee of The Depository
Trust Company ("DTC"). The interests of owners of such Receipts will be
represented by book entries on the records of DTC and participating members
thereof. Certificated Receipts will be available only under limited
circumstances.
----------
<PAGE>
PROCEEDS OF THE BONDS HELD BY THE TRUST FOR ANY SERIES ARE THE SOLE
SOURCE OF PAYMENTS ON THE RECEIPTS FOR SUCH SERIES. THE RECEIPTS WILL NOT
REPRESENT AN INTEREST IN OR OBLIGATION OF, AND ARE NOT INSURED OR GUARANTEED BY,
THE DEPOSITOR OR RICKEL SECURITIES, INC., ANY OTHER TRUST OR ANY OF THEIR
RESPECTIVE AFFILIATES. THE RECEIPTS ARE DIFFERENT FROM, AND SHOULD NOT BE DEEMED
TO BE A SUBSTITUTE FOR, DIRECT OWNERSHIP OF THE BONDS.
----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
Receipts may be sold by the Depositor through agents designated from
time to time, through underwriting syndicates led by one or more managing
underwriters or through one or more underwriters acting alone, as more fully
described under "PLAN OF DISTRIBUTION" and in the related Prospectus Supplement.
If underwriters or agents are involved in the offering of the Receipts of any
series offered hereby, the name of the managing underwriter or underwriters or
agents will be set forth in the related Prospectus Supplement.
This Prospectus may not be used to consummate sales of securities
offered hereby unless accompanied by a Prospectus Supplement.
The date of this Prospectus is , 1998.
-2-
<PAGE>
AVAILABLE INFORMATION
American Corporate Receipts, Inc., as depositor of each Trust, has
filed with the Securities and Exchange Commission (the "Commission") a
Registration Statement on Form S-3 (together with all amendments and exhibits
thereto, referred to herein as the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
Receipts offered pursuant to this Prospectus. This Prospectus, which forms a
part of the Registration Statement, omits certain information contained in such
Registration Statement pursuant to the rules and regulations of the Commission.
For further information, reference is made to the Registration Statement which
may be inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's regional offices at 500 West Madison Street, 14th Floor, Chicago,
Illinois 60661 and 75 Park Place, New York, New York 10007, or at the
Commission's Web site, http://www.sec.gov. Copies of the Registration Statement
may be obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates.
REPORTS TO RECEIPTHOLDERS
Quarterly and annual unaudited reports containing information
concerning the related Bonds, including an annual independent accountant's
statement of review regarding the payment of all income on the Bonds to the
Receiptholders ("Receiptholders" or "Holders"), will be prepared by the related
Trustee and sent on behalf of each Trust only to Cede & Co. ("Cede"), as nominee
of DTC and registered holder of the Receipts. See "CERTAIN INFORMATION REGARDING
THE RECEIPTS -- Book-Entry Registration" and "--Reports to Receiptholders". Such
reports will not constitute financial statements prepared in accordance with
generally accepted accounting principles. Each Trust will file with the
Commission such other reports as may required under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and the rules and regulations of the
Commission thereunder.
PROSPECTUS SUMMARY
This Prospectus Summary is qualified in its entirety by reference to
the detailed information appearing elsewhere in this Prospectus and by reference
to the information with respect to the Receipts contained in the related
Prospectus Supplement to be prepared and delivered in connection with the
offering of such Receipts. Certain capitalized terms used in this Prospectus
Summary are defined elsewhere in this Prospectus and in the related Prospectus
Supplement. A listing of the pages on which some of such terms are defined is
found in the "INDEX OF TERMS" on page 22 of this Prospectus.
Issuer.............. With respect to each series of Receipts, the Trust
to be formed by the Depositor and the Trustee
pursuant to the Trust Agreement. Each Trust will
be established for the primary purpose of issuing
Receipts of a single series representing
fractional ownership interests in the Bonds to be
described in the related Prospectus Supplement for
such series. The Bonds will be deposited into the
Trust by the Depositor in exchange for Receipts,
the aggregate face amount of which will correspond
exactly to the aggregate amount of principal and
interest payable on the Bonds from the date of
deposit to the date of maturity (or, in the case
of Callable Principal Receipts, the first date
upon which the Bonds are redeemable).
Depositor........... American Corporate Receipts, Inc.
Trustee............. The Trustee specified in the related Prospectus
Supplement.
The Receipts........ Each series of Receipts will include two classes
of Receipts issued pursuant to a Trust Agreement
between the Depositor and the Trustee: (i) Coupon
Receipts, which represent the right to receive a
single payment of interest on the Bonds, and (ii)
either (x) Principal Receipts, which represent the
right to receive a single payment of principal on
the Bonds upon maturity, or (y) in any case where
the Bonds are subject to early redemption,
Callable Principal Receipts, which represent the
right to receive
-3-
<PAGE>
all interest payments from the first date upon
which the Bonds are redeemable and principal upon
redemption or maturity, plus any redemption
premium. The Receipts will be available initially
only in book-entry form. Receiptholders will be
able to receive Certificated Receipts only in the
limited circumstances described herein. See
"CERTAIN INFORMATION REGARDING THE RECEIPTS --
Certificated Receipts."
The Bonds .......... The property of each Trust will be limited to
taxable debt securities (the "Bonds") acquired by
the Depositor from Rickel Securities, Inc., an
affiliate of the Depositor, in exchange for the
Receipts. The Bonds will be described in the
related Prospectus Supplement and will have been
issued by a corporation or other issuer eligible
to offer and sell securities registered on a
registration statement on Form S-3 promulgated
under the Securities Act, and which also has a
class of equity securities registered under
Section 12 of the Exchange Act and therefore is
subject to the periodic reporting requirements of
the Exchange Act. Each of the Bonds will have been
previously publicly issued in an offering
registered pursuant to the Securities Act, and at
the time that the Receipts are offered the Bonds
shall have been rated by a nationally recognized
statistical rating organization in one of its
generic rating categories which signifies
investment grade. The issuer of the Bonds will not
be involved in the issuance of the Receipts, and
will not be affiliated with the Depositor at the
time of the offering. Rickel Securities, Inc. will
have previously purchased, or will
contemporaneously purchase the Bonds in the
secondary market. Rickel Securities, Inc. will not
purchase the Bonds from the issuer thereof or any
of its affiliates, and the Bonds will not be
purchased by Rickel Securities, Inc. as a part of
the initial distribution thereof. After the date
of issuance by each Trust of the related Receipts
(the "Issuance Date"), such Trust will not
purchase or otherwise acquire any additional
securities and will not dispose of or create any
lien on its assets.
Payments............ Subject to timely receipt of payments on the
Bonds, payments in respect of each class of any
series of Receipts will be paid or distributed at
such times and in such manner as described in the
related Prospectus Supplement.
Certain Federal
Income Tax
Consequences....... Receipts will constitute "stripped coupons" or
"stripped bonds" for purposes of Section 1286 of
the Internal Revenue Code of 1986, as amended (the
"Code"). As such, the Receipts will be treated as
if issued with original issue discount.
Consequently, purchasers of Receipts should
understand that if they are subject to income
taxation, it is likely that they will be allocated
taxable income with respect to their Receipts each
year prior to maturity of the Receipts, although
they will not receive any cash distributions with
respect to the Receipts they hold prior to
Maturity. In any such event, a Holder would have
to use other cash resources to pay the tax on the
taxable income allocated as a result of his, her
or its ownership of the Receipts. Upon the
issuance of each series of Receipts, McCarter &
English, LLP, special tax counsel to the
Depositor, will deliver an opinion with respect to
certain federal income tax consequences. See
"FEDERAL INCOME TAX CONSEQUENCES" herein for
additional information concerning the application
of federal, state, local and other laws.
-4-
<PAGE>
ERISA
Considerations..... Under a regulation issued by the Department of
Labor, the Trust assets represented by a series of
Receipts will not be deemed "plan assets" of an
employee benefit plan holding the Receipts if
certain conditions are met, including that such
class of Receipts must be held, upon completion of
the initial public offering of the Receipts, by at
least 100 investors who are independent of the
Depositor and of one another. For certain series
of Receipts the Depositor expects that (i) one or
more classes of Receipts of each series will be
held by at least 100 independent investors at the
conclusion of the initial public offering thereof
(although no assurance can be given, and no
monitoring or other measures will be taken to
ensure, that such condition will be met), and (ii)
the other conditions of the regulation will be
met. If the Trust assets represented by a series
of Receipts were deemed to be "plan assets" of an
employee benefit plan investor (e.g. if the 100
independent investor criterion is not satisfied),
violation of the "prohibited transaction" rules of
the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), could result and
generate excise tax and other liabilities under
ERISA and Section 4975 of the Code, unless a
statutory, regulatory or administrative exemption
is available. It is uncertain whether existing
exemptions from the "prohibited transaction" rules
of ERISA would apply to all transactions involving
the Trust assets represented by the related
Receipts. Accordingly, fiduciaries considering a
purchase of the Receipts on behalf of employee
benefit plans should consult their counsel before
making the purchase. See "ERISA CONSIDERATIONS"
herein.
Rating.............. It is a condition to the issuance of any series of
Receipts that they be rated by a nationally
recognized statistical rating organization (such
as Moody's Investor Service, Inc. ("Moody's") or
Standard & Poor's Corporation ("S&P")) (each, a
"Rating Agency") in one of its generic rating
categories which signifies investment grade;
typically, the four highest rating categories
(within which there may be sub-categories or
gradations indicating relative standing) signify
investment grade. For example, Moody's ratings
between Aaa and Baa, and S&P's ratings between AAA
and BBB, signify investment grade. The ratings of
any series of the Receipts by the Rating Agencies
address the likelihood of the full and timely
payment of the aggregate face amount of the
Receipts. There is no assurance that any such
rating will continue for any period of time or
that it will not be revised or withdrawn entirely
by such Rating Agency if, in its judgment,
circumstances (including, without limitation, the
financial health of the issuer of the underlying
Bonds) so warrant. A revision or withdrawal of
such rating may have an adverse effect on the
market price of the Receipts. A security rating is
not a recommendation to buy, sell or hold
securities. See "RISK FACTORS" in the related
Prospectus Supplement.
THE TRUSTS
GENERAL
With respect to each series of Receipts, the Depositor will
establish a Trust by depositing the Bonds in the Trust without recourse. After
the Issuance Date with respect to each Trust, such Trust will not purchase or
otherwise acquire any additional securities and will not dispose of or create
any lien on its assets. The Receipts of each series will evidence fractional
ownership interests in the related Bonds. The related Trust Agreement shall
terminate with respect to any Trust one year following the payment upon maturity
(or any earlier redemption) by the respective issuers of the entire principal
amount (and any redemption premium) of
-5-
<PAGE>
the Bonds. If any Receipts shall remain outstanding after the date of
termination of the related Trust Agreement, the Trustee shall not perform any
further acts under the Trust Agreement, except that the Trustee shall hold the
proceeds of any payment, without liability for interest, for the pro rata
benefit of the Receiptholders which have not theretofore been surrendered for
payment unless otherwise required by applicable law.
THE TRUSTEE
The Trustee for each Trust and the principal offices of the Trustee
will be as specified in the related Prospectus Supplement. The Trustee will not
be affiliated with the Depositor at the time of the offering. The Trustee's
liability in connection with the issuance and sale of the Receipts is limited
solely to the express obligations of such Trustee set forth in the related Trust
Agreement. The Trustee's obligations under the Trust Agreement include issuing
and manually executing Receipts, receiving debt service payments on the
underlying Bonds and disbursing the same to the owners of the related Receipts,
maintaining the Receipt Register, giving notice to the Receiptholders in the
event of any payment default by the issuer of the underlying Bonds, and taking
actions as directed by the holders of the Receipts. The fee to be charged by the
Trustee for its services is negotiated by the Depositor and the Trustee for each
series and set forth in a separate agreement between them. The fee is paid by
the Depositor. The Trust Agreement provides that in no event shall the assets of
the Trust be used to pay such fees or be subject to any right, charge, security
interest, lien or claim of any kind in favor of the Trustee or any person
claiming through the Trustee.
A Trustee may resign at any time, in which event the Depositor will
be obligated to appoint a successor trustee. Any resignation or removal of a
Trustee and appointment of a successor trustee will not become effective until
acceptance of the appointment by the successor trustee. The Trust Agreement
requires that any Trustee be a bank with trust powers or trust company having a
principal office in the United States of America, having a combined capital and
surplus of at least $50,000,000, and having a rating of Baa or better assigned
by at least one nationally recognized statistical rating agency, as that term is
defined by SEC Rule 15C3-1(c)(2)(vi)(F).
THE BONDS
GENERAL
The Bonds to be purchased by each Trust will be taxable debt
securities issued by a corporation or other entity (each such entity, an
"Obligor") eligible to offer and sell securities registered on a registration
statement on Form S-3 promulgated under the Securities Act, and which also has a
class of equity security registered under Section 12 of the Exchange Act and
therefore is subject to the periodic reporting requirements of the Exchange Act.
Each of the Bonds will have been previously publicly issued in an offering
registered pursuant to the Securities Act, and at the time that the Receipts are
offered the Bonds shall have been rated by a Rating Agency (such as Moody's or
S&P) in one of its generic rating categories which signifies investment grade.
The Bonds will have been acquired by the Depositor from Rickel Securities, Inc.
in exchange for the Receipts. Rickel Securities, Inc. will have previously
purchased the Bonds in the secondary market. The Obligor will not be involved in
the issuance of the Receipts, and will not be affiliated with the Depositor at
the time of the offering. Rickel Securities, Inc. will not have purchased the
Bonds from the issuer thereof or any of its affiliates, and the Bonds will not
have been purchased by Rickel Securities, Inc. as part of the initial
distribution thereof. The specific terms and conditions of the Bonds to be
purchased by each Trust will be set forth in the related Prospectus Supplement.
THE OBLIGORS
In order to be eligible to offer and sell securities registered on a
registration statement on Form S-3, and thus fulfill that portion of the
criteria for Bond Obligors set forth above, an Obligor must:
1. Be incorporated or otherwise organized under the laws
of the United States or any State or territory or the District of
Columbia and have its principal business operations in the United
States or its territories;
-6-
<PAGE>
2. Have a class of securities registered under the
Exchange Act and be required to file reports pursuant to that Act;
3. Have been subject to the periodic reporting
requirements of the Exchange Act for a period of at least 12
calendar months, and have filed in a timely manner all reports
required to be filed during the 12 calendar months and any portion
of a month preceding the relevant date; and
4. Have at least $75,000,000 in aggregate market value
of voting stock held by non-affiliates of the Obligor.
The Depositor will base its determination of whether a specific
Obligor meets this criteria on the basis of available public information. See
"AVAILABLE INFORMATION REGARDING THE OBLIGORS -- Public Information." The
Depositor will not confirm any such determination with the Obligor. In making
such determination, the Depositor will necessarily assume that all of the
information which an Obligor has filed with the Commission is true, accurate and
complete.
AVAILABLE INFORMATION REGARDING THE OBLIGORS
PUBLIC INFORMATION
The Obligors will be corporations or other entities that are subject
to the informational requirements of the Exchange Act and in accordance
therewith file reports and other information with the Commission. Such reports,
proxy and information statements and other information filed by the Obligors
with the Commission can be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's regional offices at 500 West Madison Street,
14th Floor, Chicago, Illinois 60661 and 75 Park Place, New York, New York 10007,
or at the Commission's Web site, http://www.sec.gov. Copies of such material can
be obtained from the Public Reference Section of the SEC at 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates. If the Bonds are listed on
the New York Stock Exchange, the material described above and other information
will also be available for inspection at the offices of the New York Stock
Exchange at 20 Broad Street, New York, New York. If the Bonds are listed on the
American Stock Exchange, the material described above and other information will
also be available for inspection at the offices of the American Stock Exchange
at 86 Trinity Place, New York, New York.
POSSIBLE UNAVAILABILITY OF PUBLIC INFORMATION AND RESULTING TRANSFER
RESTRICTIONS
An Obligor whose common stock (or similar equity security) ceases to
be held of record by 300 or more holders, which has no class of security listed
on a national securities exchange, and which has no class of debt security held
of record by 300 or more holders, could elect to suspend its Exchange Act
reporting requirements. Such suspension could occur at any time after the
deposit of its Bonds in a Trust. In such event, the public information referred
to in the preceding paragraph would no longer be available. If such reports are
not available to the Trust, the Receipts of such series will, by their terms,
generally be required to be removed from the DTC book entry system, and
definitive physical certificates representing the Receipts of such series will
be issued to the Holders of the Receipts of such series. Such actions could
hinder a Holder's ability to transfer his Receipts.
In the event an Obligor suspends its Exchange Act reporting and the
Receipts are removed from the DTC book entry system, the Depositor will notify
the Obligor that the Bonds are held pursuant to the Trust Agreement and that the
holders of the Receipts constitute record holders of the Bonds. The issuance of
such definitive physical certificates representing the Receipts may increase the
likelihood that there will then be more than 300 holders of record of the Bonds,
requiring the Obligor to resume filing Exchange Act reports, in light of Rule
12g5-1(b)(1) under the Exchange Act, which appears to require an obligor with
actual knowledge that its bonds are held pursuant to a Trust Agreement to treat
holders of record of certificates or other evidences of interest issued by the
Trust as holders of record of the underlying Bonds. However, no assurances can
be given that this procedure will result in the Obligor resuming its Exchange
Act filings, due to, among other reasons, the fact that to the Depositor's
knowledge, no court of competent jurisdiction has interpreted and enforced Rule
12g5-1(b)(1) in the circumstances described above. In addition, the Depositor is
unable to predict whether, even if the Receiptholders are treated as holders of
the Bonds, the issuance of definitive physical certificates will cause there to
be more than 300 holders of record of the Bonds.
-7-
<PAGE>
BONDHOLDER COMMUNICATIONS
Upon the receipt by the Trust of any Bondholder communications from
an Obligor, the Trustee, on behalf of the Trust, will transmit such
communications to the beneficial owners of the Receipts upon receipt from the
Obligor of assurances that the Trustee's reasonable expenses will be reimbursed
by the Obligor. In addition, upon receipt by the Trust of Bondholder
communications from a third party (other than the Obligor), the Trustee, on
behalf of the Trust, will transmit such Bondholder communications to the
beneficial owners of the Receipts upon receipt from such third party of
assurances that the Trustee's reasonable expenses will be reimbursed by such
third party. In either case, if the Trustee does not receive such assurances,
then the Trustee, at the sole discretion of the Depositor and at the expense of
the Depositor and/or the Trust, will transmit or cause to be transmitted any
such Bondholder communications to such beneficial owners.
USE OF PROCEEDS
There will be no cash proceeds received by the Depositor or the
Trust from the sale of the Receipts. The issuance of each series of Receipts
will involve the following steps, some or all of which may take place
simultaneously:
- Rickel Securities, Inc. will purchase the Bonds in the secondary
market for cash at the price(s) prevailing in the market.
- The Trust will issue the Receipts to the Depositor. The aggregate
face amount of Receipts will correspond exactly to the aggregate amount of
principal and interest payable on the Bonds from the date of deposit to the date
of maturity (or, in the case of Callable Principal Receipts, the first date upon
which the Bonds are redeemable).
- The Depositor will sell the Receipts to Rickel Securities, Inc. in
exchange for the Bonds.
- The Depositor will sell the Bonds to the Trust in consideration
for the Trust's issuance of the Receipts to the Depositor.
- Rickel Securities, Inc., acting as the Underwriter, will commence
the offering of the Receipts.
The Receipts will be offered from time to time through the
Underwriter in negotiated transactions, at various prices to be determined at
the time of sale. Any spread between the price at which the Receipts are sold
and the purchase price of the Bonds (less costs and expenses) will represent
underwriting compensation to Rickel Securities, Inc. Depending on the timing of
the various steps outlined above, Rickel Securities, Inc. may utilize a portion
of the net proceeds of the sale of the Receipts to finance or refinance the
purchase of the underlying Bonds.
The aggregate face amount of any series of Receipts will correspond
exactly to the aggregate amount of principal and interest payable on the
underlying Bonds from the date of deposit to the date of maturity (or, in the
case of Callable Principal Receipts, the first date upon which the Bonds are
redeemable). Therefore, the aggregate face amount of any particular series of
Receipts will not necessarily bear a direct relationship to the fair market
value of the underlying Bonds on the date that the Receipts are issued.
The simultaneous transfer of the Bonds from the Underwriter to the
Depositor in exchange for the Receipts, and the retransfer of the Bonds from the
Depositor to the Trust in exchange for the Receipts, are intended by the parties
to constitute sale transactions. Immediately following the completion of such
transactions, physical custody of and title to the Bonds will be irrevocably
vested in the Trust and/or the Trust's nominee(s), and neither the Underwriter
nor the Depositor will have any further control over the collection, disposition
or custody thereof, or over any other actions affecting the Bonds. Neither the
Trust nor the Receiptholders will have any recourse against the Underwriter or
the Depositor in the event of a default on the Bonds by the Obligor. Conversely,
neither the Trust nor the Receiptholders will be entitled to share in any net
profit, nor will the Trust or the Receiptholders be liable for any portion of
any net loss, which may be realized by the Underwriter in connection with its
purchase of the Bonds in the market and resale of the Receipts.
-8-
<PAGE>
THE DEPOSITOR
The Depositor, a wholly owned subsidiary of Rickel Securities, Inc.,
was incorporated in the State of New Jersey in October, 1997. The Depositor was
organized for the limited purpose of acquiring Bonds from Rickel Securities,
Inc., forming Trusts, transferring Bonds to the Trusts, and engaging in related
activities. The principal executive offices of the Depositor are located at 45
Essex Street, Millburn, New Jersey 07041, and its phone number is 973-379-0300.
