As filed with the Securities and Exchange Commission on March 26 , 1998
Registration No. [ ]
- ----------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------------
TRIANGLE FUNDING II LLC
(Exact Name of Registrant as specified in its Charter)
<TABLE>
<S> <C> <C>
Delaware [ ] [ ]
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
[address]
(Address, including zip code, and
telephone number, including area
code, of registrant's principal
executive offices)
[ ]
[address]
(Name, address, including zip code,
and telephone number, including area
code, of agent for service with
respect to the Registrant)
---------------------------
Copies to:
C. Thomas Kunz, Esq.
Christopher J. Kell, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Telephone (212) 735-3240
Fax (212) 735-2000
---------------------------
Approximate date of commencement of
proposed sale to the public: As soon as
practicable after this Registration
Statement becomes effective.
---------------------------
If the only Securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. ( )
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection
with dividend or interest reinvestment plans, check the following box. ( )
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering.
( )____________
If this Form is a post-effective amendment pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. ( )____________
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. ( )
---------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed
Maximum Proposed Maximum
Amount to be Offering Aggregate Amount of
Proposed Title of Securities to be Registered Registered Price Per Unit Offering Price(1) Registration Fee
<S> <C> <C> <C> <C>
U.S. $[ ] Series 1998-1 Class I Senior Notes........ [ $1,000,000 ] 100% $[ ] [$295.00](1)
- ------------------------------------------------------- -------------- ---------------- -------------------- ---------------
U.S. $[ ] Series 1998-2 Class I Senior Notes........ [ ] 100% $[ ] $[ ](1)
- ------------------------------------------------------- -------------- ---------------- -------------------- ---------------
U.S. $[ ] Series 1998-3 Class I Senior Notes....... [ ] 100% $[ ] $[ ](1)
- ------------------------------------------------------- -------------- ---------------- -------------------- ---------------
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states that
this Registration Statement shall thereafter become effective in accordance
with Section 8(a) of the Securities Act of 1933, as amended, or until the
Registration Statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a), may determine.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws
of any such State.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED [ ], 1998
[$ ]
TRIANGLE FUNDING II LLC
Asset Backed Senior Notes
---------------------------
$----------- $----------- $-------------
Series 1998-1 Series 1998-2 Series 1998-3
Senior Notes Senior Notes Senior Notes
Offering Price: 100% Offering Price: 100% Offering Price: 100%
Triangle Funding II LLC (the "Issuer") will issue the Series 1998-1
$___________ Class I Senior Notes (the "Series 1998-1 Class I Notes"), the
Series 1998-2 $____________ Class I Senior Notes (the "Series 1998-2 Class
I Notes") and the Series 1998-3 $---------- Class I Senior Notes (the
"Series 1998-3 Class I Notes") pursuant to an indenture to be dated as of
__________, 1998 ( the "Indenture") between the Issuer and __________, as
trustee (the "Trustee"). The Series 1998-1 Class I Notes, the Series 1998-2
Class I Notes and the Series 1998-3 Class I Notes are collectively referred
to as the "Senior Notes." Only the Senior Notes are offered hereby.
There currently is no secondary market for the Senior Notes and there
is no assurance that one will develop. The Underwriters expect, but will
not be obligated, to make a market in the Senior Notes. There is no
assurance that any such market will develop, or if one does develop, that
it will continue.
(continued on next page)
---------------------------
Potential investors should consider, among other things, the
information set forth in "Risk Factors" beginning on page [ ].
THE NOTES WILL NOT REPRESENT INTERESTS IN OR OBLIGATIONS OF CREDIT SUISSE FIRST
BOSTON OR ANY OF ITS AFFILIATES. THE NOTES WILL NOT BE INSURED OR GUARANTEED
BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR BY ANY OTHER PARTY.
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.
<TABLE>
<CAPTION>
Underwriting
Discounts and
Price to Public Commissions(2) Proceeds to the Seller(1)
<S> <C> <C> <C>
Per Series 1981-1 Class I Note ............... % % %
Per Series 1988-2 Class I Note................ % % %
Per Series 1998-3 Class I Note................ % % %
Total......................................... $ $ $
</TABLE>
(1) Before deducting expenses payable by the Seller estimated at $[ ].
(2) The Issuer has agreed to indemnify the Underwriters for certain
liabilities in conjunction with the underwriting.
---------------------------
The Senior Notes are offered by the several Underwriters when, as and
if issued by the Issuer, delivered to and accepted by the Underwriters and
subject to their right to reject orders in whole or in part. It is expected
that delivery of the Senior Notes, in book-entry form, will be made through
the facilities of The Depository Trust Company on or about _______ _, 1998,
against payment in immediately available funds.
---------------------------
Credit Suisse First Boston
The date of this Prospectus is , 1998.
(continued from prior page)
In addition to the Senior Notes, the Issuer will issue the Series
1998-1 $__________ Class II Mezzanine Notes (the "Series 1998-1 Class II
Notes"), the Series 1998-1 $___________ Class III Mezzanine Notes (the
"Series 1998-1 Class III Notes"), the Series 1998-1 $__________ Class IV
Subordinated Notes (the "Series 1998-1 Class IV Notes"), the Series 1998-1
$_________ Class V Subordinated Notes (the "Series 1998-1 Class V Notes"),
the Series 1998-2 $_________ Class II Mezzanine Notes (the "Series 1998-2
Class II Notes"), the Series 1998-2 $_________ Class III Subordinated Notes
(the "Series 1998-2 Class III Notes"), the Series 1998-2 $_________ Class
IV Subordinated Notes (the "Series 1998-2 Class IV Notes"), the Series
1998-3 $__________ Class II Mezzanine Notes (the "Series 1998-3 Class II
Notes"), the Series 1998-3 $_______ Class III Subordinated Notes (the
"Series 1998-3 Class III Notes") and the Series 1998-3 $__________ Class IV
Subordinated Notes (the "Series 1998-3 Class IV Notes"), pursuant to the
Indenture. All Classes of Notes defined above are collectively referred to
as the "Notes." Only the Senior Notes are offered hereby.
Payment of interest and principal on the Notes is scheduled to be made
on the Payment Dates, as described herein. See "Description of the
Notes--Interest" and "--Principal." The principal amount of the Notes will
be due by the Legal Final Maturity Date specified in this Prospectus unless
redeemed or repaid prior thereto. The Collateral of the Issuer is the sole
source of payments on the Notes.
<TABLE>
<CAPTION>
Initial Note Applicable Scheduled Legal Final
Series Notes Balance Margin Ratings(1) Maturity Date(3) Maturity Date(3)
- --------- -------------- -------------------- -------------- ----------------- ----------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
1998-1 Class I...... $ % [ ] 1999 1998
Class II..... $ % [ ] 1999 2002
Class III.... $ % [ ] 1999 2002
Class IV..... $ % [ ] 1999 2002
Class V...... $ % (2) 1999 2002
1998-2 Class I..... $ % [ ] 2001 2004
Class II.... $ % [ ] 2001 2004
Class III... $ % [ ] 2001 2004
Class IV.... $ % (2) 2001 2004
1998-3 Class I..... $ % [ ] 2003 2006
Class II.... $ % [ ] 2003 2006
Class III... $ % [ ] 2003 2006
Class IV..... ---------- % (2) 2003 2006
Total....... $[ ]
</TABLE>
- ------------
(1) Expected ratings by Fitch, Moody's and S&P, respectively.
(2) No rating has been requested.
(3) With respect to each Class, the date provided is the 15th day of each
such month or, if such day is not a Business Day, the next succeeding
Business Day.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE
SECURITIES OFFERED HEREBY, INCLUDING OVER-ALLOTMENT, STABILIZING
TRANSACTIONS, SHORT COVERING TRANSACTIONS AND PENALTY BIDS. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "PLAN OF DISTRIBUTION."
AVAILABLE INFORMATION
The Issuer has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement (together with all amendments and
exhibits thereto, the "Registration Statement"), of which this Prospectus
is a part, under the Securities Act of 1933, as amended (the "Securities
Act"), with respect to the Senior Notes being offered hereby. This
Prospectus does not contain all of the information set forth in the
Registration Statement, certain parts of which have been omitted in
accordance with the rules and regulations of the Commission. For further
information, reference is made to the Registration Statement which is
available for inspection without charge at the public reference facilities
of the Commission at Judiciary Plaza, Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and the regional offices of the Commission at
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511, and Seven World Trade Center, Suite 1300, New York, New York
10048. Copies of such information can be obtained from the Public Reference
Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Commission maintains a Web
Site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the
Commission at http: //www.sec.gov. The Issuer will also file or cause to be
filed with the Commission such periodic reports as are required under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
rules and regulations of the Commission thereunder.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All reports and other documents filed by the Issuer, pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the
date of this Prospectus and prior to the termination of the offering of the
Senior Notes shall be deemed to be incorporated by reference into this
Prospectus and to be part hereof. Any statement contained in a document
incorporated or deemed to be incorporated by reference in this Prospectus
shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained in this Prospectus or
in any subsequently filed document which also is or is deemed to be
incorporated by reference in this Prospectus modifies or supersedes such
statement. Any such statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Issuer will provide without charge to each person to whom a copy
of this Prospectus is delivered, on the written or oral request of any such
person, a copy of any or all of the documents incorporated herein by
reference, except the exhibits of such documents (unless such exhibits are
specifically incorporated by reference in such documents). Written requests
for such copies should be directed to [ ].
REPORTS TO SENIOR NOTEHOLDERS BY THE TRUSTEE
[ ], as Trustee, will provide to Senior Noteholders
(which is expected to be Cede & Co. as the nominee of The Depository Trust
Company ("DTC") unless Individual Notes are issued under the limited
circumstances described herein) unaudited quarterly and annual reports
concerning the Notes. See "The Notes -- Statements to Senior Noteholders"
and "-- Evidence as to Compliance."
---------------
In this Prospectus, references to "Sfr" are to Swiss Francs and
references to "U.S. Dollars," "Dollars," "$" and "U.S.$" are to United
States Dollars on the date hereof.
---------------
SUMMARY OF TERMS
Prospective investors are advised to carefully read, and should rely
solely on, the detailed information appearing elsewhere in this Prospectus
relating to the Notes in making their investment decision. The Summary of
Terms does not include all relevant information relating to the securities
and collateral described herein, particularly with respect to the risks and
special considerations involved with an investment in such securities, and
is qualified in its entirety by reference to the detailed information
appearing elsewhere in this Prospectus. Prior to making an investment
decision, a prospective investor should carefully review this Prospectus.
Capitalized terms used herein have the respective meanings assigned to them
in this Prospectus. See "Index of Defined Terms."
Securities Issued........................ The Issuer will issue notes in
three series (each, a "Series")
designated as the "Series
1998-1 Notes," the "Series
1998-2 Notes" and the "Series
1998-3 Notes" (collectively,
the "Notes").
The Series 1998-1 Notes will be
in an aggregate initial
principal amount of
$___________ consisting of the
following classes (each, a
"Class"):
Class as %
of Series
----------
Class I Notes........ %
Class II Notes....... %
Class III Notes...... %
Class IV Notes....... %
Class V Notes........ %
The Series 1998-2 Notes will be
in an aggregate initial
principal amount of
$______________ consisting of
the following Classes:
Class as %
of Series
----------
Class I Notes....... %
Class II Notes...... %
Class III Notes..... %
Class IV Notes...... %
The Series 1998-3 Notes will be
in an aggregate initial
principal amount of
$____________ consisting of the
following Classes:
Class as %
of Series
----------
Class I Notes........ %
Class II Notes....... %
Class III Notes...... %
Class IV Notes....... %
The "Senior Notes" are the
Series 1998-1 Class I Notes,
the Series 1998-2 Class I Notes
and the Series 1998-3 Class I
Notes.
The "Mezzanine Notes" are the
Series 1998-1 Class II Notes,
the Series 1998-2 Class II
Notes, the Series 1998-3 Class
II Notes and the Series 1998-1
Class III Notes.
The "Subordinated Notes" are
the 1998-2 Class III Notes, the
1998-3 Class III Notes, the
Series 1998-1 Class IV Notes,
the Series 1998-2 Class IV
Notes, the Series 1998-3 Class
IV Notes and the Series 1998-1
Class V Notes.
Only the Senior Notes are being
offered hereby
The Issuer............................... Triangle Funding II LLC, a
limited liability company
organized under the laws of the
State of Delaware. The Issuer
will have nominal capital in
the form of the membership
interest of its sole member.
The Issuer will not have any
assets other than the
Collateral.
Ownership of the Issuer.................. The Issuer's sole member will
be GSS Holdings, Inc., a
Delaware corporation. The sole
manager of the Issuer will also
be GSS Holdings, Inc.
Administration of the Issuer............. ______will agree under the
terms of an administration
agreement entered into with the
Issuer (the "Administration
Agreement") to provide certain
administrative services on
behalf of the Issuer (in such
capacity, the "Administrator").