THE RECEIPTS
GENERAL
With respect to each Trust, the Receipts will be issued pursuant to
the terms of a Trust Agreement, a form of which has been filed as an exhibit to
the Registration Statement of which this Prospectus forms a part. The following
is a summary of the material terms of the Trust Agreement. The following summary
does not purport to be complete and is subject to, and qualified in its entirety
by reference to, all of the provisions of the Receipts and the Trust Agreement.
Where particular provisions or terms used in the Trust Agreement are referred
to, the actual provisions (including definitions of terms) are incorporated by
reference as part of this summary.
Each class of a series of Receipts issued in book-entry form will
initially be represented by a single Receipt registered in the name of DTC. The
Depositor has been informed by DTC that DTC's nominee will be Cede. Accordingly,
Cede is expected to be the holder of record of the Receipts issued in book-entry
form. Unless and until Certificated Receipts are issued under the limited
circumstances described herein, no Receiptholder will be entitled to receive a
physical certificate representing a Receipt. All references herein to actions by
Receiptholders refer to actions taken by DTC upon instructions from the
Participants and all references herein to distributions, notices, reports and
statements to Receiptholders refer to distributions, notices, reports and
statements to DTC or Cede, as the registered holder of the Receipts, as the case
may be, for distribution to beneficial owners in accordance with DTC's
procedures with respect thereto. See "CERTAIN INFORMATION REGARDING THE RECEIPTS
- -- Book Entry Registration" and "-- Certificated Receipts."
DISTRIBUTIONS OF INTEREST AND PRINCIPAL AMOUNT
There will not be any periodic interest payments on Coupon Receipts
or Principal Receipts. Each of such Receipts represents the right to receive a
single payment at its maturity.
With respect to Coupon Receipts, on and after the date of the
interest payment evidenced thereby, if the Obligor shall have paid in full and
the Trustee shall have confirmed receipt of the interest due on such interest
payment date on the underlying Bonds, the Trustee shall, upon surrender of such
Coupon Receipts at the office of the Trustee specified in the related Prospectus
Supplement, pay to the Holder thereof in lawful money of the United States of
America, if the Holder is DTC or its nominee, by wire transfer of immediately
available funds, and if the Holder is any other person, by check for New York
Clearing House funds in accordance with such regulations as the Trustee may
reasonably establish consistent with the provisions of the Trust Agreement, the
entire amount of such interest payment evidenced thereby, less any taxes or
governmental charges required to be withheld from such payment by the Trustee.
With respect to any Principal Receipts, if the Obligor shall have
paid in full and the Trustee shall have confirmed receipt of the amount of such
principal upon maturity of the underlying Bonds, the Trustee shall, upon
surrender of such Principal Receipts at the office of the Trustee specified in
the related Prospectus Supplement, pay to the Holder thereof in lawful money of
the United States of America, if the Holder is DTC or its nominee, by wire
transfer of immediately available funds, and if the Holder is any other person,
by check for New York Clearing House funds in accordance with such regulations
as the Trustee may reasonably establish consistent with the provisions of the
Trust Agreement, the entire amount of such principal evidenced thereby, less any
taxes or governmental charges required to be withheld from such payment by the
Trustee.
With respect to any Callable Principal Receipts: (i) on or after
each interest payment date, if the Obligor shall have paid in full and the
Trustee shall have confirmed receipt of the interest due on such interest
payment date on the underlying Bonds, the Trustee shall pay to
-9-
<PAGE>
the Holder of record on the applicable record date in lawful money of the United
States of America , if the Holder is DTC or its nominee, by wire transfer of
immediately available funds, and if the Holder is any other person, by check for
New York Clearing House funds in accordance with such regulations as the Trustee
may reasonably establish consistent with the provisions of the Trust Agreement,
the entire amount of such interest, less any taxes or governmental charges
required to be withheld for such payment by the Trustee, and (ii) if the Obligor
shall have paid and the Trustee shall have confirmed receipt of all or any part
of the principal amount of and redemption premium, if any, due upon stated
maturity or upon earlier redemption of the underlying Bonds, the Trustee shall,
upon surrender of such Callable Principal Receipts at the office of the Trustee
specified therein, pay to the Holder thereof, in lawful money of the United
States of America, if the Holder is DTC or its nominee, by wire transfer of
immediately available funds, and if the Holder is any other person, by check for
New York Clearing House funds in accordance with such regulations as the Trustee
may reasonably establish consistent with the provisions of the Trust Agreement,
the entire amount of such principal and premium, if any, evidenced thereby, or
in the case of a partial redemption, the amount of such principal so redeemed
(and any redemption premium); in each case less any taxes or governmental
charges required to be withheld from such payment by the Trustee.
The Trust Agreement provides that all moneys received from Obligors
by the Trustee which represent payments of interest, principal or redemption
premium on the underlying Bonds shall be held by the Trustee without interest in
a special account until required to be disbursed. Therefore, to the extent that
the Trustee holds in trust any payments of interest or principal for any period
prior to disbursement of the same to the Receiptholders, these amounts will not
be invested, and there will be no income generated. However, because the payment
dates of the Receipts will correspond to the payment dates of the underlying
Bonds, and because the Trustee is under a duty to transfer payments received on
the Bonds to the Receiptholders following receipt (including, in the case of
Callable Principal Receipts, following the receipt of redemption proceeds prior
to the maturity date of the Bonds), it is anticipated that any such payments
will be held by the Trustee for only that period of time as may be necessary to
arrange re-transfer to the Receiptholders. To the extent DTC is the only
Receiptholder of record, as is presently contemplated, DTC will follow its own
internal procedures in crediting the accounts of its Participants following the
receipt of any such payments.
REDEMPTION OF CALLABLE PRINCIPAL RECEIPTS
Any class of Callable Principal Receipts of any series is subject to
redemption on the optional redemption dates and any mandatory redemption dates,
if applicable, of the related Bonds as set forth in the related Prospectus
Supplement. The Bonds related to each series of Callable Principal Receipts will
be subject to redemption prior to maturity on and after the dates and at the
redemption prices set forth in the Prospectus Supplement relating to such
series.
If the Bonds underlying any series of Callable Principal Receipts
are redeemed in whole or in part, the Trustee shall redeem a principal amount of
Callable Principal Receipts of such series equal to the principal amount of the
Bonds held in trust so redeemed. Upon redemption of any Callable Principal
Receipts, the Holder will have no right to receive payments of any interest
maturing after the redemption date thereof.
In the event of a partial redemption of the Bonds underlying any
series of Callable Principal Receipts, the particular Callable Principal
Receipts to be redeemed shall be selected by the Trustee from the outstanding
Callable Principal Receipts of such series by lot or such other method as the
Trustee shall deem fair and appropriate and which may provide for the selection
for redemption of portions (in amounts equal to the minimum authorized
denomination of such series and integral multiples thereof) of the principal
amount represented by such Callable Principal Receipts. To the extent
practicable the Trustee shall, in the case of partial redemption, redeem
Callable Principal Receipts so that no more than one Callable Principal Receipt
is thereby rendered other than in an authorized denomination.
Notice of redemption shall be given by the Trustee to each Holder of
any Callable Principal Receipts to be redeemed within thirty (30) days after
notice of redemption of the underlying Bonds has been given by the Obligor,
trustee or paying agent of or for the Bonds, as the case may be. All notices of
redemption shall state the redemption date, the amount payable on such date, the
place at which such Callable Principal Receipts are to be surrendered for
payment, that interest on amounts redeemed will cease to accrue and, if less
than all of a Holder's Callable Principal Receipt is to be redeemed, the
principal amount of such Callable Principal Receipt to be redeemed.
DEFAULT ON BONDS
-10-
<PAGE>
If the Obligor defaults on the payment of any interest or principal
which is evidenced by the Receipts, the Trustee shall promptly give notice to
Holders thereof as provided in the Trust Agreement. Such notice shall set forth
(a) the identity of the issue of Bonds, (b) the date and nature of such default,
(c) the amount of the interest, principal or callable principal to which such
default relates, (d) the identifying numbers or the class of Receipts, or any
combination, evidencing the interest, Principal or Callable Principal (or
portions thereof) described above in clause "(c)", and (e) any other information
which the Trustee may deem appropriate.
Upon any default by the issuer of any Bond on the payment of any
Interest, Principal or Callable Principal which is evidenced by a Receipt, the
Trustee shall take all such steps as the Trustee, in its capacity as Trustee and
as the registered owner or nominal holder of the Bond to which the Receipt owned
by the Holder relates, shall deem necessary to protect the rights of the
Receiptholders. In order to protect such rights, the Trustee may, in its own
name and as trustee of an express trust, institute any action or proceedings at
law or in equity for the collection of the sums due and unpaid upon any Bond,
and may prosecute any such action or proceeding to judgment or final decree. In
addition, the Trustee shall be entitled and empowered, either in its own name or
as trustee of an express trust or as attorney-in-fact for the Receiptholders or
in any one or more of such capacities to file such proofs of claim, claims,
petitions, amendments thereto or any other document as may be necessary or
advisable in order to have the claims of the Holders allowed in any judicial
proceedings involving the Obligor under the Bonds or the trustee under the
indenture governing the Bonds.
The Bonds may be subject to United States or state laws permitting
bankruptcy, moratorium, reorganization or other actions which, in the event of
extreme financial difficulties of the Obligor, could result in delays in payment
or in non-payment of the Receipts relating to Bonds. In certain cases the
bankruptcy, reorganization or moratorium could result in non-payment of one or
more Coupon Receipts while the related Principal Receipts and Callable Principal
Receipts were paid in part or in full.
In the event that the Trustee receives money or other property in
respect of the Bonds (other than a scheduled interest payment with respect to an
Interest Payment Date or the scheduled payment of principal on or with respect
to the stated maturity date of the Bonds) as a result of a payment default on
the Bonds, or actual notice that such moneys or other will be paid to the
Trustee, the Trustee shall promptly give notice to DTC or, if the Receipts are
not then held by DTC, directly to the Holders of the Receipts then outstanding
and unpaid. Such notice shall state that, not later than thirty (30) days after
the receipt of such moneys or other property, the Trustee shall allocate and
distribute such moneys or other property to the Holders of the Receipts then
outstanding and unpaid, in proportion to the Accreted Value of each outstanding
class of Receipts, and within each class pro rata by face amount. Property
received, other than cash, shall be liquidated by the Trustee in a commercially
reasonable manner and the proceeds thereof, after deduction of all reasonable
costs and expenses of such liquidation, distributed in cash; provided, however,
that if such property consists of securities, such securities shall be
liquidated only to the extent necessary to avoid distribution of fractional
securities.
The term "Accreted Value" means, for any Receipt, (a) the original
issue price for such Receipt as set forth in Exhibit A to the Series Trust
Agreement, plus (b) an amount equal to an investment return thereon accrued to
the date of determination calculated based on a semiannual compounding rate, on
the basis of a 360-day year composed of twelve 30-day months, equal to the
original yield to maturity of such Receipt as set forth in Exhibit A to the
Series Trust Agreement. With respect to the allocation of proceeds of the Bonds
received in connection with a payment default on the Bonds, the relevant
determination date shall be the date of such default.
The Trustee may consult with and rely upon the calculations of an
advisor (which may be the Depositor) in connection with any calculation of
Accreted Value to the extent such amount must be determined in order for the
Trustee to carry out its duties under the Trust Agreement. The expenses of such
an advisor (other than the Depositor) shall be borne by the Holders and shall
not exceed $5,000.
Neither the Trustee nor the Depositor shall be under any obligation
whatsoever to appear in, prosecute or defend any action, suit or other
proceeding in respect of the Bonds or Receipts. Pursuant to the terms of the
Trust Indenture Act of 1939, as amended, each Receiptholder, as the beneficial
owner of the right to receive the payment(s) on the Bonds which are represented
by his or her Receipt, shall have the right to institute suit directly against
the Obligor of the underlying Bonds in accordance with the law governing the
underlying Bonds, subject to certain limitations allowed by the Act which may be
contained in the indenture pursuant to which the underlying Bonds were issued.
-11-
<PAGE>
CERTAIN INFORMATION REGARDING THE RECEIPTS
BOOK-ENTRY REGISTRATION
DTC is a limited purpose trust company organized under the laws of
the State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code and a
"clearing agency" registered pursuant to Section 17A of the Exchange Act. DTC
was created to hold securities for its Participants and to facilitate the
clearance and settlement of securities transactions between Participants through
electronic book-entries, thereby eliminating the need for physical movement of
certificates (such electronic book-entry system, the "DTC Book Entry Only
System"). Participants include securities brokers and dealers, banks, trust
companies and clearing corporations. Indirect access to the DTC system also is
available to others such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a Participant, either
directly or indirectly ("Indirect Participants").
Holders of book-entry Receipts that are not Participants or Indirect
Participants but desire to purchase, sell or otherwise transfer ownership of, or
other interests in, such Receipts may do so only through Participants and
Indirect Participants. In addition, such Holders will receive all distributions
of principal and interest through DTC Participants. DTC will forward such
payments to its Participants, which thereafter will forward them to Indirect
Participants or such Holders. Except for the Depositor, it is anticipated that
the only "Receiptholder" will be Cede, as nominee of DTC. Beneficial owners will
not be recognized by the Trustee as Receiptholders as such term is used in the
Trust Agreement, and beneficial owners will be permitted to exercise the rights
of Receiptholders only indirectly through DTC and its Participants.
Under the rules, regulations and procedures creating and affecting
DTC and its operations (the "Rules"), DTC is required to make book-entry
transfers of Receipts among Participants on whose behalf it acts with respect to
the Receipts and to receive and transmit distributions of principal of and
interest on Receipts. Participants and Indirect Participants with which Holders
have accounts with respect to the Receipts similarly are required to make
book-entry transfers and receive and transmit such payments on behalf of their
respective customers. Accordingly, although Holders will not possess Receipts,
the Rules provide a mechanism by which beneficial owners will receive payments
and will be able to transfer their Receipt interests.
The Certificated Receipts delivered to the Trustee will be
registered in the name of Cede, as nominee for DTC. The Holders, as purchasers
of Receipts, will not receive physical certificates representing their Receipts.
Instead, the ownership interests of the Holders will be recorded, directly or
indirectly, through the records of the respective Participants and Indirect
Participants. Transfers among Holders will be accomplished through and reflected
on the records of DTC and the Participants or Indirect Participants of which
those Holders are customers. DTC will maintain records for the payment, transfer
and exchange of Receipts held by DTC Participants on behalf of Holders, but will
not make payments directly to Holders or record specific transfers of Receipts
from one Holder to another.
Payments on the Bonds that are received by the Trustee from the
Obligor, including payments upon redemption of the Bonds, will be paid to DTC as
the registered holder of the related Receipts. DTC, under its current practices,
would credit those payments to the accounts of the Participants in accordance
with their respective holdings of Receipts as shown on DTC's records. Payment by
Participants and Indirect Participants to Holders will be governed by standing
instructions and customary practices, and will be the responsibility of each
such Participant or Indirect Participant and not of DTC or the Trustee, subject
to any statutory and regulatory requirements as may be in effect from time to
time.
DTC may determine to discontinue the DTC Book Entry Only System with
respect to the Receipts at any time by giving notice to the Trustee and the
Depositor and discharging its responsibilities with respect thereto. In
addition, the Depositor may cause the removal of DTC (or a successor or
substitute depository) if the Depositor determines such removal is in the best
interest of the Holders or is in the best interests of the Depositor as long as
the removal will not adversely affect the Holders. If DTC (or a successor or
substitute depository) is removed and the Depositor, after a good faith effort,
is unable to procure the services of a successor depository, the Trustee will
serve as depository of the Bonds.
-12-
<PAGE>
Because DTC can only act on behalf of Participants, who in turn act
on behalf of Indirect Participants and certain banks, the ability of a Holder to
pledge Receipts to persons or entities that do not participate in the DTC
system, or to otherwise act with respect to such Receipts, may be limited due to
the lack of a physical certificate for such Receipts.
DTC has advised the Depositor that it will take any action permitted
to be taken by a Receiptholder under the related Trust Agreement only at the
direction of one or more Participants to whose accounts with DTC the Receipts
are credited. DTC may take conflicting actions with respect to other fractional
interests to the extent that such actions are taken on behalf of Participants
whose holdings include such fractional interest.
Except as required by law, the Trustee will not have any liability
for any aspect of the records relating to or payments made on account of
beneficial ownership interest of the Receipts of any series held by Cede, as
nominee for DTC, or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
CERTIFICATED RECEIPTS
Receipts will initially be issued in book-entry form. Receipts will
be issued in fully registered, certificated form ("Certificated Receipts") to
Receiptholders or respective nominees, rather than to DTC or its nominee, only
if (i) the Depositor advises the Trustee in writing that DTC is no longer
willing or able to discharge properly its responsibilities as depository with
respect to such Receipts and the Depositor is unable to locate a qualified
successor, or (ii) the Depositor, at its option, elects to terminate the
book-entry system through DTC.
Upon the occurrence of any event described in the immediately
preceding paragraph, the Trustee will execute, register the transfer of and
exchange Certificated Receipts as requested by DTC or any other Holders of such
Receipts in appropriate amounts and in accordance with the Receipt registry of
DTC.
Distributions of principal of, and interest on, the Certificated
Receipts will thereafter be made in accordance with the procedures set forth in
the related Trust Agreement directly to holders of Certificated Receipts in
whose names the Certificated Receipts were registered at the close of business
on the day before the related Payment Date. Such distributions will be made by
check mailed to the address of such holder as it appears on the register
maintained by the Trustee. The final payment on any Certificated Receipt,
however, will be made only upon presentation and surrender of such Certificated
Receipt at the office or agency specified in the notice of final distribution to
the holders of such class.
REPORTS TO RECEIPTHOLDERS
Quarterly and annual unaudited reports containing information
concerning the related Bonds, including an annual independent accountant's
statement of review regarding the payment of all income on the Bonds to the
Receiptholders, will be prepared by the Depositor and sent on behalf of each
Trust only to Cede as nominee of DTC and registered holder of the Receipts. Such
reports will not constitute financial statements prepared in accordance with
generally accepted accounting principles. Each Trust will file with the
Commission such other reports as may be required under the Exchange Act, and the
rules and regulations of the Commission thereunder.
In addition to the foregoing, within the prescribed period of time
for tax reporting purposes after the end of each calendar year during the term
of each Trust, the Trustee will mail to each person who at any time during such
calendar year has been a Receiptholder with respect to such Trust and received
any payment thereon a statement containing certain information for the purposes
of such Receiptholder's preparation of federal income tax returns. See "FEDERAL
INCOME TAX CONSEQUENCES - Additional Tax Considerations; Tax Information
Reporting."
In addition to the foregoing, the Trustee shall transmit to the
Holders of the Receipts any communications received by the Trustee from the
issuer of the related Bonds. To the extent that the issuer of the Bonds fails to
reimburse the Trustee for its reasonable expenses in connection with the
transmission of communications to the Holders of the Receipts, the Depositor
shall pay such expenses.
-13-
<PAGE>
THE TRUST AGREEMENT
Pursuant to the Trust Agreement, the Bonds underlying any series of
Receipts will be held for the Holders of that series of Receipts by the Trustee
in physical certificate form or as book-entry credits to an account of the
Trustee at DTC. Under the DTC Book Entry Only System, DTC will be the sole
registered holder of the Receipts. For each series of Receipts, the Trustee will
establish a separate trust account of the Bonds relating to such Receipts and
two subaccounts within such separate account, the first for interest payments
underlying Coupon Receipts and the second for principal payments underlying
Principal Receipts or principal payments and interest payments underlying
Callable Principal Receipts. Unless otherwise set forth in the related
Prospectus Supplement, it is the intent of the Depositor that all of the Bonds
will be held by the Trustee by book-entry credit to its account at DTC. If, for
any reason, the Bonds may no longer be held by book-entry credit at DTC, the
Bonds will thereafter be held by the Trustee in a separate trust account.
The Depositor shall also in connection with the Series Trust
Agreement enter into a separate agreement with the Trustee providing for the
payment of the charges and expenses of the Trustee in respect of the related
Receipts. In no event shall the assets of the Trust be used to pay such fees.
Prior to a payment default by the Obligor, the only responsibility
of the Trustee with respect to payments on Receipts will be to apply all
payments received in respect of the Bonds to the registered holders of the
related Receipts without making any deductions other than for any taxes and
governmental charges.
Trust accounts established for Receipts will be special accounts
separate from the general assets of the Trustee and the interest payments and
principal payments therein will not be subject to any right, charge, security
interest, lien or claim of any kind in favor of the Trustee or any person
claiming through it. The Trustee will not have the power or authority to assign,
transfer, pledge or otherwise dispose of any of the assets of the trust accounts
to any person except as otherwise permitted by the Trust Agreement.
The Trust Agreement provides that the Trustee shall keep at its
designated office in New York, New York a register (the "Receipt Register") in
which, subject to such reasonable regulations as it may prescribe, the Trustee
shall provide for the registration of, and for the registration of transfers or
exchanges of, Receipts, which will be accomplished as described herein under
"Certain Information Regarding the Receipts -- Book-Entry Registration."