The Administrator will not be
obligated in any way to make
any payments under or in
respect of the Notes.
The Trustee.............................. ____________, a ____________,
as Trustee for the benefit of
the Noteholders of each Series
under the Indenture described
below.
The Indenture............................ The Issuer will issue the Notes
of each Series pursuant to an
indenture (the "Indenture")
between the Issuer and the
Trustee. The Indenture will be
governed by the laws of the
State of New York.
Collateral .............................. Each Series of Notes will be
secured by a security interest
granted by the Issuer to the
Trustee under the Indenture in
a separate pool of Collateral
that will consist of the right,
title and interest of the
Issuer in (i) the related
Credit Swap, (ii) with respect
to the Series 1998-1 Notes, the
One-Year Repo; with respect to
the Series 1998-2 Notes, the
Three-Year Repo; and with
respect to the Series 1998-3
Notes, the Five-Year Repo; and
(iii) any Permitted Investments
or cash held by the Custodian
in the Issuer's Account
maintained under the Custodial
Agreement with respect to the
related Repurchase Agreement.
No Series will have any right
to receive distributions from
the Collateral related to any
other Series. The security
interest of the Trustee in the
Collateral consisting of Swap
Collateral will be subject and
subordinate to the security
interest in the Swap Collateral
granted by the Issuer to the
Swap Counterparty pursuant to
the related Credit Swap as
security for the Issuer's
obligations under such Credit
Swap.
Credit Swaps............................. On the Closing Date, the Issuer
will enter into a separate
credit swap agreement with
respect to each Series of Notes
(each, a "Credit Swap") with
Credit Suisse First Boston, [ ]
Branch (in such capacity, the
"Swap Counterparty") pursuant
to a ISDA Master Agreement and
Confirmation dated the Closing
Date between the Issuer and the
Swap Counterparty. Each Credit
Swap will be scheduled to
terminate on the last day of
the Coverage Period relating to
the Scheduled Maturity Date of
the related Series of Notes.
Reference Credits................... Pursuant to each Credit Swap,
the Swap Counterparty will
designate a pool of (i)
reference obligations or
portions thereof (each, a
"Reference Obligation") of a
Reference Obligor under a term
loan, revolving credit
facility, letter of credit or
other credit facility extended
to such Reference Obligor by
the Swap Counterparty through
one or more of its branches or
subsidiaries or (ii) corporate
debt securities or portions
thereof of Reference Obligors
(each, a "Reference Security,"
and together with the Reference
Obligations, the "Reference
Credits") meeting certain
criteria specified in the
related Credit Swap (the
"Series Reference Pool Guide-
lines"). The Swap Counterparty
will have the right, in
accordance with the terms and
conditions of each Credit Swap,
to (i) substitute for existing
Reference Credits, other
Reference Credits meeting the
Series Reference Pool
Guidelines. A "Reference
Obligor" means the person or
entity obligated in respect of
a Reference Credit. Reference
Credits may also consist of
other assets which satisfy the
Rating Agency Condition.
"Rating Agency Condition"
means, with respect to any
action subject to such
condition, that each Rating
Agency shall have notified the
Issuer and the Trustee in
writing that such action will
not result in a reduction or
withdrawal of the rating of any
outstanding Class of Notes
rated by such Rating Agency.
The Reference Credits from time
to time in the pool designated
for a Credit Swap are referred
to as the "Reference Pool" with
respect to such Credit Swap.
Reference Credit Default Amount..... If a Reference Obligor fails to
pay [any amount] when it is
required to be paid under the
Reference Credit, the
occurrence of such event will
be deemed to be a "Reference
Obligor Default Event," and the
related Reference Credit will
be deemed to be a "Defaulted
Reference Credit." A "Reference
Credit Default Amount" is, with
respect to each Defaulted
Reference Credit, the total
amount of principal due and
payable, but unpaid, on the
related Defaulted Reference
Credit as of the end of the
related Coverage Period.
Default Coverage.................... Under each Credit Swap, the
Issuer will be obligated to pay
to the Swap Counterparty on
each Payment Date the Reference
Credit Default Amount with
respect to any Reference Credit
that became a Defaulted
Reference Credit during the
related Coverage Period in the
related Reference Pool, less
the amount of any payment of
principal on such Defaulted
Reference Credit expected by
the Swap Counterparty (a
"Reference Credit Expected
Recovery").
Excess Recoveries................... Upon the earlier of (i) 90 days
after the occurrence of a
Reference Obligor Default Event
and (ii) the Legal Final
Maturity Date of the related
Series, the Issuer will direct
the Swap Counterparty, to the
extent the Swap Counterparty is
legally authorized to do so, to
offer for competitive bid the
right to receive any recovery
with respect to a Defaulted
Reference Credit which exceeds
the Reference Credit Expected
Recovery (such excess, the
"Reference Credit Excess
Recovery"). If the Swap
Counterparty is able to sell
the right to the Reference
Credit Excess Recovery, the
amount of the winning bid will
be paid by the Swap
Counterparty to the Issuer. If
the Swap Counterparty is unable
to sell the right to the
Reference Credit Excess
Recovery, any Reference Credit
Excess Recovery received by the
Swap Counterparty will be
required to be paid by the Swap
Counterparty to the Issuer
under the related Credit Swap.
Prior to the Scheduled Maturity
Date of a Class of Notes whose
Note Balance was reduced as a
result of a related Reference
Obligor Default Event (any such
Class, an "Affected Class"),
Reference Credit Excess
Recoveries with respect to such
Series paid to the Issuer, and
the amount of any winning bids
paid to the Issuer with respect
to such Series paid to the
Issuer, will be reinvested by
the Issuer in the related Repur-
chase Agreement, the Note
Balance of all such Affected
Classes of such Series will be
increased by the amount of such
Reference Credit Excess
Recoveries and winning bids up
to the Initial Note Balance of
each such Affected Class in
order of increasing numeric
designation, and the Contra
Amounts with respect to such
Classes will be reduced by a
corresponding amount. Any
Reference Credit Excess
Recoveries and any winning bids
paid to the Issuer on or after
the Scheduled Maturity Date of
an Affected Class will be
distributed to each such
Affected Class as an Available
Principal Distribution Amount
in the same order. If, however,
the Legal Final Maturity Date
with respect to an Affected
Class has occurred, the amount
of any Reference Credit Excess
Recoveries and any winning bids
will (i) first be used to cover
losses allocated in the same
order to any other Class of
Notes of the relevant Series
and (ii) then be available to
be distributed to the member of
the Issuer. The Swap
Counterparty will agree with
the Issuer to use its ordinary
business practices in seeking
recovery from a Reference
Obligor as if it had not
entered into the related Credit
Swap.
Swap Amount......................... The initial maximum amount
payable by the Issuer under any
Credit Swap will be the
aggregate Reference Credit Face
Amount of the Reference Credits
related to such Credit Swap on
the Closing Date, which will
equal, in the aggregate, $[ ]
for all Series. Such initial
maximum amount will be (i)
reduced by any payments made by
the Issuer under such Credit
Swap and (ii) increased by any
Reference Credit Excess
Recoveries (such amount as so
adjusted from time to time, the
"Swap Amount").
The "Reference Credit Face
Amount" will equal, with
respect to a Reference Credit
denominated in any currency,
the Dollar equivalent of the
outstanding principal amount of
such Reference Credit converted
to a Dollar equivalent at the
spot exchange rate in effect at
the time such Reference Credit
is referenced to the related
Credit Swap (the "Reference
Credit Exchange Rate"). Prior
to a Reference Obligor Default
Event of the related Reference
Credit, the Swap Counterparty
may, from time to time, at its
option change the Reference
Credit Exchange Rate, provided
that the Series Reference Pool
Guidelines are satisfied. After
a Reference Obligor Default
Event with respect to the
related Reference Credit, the
Reference Credit Exchange Rate
will be fixed at the rate last
determined prior to such
Reference Obligor Default
Event.
Swap Counterparty Payment........... Under each Credit Swap, the
Swap Counterparty will be
obligated to pay to the Issuer
on each Deposit Date an amount
(the "Swap Counterparty
Payment") equal to the
aggregate interest payable on
the related Series of Notes
with respect to the related
Payment Date, plus the Series
Expense Amount for such Series
with respect to such Payment
Date, less the interest payable
by the Repo Counterparty under
the related Repurchase
Agreement on such Deposit Date.
Swap Collateral..................... The obligations of the Issuer
to the Swap Counterparty under
each Credit Swap will be
secured by a security interest
granted by the Issuer to the
Swap Counterparty in the
Government Securities and cash
held by the Custodian under the
Custodial Agreement in the
Issuer's Account for the
Repurchase Agreement with
respect to the related Series
of Notes (the "Swap
Collateral"). Such Government
Securities and cash will be
required to be held by the
Custodian on behalf of the Swap
Counterparty as pledgee and
will not be subject to further
transfer or pledge by the Swap
Counterparty. Any Government
Securities or cash added to an
Issuer's Account in accordance
with the Custodial Agreement
will be added to the Swap
Collateral for the
corresponding Credit Swap and
any Government Securities or
cash removed from an Issuer's
Account in accordance with the
Custodial Agreement will be
removed from the Swap
Collateral for the
corresponding Credit Swap. Such
security interest in Government
Securities and cash will
generally be senior to the
security interest granted
therein by the Issuer to the
Trustee pursuant to the
Indenture for the related
Series of Notes.
Payment of Reference Credit
Default Amounts.................... The Swap Counterparty will
provide the Issuer with notice
of any Reference Credit Default
Amount occurring during any
Coverage Period. Such notice
will be given by the Swap
Counterparty to the Issuer not
later than two Business Days
prior to the related Payment
Date (with respect to each
Payment Date, the
"Determination Date"). The
Issuer will be obligated to pay
the Reference Credit Default
Amount to the Swap Counterparty
on such Payment Date. The
Issuer will terminate in whole
or in part the related
Repurchase Agreement to the
extent necessary to make such
payment.
Contra Amounts...................... In the event the Issuer pays
any Reference Credit Default
Amount to the Swap Counterparty
under a Credit Swap, the Note
Balance of the Notes of the
related Series will be reduced
by an amount (a "Contra
Amount") equal to the amount
paid by the Issuer under such
Credit Swap. The Contra Amount
will be allocated to the Notes
of the then outstanding Class
of the related Series with the
highest numeric designation
until the Note Balance of such
Class is reduced to zero and
then among the Notes of the
outstanding Class of such
Series with the next highest
numeric designation in
descending order of numeric
designation beginning with the
Class with the highest numeric
designation through Class II
until the Note Balance of each
such Class is reduced to zero.
The Note Balance for any Class
of Notes will not be reduced to
less than zero.
Early Termination................... In the event of a default by
the Repo Counterparty under any
Repurchase Agreement, the
Issuer will have the right to
sell the related Government
Securities and apply the
proceeds of such sale, together
with any cash in the related
Issuer's Account with the
Custodian and any recoveries
from the Repo Counterparty,
first, to pay any Reference
Credit Default Amounts then
payable by the Issuer under the
related Credit Swap and
thereafter to redeem the Notes
of the related Series. Upon
such payment and redemption,
the related Credit Swap will
terminate without payment of
termination or breakage fees by
either the Issuer or the Swap
Counterparty.
Repurchase Agreements.................... On the Closing Date, the Issuer
will enter into three contracts
(the "Repurchase Agreements")
to purchase Government
Securities with the
[ ] Branch of Credit
Suisse First Boston or with
such other financial
institution or institutions as
may be selected by the Issuer
(collectively, the "Repo
Counterparty") under a Master
Repurchase Agreement dated the
Closing Date between the Issuer
and the Repo Counterparty, as
follows: a one-year repurchase
agreement pledged as Collateral
for the Series 1998-1 Notes,
having a repurchase date
occurring on the Deposit Date
relating to the Scheduled
Maturity Date for such Series
(the "One-Year Repo"); a
three-year repurchase agreement
pledged as Collateral for the
Series 1998-2 Notes, having a
repurchase date occurring on
the Deposit Date relating to
the Scheduled Maturity Date for
such Series (the "Three-Year
Repo"); and a five-year
repurchase agreement pledged as
Collateral for the Series
1998-3 Notes, having a
repurchase date occurring on
the Deposit Date relating to
the Scheduled Maturity Date for
such Series (the "Five-Year
Repo") (each such repurchase
date, a "Repurchase Date").
On the Closing Date (i) the
Government Securities purchased
under the One-Year Repo will be
required to have a market value
(the "Market Value") at least
equal to the Note Balance of
the Series 1998-1 Notes; (ii)
the Government Securities
purchased under the Three-Year
Repo will have a Market Value
at least equal to the Initial
Note Balance (as defined below)
of the Series 1998-2 Notes; and
(iii) the Government Securities
purchased under the Five-Year
Repo will have a Market Value
at least equal to the Initial
Note Balance of the Series
1998-3 Notes.