The Trust Agreement provides that, in the event of any action
requiring a vote of the registered holders of any Bonds, the Trustee (as the
owner of record of the Bonds), upon receipt of the Bond proxy, will notify DTC
(in its capacity as the owner of record of the Principal Receipts or Callable
Principal Receipts) of such action. Pursuant to currently existing procedures,
it is expected that DTC, in turn, will notify its Participants who, in turn,
will notify the beneficial owners of Principal Receipts or Callable Principal
Receipts of such event. Thereafter, except when the approval of the beneficial
owners of the Coupon Receipts is also required as described below, the Trustee
shall vote solely in accordance with the instructions received from DTC (or
pursuant to the applicable procedures of DTC) and shall apportion its voting
power on the basis of the face amount of such Principal Receipts or Callable
Principal Receipts. For any Receipts which are not then held by DTC or any other
depository, the Trustee, upon receipt of the Bond proxy, will notify the
registered holders directly of such action and shall vote in the same manner as
noted above. In no event shall the Depositor be allowed or entitled (other than
in its capacity as a safekeeper for a registered holder) to vote, directly or
indirectly any Receipts.
By their affirmative vote, the Holders of more than 50% in principal
amount of Receipts of any series may direct the Trustee to take or omit to take
any action required or permitted under the Trust Agreement or the Trust
Indenture Act of 1939, as amended; provided, however, that the Trustee shall not
vote in favor of any proposal with regard to the Bonds which would have the
effect of permitting a redemption or prepayment of the Bonds unless the Holders
of 100% of the Receipts then outstanding of the applicable series (including all
Coupon Receipts, Principal Receipts or Callable Principal Receipts, as the case
may be) vote in favor of such action.
-14-
<PAGE>
The Trustee will maintain a fidelity bond for the protection of
registered Receiptholders in customary amounts against losses due to dishonest
or fraudulent action by its employees in connection with its obligations under
the Trust Agreement.
The Trust Agreement provides that neither the Trustee nor the
Depositor shall be subject to any liabilities to registered Receiptholders other
than by reason of willful misconduct, bad faith or negligence in the performance
of duties set forth in the Trust Agreement and that neither of them shall be
liable to such registered holders if any law, government regulation or other
circumstance prevents or delays performance of duties set forth in the Trust
Agreement.
DTC will not be deemed an agent of the Trustee. The Trustee may own
and deal in bonds of the same issue and maturity as the Bonds and in Receipts.
The Trustee and the Depositor may amend the Trust Agreement,
provided that no amendment may be made which defers or alters the maturity of a
Receipt or in any manner adversely affects the rights of a Holder of a Receipt
to the interest or principal payments evidenced thereby or otherwise materially
prejudices any substantial existing right of a Holder.
No amendment to the Trust Agreement shall be effective unless the
Depositor shall have provided the nationally recognized statistical rating
agency which has rated the Receipts of each Trust to be effected by such
amendment with ten days prior written notice of such proposed amendment, and
shall have received a written confirmation from such nationally recognized
statistical rating agency that such amendment will not cause the nationally
recognized statistical rating agency to downgrade its rating of the subject
Receipts.
The Trustee shall be entitled to receive, and shall be fully
protected in relying upon, an opinion of counsel stating that the execution of
any amendment, supplement or waiver is authorized and permitted by the Trust
Agreement. Such opinion shall not be an expense of the Trustee.
The Trustee may at any time resign as Trustee by written notice to
the Depositor, such resignation to take effect upon the appointment of a
successor Trustee, subject to the terms and conditions of the Trust Agreement. A
successor Trustee shall be a bank with trust powers or trust company having its
principal office in the United States of America, having a combined capital and
surplus of at least $50,000,000, and having a rating of Baa or better assigned
by at least one nationally recognized statistical rating agency, as that term is
defined under Securities and Exchange Commission Rule 15C3-1(c)(2)(vi)(F).
The Depositor may at any time remove the Trustee as Trustee under
the Trust Agreement by written notice of its election to do so, delivered to the
Trustee, and such removal shall take effect upon the appointment of a successor
Trustee and its acceptance of such appointment, subject to the terms and
conditions of the Trust Agreement.
In the event that the Trustee becomes incapable of action, is
adjudged to be bankrupt or insolvent, or a receiver of the Trustee or of its
property is appointed, or any public officer takes charge or control of the
Trustee or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation, then the Trustee may be removed by court action
instituted by any registered holder of a Receipt who has been a registered
holder for six months or by registered holders of 10% of the face amount of
Receipts of a series which is outstanding at such time.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material federal income tax
consequences that may result from the purchase, ownership and disposition of
Receipts. This summary is based on the Internal Revenue Code of 1986, as amended
(the "Code"), as well as final, temporary and proposed Treasury regulations and
-15-
<PAGE>
administrative and judicial decisions in effect as of the date hereof.
Legislative, judicial and administrative changes may occur, possibly with
retroactive effect, affecting the accuracy of the statements set forth herein.
In particular, purchasers of the Receipts should be aware that changes in, or
clarifications of, the tax law applicable to Receipts, including the regulations
that address the federal income tax consequences relating to obligations issued
with original discount (the "OID Regulations") and adoption of regulations under
section 1286 of the Code, may occur after issuance of Receipts and may be
applied retroactively to owners of Receipts. Additional United States federal
income tax considerations applicable to particular series and/or classes of
Receipts may be set forth in the applicable Prospectus Supplement.
This summary does not purport to address all federal income tax
matters that may be relevant to purchasers of Receipts or to address the tax
consequences of a purchase of Receipts by any particular investor. For example,
it deals only with Receipts held as capital assets within the meaning of Section
1221 of the Code. It does not address tax consequences that may be relevant to
particular holders subject to special treatment under federal income tax law
(e.g., banks and other financial institutions, life insurance companies, dealers
in securities or currencies, tax-exempt entities, taxpayers holding Receipts as
a hedge, or whose "functional currency" is not the United States dollar). Except
as indicated, this summary is directed to prospective purchasers in the initial
offering described herein, and not to subsequent purchasers of Receipts.
Consequently, purchasers of Receipts (in particular dealers in securities and
purchasers of the Callable Principal Receipts) should consult their own tax
advisors concerning the tax consequences to them under federal income tax law,
as well as the tax law of any state, local or foreign jurisdiction, of the
purchase, ownership and disposition of Receipts.
Upon the issuance of each series of Receipts, McCarter & English,
LLP will render an opinion to the effect that, for federal income tax purposes:
(1) the Trust will be a grantor trust and not a partnership or an association
taxable as a corporation; (2) each Receipt will be considered a "stripped bond"
or a "stripped coupon," as appropriate, under section 1286 of the Code, for
purposes of applying the original issue discount rules of the Code to a
purchaser; (3) a Receipt purchased in an original sale or subsequent purchase
will be treated, for purposes of applying the original issue discount rules of
the Code to such purchaser, as if the Receipt held by such purchaser was issued
on the purchase date with original issue discount; (4) the original issue
discount with respect to a Receipt, other than certain Callable Principal
Receipts, will equal the excess of the amount payable at maturity of the Receipt
over the purchase price of such Receipt; (5) each of the Callable Principal
Receipts should be treated under Section 1286 of the Code as a single stripped
bond for purposes of calculating original issue discount and gain or loss on
disposition; (6) in the case of a Callable Principal Receipt with respect to
which the related Bond is required to be redeemed prior to its stated maturity
date, original issue discount and yield to maturity will likely be required to
be calculated by taking into account events that have occurred prior to the
purchase date of such Callable Principal Receipt and therefore, as if the date
on which the redemption is to take place and the redemption price were the
maturity date and amount payable at maturity, respectively; (7) in the case of a
Callable Principal Receipt not required to be redeemed prior to its stated
maturity date, the final regulations under sections 1272 through 1275 of the
Code provide that, if based on all the facts and circumstances as of the issue
date it is more likely than not that a debt instrument's stated payment schedule
will not occur, then the yield and maturity of the debt instrument are computed
based on the payment schedule most likely to occur. The Depositor will undertake
to file a copy of this opinion with the Commission as an exhibit to Form 8-K
prior to the deposit of Bonds by the Depositor with the Trustee and the issuance
of Receipts with respect to any Series.
CLASSIFICATION OF THE TRUST
In the opinion of McCarter & English, LLP the Trust will be
classified as a grantor trust under subpart E, Part I of subchapter J of the
Code and not as a partnership or an association taxable as a corporation. As a
grantor trust, the Trust will not be not subject to federal income tax, although
Receiptholders will be subject to the tax treatment discussed below.
-16-
<PAGE>
FEDERAL TAX TREATMENT OF STRIPPED BONDS AND STRIPPED COUPONS
Under section 1286 of the Code, the separation of ownership of the
right to receive some or all of the principal payments on a bond from the
ownership of the right to receive some or all of the interest payments on that
bond which have not become payable results in the creation of "stripped bonds"
with respect to the principal payments and "stripped coupons" with respect to
the interest payments. Receipts will be considered "stripped bonds" or "stripped
coupons," as appropriate, and a Receipt (whether purchased by a purchaser in an
original sale or in a subsequent transaction) will be treated, under section
1286 of the Code, solely for purposes of applying the original issue discount
rules of the Code to such purchaser, as if the Receipt held by such purchaser
was issued on the purchase date with original issue discount ("OID"). Purchasers
of the Receipts will be required to include the accrued portion of the OID (as
described below) in gross income for the taxable year even though the
corresponding payment may not be received during the taxable year.
PRINCIPAL RECEIPTS AND COUPON RECEIPTS
--------------------------------------
In the opinion of McCarter & English, LLP the Coupon Receipts will
be treated as "stripped coupons" and Principal Receipts will be treated as
"stripped bonds," within the meaning of section 1286 of the Code. The total
amount of OID with respect to a Principal Receipt or Coupon Receipt will equal
the excess of the amount payable at maturity of the particular Principal Receipt
or Coupon Receipt over the purchase price of the respective Receipt.
CALLABLE PRINCIPAL RECEIPTS
---------------------------
It is believed by the Depositor that purchasers of the Callable
Principal Receipts will be treated, for purposes of calculating original issue
discount and gain or loss on disposition, as having purchased a single "stripped
bond" (rather than multiple debt components representing separate rights to
receive principal and to receive interest on each interest payment date
subsequent to the first optional call date thereof, for which tax basis must be
separately allocated and original issue discount separately calculated). In the
event that the scheduled maturity date of a particular Callable Principal
Receipt is properly treated as the maturity date of such Receipt for purposes of
the original issue discount rules, it is believed by the Depositor that such
Callable Principal Receipt will be regarded as evidencing a single "installment
obligation", within the meaning of the regulations promulgated by the U.S.
Treasury with respect to original issue discount. This treatment is based on an
interpretation of the interrelationship between section 1286 of the Code and
certain Treasury regulations promulgated under sections 1272, 1273, and 1275 of
the Code, and there can be no assurance that the Internal Revenue Service would
agree with such interpretation. Certain of the Bonds related to Callable
Principal Receipts may be required to be redeemed prior to their stated maturity
date at a price equal to their principal amount plus, in some cases, a fixed
call premium. Under section 1286 the U.S. Treasury is given specific authority
to adopt regulations modifying treatment under such section where necessary to
accurately reflect the income of the holder of a stripped right by reason of
applicable call options or other circumstances. Because section 1286 of the Code
treats a "stripped bond" as being issued on the date of purchase for purposes of
applying the original issue discount rules of the Code, the original issue
discount and yield to maturity of the Principal Receipts will likely be required
by the Internal Revenue Service to be calculated by taking into account events
that have occurred prior to such purchase date and therefore as if the date on
which the redemption is to take place and the redemption price were the maturity
date and amount payable at maturity, respectively, of such Callable Principal
Receipts. Under regulations promulgated pursuant to sections 1271 through 1275
of the Code, if based on all the facts and circumstances as of the issue date it
is more likely than not that a debt instrument's stated payment schedule will
not occur, then the yield and maturity of the debt instrument are computed based
on the payment schedule most likely to occur. It is otherwise uncertain whether
the scheduled maturity date of a particular Callable Principal Receipt will be
viewed as the maturity date of such Callable Principal Receipt for purposes of
the original issue discount rules (e.g., determination of yield to maturity and
amount payable at maturity), particularly where on the date of purchase of such
Callable Principal Receipt objective market factors suggest that in the absence
of any market change, it can be expected to be in the economic interest of the
issuer of the related Bond to call such Bond on a date prior to scheduled
maturity. As described above, the OID Regulations provide that if, based on all
the facts and
-17-
<PAGE>
circumstances as of the issue date, it is more likely than not that a debt
instrument's stated payment schedule will not occur, then the yield and maturity
of the debt instrument are computed based on the payment schedule most likely to
occur. It is likely that future Treasury regulations promulgated pursuant to a
specific grant of regulatory authority under section 1286 of the Code with
respect to stripped rights with call options will address this question.
ACCRUAL OF ORIGINAL ISSUE DISCOUNT
----------------------------------
In general, OID on a Receipt accrues on a daily basis, based on the
constant yield to maturity of the Receipt over the term of the Receipt and is to
be allocated ratably to each day in an accrual period. The constant yield to
maturity means that interest rate which when used in computing the present value
of all of the principal and coupon payments to be made on the Receipts produces
an amount equal to the purchase price of such Receipts, calculated based on
compounding at the end of each accrual period.
In the case of any Receipt that matures more than one year after its
date of purchase, the OID will be allocated to accrual periods which may be of
any length and may vary over the term of the Receipt, provided that no period is
longer than one year and the principal payment and each coupon payment with
respect to the Receipt occurs on the first or last day of an accrual period. The
portion of the OID that is allocated to an accrual period will equal the product
of (i) the purchase price of such Receipts increased by the portion of the OID
allocated to prior accrual periods during which the purchaser held such Receipts
(and, in the case of a Callable Principal Receipts, if properly treated as an
installment obligation maturing on the scheduled maturity date, reduced by any
payments on such Receipts received in prior accrual periods during which the
purchaser held such Receipts), and (ii) the yield to maturity of the Receipts
appropriately taking into account the length of the accrual period. The
resulting portion of OID allocated to an accrual period will be divided by the
number of days in the accrual period to determine the daily portions of OID for
that accrual period.
In the case of a Receipt maturing within one year of the date on
which it is purchased, OID accrues on a straight-line basis and is apportioned
equally to each of the days subsequent to the date of purchase of such Receipt
through the date of maturity, provided that, at the owner's election, OID may be
accrued under a constant yield method based on the yield to maturity calculated
as described above but with daily compounding (rather than compounding at the
end of each accrual period).
GAIN OR LOSS
A purchaser's tax basis in a Receipt will equal the purchase price
for such Receipt increased by the portion of the original issue discount accrued
on such Receipt during the period such purchaser owns the Receipt and, in the
case of a Callable Principal Receipt, if properly treated as an installment
obligation maturing on the scheduled maturity date, reduced by any payments
actually received prior to maturity. Gain or loss on sale or at maturity of a
Receipt will be equal to the difference between the amount realized in such sale
or at maturity and the owner's tax basis at the time of sale or at maturity and
will be taxable capital gain or loss.
ADDITIONAL TAX CONSIDERATIONS
BACKUP WITHHOLDING
------------------
Payments of interest (including OID) and principal, as well as
proceeds from the disposition or retirement of Receipts, may be subject to a
"backup" withholding tax of 31 percent if a recipient fails to furnish to the
payor (in the case of Receipts, the Trustee) certain identifying information.
Certain penalties also may be imposed by the IRS on a recipient of payments who
is required to supply information, but fails to do so in the proper manner.
Backup withholding will not apply with respect to payments made to
certain exempt recipients, such as corporations and financial institutions.
Holders should consult their own tax advisers with respect to qualification for
-18-
<PAGE>
exemption from backup withholding and the procedure for obtaining such an
exemption. Any amounts deducted and withheld would be allowed as a credit
against such recipient's federal income tax.
TAX INFORMATION REPORTING
-------------------------
Within a reasonable time after the end of each calendar year, the
Trustee will furnish each Receiptholder (DTC or other holders of Certificated
Receipts) such customary information as the Trustee deems necessary or desirable
to enable Receiptholders to prepare their tax returns. The Trustee will furnish
comparable information to the IRS as and when required by law to do so. Because
the rules for accruing discount and amortizing premium with respect to Receipts
are uncertain in various respects, there is no assurance that the IRS will agree
with the information reports. Moreover, even if otherwise accepted as accurate
by the IRS, such information reports will be based on the original issue price
of the Receipt and will, therefore, in the case of Receiptholders who purchased
their Receipt after their initial issuance or at a price different from the
original issue price, require adjustments to account for such Receiptholders'
holding periods and purchase prices. Receiptholders who hold their Receipt
through DTC participants should consult the party from whom they receive tax
reports concerning the Receipts to determine whether such reports reflect such
adjustments. Receiptholders who hold Certificated Receipts should consult their
tax advisors concerning the method for making any such required adjustments.
NON-UNITED STATES HOLDERS
-------------------------
A Non-United States Holder is a beneficial owner of a Receipt other
than a United States citizen or resident, a domestic partnership or corporation,
or a trust subject to U.S. income tax on income regardless of its source. Under
present federal income and estate tax law:
(a) No withholding of federal income tax will be required
with respect to the payment of interest or OID
attributable to a Receipt owned by a Non-United States
Holder, provided that such Holder (i) does not actually
or constructively own 10 percent or more of any issuer
of Bonds, and (ii) in accordance with specified
procedures, supplies the person otherwise required to
withhold with a certification to the effect that the
beneficial owner is not a United States person, citizen
or resident. In certain circumstances, the requisite
certification may be provided by or through a bank or
other financial institution.
(b) If certain conditions are met, a nonresident alien
individual will not be subject to Federal income tax
with respect to certain gains realized on the sale,
exchange, or retirement of a Receipt.
(c) A Receipt beneficially owned by an individual who at the
time of such individual's death is a Non-United States
Holder will not be subject to federal estate tax as a
result of such individual's death, provided that the
payments with respect to such Receipt are not
effectively connected with a United States trade or
business of such individual and the Receipts constitute
portfolio debt obligations, interest on which is exempt
from withholding under the Code.
Notwithstanding the foregoing, Non-United States Holders may be
subject to income tax withholding and estate taxation with respect to any Bonds
that were issued before July 18, 1984. Further, a Non-United States Holder
engaged in a trade or business within the United States whose income from a
Receipt is effectively connected with that trade or business generally will be
subject to regular United States federal income tax on such income and gain as
if it were a United States Holder. In addition, if a Non-United States Holder is
a foreign corporation, it may be subject to a branch profits tax equal to 30
percent of its effectively connected earnings and profits for the taxable year,
subject to adjustments.
Backup withholding will not apply to payments to a Non-United States
Holder on a Receipt if the holder has certified as to its foreign status under
penalty of perjury (or has otherwise established an exemption) and certain other
-19-
<PAGE>
requirements are met, provided that the payor does not know that the payee is a
United States person. Payments on the sale, exchange or other disposition of a
Receipt to or through a foreign office of a broker will not be subject to backup
withholding provided certain requirements are met; payments to or through the
United States office of a broker will be subject to backup withholding unless
the Non-United States Holder makes the certification or otherwise establishes an
exemption under the conditions previously described.
NON-UNITED STATES HOLDERS ARE URGED TO CONSULT THEIR OWN TAX
ADVISORS REGARDING THE APPLICATION OF UNITED STATES FEDERAL INCOME TAX LAW TO
THEIR PARTICULAR SITUATIONS.
STATE AND OTHER TAX CONSIDERATIONS
In addition to the federal income tax consequences described above,
potential investors should consider the state, local and foreign tax
consequences of the acquisition, ownership and disposition of Receipts. State,
local and foreign tax law may differ substantially from federal tax law, and
this discussion does not purport to describe any aspect of the tax law of a
state or other jurisdiction. Therefore, prospective purchasers should consult
their own tax advisors with respect to such matters.
ERISA CONSIDERATIONS
Section 406 of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), and section 4975 of the Code, prohibit "plan assets" of a
pension, profit sharing and other employee benefit plans, as well as individual
retirement accounts and Keogh plans (each a "Plan"), from engaging in certain
transactions involving "plan assets" with persons that are "parties in interest"
under ERISA or "disqualified person" under the Code with respect to the Plan. A
violation of these "prohibited transaction" rules may result in an excise tax
and other liabilities under ERISA and Section 4975 of the Code for such persons,
unless a statutory, regulatory or administrative exemption is available.
A violation of the prohibited transaction rules could occur if
Receipts of any series were purchased with assets of a Plan, and if the
Depositor, the Trustee, or any of their affiliates were a "party in interest" or
a "disqualified person" with respect to such Plan, unless a statutory,
regulatory or administrative exemption is available or an exception applies
under a regulation (the "Plan Asset Regulation") issued by the Department of
Labor (the "DOL"). The Depositor, the Trustee, or their affiliates may be
"parties in interest" and "disqualified persons" with respect to certain Plans;
in particular, it is likely that the Trustee will be treated as a "party in
interest" and "disqualified person" with many Plans. Before purchasing Receipts
of any particular series, a Plan fiduciary (as defined in ERISA section 3(21)
and the regulations issued thereunder) or other Plan investor should consider
whether a prohibited transaction might arise by reason of the relationship
between the Plan and the Depositor, the relevant Trustee or any of their
affiliates, and should consult its counsel regarding the purchase in light of
the considerations described below.
The DOL has issued three class exemptions that may apply to
otherwise prohibited transactions arising from the purchase or holding of the
Receipts: DOL Prohibited Transaction Exemption 91-38 (Class Exemption for
Certain Transactions Involving Bank Collective Investment Funds), 90-1 (Class
Exemption for Certain Transactions Involving Insurance Company Pooled Separate
Accounts), and 84-14 (Class Exemption for Plan Asset Transactions Determined by
Independent Qualified Professional Asset Managers).
Under certain circumstances, the Plan Asset Regulation treats the
underlying assets of an entity in which a Plan holds an equity interest as "plan
assets" of such Plan. Because the Receipts will represent beneficial interests
in a Trust, the Receipts will be considered equity interests for purposes of the
Plan Asset Regulation, with the result that the assets of the Trust will be
treated as "plan assets" of the investing Plans for purposes of ERISA and
section 4975 of the Code, unless either of the following exceptions applies.
-20-
<PAGE>
The first exception applies to a "publicly offered security." A
publicly-offered security is a security that is (a) freely transferable, (b)
part of a class of securities that is owned, immediately subsequent to the
initial offering, by 100 or more investors who are independent of the issuer and
of one another ("Independent Investors"), and (c) either is (i) part of a class
of securities registered under section 12(b) or 12(g) of the Exchange Act, or
(ii) sold to a Plan as part of an offering of securities to the public pursuant
to an effective registration statement under the Act and the class of securities
of which such security is a part is registered under the Exchange Act within 120
days (or such later time as may be allowed by the Commission) after the end of
the fiscal year of the issuer during which the offering of such securities to
the public occurred. For purposes of the 100 Independent Investor criterion,
each class of Receipts should be deemed to be a "class" of securities that would
be tested separately from any other securities that may be issued by the Trust.
It is anticipated that each class of Receipts will meet the foregoing criteria
for treatment as "publicly-offered securities," although no assurance can be
given that each class of each Series will meet this criteria.
The second exception applies if equity participation in the entity
by "benefit plan investors" (i.e., Plans and other employee benefit plans not
subject to ERISA, such as governmental or foreign plans, as well as entities
holding assets deemed to be "plan assets") is not "significant." Benefit plan
investors' equity participation in an entity is not significant on any date on
which an equity interest in the entity is issued and outstanding if, immediately
after the most recent acquisition or any equity interest in the entity, less
than 25% of the value of each class of equity interests in the entity (excluding
interests held by any person who has discretionary authority or control with
respect to such assets of the entity, received direct or indirect compensation
for providing investment advice with respect to such assets, or is an affiliate
of such person) is held by benefit plan investors. No assurance can be given by
the Depositor as to whether or not the value of each class of Receipts in any
Trust held by benefit plan investors will be "significant" upon completion of
the offering of any series of Receipts or thereafter, and no monitoring or other
measures will be taken with respect to the satisfaction of the conditions to
this exception.
If neither of the foregoing exceptions under the Plan Asset
Regulation were satisfied with respect to a Trust and the Trust were considered
to hold "plan assets," transactions involving the Trust and "parties in
interest" or "disqualified persons" with respect to Receipts held by the Plan
might be prohibited under section 406 of ERISA and/or section 4975 of the Code,
and might result in excise tax and other liabilities under ERISA or Section 4975
of the Code unless an exemption were available. The three DOL class exemptions
mentioned above may not provide relief for all transactions involving the assets
of a Trust, even if they would otherwise apply to the purchase of a Receipt by a
Plan.
Receipts of any series may not be purchased with the assets of a
Plan if the Depositor, the Trustee, or any of their affiliates is deemed a Plan
fiduciary under the definition set forth above and, among other things, (a) has
investment or administrative discretion with respect to such Plan assets; (b)
has authority or responsibility to give, or regularly gives, investment advice
with respect to such Plan assets, for a fee and pursuant to an agreement or
understanding that such advice (i) will serve as a primary basis for investment
decisions with respect to such Plan assets, and (ii) will be based on the
particular investment needs of such Plan; or (c) is an employer maintaining or
contributing to such Plan.
In light of the foregoing, fiduciaries and other investors
considering the purchase of Receipts with "plan assets" (as defined in ERISA and
the regulations thereunder) of any Plan should consult their tax and/or legal
counsel regarding whether the assets of the Trust would be considered "plan
assets" of the Plan of such investors and fiduciaries, and the availability of
an exemption from the prohibited transaction rules.
PLAN OF DISTRIBUTION
The Receipts offered hereby and by the related Prospectus Supplement
will be offered in series through one or more of the methods described below.
The Prospectus Supplement prepared for each series will describe the method
-21-
<PAGE>
of offering being utilized for that series. The Receipts will be transferred to
Rickel Securities, Inc. in exchange for the Bonds, and there will be no cash
proceeds received by the Depositor from the sale of the Receipts.
Any Receipts acquired by Rickel Securities, Inc. in exchange for
Bonds as described above will be acquired by Rickel Securities, Inc. for its own
account and may be resold from time to time in one or more transactions,
including negotiated transactions at fixed public offering prices or a varying
prices to be determined at the time of sale or at the time of commitment
therefor. If any underwriters other than Rickel Securities, Inc. participate as
co-managers in the distribution of the Receipts of a particular series, their
names and Rickel Securities, Inc.'s will be set forth on the cover of the
Prospectus Supplement relating to such series and the members of the
underwriting syndicate, if any, will be named in such Prospectus Supplement.
In connection with any sale of the Receipts in which Rickel
Securities, Inc. is not the sole underwriter, the other underwriters may receive
compensation from Rickel Securities, Inc. or from purchasers of the Receipts in
the form of discounts, concessions or commissions. Underwriters and dealers
participating in the distribution of the Receipts may be deemed to be
underwriters in connection with such Receipts, and any discounts or commissions
received by them from Rickel Securities, Inc. and any profit on the resale of
Receipts by them may be deemed to be underwriting discounts and commissions
under the Securities Act.
It is anticipated that the underwriting agreement pertaining to the
sale of any series of Receipts in which Rickel Securities, Inc. is not the sole
underwriter will provide that the obligations of the underwriters will be
subject to certain conditions precedent, that the underwriters will be obligated
to purchase all such Receipts if any are purchased (other than in connection
with an underwriting on a best efforts basis), and that the Depositor will
indemnify the several underwriters and the underwriters will indemnify the
Depositor against certain civil liabilities, including liabilities under the
Securities Act, or will contribute to payments required to be made in respect
thereof.
LEGAL OPINIONS
Certain legal and federal income tax matters relating to the
Receipts will be passed upon for the Depositor and Rickel Securities, Inc. by
McCarter & English, LLP, counsel to the Depositor and Rickel Securities, Inc.
INDEX OF TERMS
Set forth below is a list of the defined terms used in this
Prospectus and the pages on which the definitions of such terms may be found
herein.
TERMS PAGE
- ----- ----
Accreted Value ............................................................ 11
Bonds ..................................................................... 1
Cede ...................................................................... 3
Certificated Receipts ..................................................... 13
Code ...................................................................... 4
Commission ................................................................ 3
Depositor ................................................................. 1
DOL ....................................................................... 20
DTC ....................................................................... 1
DTC Book Entry Only System ................................................ 12
ERISA ..................................................................... 5
-22-
<PAGE>
Exchange Act .............................................................. 3
Holders ................................................................... 3
Independent Investors ..................................................... 21
Indirect Participants ..................................................... 12
Issuance Date ............................................................. 4
Obligor ................................................................... 6
OID ....................................................................... 17
OID Regulations ........................................................... 16
Plan ...................................................................... 20
Plan Asset Regulation ..................................................... 20
Prospectus Supplement ..................................................... 1
Receiptholders ............................................................ 3
Receipt Register .......................................................... 14
Receipts .................................................................. 1
Registration Statement .................................................... 3
Rules ..................................................................... 12
Securities Act ............................................................ 3
Trust ..................................................................... 1
Trust Agreement ........................................................... 1
Trustee ................................................................... 1
-23-
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses to be incurred
in connection with the offering of the Receipts, other than underwriting
discounts and commissions, described in this Registration Statement:
Securities & Exchange Commission Registration Fee............$18,182
Printing.......................................................5,000
Legal Fees and Expenses.......................................75,000
Blue Sky Filing and Counsel Fees...............................4,500
Accountants' Fees..............................................5,000
Trustee Fees and Expenses.....................................10,000
Rating Agencies' Fees.........................................10,000
Miscellaneous.................................................18,104
-------
Total.......................................................$145,786
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
American Corporate Receipts, Inc. is incorporated under the laws of
New Jersey. Section 14A:3-5 of the New Jersey General Corporation Business Act
provides that a New Jersey corporation may indemnify any persons, including
officers and directors, who are, or are threatened to be made, parties to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of such corporation, by reason of the fact that such person was an
officer, director, employee or agent of such corporation, or is or was serving
at the request of such corporation as a director, officer, employee or agent of
another corporation or enterprise). The indemnity may include expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such action,
suit or proceeding, provided such person acted in good faith and in a manner he
reasonably believed to be in or not opposed to the corporation's best interests
and, for criminal proceedings, had no reasonable cause to believe that his
conduct was illegal. A New Jersey corporation may indemnify officers and
directors in an action by or in the right of the corporation under the same
conditions, except that no indemnification is permitted without judicial
approval if the officer or director is adjudged to be liable to the corporation.
Where an officer or director is successful on the merits or otherwise in the
defense of any action referred to above, the corporation must indemnify him
against the expenses which such officer or director actually and reasonably
incurred.
American Corporate Receipts, Inc.'s Certificate of Incorporation
provides, in effect, that, subject to certain limited exceptions, such
corporation will indemnify its officers and directors to the extent permitted by
New Jersey law.
ITEM 16. EXHIBITS.
Exhibits
1.1 -- Form of Underwriting Agreement.*
3.1 -- Certificate of Incorporation of the Depositor
(as amended by Certificate of Amendment).**
3.2 -- By-laws of the Depositor.*
4.1 -- Form of Master Trust Agreement and Standard Terms
and Provisions **
-24-
<PAGE>
5.1 -- Opinion of McCarter & English, LLP with respect
to legality.**
8.1 -- Opinion of McCarter & English, LLP with respect to
federal tax matters.**
24.1 -- Consent of McCarter & English, LLP
(included as part of Exhibits 5.1 and 8.1).
25.1 -- Power of Attorney.*
99.1 -- Form of Prospectus Supplement**
- -------------------
* Previously filed.
** Amended form of document previously filed.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3)
of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement
(or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a
fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide
offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(4) To file an application for the purpose of determining the
eligibility of the Trustee to act under subsection (a) of
Section 310 of the Trust Indenture Act of 1939 in accordance
with the rules and regulations prescribed by the Commission
under Section 305(b)(2) of the Trust Indenture Act of 1939.
(5) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon
Rules 430A and contained in a form of prospectus filed by the
registrant pursuant to Rules 424(b)(1) or (4) or 497(h) under
the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(6) For purposes of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
-25-
<PAGE>
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors and officers of the
Depositor pursuant to the provisions discussed in Item 14 above, or otherwise,
the Depositor has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director or officer of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director or officer in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act of 1933 and will be governed by the
final adjudication of such issue.
-26-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3, that it reasonably believes that the
securities to be offered for sale pursuant to this Registration Statement will
meet the security rating requirements for registration pursuant to Form S-3 at
the time of their sale, and has duly caused this Pre-Effective Amendment No. 1
to the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the Township of Millburn, State of New Jersey, on
the 29th day of December, 1997.
AMERICAN CORPORATE RECEIPTS, INC.
/S/ JOHN C. SABO
-------------------
John C. Sabo
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below on December 29, 1997 by the
following persons in the capacities indicated.
SIGNATURE TITLE
--------- -----
/S/ JOHN C. SABO President and Sole Director
- ----------------
John C. Sabo (Principal Executive Officer)
/S/ SUSAN P. BOWEN Senior Vice President
- ------------------
Susan P. Bowen (Chief Financial Officer)
-27-
<PAGE>
EXHIBIT INDEX
1.1 - Form of Underwriting Agreement*
3.1 - Certificate of Incorporation of the Depositor
(as amended by Certificate of Amendment)**
3.2 - By-laws of the Depositor*
4.1 - Form of Master Trust Agreement and Standard
Terms and Provisions**
5.1 - Opinion of McCarter & English, LLP with respect to legality**
8.1 - Opinion of McCarter & English, LLP with respect to
federal tax matters**
24.1 - Consent of McCarter & English, LLP (included as part
of Exhibits 5.1 and 8.1)
25.1 - Power of Attorney*
99.1 - Form of Prospectus Supplement**
- -------------------
* Previously filed.
** Amended form of document previously filed.
-28-
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
AMERICAN CORPORATE RECEIPTS, INC.
TO: The Secretary of State
State of New Jersey
THE UNDERSIGNED, of the age of eighteen or over, for the purpose of forming
a corporation under the New Jersey Business Corporation Act, title 14A,
Corporations, General, of the New Jersey Statutes, does hereby execute the
following Certificate of Incorporation:
ARTICLE I
CORPORATE NAME
The name of the Corporation is AMERICAN CORPORATE RECEIPTS, INC.
ARTICLE II
REGISTERED OFFICE AND REGISTERED AGENT
The address of the Corporation's current registered office is 45 Essex
Street, Millburn, New Jersey 07041. The name of its current registered agent at
that address is Susan P. Bowen.
ARTICLE III
CORPORATE PURPOSE
The purposes for which the Corporation is organized is to engage in any
activities for which corporations may be organized under the New Jersey Business
Corporation Act, title 14A, Corporations, General, of the New Jersey statutes.
ARTICLE IV
CAPITAL STOCK
The Corporation is authorized to issue 1,000 shares of common stock at no
par value.
<PAGE>
ARTICLE V
BOARD OF DIRECTORS AND NUMBER OF DIRECTORS
The number of directors shall be governed by the By-Laws of the
Corporation. The number of directors constituting the initial Board of Directors
shall be one. The name and address of the initial Board of Directors is as
follows:
NAME ADDRESS
John C. Sabo c/o Rickel Securities, Inc.
45 Essex Street
Millburn, New Jersey 07041
ARTICLE VI
LIMITATION OF LIABILITY
Subject to the following, a director or officer shall not be personally
liable to the Corporation or its shareholders for any breach of any duty owed to
the Corporation or its shareholders. The preceding sentence shall not relieve a
director or officer from liability for any breach of duty based upon an act or
omission (i) in breach of such person's duty of loyalty to the Corporation or
its shareholders, (ii) not in good faith or involving a knowing violation of law
or (iii) resulting in receipt by such person of an improper personal benefit. If
the New Jersey Business Corporation Act is amended to authorize a corporate
action further eliminating or limiting the personal liability of directors or
officers, then the liability of a director or officer or both of the Corporation
shall be eliminated or limited to the fullest extent permitted by the New Jersey
Business Corporation Act as so amended. No amendment to or repeal of this
Certificate of Incorporation shall apply to or have any adverse effect on the
liability or alleged liability of any director or officer for or with respect to
any acts or omissions of such director or officer occurring prior to such
amendment or repeal.
ARTICLE VII
INDEMNIFICATION OF CORPORATE AGENTS
Every Corporate Agent of the Corporation who was or is made a party or is
threatened to be made a party to or is involved in any proceeding by reason of
his or her service as a Corporate Agent, whether or not the basis of such
proceeding is an alleged action in an official capacity as a director, officer,
employee or agent or in any other capacity (including service with respect to an
employee benefit plan), shall be indemnified and held harmless by the
Corporation to the fullest extent permitted by the New Jersey Business
Corporation Act, as the same exists today or may hereafter be amended (but, in
the case of any such amendment, only to the extent that such amendment permits
the Corporation to provide broader indemnification rights than the New Jersey
Business Corporation Act permitted the Corporation to provide prior to such
amendment), against all Expenses and Liabilities (including without limitation
ERISA excise taxes or penalties). The rights provided herein are intended to
extend to all Proceedings (including,
-2-
<PAGE>
without limitation, Proceedings by or in the right of the Corporation), and the
indemnification against Expenses and Liabilities in connection with Proceedings
by or in the right of the Corporation is specifically provided for to the
fullest extent permitted by law. The rights to indemnification provided
hereunder shall also include the right to advancement of expenses to the fullest
extent permitted by law. The rights provided hereunder shall not exclude any
other rights to which a Corporate Agent may be entitled under the By-Laws of the
Corporation or under any agreement, vote of shareholders or otherwise.
All terms not defined hereby are used in accordance with the definitions
contained in the New Jersey Business Corporation Act at N.J.S.A. ss.14A:3-5(1).
ARTICLE VIII
NAME AND ADDRESS OF INCORPORATOR
The name and address of the incorporator shall be David F. Broderick, Esq.,
c/o McCarter & English, Four Gateway Center, 100 Mulberry Street, Twelfth Floor,
Newark, New Jersey 07101-0652.
ARTICLE IX
DATE OF INCORPORATION
The effective date of this Certificate of Incorporation is the date of its
filing with the Secretary of State.
IN WITNESS WHEREOF, the undersigned, the incorporator of the above named
Corporation, has hereunto signed this Certificate of Incorporation on the 27th
day of October, 1997.
/S/ DAVID F. BRODERICK
--------------------------------------
DAVID F. BRODERICK, ESQ.
-3-
<PAGE>
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
AMERICAN CORPORATE RECEIPTS INC.
Pursuant to the provisions of Section 14A:9-2(1) and Section 14A:9-4(1)
of the New Jersey Business Corporation Act, the undersigned incorporator
executes this Certificate of Amendment to the Certificate of Incorporation of
American Corporate Receipts Inc.:
1. The name of the corporation is "AMERICAN CORPORATE RECEIPTS, INC." (the
"Corporation").
2. The Corporation's Certificate of Incorporation is amended in the following
manner: Article III of the Corporation's Certificate of Incorporation is deleted
and replaced with the following new Article III:
ARTICLE III
CORPORATE PURPOSE
The purpose of the Corporation is to engage solely in
the following activities: (a) acting as settlor or depositor
of trusts formed to issue participation certificates or
receipts representing beneficial ownership interests in bonds
held by such trusts; and (b) engaging in any activity and
exercising any powers permitted to corporations under the laws
of the State of New Jersey that are incident to the foregoing
and necessary or convenient to accomplish the foregoing.
3. The amendment to the Corporation's Certificate of Incorporation set
forth in this Certificate of Amendment is hereby made by the Corporation's sole
incorporator before the organizational meeting of the Directors of the
Corporation.
IN WITNESS WHEREOF, the undersigned Incorporator has executed this
certificate this 31st day of December, 1997.
/S/ DAVID F. BRODERICK
----------------------
David F. Broderick,
Incorporator
EXHIBIT 4.1
EXHIBIT B
TO SERIES TRUST
AGREEMENT
STANDARD TERMS AND PROVISIONS OF TRUST AGREEMENT
between
AMERICAN CORPORATE RECEPTS, INC.
as Depositor,
and
----------------------------,
as Trustee
<PAGE>
STANDARD TERMS AND PROVISIONS OF TRUST AGREEMENT
This document constitutes the Standard Terms and Provisions of Trust
Agreement which are to be incorporated by reference in, and attached as Exhibit
B to, one or more Series Trust Agreements by and among American Corporate
Receipts, Inc., as Depositor, and ________________, as Trustee.
Each Series Trust Agreement will create a trust (each, a "Trust")
under the laws of the State of New York to hold securities (the "Bonds") and
will provide for the creation, execution and delivery of trust receipts (the
"Receipts").
These Standard Terms shall be of no force and effect unless and
until incorporated by reference into a Series Trust Agreement.
The following terms and provisions shall govern the Receipts subject
to contrary terms and provisions expressly set forth in a Series Trust
Agreement, which contrary terms and provisions of the Series Trust Agreement
shall control, and subject to contrary terms and provisions contained in the
Trust Indenture Act of 1939, as amended, which contrary terms and conditions
shall control over both the Series Trust Agreement and these Standard Terms and
Provisions of Trust Agreement.
ARTICLE I
DEFINITIONS
SECTION 1.01. CERTAIN DEFINITIONS. All capitalized terms used herein
shall have the meaning set forth in this Section 1.01 unless the context
otherwise requires. Any capitalized terms not otherwise defined shall have the
meanings ascribed to them in the Act.
The term "Accreted Value" means, for any Receipt, (a) the original
issue price for such Receipt as set forth in Exhibit A to the Series Trust
Agreement, plus (b) an amount equal to an investment return thereon accrued to
the date of determination calculated based on a semiannual compounding rate, on
the basis of a 360 day year composed of twelve 30-day months, equal to the
original yield to maturity of such Receipt as set forth in Exhibit A to the
Series Trust Agreement. With respect to the allocation of proceeds of the Bonds
received in connection with a payment default on the Bonds, the relevant
determination date shall be the date of such default.
The term "Act" shall mean the Trust Indenture Act of 1939, as
amended.
The term "Agreement" shall mean the trust agreement consisting of
the Series Trust Agreement into which is incorporated by reference the Standard
Terms, including all exhibits, schedules, appendices, supplements and amendments
to each.
<PAGE>
The term "Beneficial Owner" shall mean any purchaser of Receipts
which are held through a Direct or Indirect DTC Participant as such term is used
in the rules and regulations of DTC.
The term "Bond" shall mean with respect to each delivery of Receipts
hereunder, the Bonds specified in the Series Trust Agreement relating to such
Receipts in the aggregate principal amount so specified.
The term "Book-Entry Credit" shall mean the evidence of the deposit
by the Trustee of one or more Bonds in a separate account of the Trustee, as
Trustee under this Agreement, identified in the Series Trust Agreement.
The term "Callable Principal" shall mean the right to receive (i)
the payment, whether upon stated maturity or upon earlier redemption, of the
Principal of Bonds which are redeemable at the option of the issuer thereof
prior to stated maturity, including any redemption premium, and (ii) the
Interest relating to such Bonds with respect to Interest Payment Dates after the
First Call Date for such Bonds.
The term "Depositor" shall mean American Corporate Receipts, Inc., a
New Jersey corporation, and any successor as Depositor hereunder.
The term "Designated Office in New York City," when used with
respect to the Trustee, shall mean an office maintained in accordance with
Section 5.02(a) hereof and designated by the Trustee in the Borough of
Manhattan, City of New York, State of New York.
The term "DTC" shall mean The Depository Trust Company, a clearing
agency registered with the Securities and Exchange Commission, its successor or
successors, and its nominee or nominees.