In consideration for the Repo
Counterparty's sale to the
Issuer of the Government
Securities pursuant to each
Repurchase Agreement, the
Issuer will pay to the Repo
Counterparty on the Closing
Date an amount (the "Purchase
Price") equal to, in the case
of the One-Year Repo, the
Initial Note Balance of the
Series 1998-1 Notes, in the
case of the Three-Year Repo,
the Initial Note Balance of the
Series 1998-2 Notes, and in the
case of the Five-Year Repo, the
Initial Note Balance of the
Series 1998-3 Notes.
Repurchase Commitment............... Under each Repurchase
Agreement, the Repo
Counterparty will agree to
repurchase the related
Government Securities from the
Issuer on the related
Repurchase Date at a price
equal to the Purchase Price of
such Government Securities
increased by the amount of any
cash transferred by the Issuer
to the Repo Counterparty and
decreased by the amount of any
cash transferred by the Repo
Counterparty to the Issuer, in
each case in accordance with
such Repurchase Agreement (as
described below).
Custodial Agreement................. In connection with the
Repurchase Agreements, the
Issuer and the Repo
Counterparty will enter into a
Custodial Agreement dated the
Closing Date with [ ], as
custodian (the "Custodian").
The Custodian will establish
for each Repurchase Agreement a
separate buyer's account to be
held by the Custodian on behalf
of the Issuer (the "Issuer's
Account"), and a separate
seller's account to be held by
the Custodian on behalf of the
Repo Counterparty. The
Custodian will deposit the
Government Securities purchased
by the Issuer pursuant to each
Repurchase Agreement, together
with any cash paid by the Repo
Counterparty to the Issuer in
lieu of additional Government
Securities pursuant to such
Repurchase Agreement, in the
related Issuer's Account. The
Custodian will invest any cash
held in the Issuer's Account in
Permitted Investments.
Interest............................ The Repo Counterparty will pay
the Issuer interest under each
Repurchase Agreement. Such
interest will accrue during
each Interest Accrual Period on
an amount equal to the initial
Purchase Price in respect of
such Repurchase Agreement, less
the amount by which such
Purchase Price has been reduced
by partial Terminations of such
Repurchase Agreement prior to
such Interest Accrual Period to
permit the Issuer to make
payments to the related Series
of Notes under the related
Credit Swap. Such interest will
be payable, and will be
deposited into the Collection
Account for the related Series
of Notes, one Business Day
prior to the next succeeding
Payment Date (each such date, a
"Deposit Date").
Interest on the Repurchase
Agreements will accrue at the
following rates:
One-Year Repo: LIBOR less %
Three-Year Repo: LIBOR less %
Five-Year Repo: LIBOR less %
Mark to Market.................... The Market Value of the
Government Securities subject
to each Repurchase Agreement
will be determined each
Business Day. The Custodian
will determine the Market Value
of the Government Securities
each Business Day not later
than [9:30 a.m.] in accordance
with the Market Value
calculation procedures set
forth in each Repurchase
Agreement. Each Repurchase
Agreement will require that on
each Business Day the related
Government Securities have a
Market Value, together with any
cash and Permitted Investments
on deposit in the related
Issuer's Account (the "Repo
Available Amount"), at least
equal to the sum of (i) the
initial Purchase Price in
respect of such Repurchase
Agreement, less the amount by
which such Purchase Price has
been reduced by partial
Terminations of such Repurchase
Agreement, and (ii) the amount
of interest under such
Repurchase Agreement accrued
through such Business Day (the
"Repo Required Amount"). The
Custodian will advise the Repo
Counterparty and the Issuer of
the Market Value of the
Government Securities subject
to each Repurchase Agreement
not later than [10:30 a.m.] on
each Business Day.
Collateral Deficiencies........... If on any Business Day the Repo
Available Amount with respect
to any Repurchase Agreement is
less than the related Repo
Required Amount (such
deficiency, a "Margin
Deficit"), the Repo
Counterparty will be required,
by [4:30 p.m.] on such Business
Day, to deliver to the
Custodian on behalf of the
Issuer either (x) cash in an
amount equal to the Margin
Deficit or (y) Government
Securities having a Market
Value at least equal to the
Margin Deficit.
Collateral Surpluses............. In the event that the Repo
Available Amount with respect
to any Repurchase Agreement is
greater on any Business Day
than the related Repo Required
Amount (such surplus, a "Margin
Excess"), the Custodian will be
required, by [4:30 p.m.] on
such Business Day, to deliver
to the Repo Counterparty from
the related Issuer's Account
either (x) cash in an amount
equal to the Margin Excess or
(y) Government Securities
having a Market Value equal to
the Margin Excess.
Failure to Cure ................. In the event the Repo
Counterparty fails to deliver
to the Custodian on behalf of
the Issuer cash or Government
Securities in an amount
sufficient to cure any Margin
Deficit on any Repurchase
Agreement by [4:30 p.m.] on any
Business Day on which a Margin
Deficit exists, the Custodian
will be required to use its
best efforts to sell the
Government Securities subject
to such Repurchase Agreement
and any Permitted Investments
in the related Issuer's Account
on the immediately succeeding
Business Day. To the extent
that the proceeds received by
the Custodian in respect of the
sale of such Government
Securities and Permitted
Investments (plus any cash held
in such Issuer's Account) are
less than the Repo Required
Amount, the Repo Counterparty
will be required to pay the
deficiency to the Custodian on
behalf of the Issuer. To the
extent that the proceeds
received by the Custodian in
respect of such sale (plus any
such cash) are greater than the
Repo Required Amount, the
Custodian will be required to
pay the surplus to the Repo
Counterparty.
Termination Right ................ The Issuer will have the right
to terminate, in whole or in
part (a "Termination") a
Repurchase Agreement on any
related Deposit Date to the
extent that the Issuer requires
funds to perform its
obligations on the related
Credit Swap. The Issuer will
notify the Repo Counterparty of
its election to effect a
Termination of a Repurchase
Agreement not later than [2:00
p.m.] on the applicable
Determination Date. Upon any
Termination of a Repurchase
Agreement, the Repo
Counterparty will be obligated
to pay to the Issuer cash in an
amount equal to the amount
payable by the Issuer to the
Swap Counterparty under the
related Credit Swap (the
"Termination Payment"). The
Repo Counterparty will make
payment of each Termination
Payment not later than [2:00
p.m. ] on the applicable
Deposit Date. Upon any payment
by the Repo Counterparty to the
Issuer of a Termination
Payment, the Custodian will,
not later than [4:30 p.m.] on
the applicable Deposit Date,
deliver to the Repo
Counterparty Government
Securities having a Market
Value equal to the Termination
Payment to the extent that such
delivery will not result in a
Margin Deficit. In the event
the Repo Counterparty fails to
pay to the Issuer any
Termination Payment payable
under a Repurchase Agreement,
the Custodian will be required
to use its best efforts on the
Deposit Date to sell Government
Securities having a Market
Value equal to such Termination
Payment. Any payment by the
Repo Counterparty of a
Termination Payment will reduce
by the amount of such
Termination Payment, and any
sale by the Custodian of
Government Securities will
reduce by the amount of the
proceeds of such sale, the
obligation of the Repo
Counterparty under the
applicable Repurchase Agreement
to pay the Purchase Price under
such Repurchase Agreement on
the Repurchase Date.
Early Termination ................ In the event of a default by
the Swap Counterparty under any
Credit Swap, the Issuer will
have the right to terminate
such Credit Swap without
payment of any termination or
brokerage fees by the Issuer or
the Swap Counterparty. Upon
such termination, the related
Repurchase Agreement will
terminate. The proceeds
received by the Issuer upon
termination of such Repurchase
Agreement will be applied,
first, to pay any net Reference
Credit Default Amounts payable
under the related Credit Swap
immediately prior to its
termination and thereafter to
redeem the Notes of the related
Series.
Transfer or Pledge ............... Each Repurchase Agreement will
expressly permit the Issuer to
transfer or pledge the
Government Securities and cash
held by the Custodian in the
related Issuer's Account to the
Swap Counterparty under the
related Credit Swap.
Substitution .................... Each Repurchase Agreement will
expressly permit the Repo
Counterparty to deliver to the
Custodian on behalf of the
Issuer at any time Government
Securities for substitution or
exchange for Government
Securities then subject to such
Repurchase Agreement. Any such
substitution or exchange will
be permitted so long as, after
giving effect to any such
substitution or exchange, no
Margin Deficit would exist.
Assignability .................... Each Repurchase Agreement will
provide that the Issuer may
assign to the Trustee as
security for the Notes of the
related Series and to the Swap
Counterparty as security for
the obligations of the Issuer
under the Credit Swaps all of
its right, title and interest
in and to such Repurchase
Agreement and the related
Government Securities,
Permitted Investments and cash
as security for the Issuer's
obligations in respect of the
Notes.
Income .......................... Subject to the terms of each
Repurchase Agreement, the Repo
Counterparty will be entitled
to all income paid on account
of the related Government
Securities and Permitted
Investments so long as no
Margin Deficit would exist.
Government Securities.................... "Government Securities" will
consist of securities issued or
guaranteed as to principal and
interest by the United States,
or by a person controlled or
supervised by and acting as an
instrumentality of the
Government of the United States
pursuant to authority granted
by the Congress of the United
States.
Permitted Investments.................... "Permitted Investments" will
consist solely of Government
Securities.
Closing Date............................. "Closing Date" means the date
of the issuance of the Notes.
Coverage Period.......................... "Coverage Period" means, with
respect to each Payment Date,
the period commencing on the
first day of the calendar month
during which the previous
Payment Date occurred (or, in
the case of the first Coverage
Period, on the Closing Date)
and ending on the last day of
the calendar month preceding
the month in which such Payment
Date occurs.
Determination Date....................... The "Determination Date" with
respect to each Payment Date
will be two Business Days prior
to such Payment Date.
Payment Date............................. Payment of interest and
principal (to the extent due
and payable) on the Notes will
be made on ________ 15, 1998
and thereafter on the 15th day
of each January, April, July
and October or, if such day is
not a Business Day, the next
succeeding Business Day (each
such date, a "Payment Date").
Payments will be made to
Noteholders of record on (i) in
the case of book-entry Senior
Notes ("Book-Entry Senior
Notes"), the Business Day
preceding such Payment Date
[and (ii) in the case of
certificated Notes
("Certificated Notes"), the
last day of the month preceding
such Payment Date] (each such
day, a "Record Date").
Limited Assets........................... The Senior Notes are recourse
obligations of the Issuer to
the extent of the Collateral
securing such obligations;
accordingly, the Issuer's
ability to pay interest and
principal on a Series of Senior
Notes will be limited to the
extent that the Issuer receives
payments with respect to the
Collateral securing such
payment. In the event that all
of the Collateral securing the
Notes of a Series has been
exhausted, no amounts will
thereafter be due and payable
under the Notes of such Series.
Available Distribution Amount............ The "Available Interest
Distribution Amount" for each
Series, with respect to any
Coverage Period, will be (i)
all payments received in
respect of interest on the
related Repurchase Agreement
and (ii) all Swap Counterparty
Payments received under the
related Credit Swap. For each
Series, with respect to any
Coverage Period, all payments
received on the Eligible
Investments which are
attributable to interest
(including the amount of any
discount) will not be treated
as Available Interest
Distribution Amounts.
The "Available Principal
Distribution Amount" for each
Series, with respect to any
Coverage Period during which a
Principal Payment Event with
respect to such Series has
occurred, will be all payments
received in respect of
principal on the related
Repurchase Agreement and any
Permitted Investments relating
to that Series and all payments
received with respect to
Eligible Investments relating
to that Series which are
attributable to principal.
The Available Interest
Distribution Amount for each
Series will be used to pay
interest on the Notes of such
Series and the Series Expense
Amount, and the Available
Principal Distribution Amount
for each Series will be used to
pay principal on the Notes of
each such Series. For each
Series, the Available Interest
Distribution Amount and the
Available Principal
Distribution Amount (together,
the "Available Distribution
Amount") will be deposited in
the related Collection Account
maintained by the Trustee under
the Indenture (collectively,
the "Collection Accounts").
Funds on deposit in the
Collection Accounts will be
invested and reinvested by the
Trustee in accordance with the
Indenture in Eligible
Investments so long as such
funds are not needed for making
required payments to any Paying
Agent.
Interest................................. Interest on the Notes is
payable at an annual rate equal
to three-month LIBOR as
determined by the Calculation
Agent as described herein
("LIBOR"), plus, in each case,
the Applicable Margin (the
"Interest Rate"). Interest on
the Notes will be computed on
the basis of a 360-day year and
the actual number of days
elapsed during the applicable
Interest Accrual Period. The
Luxembourg Stock Exchange will
be advised of any change in the
criteria used to determine the
applicable rate.