The term "First Call Date" shall mean, for any Bond, the first date
such Bond can be redeemed at the option of the issuer thereof.
The term "Holder" shall mean a person in whose name a Receipt is
registered in the Receipt Register.
The term "Indenture" shall mean, with respect to any series of
Receipts, the trust indenture or similar agreement governing the Bonds specified
in the Series Trust Agreement relating to such series of Receipts.
The term "Interest" shall mean the right to receive the interest
payable on the Bonds on a single Interest Payment Date.
The term "Interest Payment Dates" shall mean the dates for interest
payments specified in the Series Trust Agreement.
-2-
<PAGE>
The term "Letter of Representations" shall mean the letter of
representations from the Depositor and the Trustee to DTC with respect to the
series of Receipts held at DTC.
The term "Participant" means an entity maintaining a custodial
account in its own name with DTC.
The term "Principal" shall mean the right to receive the principal
of the Bonds upon stated maturity.
The term "Receipt" shall mean a trust receipt of a class of receipts
to be issued under the Agreement, which classes are specified in the Series
Trust Agreement for the series. Such classes may consist of:
(i) Coupon Receipts, which entitle the Holders thereof, in the
aggregate, to the Interest payable on a single Interest Payment Date
on or before the First Call Date for the Bonds, or the stated
maturity date in the case of Bonds not redeemable (otherwise than in
connection with a default or acceleration) at the option of the
issuer thereof prior to stated maturity;
(ii) Principal Receipts, which entitle the Holders thereof, in the
aggregate, to Principal, payable at the stated maturity of the
Bonds, of Bonds which are not redeemable (otherwise than in
connection with a default or acceleration) at the option of the
issuer thereof prior to stated maturity; and
(iii) Callable Principal Receipts, which entitle the Holders
thereof, in the aggregate, to the Callable Principal relating to the
Bonds;
provided, that any designation of classes of Receipts made in the Series Trust
Agreement shall consist of only one of the following options: (a) Coupon
Receipts and Principal Receipts, or (b) Coupon Receipts and Callable Principal
Receipts.
The term "Receipt Register" shall have the meaning specified in
Section 2.03 hereof.
The term "Redemption Date" shall mean, with respect to any Bonds to
be redeemed, the date fixed by the issuer thereof for such redemption.
The term "Series Trust Agreement" shall mean the particular Series
Trust Agreement into which these Standard Terms have been incorporated.
The term "Standard Terms" shall mean this Standard Terms and
Provisions of Trust Agreement.
The term "Trust" shall mean each trust created by each Series Trust
Agreement.
-3-
<PAGE>
ARTICLE II
CREATION OF TRUST; DELIVERY AND CUSTODY
OF BONDS; FORM OF RECEIPTS; EXECUTION AND
DELIVERY, SURRENDER AND REDEMPTION OF RECEIPTS
SECTION 2.01. CREATION OF TRUST; DELIVERY AND CUSTODY OF BONDS;
EXECUTION AND DELIVERY OF RECEIPTS IN RESPECT THEREOF. The Trust shall be
established by the Depositor pursuant to a Series Trust Agreement. The sole
asset of such Trust shall be the Bonds deposited by the Depositor and any other
related property specified in the Series Trust Agreement. The Receipts shall
evidence fractional interests in designated portions of the assets of the Trust.
The income received by and the assets of such Trust shall be distributed solely
in accordance with this Agreement. The Trust shall not purchase or otherwise
acquire any additional securities and shall not dispose of or create any lien on
its assets. The Depositor shall, by book-entry credit or otherwise, irrevocably
deliver to the account of the Trustee specified in the Series Trust Agreement
such Bonds and, concurrently therewith, the Trustee shall, in accordance with
the provisions of this Agreement, execute and deliver to the Depositor, or such
person or persons as the Depositor may designate by written instruction, the
classes of Receipts identified in the Series Trust Agreement, evidencing the
aggregate amount, in authorized denominations, of the Bonds so delivered to the
Trustee. The Depositor shall also in connection with the Series Trust Agreement
enter into a separate agreement with the Trustee, satisfactory to the Trustee,
providing for the payment of the charges and expenses of the Trustee in respect
of such Receipts. In no event shall the assets of the Trust be used to pay such
fees.
The Trustee shall accept the Bonds so delivered as trustee for the
Holders of the Receipts which shall be delivered hereunder to evidence such
Bonds and shall hold the Bonds as provided hereunder. The Bonds specified in a
Series Trust Agreement shall be deposited by Book-Entry Credit in an account of
the Trustee at DTC, unless the Series Trust Agreement specifies that the Trustee
shall hold such Bonds (i) in a special trust account created by separate
recordation on its books, separate from all other assets of the Trustee, or (ii)
in some other manner. Separate subaccounts of any such special trust account
shall be established for each series of Receipts.
The Trustee shall hold all the Bonds delivered to it pursuant to
this Agreement in trust for the Holders, identified and held separate and apart
from the general assets of the Trustee. The account of the Trustee in which the
Bonds are held shall not contain any property of the Trustee in its individual
capacity and shall contain only property held by the Trustee as fiduciary. The
Trustee agrees that it does not have the authority to assign, transfer,
encumber, pledge, sell, set-off or otherwise dispose of any of the Bonds or any
interests therein except as provided hereunder or as required by law.
The Trustee acknowledges that it is not the beneficial owner of the
Bonds and that it holds the Bonds solely as trustee for the Holders pursuant to
this Agreement. Interest and
-4-
<PAGE>
principal payments on the Bonds held in the trust account will not be subject to
any right, charge, security interest, lien or claim of any kind in favor of the
Trustee or any person claiming through it.
The representations and covenants contained in any officer's
certificate of the Trustee delivered in connection with each series of Receipts
created by a deposit of Bonds shall be deemed to be incorporated by reference
herein, as fully as if set forth in full herein.
A reasonable time prior to the delivery of Bonds to the Trustee, the
Depositor shall furnish the Trustee with written instructions as to the name in
which the Receipts evidencing such Bonds shall initially be registered, the
denominations in which such Receipts shall initially be delivered, the persons
and addresses to whom such Receipts are to be delivered and such other
information as may be required by the Trustee in connection with the preparation
and delivery of such Receipts. Each class of Receipts shall evidence the
ownership by the Holders thereof of Interest, Principal, or Callable Principal
(or portions thereof), as the case may be, on the Bonds, to the extent required
by the terms of such class of Receipts.
Bonds underlying Receipts which are not held by book-entry credit at
an account of the Trustee at DTC shall be held by the Trustee at its Designated
Office in New York City or at such other place or places as the Trustee shall
determine.
SECTION 2.02. FORM OF RECEIPTS. Receipts shall be issued in
registered form only and shall be typewritten on safety paper or printed. The
classes of Receipts to be issued hereunder shall be identified in the Series
Trust Agreement and shall be substantially in the forms set forth in Appendix A,
in each case attached to these Standard Terms and with appropriate insertions,
modifications and omissions, as hereinafter so provided. Receipts shall be
executed by the Trustee by the manual signature of a duly authorized signatory
of the Trustee. No Receipt shall be entitled to any benefits under this
Agreement or be valid or obligatory for any purpose, unless it shall have been
executed manually by the Trustee by the signature of a duly authorized
signatory. The Trustee shall record in the Receipt Register each Receipt so
signed and delivered as herein provided.
The authorized denominations for each class of Receipts shall be the
dollar amount, and greater multiples thereof (or of such other dollar amount
specified in the Series Trust Agreement), set forth in the Series Trust
Agreement.
Receipts may be endorsed with or have incorporated in the text
thereof such legends or recitals not inconsistent with the provisions of this
Agreement as may be required by the Trustee or required to comply with any
applicable law or any regulation thereunder.
SECTION 2.03. REGISTRATION AND REGISTRATION OF TRANSFER AND EXCHANGE
OF RECEIPTS. The Trustee shall keep at its Designated Office in New York City
pursuant to Section 314 of the Act a register (the register maintained in such
office being herein sometimes referred to as the "Receipt Register") in which,
subject to such reasonable regulations as it may prescribe,
-5-
<PAGE>
the Trustee shall provide for the registration of Receipts and for the
registration of transfers or exchanges of Receipts.
Upon surrender for registration of transfer of any Receipt at the
Trustee's Designated Office in New York City, the Trustee shall, subject to
Sections 2.04 and 2.08 and any limitations that may be specified in the
applicable Series Trust Agreement, execute and deliver, in the name of the
designated transferee or transferees, one or more Receipts of the same class and
series, of any authorized denominations and of a like aggregate amount.
At the option of the Holder, Receipts may be exchanged for other
Receipts of the same class and series, of any authorized denominations and of a
like aggregate amount, upon surrender of the Receipts to be exchanged at the
Trustee's Designated Office in New York City. Whenever any Receipts are so
surrendered for exchange, the Trustee shall execute and deliver the Receipts
which the Holder making the exchange is entitled to receive.
All Receipts issued upon any registration of transfer or exchange of
Receipts shall evidence, to the extent indicated thereby, Interest, Principal or
Callable Principal (or portions thereof), as the case may be, of Bonds held by
the Trustee hereunder and shall be entitled to the same benefits under this
Agreement as the Receipts surrendered upon such registration of transfer or
exchange.
Every Receipt presented for registration of transfer or for exchange
shall (if so required by the Trustee) be duly endorsed by, or be accompanied by
a written instrument of transfer in form satisfactory to the Trustee and duly
executed by, the Holder thereof or such holder's attorney duly authorized in
writing.
The Trustee shall have no obligation to effect transfers or pledge
of Bonds in accordance with Section 8-320 of the New York Uniform Commercial
Code.
SECTION 2.04. LIMITATIONS ON EXECUTION AND DELIVERY, SURRENDER AND
REGISTRATION OF TRANSFER AND EXCHANGE OF RECEIPTS. As a condition precedent to
the execution and delivery, surrender or registration of transfer or exchange of
any Receipt, the Trustee may require payment, by the Holder requesting such
action, of the then applicable service charge of the Trustee and of a sum
sufficient for reimbursement of any tax or other governmental charge with
respect thereto, may require the production of proof reasonably satisfactory to
it as to the Holder's residence and identity and genuineness of any signature,
may require the Holder to execute receipts and to make such representations and
assurances as the Trustee may reasonably deem necessary or proper and may also
require compliance with such regulations, if any, as the Trustee may reasonably
establish consistent with the provisions of this Agreement.
The surrender or registration of transfer or exchange of outstanding
Receipts may be suspended if any such suspension is deemed necessary or
advisable by the Trustee at any time or from time to time because of any
requirement of law or of any government or governmental body or commission, or
under any provision of this Agreement, or for any other reason which makes such
surrender or registration of transfer or exchange impracticable.
-6-
<PAGE>
SECTION 2.05. MUTILATED, DESTROYED, LOST OR STOLEN RECEIPTS. In case
any Receipt shall be mutilated, the Trustee in its discretion may execute and
deliver a Receipt of the same series, of like form and tenor, and in the same
denomination and bearing a number not contemporaneously outstanding, in exchange
and substitution for such mutilated Receipt. In case any Receipt shall be
destroyed, lost or stolen, the Trustee may execute and deliver a Receipt of the
same series, of like form and tenor, and in the same denomination and bearing a
number not contemporaneously outstanding, in lieu of and in substitution for
such destroyed, lost or stolen Receipt, only upon (i) the filing by the Holder
thereof with the Trustee of evidence satisfactory to the Trustee of the
destruction, loss or theft of such Receipt and of the authenticity of such
Holder's ownership thereof, and (ii) the furnishing to the Trustee of reasonable
indemnification satisfactory to it. All expenses and charges associated with
such indemnity and with the preparation, execution and delivery of a new Receipt
shall be borne by the Holder of the Receipt mutilated destroyed, lost or stolen.
SECTION 2.06. PERSONS DEEMED OWNERS. Prior to due presentment of a
Receipt for registration of transfer, the Trustee and any agent of the Trustee
may treat the person in whose name such Receipt is registered as the owner of
such Receipt for the purpose of receiving payment of such Receipt and for all
other purposes whatsoever, whether or not such Receipt be overdue, and neither
the Trustee nor any agent of the Trustee shall be affected by notice to the
contrary.
SECTION 2.07. CANCELLATION AND DESTRUCTION OF SURRENDERED RECEIPTS.
All Receipts surrendered to the Trustee shall be canceled by the Trustee. The
Trustee is authorized to destroy such receipts so canceled.
SECTION 2.08. BOOK-ENTRY. (i) At the election of the Depositor, any
Series Trust Agreement may provide that (1) all Receipts of a series are to be
held in DTC's book-entry only system, (2) all Receipts of a series are to be
issued in definitive physical form, or (3) the Receipts (or any part thereof)
are to be issued or held in such other form as is specified in the Series Trust
Agreement.
(ii) When the registered Holder of any or all of the Receipts is
DTC, such Receipts shall be registered in the name of Cede & Co., as nominee for
DTC. Payment in respect of any Interest or Principal represented by any Receipt
(a) if registered in the name of Cede & Co., shall be made by wire transfer of
immediately available funds to the account indicated for Cede & Co. in the
Receipt Register, and (b) if registered in the name of any other person (other
than a substitute depository for DTC described in Section 2.10 hereof), shall be
made by check for New York Clearing House funds mailed to the address indicated
for such person in the Receipt Register.
(iii) Receipts of which Cede & Co. shall be the Holder shall be
initially issued in the form of a separate single Receipt for each separate
class of Receipts identified in the Series Trust Agreement to be issued
hereunder, in the amount of each separate stated maturity of such Receipt. Upon
initial issuance, the ownership of such Receipt shall be
-7-
<PAGE>
registered in the Receipt Register in the name of Cede & Co., as nominee for
DTC. The Depositor and the Trustee may treat DTC (or its nominee) as the sole
and exclusive owner of the Receipt registered in its name for the purposes of
payment of interest, principal and/or premium represented thereby, giving any
notice permitted or required to be given to Holders under this Agreement,
registering the transfer of such Receipt, obtaining any consent or other action
to be taken by Holders and for all other purposes whatsoever, and neither the
Depositor nor the Trustee shall be affected by any notice to the contrary.
Neither the Depositor nor the Trustee shall have any responsibility or
obligation to any Participant, any person claiming a beneficial ownership
interest in such Receipt under or through DTC or any Participant or any other
person that is not shown on the Receipt Register as being a Holder of such
Receipt, with respect to the accuracy of any records maintained by DTC or any
Participant; the payment by DTC or any Participant of any amount in respect of
principal, interest and/or premium represented by such Receipt; any notice (or
the timeliness thereof) that is permitted or required to be given to Holders of
such Receipt under this Agreement; or any consent given or other action taken by
DTC as the Holder of such Receipt. Upon delivery by DTC to the Trustee of
written notice to the effect that DTC has determined to substitute a new nominee
in place of Cede & Co., and subject to the provisions of Section 2.03 hereof
limiting the obligations of the Trustee to register transfers of or to exchange
Receipts, the words "Cede & Co." in this Agreement shall refer to such new
nominee of DTC.
(iv) Upon (1) the resignation of DTC or its successor (or substitute
depository or its successor) from its functions as depository or (2) a
determination by the Depositor that it is in the best interests of (A) the
Depositor (and will not adversely affect the beneficial owners) or (B) the
beneficial owners to remove DTC or its functions as depository, the Depositor
shall notify DTC and the Trustee, whereupon DTC will notify the Participants of
the availability through DTC of physical certificates evidencing the Receipts.
In such event, the Trustee shall execute, register the transfer of and exchange
Receipts as requested by DTC or by any other Holders of such Receipts in
appropriate amounts and in accordance with the Receipt registry of DTC. In the
event the issuer of any Bond defaults on the payment of any Interest or
Principal which is evidenced by a Receipt held by DTC, and such default remains
uncured for 10 days, the Trustee may (but shall not be obligated to) withdraw
from DTC, in which event DTC shall promptly deliver to the Trustee the physical
certificates evidencing such Bonds. Whenever DTC requests the Trustee to do so,
the Trustee and the Depositor will cooperate with DTC in taking appropriate
action after reasonable notice (a) to make available one or more separate
physical certificates evidencing such Receipts to any Participant having
Receipts credited to its DTC account or (b) to arrange for another securities
depository to maintain custody of physical certificates evidencing such
Receipts.
(v) Notwithstanding any other provision of this Agreement to the
contrary, so long as any Receipt is registered in the name of Cede & Co., as
nominee for DTC, all payments with respect to the principal, interest and/or
premium represented by such Receipt shall be made by wire transfer of
immediately available funds and all notices with respect to such Receipt shall
be given, respectively, to DTC as provided in the Letter of Representations.
-8-
<PAGE>
(vi) In connection with any notice or other communication to be
provided to Holders pursuant to this Agreement by the Trustee with respect to
any consent or other action to be taken by Holders, the Trustee shall establish
a record date for such consent or other action and give DTC notice of such
record date not less than 15 calendar days in advance of such record date to the
extent possible.
(vii) If quarterly and annual financial statements concerning the
issuer of the Bonds are not available to the Trust and less than two years have
elapsed from the date of issuance of the Receipts, then, unless the Trust has
earlier suspended its own reporting requirements under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), for such Receipts, the Receipts
shall be removed from the DTC book entry system, and physical certificates
representing the Receipts of each class will be issued to the Holders of the
Receipts. Such physical certificates will bear a legend indicating that pursuant
to an undertaking by the Depositor to the staff of the Securities and Exchange
Commission, such Receipts must be treated as restricted securities that have not
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), and may not be transferred unless they are subsequently registered under
the Securities Act or transferred pursuant to an exemption thereto. No such
removal from the DTC book entry system and legending as restricted securities
will be required at any time after the earlier of two years from the date of
issuance of the Receipts or the suspension by the Trust of its own Exchange Act
reporting requirements. In addition, in the event that Receipts have been so
removed and legended, such Receipts will be returned to the DTC book entry
system and such legends will be removed promptly after the first to occur of (a)
the lapse of two years after the date of issuance of such Receipts, (b) the
suspension by the Trust of its Exchange Act reporting requirements with respect
to such Receipts, and (c) the reinstatement of the Exchange Act reporting
requirements of the issuer of the Bonds.
SECTION 2.09. ACTION OR CONSENT OF HOLDERS. In the event of any
action or consent requiring the vote of the owners of any Bonds, the Trustee,
upon receipt of the Bond proxy, will notify DTC of such action. Under current
procedures it is expected that DTC will notify the Participants who will notify
the beneficial owners of Principal or Callable Principal Receipts of such event.
Thereafter, except when the approval of the beneficial owners of the Coupon
Receipts is also required as provided below, the Trustee shall vote solely in
accordance with the instructions received from the DTC (or pursuant to the
applicable procedures of DTC) and shall apportion its voting powers on the basis
of the face amount of the Principal or Callable Principal Receipts. If the
Receipts are not then held by DTC or any other Depository, the Trustee upon
receipt of the Bond proxy will notify the Holders of the Principal or Callable
Principal Receipts directly of such action and shall vote in the same manner as
noted above.
In no event shall the Depositor be allowed or entitled (other than
in its capacity as a safekeeper for a Holder) to vote, directly or indirectly,
any Receipts.
By their affirmative vote, the Holders of more than 50% in principal
amount of Receipts of any Series may direct the Trustee to take or omit to take
any action required or permitted under this Agreement or the Act; provided,
however, that the Trustee shall not vote in favor of any proposal with regard to
the Bonds which would have the effect of permitting a
-9-
<PAGE>
redemption or prepayment of the Bonds unless the Holders of 100% of the Receipts
then outstanding of the applicable Series (including all Coupon Receipts,
Principal Receipts or Callable Principal Receipts as the case may be) vote in
favor of such action.
SECTION 2.10. TRANSFER OF RECEIPTS HELD BY DTC TO SUCCESSOR
DEPOSITORY. If the Depositor elects to direct that the Trustee deliver Receipts
with respect to a particular Series Trust Agreement in the name of and to DTC,
as the Depository hereunder, subject to Section 2.08, said Receipts may not
thereafter be transferred except:
(i) to any successor of DTC or its nominee, or to any substitute
depository designated pursuant to clause (ii) of this subsection (a)
("substitute depository"); provided, that any successor of DTC or substitute
depository shall be qualified under any applicable laws to provide the services
proposed to be provided by it;
(ii) to any substitute depository not objected to by the Trustee,
upon (1) the resignation of DTC or its successor (or any substitute depository
or its successor) from its functions as depository or (2) a determination by the
Depositor that it is in the best interest of the Depositor (and will not
adversely affect the beneficial owners) or the Holders to remove DTC or its
successor (or any substitute depository or its successor); provided, that any
such substitute depository shall be qualified under any applicable laws to
provide the services proposed to be provided by it; or
(iii) as provided in Section 2.08(iv) hereof.
SECTION 2.11. TEMPORARY RECEIPTS. The Receipts may be initially
delivered in temporary form exchangeable for definitive Receipts when ready for
delivery, which temporary Receipts shall be printed, lithographed or
typewritten, shall be of such denominations as may be determined by the Trustee,
shall be in fully registered form and shall contain such reference to any of the
provisions hereof as may be appropriate. Every temporary Receipt shall be
executed and delivered by the Trustee upon the same conditions and terms and in
substantially the same manner as definitive Receipts. If temporary Receipts are
issued, the Trustee will execute and deliver definitive Receipts without delay,
and in that case upon demand of the Holder of any temporary Receipts such
temporary Receipts shall be exchanged without cost to such Holder for definitive
Receipts at the office of the Trustee upon surrender of such temporary Receipts,
and until so exchanged such temporary Receipts shall be entitled to the same
benefit, protection and security hereunder as the definitive Receipts executed
and delivered hereunder. All temporary Receipts surrendered pursuant to the
provisions of this Section 2.11 shall be canceled by the Trustee, shall not be
redelivered and shall be destroyed by the Trustee.
-10-
<PAGE>
ARTICLE III
CERTAIN OBLIGATIONS OF HOLDERS OF
RECEIPTS; DEPOSITOR'S WARRANTIES
SECTION 3.01. FILING PROOFS, CERTIFICATES AND OTHER INFORMATION. Any
Holder presenting Receipts for surrender or registration of transfer may be
required to file such proof of residence, or other matters or information, to
execute such certificates and to make such representations and warranties as the
Trustee may reasonably deem necessary or proper. The Trustee may withhold the
delivery or delay the surrender of or registration of transfer or exchange of
any Receipt until such proof or other information is filed, such certificates
are executed or such representations and warranties are made.
SECTION 3.02. PAYMENT OF TAXES OR OTHER GOVERNMENTAL CHARGES. If any
tax or other governmental charge shall become payable by or on behalf of the
Trustee, including any tax or charge required to be withheld from any payment
made to or by the Trustee under the provisions of any applicable law, with
respect to any Receipt or with respect to the Interest, Principal or Callable
Principal (or portions thereof) evidenced by any such Receipt, such tax or
governmental charge shall be payable by the Holder of such Receipt and may be so
withheld by the Trustee. The surrender of or registration of transfer or
exchange of any Receipt may be refused until such payment is made.
SECTION 3.03. DEPOSITOR'S WARRANTIES. In the case of each delivery
of Bonds to the Trustee, the Depositor shall be deemed thereby to represent and
warrant to the Trustee that the Depositor is duly authorized to so deliver such
Bonds and that immediately prior to the delivery thereof the Depositor owned
such Bonds free and clear of any lien, pledge, encumbrance or other security
interest. The Depositor shall further be deemed by such delivery to have made
the representations and warranties contained in the Series Trust Agreement with
respect to such Bonds and to represent and warrant to the Trustee that the
prospectus and prospectus supplement prepared by the Depositor with respect to
the Receipts makes such disclosure with respect to the Bonds as is required by
applicable federal and state securities laws. Such representations and
warranties shall survive the delivery of such Bonds and the Receipts in respect
thereof.
ARTICLE IV
PAYMENT OF INTEREST AND PRINCIPAL, CUSTODY
OF PROCEEDS OF INTEREST AND PRINCIPAL PAYMENTS
SECTION 4.01. PAYMENT OF INTEREST; PAYMENT OF PRINCIPAL. In the case
of any interest or principal payments due on Bonds held by the Trustee in
certificate form, the Trustee shall present to the issuer, trustee or paying
agent therefor, as applicable, for payment all coupons or other documents
required on the Interest Payment Dates related thereto and the
-11-
<PAGE>
receipts representing the Bonds and/or all other required documents at stated
maturity or upon the Redemption Date therefor.
With respect to any Coupon Receipt, on and after the Interest
Payment Date of the Interest evidenced thereby, if the applicable issuer shall
have paid in full and the Trustee shall have received the interest due on such
Interest Payment Date on the underlying Bonds, the Trustee shall pay to the
Holder thereof as of the applicable record date of the underlying Bonds, in
lawful money of the United States of America, (i) if the Holder is DTC or its
nominee or any successor depository or nominee thereof, by wire transfer of
immediately available funds, and (ii) if the Holder is any other person, by
check for New York Clearing House Funds sent by first-class mail to the address
of the Holder set forth in the Receipt Register, the entire amount of such
Interest evidenced thereby, less any taxes or governmental charges required to
be withheld from such payment by the Trustee.
Except as provided for under Section 5.01 hereof, with respect to
any Principal Receipt, if the applicable issuer shall have paid in full and the
Trustee shall have received the amount of such Principal, the Trustee shall pay
to the Holder thereof as of the applicable record date, in lawful money of the
United States of America, (i) if the Holder is DTC or its nominee or any
successor depository or nominee thereof, by wire transfer of immediately
available funds, and (ii) if the Holder is any other person, by check for New
York Clearing House Funds sent by first-class mail to the address of the Holder
set forth in the Receipt Register, the entire amount of such Principal evidenced
thereby, less any taxes or governmental charges required to be withheld from
such payment by the Trustee.
Except as provided for under Section 5.01 hereof, with respect to
any Callable Principal Receipt, if the applicable issuer shall have paid and the
Trustee shall have received all or any part of the principal amount of the
Principal and redemption premium, if any, due upon maturity, or upon the earlier
redemption of the underlying Bonds, the Trustee shall pay to the Holder thereof
as of the applicable record date, in lawful money of the United States of
America, (i) if the Holder is DTC or its nominee or any successor depository or
nominee thereof, by wire transfer of immediately available funds, and (ii) if
the Holder is any other person, by check for New York Clearing House funds sent
by first-class mail to the address of the Holder set forth in the Receipt
Register, the entire amount of such Principal and premium, if any, evidenced
thereby, or, in the case of a Callable Principal Receipt redeemed in part, the
amount of such Principal so redeemed; in each case less any taxes or
governmental charges required to be withheld from such Payment by the Trustee.
With respect to any Callable Principal Receipt, on and after the
Interest Payment Date of the Interest evidenced thereby (which Interest Payment
Date shall be on or after the First Call Date), if the applicable issuer shall
have paid in full and the Trustee shall have received the interest due on such
Interest Payment Date on the underlying Bonds, the Trustee shall pay to the
Holder thereof as of the applicable record date of the underlying Bonds, in
lawful money of the United States of America, (i) if the Holder is DTC or its
nominee or any successor depository or nominee thereof, by wire transfer of
immediately available funds, and (ii) if the Holder is any other person, by
check for New York Clearing House Funds sent by first-class mail to the
-12-
<PAGE>
address of the Holder set forth in the Receipt Register, the entire amount of
such Interest evidenced thereby, less any taxes or governmental charges required
to be withheld from such payment by the Trustee.
When making any payment to a Holder of a Receipt under this
Agreement, the Trustee shall round down such payment to the nearest whole cent.
SECTION 4.02. SEGREGATION OF MONEYS RECEIVED FROM ISSUERS IN RESPECT
OF BONDS. All moneys received from the issuers of Bonds or otherwise by the
Trustee in respect of Bonds evidenced by Receipts issued hereunder shall be held
by it without interest in a special account for each issue of Bonds held in
trust until required to be disbursed in accordance with the provisions of this
Agreement or as otherwise required by law and such moneys will be segregated by
separate recordation on the books and records of the Trustee.
ARTICLE V
THE TRUSTEE AND THE DEPOSITOR
SECTION 5.01. NO LIABILITY OF THE TRUSTEE OR THE DEPOSITOR ON THE
BONDS; POWERS OF TRUSTEE UPON A DEFAULT ON THE BONDS. The sole obligor with
respect to any Bond is the issuer thereof or any other entity obligated to make
payments to or on behalf of the issuer thereof (or its trustee or other
applicable fiduciary) with respect to any Bond. Neither the Trustee nor the
Depositor shall have any obligation on or with respect to the Bonds except as
provided herein or in the Act; and their respective obligations with respect to
Receipts shall be solely as set forth in this Agreement and the Act.
Upon any default by the issuer of any Bond on the payment of any
Interest, Principal, or Callable Principal which is evidenced by a Receipt, the
Trustee shall promptly give notice to DTC or, if the Receipts are not then held
by DTC or any other Depository, directly to Holders thereof as provided in
Section 8.03 hereof. Such notice shall set forth (a) the identity of the issue
of Bonds, (b) the date and nature of such default, (c) the face amount of the
Interest, Principal or Callable Principal to which such default relates, (d) the
identifying numbers or the class of Receipts, or any combination, as the case
may be, evidencing the Interest, Principal or Callable Principal (or portions
thereof) described above in clause (c), and (e) any other information which the
Trustee may deem appropriate.
Upon any default by the issuer of any Bond on the payment of any
Interest, Principal, or Callable Principal which is evidenced by a Receipt, the
Trustee shall take all such steps as the Trustee, in its capacity as Trustee and
as the registered owner or nominal holder of the Bond to which the Receipt owned
by the Holder relates, shall deem necessary to protect the rights of the Holders
of Receipts; provided, however, that the Trustee shall not be required to expend
its own funds in furtherance of such steps until the Trustee has received from
the Holders an indemnity for any costs or expenses incurred in connection
therewith in form and substance reasonably satisfactory to the Trustee. In order
to protect such rights, the Trustee may, in its own
-13-
<PAGE>
name and as trustee of an express trust, institute any action or proceedings at
law or in equity for the collection of the sums due and unpaid upon any Bond,
and may prosecute any such action or proceeding to judgment or final decree. In
addition, the Trustee shall be entitled and empowered, either in its own name or
as trustee of an express trust or as attorney-in-fact for the Holders of
Receipts or in any one or more of such capacities to file such proofs of claim,
claims, petitions, amendments thereto or any other documents as may be necessary
or advisable in order to have the claims of the Holders allowed in any judicial
proceedings involving the obligor under the Bonds or the trustee under the
Indenture.
In the event that the Trustee receives money or other property in
respect of the Bonds (other than a scheduled interest payment with respect to an
Interest Payment Date or the scheduled payment of principal on or with respect
to the stated maturity date of the Bonds) as a result of a payment default on
the Bonds, or actual notice that such moneys or other property will be paid to
the Trustee, the Trustee shall promptly give notice (as provided in Section 8.03
hereof) to DTC or, if the Receipts are not then held by DTC or any other
Depository, directly to the Holders of the Receipts then outstanding and unpaid.
Such notice shall state that, not later than thirty (30) days after the receipt
of such moneys or other property, the Trustee shall allocate and distribute such
moneys or other property to the Holders of the Receipts then outstanding and
unpaid, in proportion to the Accreted Value of each outstanding class of
Receipts, and within each class pro rata by face amount. Property received,
other than cash, shall be liquidated by the Trustee in a commercially reasonable
manner and the proceeds thereof, after deduction of all reasonable costs and
expenses of such liquidation, distributed in cash; provided, however, that if
such property consists of securities, such securities shall be liquidated only
to the extent necessary to avoid distribution of fractional securities.
Sections 317(a), 316(a)(1), 316(b), 315(b) and 315(e) of the Act are
hereby specifically incorporated by reference into these Standard Terms.
Neither the Trustee nor the Depositor shall be under any obligation
whatsoever to appear in, prosecute or defend any action, suit or other
proceeding in respect of the Bonds or Receipts.
ANY ACTION OR PROCEEDING ALLEGING ANY BREACH BY THE TRUSTEE OF ITS
DUTIES UNDER THIS AGREEMENT SHALL BE PROSECUTED ONLY IN A STATE OR FEDERAL COURT
LOCATED IN THE STATE OF NEW YORK COUNTY, NEW YORK. THE TRUSTEE SHALL HAVE THE
RIGHT AT ANY TIME TO SEEK INSTRUCTIONS FROM ANY COURT OF COMPETENT JURISDICTION.
The Trustee may consult with and rely upon the calculations of an
advisor (which may be the Depositor) in connection with any calculation of
Accreted Value to the extent such amount must be determined in order for the
Trustee to carry out its duties hereunder. The expenses of such an advisor
(other than the Depositor) shall be borne by the Holders and shall not exceed
$5,000.
-14-
<PAGE>
SECTION 5.02. MAINTENANCE OF OFFICES AND AGENCIES BY THE TRUSTEE.
Until termination of this Agreement in accordance with its terms, the Trustee
shall maintain (a) facilities in the Borough of Manhattan, City of New York,
State of New York, for the execution and delivery, payment, surrender and
registration of transfer and exchange of Receipts, all in accordance with the
provisions of this Agreement, and (b) such other agents, if any, according to
the terms and conditions as the Trustee and the Depositor may agree from time to
time.
SECTION 5.03. PREVENTION OR DELAY IN PERFORMANCE BY THE TRUSTEE OR
THE DEPOSITOR. Neither the Trustee nor the Depositor shall incur any liability
to any Holder of any Receipt, if by reason of any provision of any present or
future law, or regulation thereunder, of any governmental authority, or by
reason of any act of God or war or other circumstance beyond the control of the
relevant party, the Trustee or the Depositor shall be prevented or forbidden
from doing or performing any act or thing which the terms of this Agreement
provide shall be done or performed; and neither the Trustee nor the Depositor
shall incur any liability to any Holder of a Receipt by reason of any
non-performance or delay, caused as aforesaid, in the performance of any act or
thing which the terms of this Agreement provide shall or may be done or
performed, or by reason of any exercise of, or failure to exercise, any
discretion provided for in this Agreement.
SECTION 5.04. OBLIGATIONS OF THE TRUSTEE AND THE DEPOSITOR. Subject
to Section 315 of the Act as to the Trustee, neither the Trustee nor the
Depositor assume any obligation or shall be subject to any liability under this
Agreement to Holders of Receipts, other than by reason of willful misconduct,
bad faith or negligence in the performance of such duties as are specifically
set forth in this Agreement. Neither the Depositor nor the Trustee shall be
under any obligation to take any action hereunder which may tend to involve it
in any expense or liability, the payment of which within a reasonable time is
not, in its reasonable opinion, assured to it.
Neither the Trustee nor the Depositor shall be liable to any Holder
of any Receipt for any action or non-action by it in reliance upon the advice of
or information from legal counsel, accountants, any Holder of a Receipt or any
other person believed by it in good faith to be competent to give such advice or
information. The Trustee and the Depositor may each rely and shall each be
protected in acting upon any written notice, request, direction or other
document believed by it to be genuine and to have been signed or presented by
the proper party or parties.
Neither DTC nor any registrar with which Bonds are maintained as
book-entry credits shall be deemed agents of the Trustee. The Trustee may own
and deal in bonds of the same issue and maturity as the Bonds and in Receipts.
The Trustee shall at all times maintain a fidelity bond in
reasonable form and amount to protect against loss due to dishonest or
fraudulent action by its employees in connection with its obligations hereunder.
SECTION 5.05. RESIGNATION AND REMOVAL OF THE TRUSTEE; APPOINTMENT OF
SUCCESSOR TRUSTEE. The Trustee may at any time resign as Trustee hereunder by
written notice of
-15-
<PAGE>
its election so to do, delivered to the Depositor, and such resignation shall
take effect upon the appointment of a successor Trustee and its acceptance of
such appointment as hereinafter provided. The Depositor may at any time remove
the Trustee as Trustee hereunder by written notice of its election to do so,
delivered to the Trustee as provided in Section 8.03 hereof, and such removal
shall take effect upon the appointment of a successor Trustee and its acceptance
of such appointment as provided in the third succeeding paragraph; provided,
however, that in the event of such removal, the Depositor shall negotiate in
good faith with the Trustee in order to agree regarding payment of the
termination costs of the Trustee resulting from such removal. Upon the
designation of a successor Trustee following either resignation by or removal of
the Trustee, the Trustee shall deliver to the successor Trustee all records
relating to the Receipts in the form and manner then maintained by the Trustee,
which shall include a hard copy thereof upon request of the successor Trustee.
If at any time the Trustee fails to meet the qualifications for
successor Trustees set forth in the next paragraph, shall become incapable of
acting or shall be adjudged a bankrupt or insolvent, or a receiver of the
Trustee or of its property shall be appointed, or any public officer shall take
charge or control of the Trustee or of its property or affairs for the purpose
of rehabilitation, conservation or liquidation, or the Trustee shall fail to
comply with the provisions of Section 310(b) of the Act, then any Holder of a
Receipt with respect to a particular issue of Bonds which has been such a Holder
for at least six (6) months or the Holders of ten percent (10%) of the face
amount of Receipts of a series which is outstanding at such time may, on behalf
of himself, herself or themselves and all others similarly situated, petition
any court of competent jurisdiction for the removal of the Trustee with respect
to the Bonds evidenced by such Receipts and the appointment of a successor
Trustee.
In the case at any time the Trustee acting hereunder notifies the
Depositor that it elects to resign or the Depositor notifies the Trustee that it
elects to remove the Trustee as Trustee, the Depositor shall, within ninety (90)
days after the delivery of the notice of resignation or removal, appoint a
successor Trustee, which shall be a bank with trust powers or trust company
having its principal office in the United States of America, having a combined
capital and surplus of at least $50,000,000, and having a rating of Baa or
better assigned by at least one nationally recognized statistical rating agency,
as that term is defined under Securities and Exchange Commission Rule
15C3-1(c)(2)(vi)(F). If no successor Trustee has been appointed a successor
Trustee within ninety (90) days after the Trustee has given written notice of
its election to resign or the Depositor has given written notice to the Trustee
of its election to remove the Trustee, as the case may be, the Trustee may
petition any court of competent jurisdiction for the appointment of a successor
Trustee. Every successor Trustee shall execute and deliver to its predecessor
and to the Depositor an instrument in writing accepting its appointment
hereunder, and thereupon such successor Trustee, without any further act or
deed, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor and for all purposes shall be the Trustee under
this Agreement, and such predecessor, upon payment of all sums due it and on the
written request of the Depositor, shall execute and deliver an instrument
transferring to such successor all rights, obligations and powers of such
predecessor hereunder, and shall duly assign, transfer and deliver all right,
title and interest in the Bonds and parts thereof to such successor.
-16-
<PAGE>
Any successor Trustee shall promptly give notice of its appointment to the
Holders of Receipts for which it is successor Trustee as provided in Section
8.03 hereof.
Any corporation into or with which the Trustee may be merged,
consolidated or converted or any corporation which shall succeed to all or
substantially all of the corporate trust business of the Trustee shall be the
successor of such Trustee without the execution or filing of any document or any
further act.
SECTION 5.06. INDEMNIFICATION BY THE DEPOSITOR; CONTRIBUTION. The
Depositor agrees to indemnify the Trustee against, and hold it harmless from,
any liability which may arise out of or in relation to the acceptance,
administration or performance by the Trustee of its duties hereunder or any acts
performed or omitted in accordance with the provisions of this Agreement, as the
same may be amended, supplemented or modified from time to time, in relation to
the Bonds described in the Series Trust Agreement executed by the Depositor or
the Receipts of a series and any liability which may arise out of acts performed
or omitted in relation to such Receipts (a) by the Trustee or its agents, except
for any liability arising out of acts of willful misconduct, bad faith or
negligence on the part of the Trustee or its agents, or (b) by the Depositor or
any of its agents.
If the indemnification provided for in the preceding paragraph is
invalid or unenforceable, then the Depositor shall contribute to the amount paid
or payable by the Trustee as a result of such liability in such proportion as is
appropriate to reflect the relative benefits received by the Depositor on one
hand and the Trustee on the other from the issuance and sale of such Receipts.
For this purpose the benefits received by the Depositor shall be the aggregate
amount received by it upon the sale of such Receipts, less the costs and
expenses of such sale, including the cost of acquisition of the Bonds evidenced
thereby, and the benefits received by the Trustee shall be the aggregate amount
of fees received by it as Trustee, less costs and expenses incurred by it as
Trustee in relation to such Receipts, and the Bonds evidenced thereby. If,
however, the allocation provided by the immediately preceding two sentences is
not permitted by applicable law, then the Depositor shall contribute to such
amount paid or payable by the Trustee in such proportion as is appropriate to
reflect not only such relative benefits but also the relative fault of the
Depositor on the one hand and the Trustee on the other in connection with the
actions or omissions which resulted in such liability, as well as any other
relevant equitable considerations.
The term "liability," as used in this Section 5.06, shall include
any losses, claims, damages, expenses (including without limitation the
Trustee's costs and expenses in defending itself against any losses, claims or
investigations of any nature whatsoever to the extent the Trustee is not
reimbursed as contemplated therein) or other liabilities, joint or several,
arising for any reason (including without limitation violation of applicable
laws or trademarks or service marks).
The obligations of the Depositor under this Section 5.06 shall (i)
be in addition to any liability which the Depositor may otherwise have and shall
extend, upon the same terms and conditions, to each officer and director of the
Trustee and to each person, if any, who controls the
-17-
<PAGE>
Trustee within the meaning of the Securities Exchange Act of 1934, as amended
and (ii) survive the resignation or removal of the Trustee and the termination
of this Agreement.
SECTION 5.07. CHARGES AND EXPENSES. Except as otherwise provided in
this Agreement, (i) no current or future charges, fees and expenses of the
Trustee shall be payable by or withheld from any person other than the
Depositor, except for any taxes and other governmental charges, and (ii) in full
payment and satisfaction of all other charges and expenses of the Trustee
(including, in each case, fees and expenses of counsel) incidental to the
performance of its obligations hereunder, the Depositor shall pay the Trustee an
amount determined in accordance with a separate agreement between it and the
Trustee.
SECTION 5.08. REPORTS TO RECEIPT HOLDERS.
(a) Quarterly and annual unaudited reports containing information
concerning the related Bonds, including an annual independent accountant's
statement of review regarding the payment of all income on the Bonds to the
Receipt Holders, will be prepared by the Depositor and sent on behalf of the
Trust to the Holders of the Receipts. The Depositor shall cause each Trust to
file with the Securities and Exchange Commission such other reports as may be
required under the Exchange Act of 1934, and the rules and regulations
thereunder, and, in addition, to prepare such reports and take such actions as
may otherwise be required by Section 314(a) of the Act.
(b) In addition to the foregoing, within the period of time
prescribed by the Internal Revenue Code of 1986, as amended, and the rules and
regulations thereunder, after the end of each calendar year during the term of
each Trust, the Trustee will mail to each person who at any time during such
calendar year has been a Holder and received any payment thereon a statement
containing certain information for the purposes of such Holder's preparation of
federal income tax returns.