The "Applicable Margin" will be
as follows:
<TABLE>
<CAPTION>
Series Notes Applicable Margin
--------- ---------- --------------------------
<S> <C> <C>
1998-1 Class I............. ___% per annum;
Class II............ ___% per annum;
Class III........... ___% per annum;
Class IV............ ___% per annum;
Class V............. ___% per annum;
1998-2 Class I............. ___% per annum;
Class II............ ___% per annum;
Class III........... ___% per annum;
Class IV............ ___% per annum;
1998-3 Class I............. ___% per annum;
Class II............ ___% per annum;
Class III........... ___% per annum; and
Class IV............ ___% per annum.
</TABLE>
Distribution of Interest................. On each Payment Date, with
respect to each Series, the
Available Interest Distribution
Amount will be distributed as
follows: (i) first, an amount
equal to the Series Expense
Amount, to the Issuer; and (ii)
second, to each Class of Notes
in order of increasing numeric
designation, an amount equal
to the related Interest
Distribution Amount for that
Series.
"Interest Distribution Amount"
means, for any Payment Date,
for any Class of Notes, the
interest accrued on such Class
during the related Interest
Accrual Period at the
applicable Interest Rate on the
Note Balance of such Class
immediately prior to that
Payment Date.
"Interest Accrual Period" means
(i) with respect to the initial
Payment Date, the period
commencing on the Closing Date
and ending on the close of
business on ______, 1998, and
(ii) with respect to each Pay-
ment Date thereafter, the
period commencing on the
fifteenth day of the month in
which the preceding Payment
Date occurred and ending at the
close of business on the
fourteenth day of the month in
which such Payment Date occurs.
Distribution of Principal................ Upon the occurrence of (i) an
Event of Default, (ii) an
Optional Tax Redemption or
(iii) the Scheduled Maturity
Date for any Class of Notes
(each such event, a "Principal
Payment Event"), an amount
equal to the Note Balance of
the Notes with respect to which
such Principal Payment Event
relates is required to be paid
on such Notes. On any Payment
Date following the occurrence
of a Principal Payment Event
with respect to a Series of
Notes, the aggregate amount of
principal due to such Series
(the "Principal Distribution
Amount") will be distributed to
the Noteholders of each related
Class in order of increasing
numeric designation to the
extent of the Available
Principal Distribution Amount,
with such Available Principal
Distribution Amount being
distributed to Classes of Notes
within such Series with
identical numeric designations
pro rata based on their
respective Note Balances.
No principal will be
distributable to any Class of a
Series prior to the date on
which a Principal Payment Event
with respect to such Series has
occurred.
Paying Agents............................ _____________, __________
Luxembourg S.A. and any other
financial institution
appointed as a Paying Agent by
the Issuer.
Scheduled Maturity Date.................. Unless previously paid, or
purchased and cancelled by the
Issuer, (i) the Series 1998-1
Notes are expected to mature on
the ______ 1999 Payment Date,
(ii) the Series 1998-2 Notes
are expected to mature on the
______ 2001 Payment Date and
(iii) the Series 1998-3 Notes
are expected to mature on the
______ 2003 Payment Date (with
respect to each Class of Notes,
the "Scheduled Maturity Date").
Legal Final Maturity Date................ No further payments of
principal or interest will be
made with respect to (i) the
Series 1998-1 Class I Notes
after _______, 1999, (ii) the
Series 1998-1 Notes (other than
the Series 1998-1 Class I
Notes) after the ______ 2002
Payment Date, (iii) the Series
1998-2 Notes after the ______
2004 Payment Date and (iv) the
Series 1998-3 Notes after the
______ 2006 Payment Date (with
respect to each Class of Notes,
the "Legal Final Maturity
Date").
Allocation of Contra Amounts............. The "Contra Amount" with
respect to a Series at any time
is the aggregate net amount
paid by the Issuer under the
related Credit Swap. Any
increase in the Contra Amount
during any Coverage Period will
be allocated among the Notes of
the then outstanding Class with
the highest numeric designation
until the Note Balance of such
Class is reduced to zero and
then among the Notes of the
outstanding Class with the next
highest numeric designation in
descending order of numeric
designation beginning with the
Class with the highest numeric
designation through Class II
until the Note Balance of each
such Class is reduced to zero;
provided that the Note Balance
for any Class of Notes will not
be reduced to less than zero.
Any decrease in the Contra
Amount during any Coverage
Period will be allocated among
the Notes of the then
outstanding Class with the
lowest numeric designation
until the Contra Amount
allocated to such Class is
reduced to zero and then among
the Notes of the outstanding
Class with the next lowest
numeric designation in
ascending order of numeric
designation beginning with
Class II through the Class with
the highest numeric designation
until the Contra Amount
allocated to each such Class is
reduced to zero.
Note Balance............................. The "Initial Note Balance" of
any Class of Notes is the
initial principal amount of
such Class as of the Closing
Date. The "Note Balance" of any
Class of Notes is an amount
equal to the Initial Note
Balance of such Class of Notes,
minus the sum of (i) the
aggregate amount of principal
payments made to Noteholders of
such Class of Notes on or prior
to such date and (ii) any
Contra Amounts allocated to
such Class of Notes on or prior
to such date, plus the
aggregate amount of any
Reference Credit Excess
Recoveries allocated to such
Class. The "Series Initial Note
Balance" of a Series is the
aggregate of the Initial Note
Balances of each Class of Notes
of such Series. The "Series
Note Balance" of the Notes is
the aggregate of the Note
Balances of each Class of Notes
of such Series. In no event
will the Series Note Balance
exceed the Series Initial Note
Balance.
Credit Support........................... The credit support for the
Senior Notes of a Series is the
subordination of the Classes of
Notes of such Series with
higher numeric designations.
Such subordination is effected
by the allocation of Contra
Amounts as described above and
by the preferential application
of the Available Distribution
Amounts to the Classes of Notes
of a Series with a lower
numeric designation relative to
the Senior Notes of such Series
to the extent described above.
Reference Pool Amortization Events....... Upon the occurrence of either
of the events listed below
(each, an "Reference Pool
Amortization Event") relating
to any Series of Notes, the
Swap Counterparty will not be
permitted to add any additional
Reference Credits to the
related Reference Pool and the
Swap Amount of the related
Credit Swap will be reduced as
and to the extent that the
Reference Credit Face Amount of
each Reference Credit in the
related Reference Pool is
reduced through payments of
principal on the Reference
Credits.
A "Series Cumulative Loss
Amortization Event" will occur
on the first Payment Date on
which the aggregate outstanding
Contra Amount as of the related
Determination Date exceeds (i)
with respect to Series 1998-1,
___% of the Series Initial Note
Balance for Series 1998-1, (ii)
with respect to Series 1998-2,
___% of the Series Initial Note
Balance for Series 1998-2 or
(iii) with respect to Series
1998-3, ___% of the Series
Initial Note Balance for Series
1998-3.
A "Series Pool Amortization
Event" will occur on the
Payment Date immediately
following a Coverage Period in
which (i) the Reference Credits
do not meet the Series
Reference Pool Guidelines and
(ii) such failure has been
unremedied for a period of the
greater of (a) thirty days and
(b) the number of days from the
initial failure to meet the
Series Reference Pool
Guidelines to and including the
next Payment Date.
Events of Default........................ Each of the following events
constitutes an "Event of
Default":
(i) the Issuer defaults in
the payment of any
interest or principal
due in respect of any
Class of Notes and
such default continues
for a period of five
Business Days;
(ii) the Issuer fails to
perform or observe any
of its other material
obligations under the
Notes or the Indenture
and such failure
continues for a period
of thirty days (or
such longer period as
the Trustee may
permit) following the
service of notice of
such failure to
perform to the Issuer;
(iii) the Issuer becomes
subject to an
insolvency event;
(iv) the Repo Counterparty
defaults in the
payment of any amount
due in respect of the
Repurchase Agreements
and such default
continues for a period
of five Business Days;
(v) the Swap Counterparty
defaults in the
payment of any amount
due in respect of any
Credit Swap and such
default continues for
a period of five
Business Days;
(vi) the Issuer is required
to register as an
"investment company"
under the United
States Investment
Company Act of 1940,
as amended (the
"Investment Company
Act"); or
(vii) the entry against the
Issuer by one or more
courts of competent
jurisdiction of one or
more final judgments
or orders (not subject
to appeal) in an
aggregate amount in
excess of $1,000,000
(after giving effect
to insurance, if any,
available with respect
thereto) which
judgment(s) or
order(s) remain
unstayed or
undischarged for a
period of 30 days
after the date on
which the right to
appeal has expired.
In the case of any event
described in the preceding
paragraph, other than clause
(ii), an Event of Default with
respect to the Series to which
such Event of Default applies
will be deemed to have occurred
without any notice or other
action on the part of the
Trustee or the Noteholders
immediately upon the occurrence
of such event. In the case of
any event described in clause
(ii) above, an Event of Default
with respect to the Series to
which such Event of Default
applies will be deemed to have
occurred only if, after any
applicable grace period, the
Trustee at its discretion or if
so requested in writing by the
holders of at least a majority
of the aggregate Note Balance
of the Senior Notes of such
Series or if so directed by a
resolution of such Noteholders
adopted by a two-thirds
majority of the Note Balance of
such Notes declares that an
Event of Default has occurred
with respect to all Notes of
such Series. On the date on
which an Event of Default with
respect to any Series is deemed
to have occurred, all Notes
with respect to such Series
will be due and payable at
their Note Balance and any
accrued and unpaid interest
thereon.
Optional Tax Redemption.................. The Issuer may, with 30 days'
prior written notice, on any
Payment Date redeem all (but
not part) of the Notes at the
aggregate principal amount
thereof plus all accrued and
unpaid interest thereon in the
event (each such event, an
"Optional Tax Redemption") of:
(a) certain tax changes
affecting the Notes,
the Swap Counterparty
Payments or payments
on the Repurchase
Agreements; or
(b) certain tax changes
affecting the Issuer
if it would not be
entitled to relief for
any amount of tax
which it is obligated
to pay.
Form and Denomination.................... The Senior Notes will be issued
in the form of beneficial
interests in one or more global
notes (the "Global Senior
Notes"), deposited with the
Trustee as custodian for DTC
(in such capacity, the
"Custodian") or any successor,
pursuant to a depositary
agreement (the "Depositary
Agreement") among the Issuer,
the Depositary and the Trustee.
The Senior Notes will be
available in the minimum
denomination of $1,000 each and
in multiples of $1.00 in excess
thereof.
Covenants................................ The Issuer will be subject to
covenants including a negative
pledge and a covenant not to
engage in any activity other
than entry into the Credit
Swaps and the Repurchase
Agreements, the exercise of its
rights in respect of the
Collateral, the exercise of
related rights and powers and
other activities referred to
herein or reasonably incidental
thereto.
Administration of the
Reference Obligations.................... The Swap Counterparty will
remain the legal and beneficial
owner of the Reference Credits
and will covenant to the Issuer
and the Trustee that the Swap
Counterparty will administer
each Reference Credit in
accordance with its ordinary
business practices as if it had
not entered in the Credit
Swaps. The Swap Counterparty
may, at its option, sell,
assign, participate or transfer
all or any portion of its
rights and obligations under a
Reference Credit.
Ratings.................................. It is a condition to issuance
of the Series 1998-1 Notes, the
Series 1998-2 Notes and the
Series 1998-3 Notes that the
Notes be rated as follows by
Fitch Investors Service, L.P.
("Fitch"), Moody's Investors
Service ("Moody's") and
Standard & Poor's Ratings
Services, a division of The
McGraw-Hill Companies, Inc.
("S&P," and together with Fitch
and Moody's, the "Rating
Agencies"):
<TABLE>
<CAPTION>
Ratings
Series Notes Fitch Moody's S&P
--------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
1998-1 Class I............. [ ] [ ] [ ]
Class II............ [ ] [ ] [ ]
Class III........... [ ] [ ] [ ]
Class IV............ [ ] [ ] [ ]
1998-2 Class I............. [ ] [ ] [ ]
Class II............ [ ] [ ] [ ]
Class III........... [ ] [ ] [ ]
1998-3 Class I............. [ ] [ ] [ ]
Class II............ [ ] [ ] [ ]
Class III........... [ ] [ ] [ ]
</TABLE>
No rating has been requested
for the Series 1998-1 Class V
Notes, the Series 1998-2 Class
IV Notes or the Series 1998-3
Class IV Notes and it is not
expected that such Notes will
be rated.
Legal Investment Consideration........... The Series 1998-1 Class I Notes
will be eligible securities for
purchase by money market funds
under Rule 2a-7 under the
Investment Company Act of 1940,
as amended.
Tax Status............................... Upon the issuance of the Senior
Notes, Skadden, Arps, Slate,
Meagher & Flom LLP, special tax
counsel to the Issuer, will
deliver an opinion, based on
the assumptions and
representations referred to
therein to the effect that, for
United States Federal income
tax purposes the Senior Notes
will be characterized as
indebtedness. Each holder, by
the acceptance of a Senior
Note, and each purchaser, by
its acceptance of a beneficial
interest in a Senior Note, will
agree to treat such Note as
indebtedness for all United
States Federal, state and local
income tax purposes.
ERISA Status............................. Any person that proposes to
purchase Senior Notes on behalf
or with the "plan assets" of
any employee benefit plan or
other retirement arrangement
subject to Title I of the
Employee Retirement Income
Security Act of 1974, as
amended ("ERISA") or Section
4975 of the Internal Revenue
Code of 1986, as amended (the
"Code") will be deemed to
represent and warrant that one
or more statutory or
administrative exemptions from
the prohibited transaction
rules of ERISA and Section 4975
of the Code applies, such that
the purchase and holding of
such Senior Notes by, on behalf
of, or with "plan assets" of
such plan does not and will not
constitute or result in a
"non-exempt prohibited
transaction" under ERISA or
Section 4975 of the Code. Such
exemptions may apply to certain
transactions involving
insurance company general
accounts, insurance company
separate accounts, and bank
collective investment funds,
and to certain transactions
determined on behalf of a plan
by a "qualified professional
assets manager" ("QPAM") or an
"in-house asset manager"
("INHAM"). See "ERISA
Considerations." Purchasers of
the Notes will be deemed to
have made certain
representations set forth
therein.
Operating Convention..................... Calculations made on or as of a
specified day will, unless the
context requires otherwise, be
made as of the close of
business on the immediately
preceding Business Day.
RISK FACTORS
An investment in the Notes involves certain risks. Prospective
investors should carefully consider the following factors, in addition to
the matters set forth elsewhere in this Prospectus, prior to investing in
the Notes.
Credit Exposure to the Reference Obligors. As described in "The Credit
Swaps," the obligation of the Issuer to make payments to the Swap
Counterparty under the Credit Swaps is related to the credit of a number of
Reference Obligors on specific Reference Credits. The Issuer will not know
the identities of the Reference Obligors, and the identities of the
Reference Obligors will not be disclosed to the Noteholders. Following the
occurrence of a Reference Obligor Default Event, the Issuer will be
obligated to pay to the Swap Counterparty under the Credit Swap an amount
equal to the Reference Credit Default Amount with respect to any Defaulted
Reference Credit in the Reference Pool. Because the amount the Issuer is
obligated to pay to the Swap Counterparty under a Credit Swap is calculated
as described above, the Issuer will be exposed to the credit of the
Reference Obligors. In addition, in the event the Issuer pays any amount to
the Swap Counterparty under a Credit Swap, the Note Balance of the Notes
will be reduced by an amount (a "Contra Amount") equal to the amount paid
by the Issuer allocated among the Notes of the then outstanding Class with
the highest numeric designation until the Note Balance of such Class is
reduced to zero and then among the Notes of the outstanding Class with the
next highest numeric designation in descending order of numeric designation
beginning with the Class with the highest numeric designation through Class
II until the Note Balance of each such Class is reduced to zero.
No Legal or Beneficial Interest in the Reference Credits. As a
Counterparty under the Swap, the Issuer will have a contractual
relationship only with the Swap Counterparty and not with the Reference
Obligors. Consequently, the Issuer will not have any interest in any
Reference Credits, and legal and equitable title to the Reference Credits
will remain with the Swap Counterparty. The Issuer and the Trustee will
have rights solely against the Swap Counterparty with respect to the Credit
Swaps and will have no rights against the Reference Obligors. None of the
Issuer, the Trustee, the Noteholders or any other entity have any rights to
acquire from the Swap Counterparty (or to require the Swap Counterparty to
transfer, assign or otherwise dispose of) any interest in the Reference
Credits. Moreover, the Swap Counterparty will not grant the Issuer or the
Trustee any security interest in any such Reference Credits.
Reliance on Creditworthiness of CSFB. The ability of the Issuer to
meet its obligations under the Notes will in part be dependent on the
receipt by it of payments from CSFB as Repo Counterparty under the
Repurchase Agreements with respect to its obligations to pay interest under
the Repurchase Agreements and to transfer additional Government Securities
or cash to the Custodian to make up any Margin Deficit, and as a Swap
Counterparty under the Credit Swaps with respect to its obligation to pay
the quarterly Swap Counterparty Payment to the Issuer. Those obligations of
CSFB under the Repurchase Agreements and under the Credit Swaps are
unsecured obligations of CSFB. Consequently, the Issuer is relying not only
on the creditworthiness of the Reference Obligors in respect of the
Reference Credits, but also on the creditworthiness of CSFB in respect of
the performance of its obligations to make payments to the Issuer under the
Repurchase Agreements and under the Credit Swaps. CSFB has no obligation to
transfer any of its rights and obligations under the Reference Credits or
any other transaction document in the event of a revision or withdrawal of
its any rating on its unsecured senior debt.
Continued Relationship of CSFB with Reference Obligors under the
Reference Credits. The Issuer has no legal or beneficial ownership interest
in the Reference Credits, and CSFB will not be, and will not be deemed to
be acting as, the agent or trustee of the Issuer in connection with the
exercise of, or the failure to exercise, any of the rights or powers of
CSFB arising under or in connection with its holding of any such Reference
Credits. CSFB and its affiliates may accept deposits from, make loans or
otherwise extend credit to, and generally engage in any kind of commercial
or investment banking or other business transactions with, any Reference
Obligor and, as lender of record for each Reference Credit, may act with
respect to such transactions in the same manner as if it had not entered
into the Credit Swaps and without regard to whether any such action might
have an adverse effect on a Reference Obligor, a Reference Credit, the
Issuer or the Noteholders. CSFB and its affiliates may have entered into
and may from time to time enter into business transactions with Reference
Obligors and may or may not hold obligations of or have any business
relationships with any Reference Obligors. These relationships may give
rise to interests that are different from or adverse to the interests of
the Noteholders.
Considerations of the Interests of the Issuer by CSFB. CSFB will
exercise or enforce or refrain from exercising or enforcing any or all of
its rights and powers arising under or in connection with a Reference
Obligation or agree to or refuse amendments or waivers of the terms
applicable to any such Reference Obligation in accordance with its ordinary
business practices as if it had not entered into the Credit Swaps. As a
result, the Issuer is relying on the ordinary business practices of CSFB
with respect to the administration of the Reference Obligations. Neither
the Issuer nor the Trustee has any rights or powers to compel CSFB to take
or refrain from taking any action other than in accordance with its
ordinary business practices as if it had not entered into the Credit Swaps.
The Issuer has agreed with CSFB that the interests of the Issuer will be
deemed to be adequately protected if CSFB acts or refrains from acting in
accordance with its ordinary business practices as if it had not entered
into the Credit Swaps, and CSFB will be entitled to undertake or refrain
from undertaking actions referred to above with respect to the Reference
Obligations without further regard to the interests of the Issuer.
Limited Provision of Information from CSFB. CSFB is not required to
provide the Issuer, the Trustee or any other person with information
relating to the identity of a Reference Obligor or other information that
would lead to the identification of a Reference Obligor or with copies of
financial and other information sent to it pursuant to any Reference Credit
or notify the Issuer, the Trustee or any other person of the contents of
any notice received by it pursuant to any Reference Credit. In addition,
CSFB will not have any obligation to keep the Issuer, the Trustee or any
other person informed as to matters arising in relation to the Reference
Credits except with respect to certain information provided pursuant to the
related Credit Swap. None of the Issuer, its agents or the Trustee will
have any right to inspect any records relating to the Reference Credits
held by CSFB or its delegates, and CSFB will be under no obligation to
disclose any further information or evidence regarding the existence or
terms of any Reference Credit or any matters arising in relation thereto or
otherwise regarding a Reference Credit, guarantor or other person unless
specifically referred to in the operative documents relating to the
transactions described herein.
Limited Assets. The Issuer has limited assets and, accordingly, the
Issuer's ability to pay interest and principal on the Notes of a Series
will be limited to the extent that the Issuer receives payments under the
related Repurchase Agreement and under the related Credit Swap. In the
event that all of the assets of the Issuer securing a Series have been
exhausted, no amounts will thereafter be due and payable under such Series.
None of the Series offered hereby will have any right to receive
distributions from the for any other Series.
Book-Entry Interests. Holders of Book-Entry Senior Notes will not be
considered Noteholders under the Indenture. After payment to the
Depositary, the Issuer will have no responsibility or liability for the
payment of interest, principal or other amounts to DTC or to holders of
Book-Entry Senior Notes. The Depositary or its nominee will be the sole
Noteholder for Book-Entry Senior Notes, and, therefore, each person owning
Book-Entry Senior Notes must rely on the procedures of the Depositary and
DTC and, if such person is not a participant in DTC, on the procedures of
the participant through which such person owns its interest (including, if
applicable, Euroclear or Cedel Bank), to exercise any rights of a
Noteholder under either Indenture.
Limited Liquidity of the Senior Notes. There is currently no market
for the Senior Notes. While the Underwriters intend to make a market in the
Senior Notes they are under no obligation to do so. There can be no
assurance that a secondary market for any of the Senior Notes will develop,
or if a secondary market does develop, that it will provide the holders of
the Senior Notes with liquidity or that it will continue for the life of
such Notes. Consequently, any purchaser of the Senior Notes must be
prepared to hold such Notes for an indefinite period of time or until final
redemption of Senior Notes.
DESCRIPTION OF THE NOTES
The Senior Notes, the Mezzanine Notes and the Subordinated Notes will
all be issued pursuant to the Indenture. The following summary describes
certain provisions of the Notes. This summary does not purport to be
complete and is subject to, and qualified in its entirety by reference to,
the provisions of the Indenture. Copies of the Indenture may be obtained by
prospective purchasers upon request in writing to the Trustee at
____________, Corporate Trust Department, ___________, New York, New York
______, Attention: Structured Finance Group. The Indenture will be
available for inspection at the office of the Paying Agent in Luxembourg.
Only the Senior Notes are being offered hereby.
Status and Security
The Notes will be recourse debt obligations of the Issuer to the
extent of the Collateral securing such obligations as described below. In
the event that all assets of the Issuer have been exhausted, no amounts
will thereafter be due and payable under the Notes. With respect to each
Series, each Class of Notes will be senior in right of payment of interest
and principal to each Class of Notes of such Series with a higher numeric
designation. The Issuer's ability to pay interest and principal on the
Notes of any Series, as direct recourse obligations of the Issuer, is
limited to the extent that funds are available from the proceeds of the
Collateral relating to such Series of Notes and otherwise as described
herein. Accordingly, the Noteholders will be exposed to the credit risk of
the Reference Obligors to the full extent of their investment in the Notes
insofar as credit losses with respect to the Reference Obligors are not
absorbed by the allocation of Contra Amounts to Notes with higher numeric
designations.
The credit support for the Senior Notes is the subordination of the
Classes of Notes of such Series with higher numeric designations. Such
subordination is effected by the allocation of Contra Amounts as described
herein and by the preferential application of the Available Distribution
Amounts to the Class of Notes with a lower numeric designation relative to
the Classes of Notes with higher numeric designations, to the extent
described herein.
Under the terms of the Indenture, in order to secure the Issuer's
obligations under the Indenture with respect to each Series of Notes, the
Issuer will grant to the Trustee, on behalf of the Noteholders of the Notes
of such Series, a security interest in (a) all of the Issuer's rights under
the related Repurchase Agreement, together with all payments thereon or
with respect thereto, (b) any Permitted Investments or cash held by the
Custodian in the Issuer's Account maintained under the Custodial Agreement
with respect to such Repurchase Agreement, (c) all of the Issuer's rights
under the related Credit Swap, (d) all of the Issuer's benefits (but none
of its liabilities) under the Administration Agreement, (e) all of the
Issuer's rights in the Collection Account maintained by the Trustee with
respect to such Series under the Indenture and the Eligible Investments
held by the Trustee in such Collection Account, together with all payments
thereon or with respect thereto, (f) all of the Issuer's rights in certain
other bank accounts of the Issuer, (g) any sums held by any Paying Agent to
meet the payments in respect of the Notes of such Series, (h) all of the
Issuer's rights under any of the transaction documents not specifically
described above, and (i) all proceeds of any of the foregoing, in each case
relating to such Series (collectively, the "Collateral"). Such security
interest in the portion of the Collateral consisting of Government
Securities and cash will be subject and subordinate to the security
interest in the Swap Collateral granted by the Issuer to the Swap
Counterparty pursuant to the related Credit Swap as security for the
Issuer's obligations under such Credit Swap.