(c) On or before February 1 of each year, the Trustee for each Trust
shall transmit by mail to the Holders of the related Receipts the report, if
any, required by Section 313(a) of the Act.
(d) In addition to the foregoing, the Trustee shall transmit to the
Holders of the Receipts any communications received by the Trustee from the
issuer of the related Bonds. To the extent that the issuer of the Bonds fails to
reimburse the Trustee for its reasonable expenses in connection with the
transmission of communications to the Holders of the Receipts, the Depositor
shall pay such expenses pursuant to Section 5.07 hereof.
SECTION 5.09. REPORTS TO TRUSTEE. The Depositor, on behalf of the
Trust, shall deliver to the Trustee semi-annually each June 30 and December 31
the information required by Section 312(a) of the Act; provided, however, that
so long as the Trustee is acting as registrar for the Receipts, no such
information need be furnished.
-18-
<PAGE>
ARTICLE VI
AMENDMENT AND TERMINATION
SECTION 6.01. AMENDMENT. The form of the Receipts and any provisions
of this Agreement may at any time and from time to time be amended by agreement
in writing between the Depositor and the Trustee, executed by each of them, in
any respect which they may deem necessary or desirable, provided that in no
event shall any amendment defer or alter the maturity of a Receipt or, as
evidenced by an opinion of counsel delivered to the Trustee, in any other manner
adversely affect the rights to payment of a Holder of a Receipt or otherwise
materially prejudice any substantial existing right of the Holders of the
Receipts. Every Holder of a Receipt at the time any such amendment so becomes
effective shall be deemed to be continuing to hold such Receipt, to consent and
agree to such amendment and to be bound by this Agreement as amended thereby.
Notwithstanding any other provision herein, no amendment to this Agreement shall
be effective unless the Depositor shall provide the nationally recognized
statistical rating agency, if any, which has rated the Receipts of each Trust to
be effected by such amendment with ten (10) days prior written notice of such
proposed amendment and has received a written confirmation from such nationally
recognized statistical rating agency that such amendment will not cause the
nationally recognized statistical rating agency to downgrade its rating of the
subject Receipts.
The Trustee shall be entitled to receive, and shall be fully
protected in relying upon, an opinion of counsel, in form and substance
reasonably satisfactory to the Trustee, stating that the execution of any
amendment, supplement or waiver authorized pursuant to this Section 6.01 is
authorized and permitted by this Agreement. Such opinion of counsel shall not be
an expense of the Trustee.
SECTION 6.02. TERMINATION. This Agreement shall terminate with
respect to any Trust one year following the payment upon maturity (or any
earlier redemption) by the respective issuers of the entire principal amount
(and any redemption premium) of the Bonds. If any Receipts shall remain
outstanding after the date of termination of this Agreement, the Trustee shall
not perform any further acts under this Agreement, except that the Trustee shall
hold the proceeds of any payment, without liability for interest, for the pro
rata benefit of the Holders of Receipts which have not theretofore been
surrendered for payment unless otherwise required by applicable law. Upon the
termination of this Agreement, the Depositor shall be discharged from all
obligations under this Agreement except for its obligations to the Trustee under
Section 5.06 and 5.07 hereof.
ARTICLE VII
REDEMPTION OF CALLABLE PRINCIPAL RECEIPTS
SECTION 7.01. REDEMPTION. If the Bonds of any issue underlying
Callable Principal Receipts are redeemed in whole or in part on or after the
First Call Date, and upon
-19-
<PAGE>
actual receipt by the Trustee of notice of such redemption, the Trustee shall,
in accordance with the provisions of this Article VII, redeem a principal amount
of Callable Principal Receipts equal to the principal amount of the Bonds of
such issue held in trust hereunder so redeemed. In the absence of the actual
notice described in this Section 7.01, the Trustee shall be under no obligation
to effect the redemption required by this Section 7.01. The particular Callable
Principal Receipts to be redeemed shall be selected by the Trustee from the
outstanding Callable Principal Receipts of such series by lot or such other
method as the Trustee shall deem fair and appropriate and which may provide for
the selection for redemption of portions (in amounts equal to the minimum
authorized denomination of such series and integral multiples thereof) of the
principal amount represented by such Callable Principal Receipts. To the extent
practicable the Trustee shall, in the case of partial redemption, redeem
Callable Principal Receipts so that no more than one Callable Principal Receipt
is thereby rendered other than in an authorized denomination. Upon redemption of
any Callable Principal Receipts, the Holder will have no right to receive
Payments on any Interest maturing after the Redemption Date thereof.
SECTION 7.02. NOTICE OF REDEMPTION. Notice of redemption shall be
given by the Trustee to each Holder of any Callable Principal Receipts to be
redeemed as provided in Section 8.03 hereof within thirty (30) days after notice
of redemption of the underlying Bonds has been given by the issuer, trustee or
paying agent of or for the Bonds, as the case may be (but not less than fifteen
days prior to the redemption date); provided, however, that the Trustee shall
not be required to give any notice of redemption less than three (3) business
days after the date it receives notice of such redemption. All notices of
redemption shall be mailed to each Holder at such Holder's last address on the
Receipt Register and shall state the Redemption Date, the amount payable on such
date, the place at which Callable Principal Receipts are to be surrendered for
payment, that interest on amounts redeemed will cease to accrue and, if less
than all of a Holder's Callable Principal Receipt is to be redeemed, the
principal amount of such Callable Principal Receipt to be redeemed.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. EXCLUSIVE BENEFIT OF PARTIES AND HOLDERS OF RECEIPTS;
EFFECTIVE DATE. This Agreement is for the exclusive benefit of the parties
hereto, their respective successors hereunder, and Holders of Receipts, and
shall not be deemed to give any legal or equitable right, remedy or claim to any
other person whatsoever. The Holders from time to time shall be beneficiaries of
this Agreement and shall be bound by all the terms and conditions hereof and of
the Receipts by acceptance of delivery thereof. This Agreement shall become
effective as to the Trustee and the Depositor for each series of Receipts upon
the execution of the Series Trust Agreement for such series by the Trustee and
Depositor and the receipt by the Trustee of the Bonds deposited therewith.
SECTION 8.02. INVALIDITY OF PROVISIONS. In case any one or more of
the provisions contained in this Agreement or contained in the Receipts should
be or become invalid, illegal or
-20-
<PAGE>
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein or therein shall in no way be affected,
prejudiced or disturbed thereby.
SECTION 8.03. NOTICES. Any and all notices to be given to the
Depositor shall be deemed to have been duly given if personally delivered or
sent by mail or facsimile confirmed by letter addressed to the address set forth
in the Series Trust Agreement relating to Receipts evidencing Bonds deposited by
the Depositor, or at any other place to which the Depositor may have transferred
its principal executive office.
Any and all notices to be given to the Trustee shall be deemed to
have been duly given if personally delivered or sent by mail or by facsimile
confirmed by letter addressed to the Trustee at [___________________] Attention:
Corporate Trust Department, or to such other place which the Trustee may have
designated in writing to the Depositor.
All other notices to be given to any Holder shall be deemed to have
been duly given if given by mail, first-class postage prepaid, to each Holder at
such Holder's address as it appears in the Receipt Register. Neither the failure
to mail such notice, nor any defect in any notice so mailed, to any particular
Holder shall affect the sufficiency of such notice with respect to other
Holders.
SECTION 8.04. GOVERNING LAW. This Agreement and the Receipts shall
be governed by, and construed in accordance with, the laws of the State of New
York.
SECTION 8.05. HEADINGS. The headings of articles and sections in
this Agreement and in the form of the Receipts set forth in Appendix A hereto
have been inserted for convenience only and are not to be regarded as a part of
this Agreement or to have any bearing upon the meaning or interpretation of any
provision contained herein or in the Receipts.
SECTION 8.06. TRUST INDENTURE ACT. The provisions of the Act which
impose duties on any person (including provisions automatically deemed included
in an indenture under the Act unless the indenture provides that such provisions
are excluded) are part of and govern this Agreement. If any provision hereof
limits, qualifies or conflicts with any of the duties imposed by operation of
the Act, the provisions of the Act shall control.
-21-
EXHIBIT 5.1
Opinion and Consent of Counsel
December 31, 1997
Re: American Corporate Receipts, Inc.
Registration Statement on Form S-3
American Corporate Receipts, Inc.
c/o Rickel Securities, Inc.
45 Essex Street
Millburn, New Jersey 07041
Dear Sirs:
We have acted as special counsel for American Corporate Receipts,
Inc., a New Jersey corporation (the "Company") in connection with the
preparation of the Registration Statement of the Company on Form S-3 (the
"Registration Statement") filed with the Securities and Exchange Commission
pursuant to the Securities Act of 1933, as amended (the "Act") relating to the
registration of trust receipts fully described in the Registration Statement
(collectively, the "Securities"). The Securities are issuable in series (each, a
"Series") under a separate Trust Agreement by and between the Company and a
trustee named therein establishing an individual trust for each Series (each, a
"Trust"). The Securities are to be sold as set forth in the Registration
Statement, and any amendments thereto, and any prospectus supplement relating to
each Series.
In so acting, we have examined, and relied as to matters of fact
upon, the originals, or copies certified or otherwise identified to our
satisfaction, of the Certificate of Incorporation and By-laws of the Company and
such other certificates (including certificates of officers of the Company),
records, instruments and documents, and have made such other and further
investigations, as we have deemed necessary or appropriate to enable us to
express the opinion set forth below. In such examination, we have assumed the
genuineness of all signatures, the legal capacity of natural persons, the
authenticity of all documents submitted to us as originals, the conformity to
originals of all documents submitted to us as certified or photostatic copies,
and the authenticity of the originals of such latter documents.
Based on the foregoing, we are of the opinion that when the issuance
of each Series of Securities has been duly authorized by appropriate corporate
action and the Securities
<PAGE>
American Corporate Receipts, Inc.
December 31, 1997
Page 3
of such Series have been duly executed, authenticated and delivered in
accordance with the related Trust Agreement and sold in the manner described in
the Registration Statement, any amendment thereto and the prospectus supplement
relating to each Series, the Securities of such Series will be legally issued,
fully paid and nonassessable and the holders of the Securities of such Series
will be entitled to the benefits of the related Trust Agreement, except as
enforcement thereof may be limited by applicable bankruptcy, insolvency,
reorganization, arrangement, fraudulent conveyance, moratorium or other laws
relating to or affecting the rights of creditors generally and general
principles of equity, and the possible unavailability of specific performance or
injunctive relief, regardless of whether such enforceability is considered in a
proceeding in equity or at law.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name wherever appearing in the
Registration Statement. In giving the foregoing consent, we do not admit that we
are in the category of persons whose consent is required under Section 7 of the
Act or the Rules and Regulations of the Securities and Exchange Commission
promulgated thereunder.
Very truly yours,
/s/ McCarter & English, LLP
EXHIBIT 8.1
[FORM OF McCARTER & ENGLISH TAX OPINION]
MCCARTER & ENGLISH, LLP
ATTORNEYS AT LAW
FOUR GATEWAY CENTER
1OO MULBERRY STREET
P.O. BOX 652
NEWARK, NJ O71O1-O652
(973) 622-4444
TELECOPIER (973) 624-7O7O
CHERRY HILL, NJ BOCA RATON, FL
NEW YORK, NY WILMINGTON, DE
PHILADELPHIA, PA
December 31, 1997
American Corporate Receipts, Inc.,
as Depositor
45 Essex Street
Millburn, New Jersey 07041
Gentlemen:
We are acting as special tax counsel to American Corporate Receipts,
Inc., as Depositor (the "Depositor"), in connection with the proposed issuance
of one or more Series of trust receipts (the "Receipts") pursuant to
Registration Statement No. 33- 39333 on Form S-3 ( the "Registration Statement")
filed with the Securities and Exchange Commission (the "Commission") pursuant to
the Securities Act of 1933, as amended (the "Act"). Capitalized terms not
defined herein have the same meanings given them in the Registration Statement.
Our opinion regarding anticipated federal income tax consequences to
the purchasers of Receipts is based on statutes, regulations, rulings and court
decisions now in effect. Because no final regulations, rulings or court
decisions have been issued that provide definitive interpretations of section
1286 of the Internal Revenue Code of 1986, as amended (the "Code") and the
interrelationship between section 1286 of the Code with certain Treasury
regulations promulgated under sections 1272, 1273, and 1275 of the Code in this
context, substantial
<PAGE>
American Corporate Receipts, Inc.
December 31, 1997
Page 3
uncertainty exists in the application of these provisions. The opinions
expressed herein are therefore subject to clarification or modification.
Based on the foregoing and on our review of such documents,
statutes, regulations, rulings, and court decisions as we have deemed
appropriate, we are of the opinion that:
1. The Trust will be classified as a grantor trust under subpart E,
Part I of subchapter J of the Code and not as a partnership or an association
taxable as a corporation.
2. The Receipts will be considered "stripped bonds" or "stripped
coupons," as appropriate, and a Receipt (whether purchased by a purchaser in an
original sale or in a subsequent transaction) will be treated, under section
1286 of the Code, solely for purposes of applying the original issue discount
rules of the Code to such purchaser, as if the Receipt held by such purchaser
was issued on the purchase date with original issue discount.
3. The Coupon Receipts will be treated as "stripped coupons," within
the meaning of section 1286 of the Code. Original issue discount (as defined
below) with respect to a Coupon Receipt will equal the excess of the amount
payable at maturity of the Coupon Receipts over the purchase price of such
Coupon Receipts.
4. The Principal Receipts, other than possibly the Callable
Principal Receipts, will be treated as "stripped bonds," within the meaning of
section 1286 of the Code. Original issue discount with respect to a Principal
Receipts will equal the excess of the amount payable at maturity of the
Principal Receipts over the purchase price of such Principal Receipts.
5. For purposes of calculating original issue discount and gain or
loss on disposition, the Callable Principal Receipts should be treated as a
single "stripped bond" (rather than multiple debt components representing
separate rights to receive principal and to receive interest on each semiannual
interest payment date subsequent to the first optional call date thereof, for
which tax basis must be separately allocated and original issue discount
separately calculated). In the event that the scheduled maturity date of a
particular Callable Principal Receipt is properly treated as the maturity date
of such Receipts for purposes of the original issue discount rules, such
Callable Principal Receipts should be regarded as evidencing a single
"installment obligation", within the meaning of the regulations promulgated by
the U.S. Treasury with respect to original issue discount. This treatment is
based on an interpretation of the interrelationship between section 1286 of the
Code and certain Treasury regulations promulgated under sections 1272, 1273, and
1275 of the Code and is not free from doubt. It is uncertain whether the
scheduled maturity date of a particular Callable Principal Receipts will be
viewed as the maturity date of such Callable Principal Receipts for purposes of
the original issue discount rules (e.g., determination of yield to maturity and
amount payable at maturity), particularly where on the date of purchase of such
Callable Principal Receipts objective market factors suggest that in the absence
of any market change, it can be expected to be in the economic interest of the
issuer of the Bond to call such
<PAGE>
American Corporate Receipts, Inc.
December 31, 1997
Page 4
Bond on a date prior to scheduled maturity. It is likely that future regulations
adopted by the U.S. Treasury pursuant to its specific grant of regulatory
authority under section 1286 of the Code with respect to stripped rights with
call options will address this question.
6. In the case of Callable Principal Receipts with respect to which
the Bond is required to be redeemed prior to its stated maturity date, original
issue discount and yield to maturity will likely be required to be calculated by
taking into account events that have occurred prior to the purchase date of such
Callable Principal Receipts and therefore, as if the date on which the
redemption is to take place and the redemption price were the maturity date and
amount payable at maturity, respectively.
7. A purchaser's tax basis in a Receipt will equal the purchase
price for such Receipt increased by the portion of the original issue discount
accrued on such Receipt during the period such purchaser owns the Receipt and,
in the case of a Callable Principal Receipt, if properly treated as an
installment obligation maturing on the scheduled maturity date, reduced by any
payments actually received prior to maturity. Gain or loss on sale or at
maturity of a Receipt will be equal to the difference between the amount
realized in such sale or at maturity and the owner's tax basis at the time of
sale or at maturity and will be taxable capital gain or loss, if the Receipts
are held as capital assets. No gain or loss will be realized by a purchaser of
holding such Receipts until maturity.
No opinion is expressed as to any other consequence, for federal
income tax purposes, of ownership of Receipts. Moreover, no opinion is expressed
with respect to the treatment of Receipts for purposes of state or local income
taxes, or any other federal or state law, unless specifically provided herein.
Very truly yours,
/s/ McCarter & English, LLP
EXHIBIT 99.1
Form of Prospectus Supplement
SUBJECT TO COMPLETION, DATED ___________, 1998
Prospectus Supplement
(To Prospectus Dated ________,1998)
AMERICAN CORPORATE RECEIPTS, INC.
AMERICAN CORPORATE RECEIPTS, SERIES ____
RELATING TO
[NAME OF OBLIGOR]
___% BONDS SERIES ______ DUE ____
COUPON RECEIPTS AND
CALLABLE PRINCIPAL RECEIPTS1
DUE _______ __, ____ OR UPON EARLIER REDEMPTION
American Corporate Receipts, Series ____ (the "Receipts"), evidence
ownership of future interest and principal payments due on the ____ % Bonds
Series ____ Due ____ (the "Bonds") issued by [Name of Obligor] (the "Obligor").
The Receipts consist of Coupon Receipts and Callable Principal Receipts relating
initially to $_________ aggregate principal amount (out of $_______________
aggregate principal amount originally issued in _______ 19____) of the Bonds, as
purchased by American Corporate Receipts, Inc. (the "Depositor") from Rickel
Securities, Inc. ("Rickel"), an affiliate of the Depositor, which acquired the
Bonds in the secondary market. The Bonds provide for [semi-annual] interest
payments due on _______ and ________ of each year ("Interest Payments") and for
a single payment of principal, together with any related premium payable upon
redemption, due on the earlier of ______, ___, or the date on which the Bonds
are redeemed by the Obligor (the "Callable Principal Payment"). No payment will
be made on any Receipt prior to the due date of the corresponding Interest
Payment or the due date of the Callable Principal Payment at maturity or upon
redemption of the Bonds. Each Callable Principal Receipt also includes the right
to receive any redemption premium and any related Interest Payments made after
__________, ___ (the "First Call Date") on a Bond. The Bonds will be held on
behalf of the purchasers of the related Receipts, as the beneficial owners
thereof (each, a Holder), by ________________, as trustee (the "Trustee"),
pursuant to a Trust Agreement, dated as of _______ __, ______, between the
Depositor and the Trustee (the "Trust Agreement").
THE RECEIPTS ARE ZERO COUPON OBLIGATIONS AND DO NOT ENTITLE THE
HOLDERS THEREOF TO ANY PERIODIC PAYMENT OF INTEREST, EXCEPT AFTER THE FIRST CALL
DATE UNDER THE CIRCUMSTANCES DESCRIBED HEREIN WITH RESPECT TO THE CALLABLE
PRINCIPAL RECEIPTS ONLY.
The Receipts are being offered in registered form. The Receipts are
being offered initially in book entry form only through The Depository Trust
Company, New York, New York ("DTC"), and purchasers will not receive
Certificates representing their ownership of the
- --------
1 This Exhibit has been prepared assuming that Callable Principal Receipts,
rather than Principal Receipts, will be issued with respect to this hypothetical
series.
S-2
<PAGE>
Receipts. See "CERTAIN INFORMATION REGARDING THE RECEIPTS - Book-Entry
Registration" in the Prospectus. The Receipts will be delivered in face amounts
of $1,000 and multiples thereof.
SEE "RISK FACTORS" HEREIN FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD CAREFULLY BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE RECEIPTS.
THE RECEIPTS WILL BE OFFERED AT SUBSTANTIAL DISCOUNTS FROM THEIR
NOTIONAL OR FACE AMOUNTS. SEE "RISK FACTORS" HEREIN FOR A DISCUSSION OF PRICE
VOLATILITY OF THE RECEIPTS AND "FEDERAL INCOME TAX CONSEQUENCES" IN THE
PROSPECTUS FOR A DISCUSSION OF FEDERAL INCOME TAX CONSIDERATIONS, INCLUDING
IMPLICATIONS OF ORIGINAL ISSUE DISCOUNT AND POSSIBLE TAX WITHHOLDING.
There is currently no secondary market for the Receipts offered
hereby. Rickel Securities, Inc., as underwriter (in such capacity, the
"Underwriter"), intends to make a secondary market in the Receipts but has no
obligation to do so. There can be no assurance that a secondary market in the
Receipts will develop or, if it does develop, that it will be maintained. See
"Risk Factors."
THIS PROSPECTUS SUPPLEMENT DOES NOT PROVIDE DETAILED INFORMATION
WITH RESPECT TO THE OBLIGOR. IN THE EVENT OF A DEFAULT ON A BOND, THE RISK OF
LOSS LIES ENTIRELY WITH THE HOLDERS OF THE RELATED RECEIPTS. THE OBLIGOR IS NOT
AFFILIATED WITH THE DEPOSITOR NOR IS THE OBLIGOR INVOLVED IN THIS OFFERING OF
RECEIPTS. SEE "RISK FACTORS" HEREIN AND "AVAILABLE INFORMATION REGARDING THE
OBLIGORS" IN THE PROSPECTUS. NO CREDIT ENHANCEMENT (IN THE FORM OF
OVER-COLLATERALIZATION, INSURANCE OR GUARANTEES) WILL BE AVAILABLE TO SUPPLEMENT
PAYMENTS MADE ON THE BONDS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Receipts will be offered from time to time by the Underwriter in
negotiated transactions or otherwise at fixed or varying prices to be determined
at the time of sale.