All payments in respect of each Series of Notes and the payment of any
expenses will be made solely from the proceeds of the Collateral relating
to such Series. The amount that will be available for payments on the Notes
of a Series and payment of the related Series Expense Amount on any Payment
Date will be the amount of payments and collections received in respect of
the Collateral of such Series (including the proceeds of the sale of any
Collateral) during the related Coverage Period.
"Business Day" means any day other than (i) Saturday or Sunday or (ii)
a day on which commercial banks in New York, New York or, for final payment
of principal, in the relevant place of presentation, or the city in which
either Trustee is located, are authorized or required by applicable law,
regulation or executive order to close.
Legal Investment Consideration
The Series 1998-1 Class I Notes will be eligible securities for
purchase by money market funds under Rule 2a-7 under the Investment Company
Act of 1940, as amended.
Interest
The Notes will bear interest from the Closing Date. Such interest will
be payable on each Payment Date, commencing ________ 15, 1998, quarterly in
arrears on the 15th day of each January, April, July and October or, if
such day is not a Business Day, the next succeeding Business Day. The
Interest Accrual Period means (i) with respect to the initial Payment Date,
the period commencing on the Closing Date and ending on the close of
business on ----- 14, 1998, and (ii) with respect to each Payment Date
thereafter, the period commencing on the fifteenth day of the month in
which the preceding Payment Date occurred and ending at the close of
business on the fourteenth day of the month in which such Payment Date
occurs. Interest on the Notes will be calculated on the basis of a 360-day
year and the actual number of days elapsed during the applicable Interest
Accrual Period.
On each Payment Date, the Available Interest Distribution Amount with
respect to each Series will be distributed as follows: (i) first, an amount
equal to the Series Expense Amount, to the Issuer; and (ii) second, to each
Class of Notes in order of increasing numeric designation, an amount equal
to the related Interest Distribution Amount, with the Available Interest
Distribution Amount being distributed to Classes of Notes with identical
numeric designations pro rata based on their respective Note Balances.
Available Distribution Amount
For each Series, with respect to any Coverage Period, all payments
received in respect of interest on the related Repurchase Agreement and
payments by the Swap Counterparty of Swap Counterparty Payments on the
related Credit Swap will constitute the "Available Interest Distribution
Amount" for such Series and Coverage Period. All payments received with
respect to Eligible Investments which are attributable to interest
(including the amount of any discount) will not be treated as "Available
Interest Distribution Amounts."
For each Series, with respect to any Coverage Period during which a
Principal Payment Event with respect to such Series has occurred, all
payments received in respect of principal on the related Repurchase
Agreement and any Permitted Investments relating to that Series and all
payments received with respect to Eligible Investments relating to that
Series which are attributable to principal will constitute the "Available
Principal Distribution Amount" for such Series and Coverage Period.
The Available Interest Distribution Amount for each Series will be
used to pay interest on the Notes of such Series and the Series Expense
Amount, and the Available Principal Distribution Amount will be used to pay
principal on the Notes for each such Series. For each Series, the Available
Interest Distribution Amount and the Available Principal Distribution
Amount (together, the "Available Distribution Amount") will be deposited in
the related Collection Account maintained by the Trustee under the
Indenture (collectively, the "Collection Accounts").
The Trustee will, in accordance with the Indenture, invest and
reinvest, on behalf of the Issuer, collected funds on deposit in the
Collection Accounts in Eligible Investments so long as such funds are not
needed for making required payments to any Paying Agent.
"Eligible Investments" means (i) obligations fully guaranteed by the
United States of America, (ii) demand deposits, time deposits or
certificates of deposit of depository institutions or trust companies
incorporated under the laws of the United States of America or any state
thereof and subject to supervision and examination by federal or state
banking or depository institution authorities; provided the short-term debt
rating of such depository institution or trust Company will be at least
"A-1" by S&P and at least "P-1" by Moody's, (iii) commercial paper having,
at the time of the Issuer's investment or a contractual commitment to
invest, a rating of at least "A-1" by S&P and at least "P-1" by Moody's,
(iv) demand deposits, time deposits or certificates of deposit which are
fully insured by the Federal Deposit Insurance Corporation having, at the
time of the Issuer's investment therein, a rating of at least "A-1" by S&P
and at least "P-1" by Moody's, (v) bankers' acceptances issued by any
depository institution or trust Company described in (ii) above, (vi) money
market funds having, at the time of the Issuer's investment therein, a
rating of at least "AAAm" by S&P and at least "Aaa" by Moody's, (vii) time
deposits, other than as referred to in (iv) above, with an entity, the
commercial paper of such entity having a credit rating of at least "A-1" by
S&P and at least "P-1" by Moody's, and (viii) any other investment if the
Rating Agency Condition has been satisfied.
"Series Expense Amount" means for each Series, with respect to each
Payment Date, the ordinary administrative expenses of the Issuer, other
than the interest on the Notes, which accrued during the related Coverage
Period, allocable to each such Series on a pro rata basis based on the
respective Note Balances. The aggregate Series Expense Amount for all
Series will not exceed [$200,000] per annum.
The Interest Rate payable on the Notes with respect to each Interest
Accrual Period will be an annual rate equal to the London interbank offered
rate for three-month Eurodollar deposits ("LIBOR") plus the Applicable
Margin for such Class of Notes. The Luxembourg Stock Exchange will be
informed of any change in reference criteria used to calculate the Notes.
The Issuer has initially appointed ___________ in London as calculation
agent (the "Calculation Agent") for purposes of determining LIBOR for each
Interest Accrual Period. On the second London Banking Day preceding the
first day of each Interest Accrual Period (each, a "LIBOR Determination
Date"), the Calculation Agent will determine LIBOR in accordance with the
following provisions:
LIBOR for any Interest Accrual Period will equal the rate, as
determined by the Calculation Agent, for Dollar deposits for the
relevant term which appears on the Telerate Page 3750 (as defined in
the 1991 ISDA Definitions published by the International Swaps and
Derivatives Association, Inc., or such other page as may replace such
Telerate Page 3750) as of 11:00 a.m. (London time) on the applicable
LIBOR Determination Date, as reported by Bloomberg Financial Markets
Commodities News. If, on any LIBOR Determination Date, such rate does
not appear on the Telerate Page 3750, the Calculation Agent will
determine the arithmetic mean of the offered quotations of the
Reference Banks to prime banks in the London interbank market for
Eurodollar deposits for the term of such Interest Accrual Period
(except that in the case where such Interest Accrual Period will
commence on a day that is not a Business Day, for the relevant term
commencing on the next following Business Day), by reference to
requests for quotations as of approximately 11:00 a.m. (London time)
on such LIBOR Determination Date made by the Calculation Agent to the
Reference Banks. If, on any LIBOR Determination Date, at least two of
the Reference Banks provide such quotations, LIBOR will equal such
arithmetic mean. If, on any LIBOR Determination Date, only one or none
of the Reference Banks provide such quotations, LIBOR will be deemed
to be the arithmetic mean of the offered quotations that the leading
banks in New York City selected by the Calculation Agent (after
consultation with the Issuer) are quoting as of approximately 11:00
a.m. (New York City time) on the first day of the Interest Accrual
Period for Dollar deposits for the term of such Interest Accrual
Period (except that in the case where such Interest Accrual Period
will commence on a day that is not a Business Day, for the relevant
term commencing on the next following Business Day), to leading banks
in the London interbank market.
For the purposes of the preceding paragraph, all percentages resulting
from such calculations will be rounded, if necessary, to the nearest one
thirty-second of a percentage point and, for purposes of the last sentence
of the above paragraph, all percentages resulting from such calculations
will be rounded, if necessary, to the nearest one hundred-thousandth of a
percentage point.
"London Banking Day" means any day on which commercial banks are open
for business and dealings in foreign exchange and foreign currency deposits
are transacted in the London interbank market.
"Reference Banks" means four major banks in the London interbank
market selected by the Calculation Agent. The Calculation Agent will have
no liability for the selection of Reference Banks.
As soon as practicable after 11:00 a.m. (London time) on each LIBOR
Determination Date, but in no event later than 4:30 p.m. (London time) on
such day, the Calculation Agent will cause the Interest Rate for each Class
of Notes for the next Interest Accrual Period and the amount of interest
for such Interest Accrual Period payable in respect of each [$100,000]
principal amount of each Class of Notes on the related Payment Date to be
given to the Issuer and the Trustee. The Calculation Agent will also
specify to the Issuer the quotations upon which the Interest Rates are
based, and in any event the Calculation Agent will notify the Issuer before
4:30 p.m. (London time) on each LIBOR Determination Date that either: (i)
it has determined or is in the process of determining such rates and
amounts or (ii) it has not determined and is not in the process of
determining such rates and amounts, together with its reasons therefor.
The Issuer agrees that for so long as any of the Notes remain
outstanding there will at all times be a Calculation Agent which will be a
leading bank engaged in transactions in Eurodeposits in the international
Euromarket, will not control, be controlled by or under common control with
the Issuer or its affiliates, and will have an established place of
business in London. The Calculation Agent may be removed by the Issuer at
any time. If the Calculation Agent is unable or unwilling to act as such or
is removed by the Issuer, or if the Calculation Agent fails to determine
either of the rates or amounts for any Interest Accrual Period, the Issuer
will promptly appoint the London office of another leading bank meeting the
qualifications set forth in the Indenture, to act as successor Calculation
Agent. The Calculation Agent may not resign its duties without a successor
having been duly appointed.
The Calculation Agent will cause the rates, amounts and Payment Date
to be communicated to Euroclear and Cedel Bank by the Business Day
immediately following each LIBOR Determination Date. The determination of
the rates and the amounts by the Calculation Agent will (in the absence of
manifest error) be final and binding upon all parties.
Principal
Upon the occurrence of (i) an Event of Default, (ii) an Optional Tax
Redemption or (iii) the Scheduled Maturity Date for any Class of Notes
(each such event, a "Principal Payment Event"), an amount equal to the Note
Balance of the Notes with respect to which such Principal Payment Event
relates is required to be paid on such Notes. On the Payment Date following
the occurrence of a Principal Payment Event with respect to a Series of
Notes, the Principal Distribution Amount for such Series will be
distributed to the payment of the Note Balance of each related Class of
Notes in order of increasing numeric designation to the extent of Available
Principal Distribution Amount of such Series, with the Available Principal
Distribution Amount of such Series being distributed to Classes of Notes
within such Series with identical numeric designations pro rata based on
their respective Note Balances.
No principal will be distributable to any Class of Notes of a Series
prior to the date on which a Principal Payment Event with respect to the
such Series has occurred.
Scheduled Maturity Date
Unless previously paid, or purchased and cancelled by the Issuer, (i)
the Series 1998-1 Notes are expected to mature on the ______ 1999 Payment
Date, (ii) the Series 1998-2 Notes are expected to mature on the ______
2001 Payment Date and (iii) the Series 1998-3 Notes are expected to mature
on the ______ 2003 Payment Date.
Legal Final Maturity Date
No further payments of principal or interest will be made with respect
to (i) the Series 1998-1 Class I Notes after _______, 1999, (ii) the Series
1998-1 Notes (other than the Series 1998-1 Class I Notes) after the ______
2002 Payment Date, (iii) the Series 1998-2 Notes after the ______ 2004
Payment Date and (iv) the Series 1998-3 Notes after the ______ 2006 Payment
Date.
Allocation of Contra Amounts
The Contra Amount with respect to a Series at any time is the
aggregate amount paid by the Issuer under the related Credit Swap. Any
increase in the Contra Amount with respect to a Series during any Coverage
Period will be allocated among the Notes of the then outstanding Class of
such Series with the highest numeric designation until the Note Balance of
such Class is reduced to zero and then among the Notes of the outstanding
Class with the next highest numeric designation in descending order of
numeric designation beginning with the Class with the highest numeric
designation through Class II until the Note Balance of each such Class is
reduced to zero; provided that the Note Balance for any Class of Notes will
not be reduced to less than zero.
Any decrease in the Contra Amount during any Coverage Period will be
allocated among the Notes of the then outstanding Class with the lowest
numeric designation until the Contra Amount allocated to such Class is
reduced to zero and then among the Notes of the outstanding Class with the
next lowest numeric designation in ascending order of numeric designation
beginning with Class II through the Class with the highest numeric
designation until the Contra Amount allocated to each such Class is reduced
to zero.
Note Balance
The Initial Note Balance of any Class of Notes is the initial
principal amount of such Class as of the Closing Date. The "Note Balance"
of any Class of Notes is an amount equal to the Initial Note Balance of
such Class, minus the sum of (i) the aggregate amount of principal payments
on any date made to Noteholders of such Class of Notes on or prior to such
date and (ii) any Contra Amounts allocated to such Class of Notes on or
prior to such date, plus the aggregate amount of any Reference Credit
Excess Recoveries allocated to such Class. The Series Initial Note Balance
of a Series is the aggregate of the Initial Note Balances of each Class of
Notes of such Series. The Series Note Balance of the Notes on any date is
the aggregate of the Note Balances of each Class of Notes of such Series on
such date. In no event will the Series Note Balance exceed the Series
Initial Note Balance.
Credit Support
With respect to each Series, the credit support for the Senior Notes
is the subordination of the Classes of Notes of such Series with higher
numeric designations. Such subordination is effected by the allocation of
Contra Amounts as described above and by the preferential application of
the Available Distribution Amount to the Classes of Notes with a lower
numeric designation relative to the other Classes of Notes of such Series
to the extent described above.
Reference Pool Amortization Events
Upon the occurrence of either of the events listed below (each, a
"Reference Pool Amortization Event") relating to any Series of Notes, the
Swap Counterparty will not be permitted to add any additional Reference
Credits to the related Reference Pool and the Swap Amount of the related
Credit Swap will be reduced as and to the extent that the Reference Credit
Face Amount of each Reference Credit in the related Reference Pool is
reduced through payments of principal on the Reference Credits.
A Series Cumulative Amortization Event will occur on the first Payment
Date on which the aggregate outstanding Contra Amount as of the related
Determination Date exceeds (i) with respect to Series 1998-1, ___% of the
Series Initial Note Balance for Series 1998-1, (ii) with respect to Series
1998-2, ___% of the Series Initial Note Balance for Series 1998-2 and (iii)
with respect to Series 1998-3, ___% of the Series Initial Note Balance for
Series 1998-3.
A Series Pool Amortization Event will occur on the Payment Date
immediately following a Coverage Period in which (i) the Reference Credits
for that Series do not meet the Series Reference Pool Guidelines and (ii)
such failure has been unremedied for a period equal to the greater of (a)
thirty days and (b) the number of days from the initial failure to meet the
Series Reference Pool Guidelines to and including the next Payment Date.
Optional Tax Redemption
The Issuer may, with 30 days' prior written notice, on any Payment
Date redeem all (but not part) of the Notes at their Note Balance plus all
accrued and unpaid interest thereon in the event (each such event, an
"Optional Tax Redemption") of:
(a) certain tax changes affecting the Notes, the Swap Counterparty
Payments, or payments pursuant to the Repurchase Agreements; or
(b) certain tax changes affecting the Issuer if it would not be
entitled to relief for any amount of tax which it is obligated to pay.
Redemption Procedures. Notice of redemption by the Issuer will be
published in the Authorized Newspaper and will be given by first-class
mail, postage prepaid, mailed not less than ten Business Days prior to the
applicable redemption date, to each Noteholder at such Noteholder's address
in the Note Register maintained by the Note Registrar under the Indenture.
Any such notice of redemption may be withdrawn by the Issuer up to the
sixth Business Day prior to the scheduled redemption date by written notice
to the Trustee. Notice of any such withdrawal will be given by the Trustee
to each Noteholder at such Noteholder's address in the Note Register by
overnight courier guaranteeing next day delivery not later than the third
Business Day prior to the scheduled redemption date.
Withholding Tax
[Although payments of interest and principal on the Notes are not
currently expected to be subject to withholding taxes (subject to
compliance with any applicable administrative and procedural requirements),
if any such taxes were imposed, because the Issuer is not obligated to pay
additional amounts in relation thereto, the Noteholders would bear the
burden of such taxes. In the event of an imposition by any jurisdiction of
withholding tax with respect to any payment by CSFB with respect to the
Repurchase Agreements or the Credit Swap, CSFB will be obligated to pay
additional amounts to the Issuer such that the Issuer receives its payments
on a "grossed-up" basis.]
Cancellation
All Notes that are redeemed or paid and surrendered for cancellation
as described herein will forthwith be cancelled and may not be reissued or
resold.
Paying Agents and Transfer Agent
____________and ________ Luxembourg S.A. and any other financial
institution appointed as a Paying Agent by the Issuer. For so long as the
Senior Notes are listed on the Luxembourg Stock Exchange, the Issuer will
maintain a Paying Agent and Transfer Agent in Luxembourg.
Payments on Registered Global and Individual Notes
Payments in respect of principal and interest on a Note will be made
to the person in whose name such Note is registered on the Record Date.
Payments on the Global Senior Notes will be made by wire transfer in
immediately available funds to an account maintained by DTC or its nominee
or, if wire transfer cannot be effected, by a check delivered to DTC or its
nominee. Final payments in respect of principal on the Notes will be made
only against surrender of such Notes at the office of any Paying Agent
appointed under the Indenture. None of the Issuer, the Trustee or the
Paying Agents will have any responsibility or liability for any aspects of
the records maintained by DTC or its nominee or any of its participants
relating to, or for payments made thereby on account of, beneficial
interests in a Global Senior Note.
The Issuer expects that DTC or its nominee, upon receipt of any
payment of principal or interest in respect of a Global Senior Note held by
DTC or its nominee, will immediately credit participants' accounts with
payments in amounts proportionate to their respective beneficial interests
in such Global Senior Note as shown on the records of DTC or its nominee.
The Issuer also expects that payments by participants to owners of
beneficial interests in such Global Senior Note held through such
participants will be governed by standing instructions and customary
practices, as is now the case with securities held for the accounts of
customers registered in the names of nominees for such customers. Such
payments will be the responsibility of such participants.
Payments on the Individual Notes will be made by a check delivered by
mail to the Noteholder at the address noted in the Note Register or its
nominee or by wire transfer in immediately available funds, provided that
the Noteholder provides wiring instructions to the Trustee as set forth in
the Indenture. If any payment on a Note is due on a day that is not a
Business Day, then payment will not be made until the next succeeding
Business Day with the same force and effect as if made on the date for
payment, and no interest will accrue for the period from or after that day.
Form, Denomination and Registration of the Notes
The Issuer will cause to be kept a register (the "Note Register") with
respect to the Notes. Subject to such reasonable regulations as it may
prescribe, the Issuer will provide for the registration of Notes and the
registration of transfers of Notes in the Note Register. The Trustee has
been initially appointed "Note Registrar" for the purpose of registering
the Notes and transfers of Notes as provided herein and in the Indenture.
The Senior Notes will be issued in the form of beneficial interests in
one or more global notes (the "Global Senior Notes"), deposited with the
Trustee as custodian for DTC (in such capacity, the "Custodian") or any
successor.
Upon the issuance of the Global Senior Notes, DTC will credit, on its
internal system, the respective individual beneficial interests represented
by each Global Senior Note to the accounts of persons who have accounts
with DTC ("Participants"). Such accounts initially will be designated by or
on behalf of the Underwriters. Ownership of beneficial interests in a
Global Senior Note will be limited to Participants or persons who hold
interests through Participants. Beneficial interests in the Global Senior
Notes may be held in minimum denominations of $1,000 in initial principal
amount or any integral multiple of $1.00 in excess thereof. Ownership of
beneficial interests in the Global Senior Notes will be shown on, and the
transfer of that ownership will be effected only through, records
maintained by DTC or its nominee (with respect to interests of
Participants) and the records of Participants (with respect to interests of
persons who hold through Participants).
So long as DTC, or its nominee, is the registered owner or holder of a
Global Senior Note, DTC or such nominee, as the case may be, will be
treated as the sole owner or holder of the Notes represented by such Global
Senior Note for all purposes under the Indenture and the Notes. No owner of
a beneficial interest in a Global Senior Note will be able to transfer that
interest except in accordance with DTC's applicable procedures.
Transfers within and among DTC, Cedel Bank and Euroclear. Transfers
between Participants in DTC will be effected through DTC's
Deposit/Withdrawal at Custodian ("DWAC") system and will be settled in
same-day funds upon clearance of the transfer through the DWAC system. The
laws of some States require that certain persons take physical delivery in
definitive form of securities. Consequently, the ability to transfer
beneficial interests in a Global Senior Note to such persons may be
limited. 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
person having a beneficial interest in a Global Senior Note to pledge such
interest to persons or entities that do not participate in the DTC system,
or otherwise take actions in respect of such interest, may be affected by
the lack of a physical certificate evidencing such interest. Transfers
between participants in Cedel Bank and Euroclear will be effected in
accordance with their respective rules and operating procedures.
Cross-market transfers between DTC Participants other than
depositaries for Cedel Bank or Euroclear, on the one hand, and directly or
indirectly through Cedel Bank or Euroclear participants, on the other, will
be effected through the DWAC system on behalf of Cedel Bank or Euroclear,
as the case may be, by its respective depositary; however, such
cross-market transactions will require delivery of instructions to Cedel
Bank or Euroclear, as the case may be, by the counterpart in such system in
accordance with its rules and procedures and within its established
deadlines (which are established on the basis of Brussels time). Cedel Bank
or Euroclear, as the case may be, will, if the transaction meets its
settlement requirements, deliver instructions to its respective depositary
to take action to effect final settlement on its behalf by delivering or
receiving beneficial interests in the relevant Global Senior Note in DTC,
and making or receiving payment in accordance with normal procedures for
same-day funds settlement applicable to the DWAC system upon clearance of
the transfer through the DWAC system. Cedel Bank participants and
participants in Euroclear may not deliver instructions directly to the
depositaries for Cedel Bank or Euroclear.
Although DTC, Cedel Bank and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of beneficial interests in the
Global Senior Notes among participants of DTC, Cedel Bank and Euroclear,
they are under no obligation to perform or continue to perform such
procedures, and such procedures may be discontinued at any time. Neither
the Issuer nor the Trustee will have any responsibility for the performance
by DTC, Cedel Bank or Euroclear or their respective participants or
indirect participants of their respective obligations under the rules and
procedures governing their operations.
Individual Notes. Individual certificated notes ("Individual Notes")
will be issued to Noteholders or their nominees if DTC notifies the Note
Registrar or the Trustee that it is no longer willing or able to continue
as depository with respect to the Global Senior Notes or is no longer
eligible under the terms of the Indenture to act as depository and the Note
Registrar is unable to appoint a qualified successor within 90 days of
receiving notice of such ineligibility on the part of DTC.
Individual Notes may, in the sole discretion of the Trustee, be issued
to Noteholders or their nominees if the Trustee has instituted or has been
directed to institute any judicial proceeding in a court to enforce the
rights of the Noteholders under the Notes, and the Trustee has been advised
by counsel that in connection with such proceeding it is necessary or
appropriate for the Trustee to obtain possession of such Notes.
Notices
Notices to Noteholders will be mailed or faxed to them at their
respective addresses or fax numbers in the Register and will be published
(so long as any Senior Notes are listed on the Luxembourg Stock Exchange
and the rules of that exchange so require) in a leading newspaper having
general circulation in Luxembourg (which is expected to be the Luxembourger
Wort). Any such notice will be deemed to have been given on the later of
the date of such publication and the day of such mailing or faxing;
provided, however, in no case will any such notice be effective with
respect to a particular Noteholder later than the date of receipt of such
notice by such Noteholder.
Access to Noteholder List
Any Noteholder will have the right, after the occurrence and during
the continuance of a Default (as defined in the Indenture) or Event of
Default and upon five Business Days' prior written notice to the Note
Registrar and at the expense of the Issuer, to obtain a complete list of
the Noteholders; provided, however, that each Noteholder agrees by
acceptance of its Note that it will use such list for no purpose other than
the exercise of its rights under the Indenture; provided, further, that the
Note Registrar will have no liability in connection with releasing such a
list upon request made in accordance with the terms of the Indenture.
Governing Law
The Notes, the Indenture, the Repurchase Agreements, the Custodial
Agreements, the Credit Swaps and the Administration Agreement are governed
by, and will be construed in accordance with, the laws of the State of New
York. The parties to such agreements have submitted to the non-exclusive
jurisdiction of the New York courts.
THE INDENTURE
The Issuer will issue the Notes pursuant to the Indenture. The
Administrator will undertake certain administrative duties with respect to
the Issuer pursuant to the Administration Agreement. The following summary
does not purport to be complete and is subject to, and qualified in its
entirety by reference to, the provisions of the Indenture, the
Administration Agreement and the other agreements referred to below.