The Prospectus Supplement should be retained for future reference.
RICKEL SECURITIES, INC.
The date of this Prospectus Supplement is _____________ ___,
_______.
S-3
<PAGE>
This Prospectus Supplement does not contain complete information
about the Receipts offered hereby. Additional information is contained in the
Prospectus, and purchasers are urged to read both this Prospectus Supplement and
the Prospectus in full. Sales of the Receipts may not be consummated unless the
purchaser has received both this Prospectus Supplement and the Prospectus.
----------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR
EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICES OF THE RECEIPTS
AT LEVELS ABOVE THOSE THAT MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
----------
S-4
<PAGE>
RISK FACTORS
A prospective purchaser of the Receipts should be aware of the
following factors in evaluating the merits and risks of an investment therein.
1. PRICE VOLATILITY OF ZERO COUPON OBLIGATIONS AND
POSSIBILITY OF LOSS. The purchase at a discount of a Receipt will
likely result in greater price volatility than the purchase of an
obligation of a similar maturity which pays interest periodically.
The Receipts are zero coupon obligations. The market prices of zero
coupon obligations, such as those represented by Receipts, are
particularly sensitive to fluctuations in market interest rates.
Thus, when market interest rates rise, absent other factors such as
changes in the perceived creditworthiness of the Obligor on the
underlying Bonds, there will be a sharp percentage fall in the
market price of Coupon Receipts relative to coupon bearing
instruments of a similar maturity. The market prices of Callable
Principal Receipts will be subject to similar volatility. Investors
should consider whether such potential secondary market price
volatility is in accordance with their investment needs.
2. NO DETAILED INFORMATION ABOUT OBLIGOR. This
Prospectus Supplement does not provide detailed information with
respect to the Obligor. See "AVAILABLE INFORMATION REGARDING THE
OBLIGORS" in the Prospectus.
3. OBLIGOR IS ONLY PAYMENT SOURCE. Proceeds of the Bonds
held by the Trust are the sole source of payment for the Receipts.
The Bonds may be subject to laws permitting bankruptcy, moratorium,
reorganization or other actions which, in the event of financial
difficulties of the Obligor, could result in delays in payment or in
non-payment of the Bonds and consequently late payment or
non-payment of Receipts. In certain cases, the bankruptcy,
reorganization or moratorium could result in non-payment of one or
more Coupon Receipts while the related Callable Principal Receipts
are paid in part or in full.
4. LACK OF AFFILIATION BETWEEN THE OBLIGOR AND THE
DEPOSITOR. The Depositor is not affiliated with the Obligor and,
although the Depositor has no knowledge of any event that would have
a material adverse effect on the Obligor, any such event is beyond
the Depositor's ability to control and may be difficult to predict.
The Obligor is not involved in the offering of the
receipts and has no obligation with respect to the receipts,
including any obligation to take the needs of the Depositor or of
holders of the receipts into consideration for any reason. The
Depositor will not receive any of the proceeds of this Offering and
is not responsible for, and has not participated in, the
determination of the timing of, prices for, or quantities of, the
receipts to be issued in this Offering or in the determination or
calculation of the principal amount to be paid at maturity. The
Obligor is not involved with the administration, marketing or
S-5
<PAGE>
trading of the receipts and has no obligations with respect to the
principal amount to be paid to holders of receipts at maturity.
5. NO ASSURANCE OF LIQUIDITY. There is no assurance that
any secondary market will develop or be maintained for any Receipt.
While Rickel intends to maintain a secondary market for Receipts, it
is not obligated to do so. There can be no assurance that a
secondary market in the Receipts will develop or, if it does
develop, that it will remain in existence for any period of time.
The absence of a secondary market would adversely affect the
liquidity of the Receipts. Even if such a secondary market develops,
the secondary market for securities of a type similar to the
Receipts has at times been characterized by high volatility, with
widely disparate price quotes and wide spreads between bid and asked
prices. Such secondary market conditions may create difficulties for
investors who need to obtain timely daily price quotes with respect
to the Receipts or for investors who wish to dispose of Receipts.
6. CERTAIN TAX CONSIDERATIONS. Under Section 1286 of the
Code, the separation of the right to receive principal payments on a
bond from the right to receive interest payments on the bond results
in the creation of a "stripped bond" (with respect to the principal
payments) and "stripped coupons" (with respect to the interest
payments). As a result of the separation of the interest component
of a Bond from the principal component, the resulting Receipts will
be treated for tax purposes as being issued on the purchase date
with original issue discount ("OID"). Under the relevant tax rules,
OID accrues for tax purposes on a daily basis over the term of the
Receipt. It is essential that each potential purchaser of Receipts
understand that OID accrues (and taxable income results) in any year
REGARDLESS OF WHETHER ANY CASH PAYMENT IS MADE to the Holder with
respect to the Receipt or Receipts that he, she or it holds.
Consequently, Holders of Receipts who are subject to income taxation
are likely to recognize taxable income in the form of accrued OID in
tax years when they receive NO CASH DISTRIBUTIONS with respect to
the Receipts. Any purchaser of Receipts must consider whether he,
she or it has the cash resources to meet the tax obligations
resulting from the accrual of OID with respect to the Receipts in
taxable years when no cash will be distributed with respect to the
Receipts.
7. BONDS SUBJECT TO REDEMPTION. The Bonds are subject to
redemption prior to maturity at the option of the Obligor on or
after the First Call Date, in whole or in part. Such redemption will
cause the retirement of all or a pro rata portion of the Callable
Principal Receipts, as applicable. There can be no assurance,
however, that all or any portion of the Callable Principal Receipts
will be redeemed on the First Call Date, or on any other date prior
to their maturity.
8. RATING OF THE RECEIPTS. It is a condition to the
issuance of any series of Receipts that they be rated by a
nationally recognized statistical rating organization (such as
Moody's Investor Service, Inc. ("Moody's") or Standard & Poor's
Corporation ("S&P")) (each, a
S-6
<PAGE>
"Rating Agency") in one of its generic rating categories which
signifies investment grade; typically, the four highest rating
categories (within which there may be sub-categories or gradations
indicating relative standing) signify investment grade. For example,
Moody's ratings between Aaa and Baa, and S&P's ratings between AAA
and BBB, signify investment grade. The ratings of any series of the
Receipts by the Rating Agencies address the likelihood of the full
and timely payment of the aggregate face amount of the Receipts.
There is no assurance that any such rating will continue for any
period of time or that it will not be revised or withdrawn entirely
by such Rating Agency if, in its judgment, circumstances (including,
without limitation, the financial health of the issuer of the
underlying Bonds) so warrant. A revision or withdrawal of such
rating may have an adverse effect on the market price of the
Receipts. A security rating is not a recommendation to buy, sell or
hold securities.
THE OBLIGOR
According to publicly available documents, the Obligor, a
______________ corporation, is primarily in the business of ______________. The
Obligor is subject to the informational requirements of the Securities Exchange
Act of 1934, as amended. Accordingly, the Obligor files reports, proxy
statements and other information with the Securities and Exchange Commission.
Copies of such reports, proxy statements and other information may be inspected
and copied at certain offices of the Commission and at the offices of the
[Exchange] [NASD] at the addresses listed under "Available Information" in the
Prospectus.
THIS PROSPECTUS SUPPLEMENT RELATES ONLY TO THE RECEIPTS OFFERED
HEREBY AND DOES NOT RELATE TO ANY SECURITIES OF THE OBLIGOR. ALL DISCLOSURES
CONTAINED IN THIS PROSPECTUS SUPPLEMENT REGARDING THE OBLIGOR ARE DERIVED FROM
THE PUBLICLY AVAILABLE DOCUMENTS DESCRIBED IN THE PRECEDING PARAGRAPH. NEITHER
THE DEPOSITOR NOR THE UNDERWRITER HAVE PARTICIPATED IN THE PREPARATION OF THOSE
DOCUMENTS, OR MADE ANY DUE DILIGENCE INQUIRY WITH RESPECT TO THE INFORMATION
PROVIDED THEREIN. THERE CAN BE NO ASSURANCE THAT ALL EVENTS CURRENT PRIOR TO THE
DATE HEREOF THAT WOULD EFFECT THE OBLIGOR (INCLUDING EVENTS THAT WOULD EFFECT
THE ACCURACY OR COMPLETENESS OF THE PUBLICLY AVAILABLE DOCUMENTS DESCRIBED IN
THE PRECEDING PARAGRAPH) HAVE BEEN PUBLICLY DISCLOSED.
THE RECEIPTS
GENERAL
The Receipts consist of Coupon Receipts evidencing ownership of
future interest payments ("Interest Payments") and Callable Principal Receipts
evidencing ownership of future payments of principal and redemption premium, if
any ("Callable Principal Payments"), and all Interest Payments due after the
First Call Date and prior to redemption or maturity. Payments of interest and
principal will come solely from payments of principal, interest and premium, if
any, on the Bonds made by the Obligor. An investor purchasing Receipts should
avail itself of the
S-7
<PAGE>
same information concerning the Obligor as it would if it were purchasing Bonds.
See "AVAILABLE INFORMATION REGARDING THE OBLIGORS" in the Prospectus.
Each Coupon Receipt is payable on or after the due date of the
corresponding Interest Payment on the Bonds, subject to receipt thereof by the
Trustee. The principal portion of each Callable Principal Receipt and any
redemption premium is payable on or after the earlier of the due date of the
corresponding Callable Principal Payment, which is the maturity date of the
Bonds, and the date on which the Bonds are redeemed by the Obligor, subject to
receipt of such principal and any redemption premium by the Trustee. Each
Callable Principal Receipt includes the right to receive Interest Payments due
on each _____ and _____ occurring after the First Call Date up to and including
the maturity date of the Bonds or the date on which the Bonds are redeemed by
the Obligor. No Interest Payments will be made on Callable Principal Receipts
after any such redemption. The face amount of each Receipt will be equal to the
payment or payments to be received thereon, except that the face amount of
Callable Principal Receipts will not include (i) the amount of any redemption
premium which would be paid in the event of a redemption prior to maturity or
(ii) any Interest Payments which may be made if the underlying Bonds are not
called for redemption on the First Call Date. See "Redemption of Bonds
Underlying Callable Principal Receipts."
The Receipts are being offered at substantial discounts from their
face amounts. See "FEDERAL INCOME TAX CONSEQUENCES" in the Prospectus for a
discussion of income tax consequences.
Pursuant to the Trust Agreement, the Bonds underlying the Receipts
will be held by the Trustee for the benefit of the Holders in the form of
physical Receipts or as book-entry credits to an account of the Trustee at DTC.
The Obligor is not a party to the Trust Agreement. Each Holder of a Receipt, by
its acceptance thereof, agrees to be bound by the terms and conditions of the
Trust Agreement.
THE RECEIPTS OFFERED HEREBY ARE DIFFERENT FROM, AND NOT EXCHANGEABLE
FOR, ANY OTHER SERIES OF RECEIPTS OR ANY OTHER RECEIPT OR CERTIFICATE EVIDENCING
OWNERSHIP OF FUTURE INTEREST, PRINCIPAL AND PREMIUM, IF ANY, PAYMENTS DUE ON
OBLIGOR OBLIGATIONS, AND ARE SUBJECT TO THE TERMS AND CONDITIONS OF THE TRUST
AGREEMENT.
The Receipts will be delivered in registered form. The Receipts are
being offered initially in book entry form only through DTC, in face amounts of
$1,000 and multiples thereof, and purchasers will not receive physical Receipts
representing their ownership of Receipts.
THE BONDS
The following description has been obtained from the Obligor's
Registration Statement on Form S-__ dated _______ __, ____ (No. 33-______)
pursuant to which the Bonds were originally offered and sold to the public. The
following summary of certain provisions of the Indenture (as defined below) and
the Bonds does not purport to be complete, and such descriptions are qualified
in their entirety by reference to all of the provisions of the Indenture
S-8
<PAGE>
and the Bonds, as the case may be (including in each case the definitions
therein of certain terms). Although the Depositor believes that the descriptions
contained herein are accurate, the Depositor has not independently confirmed the
accuracy of each of the statements made herein.
GENERAL
The Bonds have been issued under an Indenture dated (the
"Indenture"), between the Obligor and ____________, as the trustee (the "Bond
Trustee").
Interest on the Bonds will be payable [semi-annually] on
____________ and _____________. The Bonds will mature on ______________ __, ,
unless redeemed earlier at the option of the Obligor.
The Bonds are not secured by the assets of the Obligor or otherwise
and do not have the benefit of a sinking fund for the retirement of principal.
Only capital stock of the Obligor is junior in right of payment to the Bonds.
REDEMPTION AT THE OPTION OF THE OBLIGOR
The Bonds are redeemable at the option of the Obligor, in whole or
in part, at any time after ________, _____, and in certain circumstances,
sooner, on not less than 30 days notice, at an initial redemption price equal to
________________, declining in equal annual increments to ____% in the tenth
year together with accrued interest to the redemption date.
SUBORDINATION
The principal and premium, if any, and interest on the Bonds will be
subordinated and junior in right of payment to the prior payment in full of all
Senior Indebtedness of the Obligor. Senior Indebtedness is defined as any and
all indebtedness of the Obligor except any particular indebtedness which
expressly provides in the instrument creating such indebtedness that such
indebtedness shall be subordinate or rank pari passu in right of payment of the
Bonds. Upon any distribution of assets of the Obligor in connection with any
dissolution, winding up, liquidation, reorganization, bankruptcy or other
similar proceeding relative to the Obligor, holders of all Senior Indebtedness
will first be entitled to receive payment in full before any distribution to the
holders of the Bonds. No direct or indirect payment may be made by the Obligor
of principal, premium or interest on the Bonds and no Bonds may be acquired by
the Obligor for cash or property if at the time of such payment or acquisition
there exists a default in the payment of all or part of principal, premium or
interest on any Senior Indebtedness and such default has not been cured or
unless the effect of this provision has been waived by the holders of such
Senior Indebtedness.
RESTRICTIONS ON SALE OF ASSETS
The Indenture also provides that the Obligor will not sell, assign,
transfer, or otherwise dispose of any Capital Stock of any subsidiary or
securities convertible into, or options, warrants, or rights to subscribe for or
to purchase any Capital Stock of any such subsidiary, except for (i)
S-9
<PAGE>
sales on other dispositions made to qualify a person to serve as a director of
any such subsidiary; (ii) sales or other dispositions of fair market value in
cash (as determined by the Board of Directors of the Obligor) if, after giving
effect hereto and assuming conversion of any convertible securities, the Obligor
will own not less than 80% of the Capital Stock of such subsidiary; (iii) sales
or other dispositions in connection with a merger or consolidation as to which
the Obligor will have the same or greater proportionate ownership in the
resulting or surviving entity than that which it had in such subsidiary; (iv)
sales or other dispositions made in compliance with an order of a court or
regulatory authority of competent jurisdiction; or (v) any sale by any
subsidiary of shares of its Capital Stock to the Obligor.
MERGER, CONSOLIDATION OR SALE OF ASSETS; SUCCESSOR CORPORATION
The Obligor has agreed that it will not merge or consolidate with,
or sell all or substantially all of its assets to, any person, firm or
corporation unless it is the surviving corporation in such transaction and,
immediately thereafter, is not in default under the Indenture or, if it is not
the surviving corporation, the successor corporation expressly assumes the
Obligor's obligations under the Indenture and, immediately after such
transaction, the successor corporation is not in default under the Indenture.
Any successor corporation shall assume by supplemental indenture all of the
obligations of the Obligor under the Bonds and the Indenture.
EVENTS OF DEFAULT
Under the Indenture, an "Event of Default" on the Bonds occurs if:
(i) the Obligor defaults in the payment of interest on the Bonds
when the same becomes due and the default continues for a period of 30 days,
whether or not such payments shall be prohibited by the provisions of the
Indenture;
(ii) the Obligor defaults in the payment of the principal of (or
premium, if any, on) the Bonds when the same becomes due and payable at
maturity, upon acceleration, redemption or otherwise, whether or not such
payment shall be prohibited by the provisions of the Indenture;
(iii) the Obligor fails to comply with any of its agreements or
covenants in, or provisions of, or the Indenture, and the default continues for
the period and after the notice specified below;
(iv) a final judgment or final judgments for the payment of money
are entered by a court or courts of competent jurisdiction against the Obligor
or its subsidiaries which remain undischarged and unbonded for a period (during
which execution shall not be effectively stayed) of 60 days and have not been
appealed, provided that the aggregate of all such judgments (to the extent not
paid or covered by insurance) exceeds $3,000,000;
(v) the Obligor or any subsidiary or subsidiaries, pursuant to or
within the meaning of any Bankruptcy Law:
(A) commences a voluntary case or proceeding,
S-10
<PAGE>
(B) consents to the entry of an order for relief against it in an
involuntary case or proceeding,
(C) consents to the appointment of a Custodian of it or for all
substantially all of its property,
(D) makes a general assignment for the benefit of its creditors,
or
(E) generally is not paying its debts as the same becomes due
unless such debts are the subject of a bona fide dispute; or
(vi) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(A) is for relief against the Obligor or any subsidiary or
subsidiaries in an involuntary case or proceeding,
(B) appoints a Custodian of the Obligor or any subsidiary or
subsidiaries or for all or substantially all of its property;
or
(C) orders the liquidation of the Obligor or any subsidiary or
subsidiaries; and
in each case the order or decree remains unstayed and in effect for 60 days.
The term "Bankruptcy Law" means Title 11, U.S. Code or any similar
Federal or state law for the relief of debtors. The term "Custodian" means any
receiver, trustee, assignee, liquidator, sequestrator or similar official under
any Bankruptcy Law.
A default under clause (iii) above is not an Event of Default until
the Bond Trustee notifies the Obligor in writing, or the Holders of at least 25%
in principal amount of the Bonds then outstanding notify the Obligor and the
Bond Trustee in writing, of the default, and the Obligor does not cure the
Default within 30 days after receipt of the notice. The notice must specify the
default, demand that it be remedied and state that the notice is a "Notice of
Default". Such notice shall be given by the Bond Trustee if so requested in
writing by the Holders of at least 25% in principal amount of the Bonds then
outstanding. Any notice required to be delivered by the Bond Trustee to the
Obligor shall be given promptly after the Bond Trustee becomes aware of such
Default or is requested by the Holders to deliver such notice.
MODIFICATION AND WAIVER
The Obligor may omit in any particular instance to comply with any
covenant or condition as set forth in the Indenture if before the time for such
compliance the holders of 66 2/3% in aggregate principal amount of the Bonds at
the time outstanding shall either waive such compliance in such instance or
generally waive compliance with such covenant or condition, but no such waiver
may extend to or affect such covenant or condition except to the extent so
S-11
<PAGE>
expressly waived, and, until such waiver has become effective, the obligations
of the Obligor and the duties of the Bond Trustee in respect of any such
covenant will remain in full force and effect. No Supplemental Indenture will
affect the seniority rights of the holders of Senior Indebtedness without the
consent of such holders.
Most of the terms of the Indenture and the Bond may be modified with
the written consent of two-thirds of the Holders. However, each holder must
agree to an extension of maturity, a reduction in conversion price or redemption
percentage or a reduction in the aforesaid percentage required for modification.
THE TRUSTEE
_________________ will act as Trustee under the Trust Agreement. The
designated office of the Trustee for the transfer, exchange or withdrawal of
Receipts is ______________, New York, New York. Notwithstanding the foregoing,
under the DTC Book Entry Only System, transfers and exchange of Receipts will be
accomplished as described under "Certain Information Regarding the Receipts -
Book-Entry Registration" in the Prospectus.
Any Holder presenting Receipts for surrender or registration of
transfer or exchange may be required to file such proof of residence, or other
matters or information, to execute such certificates and to make such
representations and warranties and such assurances, including a signature
guaranty, as the Trustee may reasonably deem necessary or proper. The Trustee
may withhold the delivery or delay the surrender of a registration of transfer
or exchange of any Receipts until such proof or other information is filed, such
receipts are executed or such representations and warranties are made.
THE OFFERING
The Receipts will be transferred by the Depositor to Rickel
Securities, Inc. in exchange for the Bonds, and there will be no cash proceeds
received by the Depositor from the sale of the Receipts. Rickel Securities, Inc.
has purchased each Bond in the secondary market at a price that is lower than
the aggregate price expected to be realized by Rickel Securities, Inc. from its
sale of the Coupon Receipts and Callable Principal Receipts related to such
Bond. The difference between the price paid by Rickel Securities, Inc. to
purchase each Bond in the secondary market and the aggregate proceeds to be
realized by Rickel Securities, Inc. from the sale of the Receipts related to
such Bond, less costs and expenses, represents underwriting compensation to
Rickel Securities, Inc. No other remuneration will be received by Rickel
Securities, Inc. or the Depositor in connection with the offering.
The Receipts are being offered and sold by Rickel Securities, Inc.
pursuant to this Prospectus Supplement in negotiated transactions with
investors. The actual price of the Receipts will be determined at the times of
such sales and are expected to vary for different Receipts.
S-12
<PAGE>
The obligation of Rickel Securities, Inc. to deliver the Receipts is
subject to certain conditions, including, among others, the receipt of certain
legal opinions described in the Prospectus.
Prior to the Offering, there has been no public market for the
Receipts and no assurance can be given that such a market will develop as a
result of this offering.
S-13
<PAGE>
COUPON RECEIPTS
ITEM CUSIP AGGREGATE FACE
NUMBER DUE DATE NUMBER AMOUNT OFFERED
CALLABLE PRINCIPAL RECEIPTS
ITEM CUSIP AGGREGATE FACE
NUMBER DUE DATE NUMBER AMOUNT OFFERED
FIRST CALL DATE
------- ---, -----
S-14