Events of Default
With respect to each Series, the "Events of Default" in the Indenture
consist of the following events: (i) the Issuer defaults in the payment of
any interest or principal due in respect of any Class of Notes and such
default continues for a period of five Business Days; (ii) the Issuer fails
to perform or observe any of its other material obligations under the Notes
or the Indenture and such failure continues for a period of thirty days (or
such longer period as the Trustee may permit) following the service of
notice of such failure to perform to the Issuer; (iii) the commencement by
the Issuer of a voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts under
any bankruptcy, insolvency or other similar law or seeking the appointment
of a trustee, receiver, liquidator, custodian or other similar official of
it or any substantial part of its property; or the consent by the Issuer to
any such relief or to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced against it,
or the making of a general assignment for the benefit of creditors; or the
failure on the part of the Issuer generally to pay its debts as they become
due or the taking of any action in furtherance of any of the foregoing;
(iv) the commencement of an involuntary case or other proceeding against
the Issuer seeking liquidation, reorganization or other relief with respect
to it or its debts under any bankruptcy, insolvency or other similar law or
seeking the appointment of a trustee, receiver, liquidator, custodian or
other similar official of it or any substantial part of its property, where
such involuntary case or other proceeding will remain undismissed and
unstayed for a period of 60 days; or the entry of an order for relief
against the Issuer under any bankruptcy law; (v) the Repo Counterparty
defaults in the payment of any amount due in respect of the Repurchase
Agreements and such default continues for a period of [five Business Days];
(vi) the Swap Counterparty defaults in the payment of any amount due in
respect of any Credit Swap and such default continues for a period of five
Business Days; (vii) the Issuer is required to register as an "investment
company" under the Investment Company Act; or (viii) the entry against the
Issuer by one or more courts of competent jurisdiction of one or more final
judgments or orders (not subject to appeal) in an aggregate amount in
excess of $1,000,000 (after giving effect to insurance, if any, available
with respect thereto) which judgment(s) or order(s) remain unstayed or
undischarged for a period of 30 days after the date on which the right to
appeal has expired.
In the case of any event described in the preceding paragraph, other
than clause (ii), an Event of Default with respect to the Series to which
such Event of Default applies will be deemed to have occurred without any
notice or other action on the part of the Trustee or the Noteholders
immediately upon the occurrence of such event. In the case of any event
described in clause (ii) above, an Event of Default with respect to the
Series to which such Event of Default applies will be deemed to have
occurred only if, after any applicable grace period, the Trustee at its
discretion or if so requested in writing by the holders of at least a
majority of the aggregate Note Balance of Senior Notes of such Series (or,
if no Senior Notes are outstanding, the Mezzanine Notes and the
Subordinated Notes) or if so directed by a resolution of such Noteholders
adopted by a two-thirds majority of the Note Balance of such Notes declares
that an Event of Default has occurred with respect to all Notes of such
Series. On the date on which an Event of Default with respect to any Series
is deemed to have occurred, all Notes with respect to such Series will be
due and payable at their Note Balance and any accrued and unpaid interest
thereon.
Remedies
Following an Event of Default, the Trustee may pursue any available
remedy by proceeding at law or in equity to collect the payment of
principal of or interest on such Notes or to enforce the performance of any
provision (including any obligation of payment or performance) of the Notes
or the Indenture. The Trustee may maintain a proceeding even if it does not
possess any of the Notes or does not produce any of them in the proceeding,
and a delay or omission by such Note Trustee or any Noteholders in
exercising any right or remedy accruing upon an Event of Default will not
impair any right or remedy available to such Noteholders or the Trustee or
constitute a waiver of or acquiescence in the Event of Default.
With respect to each Series, in the event of receipt by the Trustee of
money upon the occurrence of an Event of Default with respect to such
Series, the proceeds will be distributed: (a) to the payment of the [pro
rata portion of the following expenses based on the aggregate Note Balance
of such defaulted Series:] (i) taxes owing by the Issuer accrued for the
related Interest Accrual Period, if any; (ii) accrued and unpaid expenses
of the Issuer; (iii) [accrued and unpaid fees, and reimbursement of
expenses of, the Trustee;] and (iv) accrued and unpaid expenses of the
Administrator incurred in connection with the enforcement of the rights of
the Issuer or the Senior Noteholders; (b) to the payment when due of all
amounts payable under the Indenture in respect of the Class I Notes with
respect to such Series; (c) to the payment when due of all amounts payable
under the Indenture in respect of the Class II Notes with respect to such
Series; (d) to the payment when due of all amounts payable under the
Indenture in respect of the Class III Notes with respect to such Series;
(e) to the payment when due of all amounts payable under the Indenture in
respect of the Class IV Notes with respect to such Series; (f) to the
payment when due of all amounts payable under the Indenture in respect of
the Series 1998-1 Class V Notes; (g) to the payment of all costs and
expenses, pro rata, based on the aggregate Note Balance of such defaulted
Series incurred by the Administrator under the Administration Agreement,
other than those costs and expenses set out above; and (h) to the payment
of the Issuer.
With respect to each Series, the holders of a majority of the
aggregate Note Balance of the Class outstanding with the lowest numeric
designation of such Series may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on it. However, subject to the
provisions of the Indenture relating to the duties of the Trustee, the
Trustee may refuse to follow any direction that conflicts with any law or
the Indenture, that the Trustee determines may be unduly prejudicial to the
rights of any other Noteholder of such Class (as such), or that may involve
the Trustee in personal liability; provided, however, that the Trustee may
take any other action deemed proper by the Trustee which is not
inconsistent with such direction. With respect to Book-Entry Senior Notes,
the Trustee will act only in accordance with the instructions of Cede &
Co., as nominee for The Depository Trust Company ("DTC"), in respect of all
Global Senior Notes. Under its rules, DTC will act only in accordance with
the instructions of the Participants to whom Notes are credited, which will
in turn act in accordance with the instructions of persons holding
beneficial interests in such Notes through such Participants. Accordingly,
although only Cede & Co. will be entitled to vote under the Indenture in
respect of the Global Senior Notes, holders of beneficial interests in the
Global Senior Notes will be entitled to instruct DTC as to the manner in
which to vote.
No Noteholder may pursue any remedy with respect to the Indenture or
the Notes (other than the institution of a suit for the payment of
principal of Notes held by such Noteholder when due), unless (i) the
Noteholder gives to the Trustee written notice of a continuing Event of
Default; (ii) the holders of a majority of the aggregate Note Balance of
the Notes of the same Class as the Notes of such Noteholder make a written
request to the Trustee to pursue the remedy; (iii) the holders of a
majority of the aggregate Note Balance of the Notes of the same Class as
the Notes of such Noteholder offer to the Trustee indemnity satisfactory to
the Trustee against any loss, liability or expense; (iv) the Trustee does
not comply with the request within 60 days after receipt of the request and
the offer of indemnity; and (v) during such 60-day period the holders of a
majority of the aggregate Note Balance of the Notes of the same Class as
the Notes of such Noteholder do not give the Trustee a direction which, in
the opinion of the Trustee, is inconsistent with the request. Neither the
Trustee in its individual capacity, nor the Underwriters, nor any of their
respective owners, beneficiaries, agents, officers, directors, employees,
successors or assigns will, in the absence of an express agreement to the
contrary, be personally liable for the payment of interest on or principal
of the Notes or for the agreements of the Issuer contained in the
Indenture.
Security Interest
Pursuant to the Indenture, the Issuer will grant to the Trustee for
the benefit of the Noteholders of each Series a security interest in the
Collateral for such Series. Such security interest in Government Securities
and cash will be subject and subordinate to the security interest in the
Swap Collateral granted by the Issuer to the Swap Counterparty pursuant to
the related Credit Swap as security for the Issuer's obligations under such
Credit Swap.
Certain Covenants
The Issuer has covenanted with the Trustee that it will not, among
other things, (i) sell, transfer, assign, exchange or otherwise dispose of,
or pledge, mortgage, hypothecate or otherwise encumber (by security
interest, lien (statutory or otherwise), preference, priority or other
security agreement or preferential arrangement of any kind or nature
whatsoever or otherwise) (or permit such to occur or suffer such to exist)
any part of the Collateral, except as expressly permitted by the Indenture;
(ii) claim any credit on, or make any deduction from, the principal or
interest payable in respect of the Notes (other than amounts withheld in
accordance with the Code) or assert any claim against any present or future
Noteholder, by reason of the payment of any taxes levied or assessed upon
any part of the Collateral; (iii) incur, assume or guarantee or become
directly or indirectly liable with respect to any indebtedness or any
contingent obligations (including swap agreements, cap agreements,
reimbursement obligations, repurchase obligations or the like), other than
pursuant to the Notes, the Underwriting Agreement, the Indenture, and the
other agreements and transactions expressly contemplated hereby; (iv) (A)
permit the validity or effectiveness of the Indenture or any grant
thereunder to be impaired, or permit the lien of the Indenture to be
amended, hypothecated, subordinated, terminated or discharged, or permit
any Person to be released from any covenants or obligations with respect to
the Indenture or the Notes, except as may be expressly permitted hereby,
(B) permit any lien, charge, adverse claim, security interest, mortgage or
other encumbrance (other than the lien of the Indenture and, with respect
to the Swap Collateral, the lien under the Credit Swaps) to be created on
or extend to or otherwise arise upon or burden the Collateral or any part
thereof, any interest therein or the proceeds thereof, or (C) take any
action that would cause the lien of the Indenture not to constitute a valid
first priority perfected security interest in the Collateral, except as may
be expressly permitted thereby (or in connection with a disposition of
Collateral required thereby); (D) make or incur any capital expenditures,
except as reasonably required to perform its functions in accordance with
the terms of the Indenture; or (E) become liable in any way, whether
directly or by assignment or as a guarantor or other surety, for the
obligations of the lessee under any lease.
The Issuer has further covenanted with the Trustee that it will not,
among other things, (a) (i) engage in any activity which is not reasonably
incidental to any of the activities which the relevant transaction
documents provide or envisage that the Issuer will engage in; (ii) open any
account whatsoever with any bank or other financial institution, save where
obliged to do so under the transaction documents; or (iii) have any
subsidiaries or employees or premises; (b) pay any dividend or make any
other distribution to its shareholders except in accordance with the
provisions of the transaction documents; (c) consolidate or merge with any
other person or convey or transfer its properties or assets substantially
as an entirety to any other person; or (d) cause or permit any of such
documents, or the priority of these security interests created thereby, to
be amended, terminated or discharged or cause or permit any party to any of
such documents to be released from any obligations thereunder.
The Collection and Payment Accounts
All payments on the Repurchase Agreement and the Credit Swap for a
Series will be held by the Trustee in an account established by the Trustee
under the Indenture (each, a "Collection Account") for the benefit of the
Noteholders of such Series. Amounts in a Collection Account will be
available for application as described herein under "Description of the
Notes--Interest" and "--Principal." Amounts received in the Collection
Account will be invested and reinvested by the Trustee at the direction of
the Issuer in Eligible Investments.
The Trustee
The Trustee under the Indenture will be __________, a ____________ or
any successor thereto.
Duties of Trustee
With respect to each Series, except during the continuance of an Event
of Default, thee Trustee will (i) perform such duties and only such duties
as are specifically set forth in the Indenture, (ii) rely, as to the truth
of the statements and the correctness of the opinions expressed therein, on
certificates or opinions furnished to the Trustee which conform to the
requirements of the Indenture, and (iii) examine any such certificates and
opinions which are specifically required to be furnished to the Trustee by
the Indenture to determine whether or not they conform to the requirements
of the Indenture. Upon the continuance of an Event of Default, the Trustee
will be required to exercise the rights and powers vested in it by the
Indenture and use the same degree of care and skill in the exercise thereof
as a prudent person would exercise or use under the circumstances in the
conduct of such person's own affairs. Within ninety days after ascertaining
the occurrence of an Event of Default which has not been cured or waived,
unless otherwise authorized by the Commission, the Trustee will be required
to resign with respect to the Mezzanine and Subordinated Notes in
accordance with the provisions of the Indenture, and the Issuer will be
required to appoint a successor Trustee for the Mezzanine and Subordinated
Notes so that there will be separate Trustees for the Senior Notes, on the
one hand, and the Mezzanine and Subordinated Notes, on the other hand.
Compensation and Indemnity of Trustee
The Issuer will (i) pay to the Trustee from time to time reasonable
compensation for its services, (ii) reimburse the Trustee for all expenses,
advances and disbursements reasonably incurred and (iii) indemnify the
Trustee for, and hold it harmless against, any and all losses, liability or
expense (including attorneys' fees) incurred by it in connection with the
performance of its duties. The Trustee will not be indemnified against any
loss, liability or expense incurred by it through its own willful
misconduct, negligence or bad faith.
Replacement of Trustee
The Senior Noteholders or, if no Senior Notes are outstanding, the
Noteholders of the Mezzanine Notes and the Subordinated Notes (the
"Subordinated Noteholders") holding not less than a majority of the
aggregate Note Balance of the Senior Notes or the Mezzanine Notes and
Subordinated Notes, as the case may be, may remove the Trustee without
cause by so notifying the Trustee and the Issuer, and following such
removal may appoint a successor Trustee. Any successor Trustee must at all
times satisfy the requirements of Section 310(a) of the Trust Indenture Act
of 1939, as amended, and must have a combined capital and surplus of at
least $50,000,000 and a long-term debt rating of investment grade or better
by each Rating Agency.
The Trustee may resign at any time by so notifying the Issuer. If (i)
the Trustee ceases to be eligible under the Indenture to continue as the
Trustee, (ii) the Trustee is adjudged to be bankrupt or insolvent, (iii)
the property of the Trustee comes under the charge of a receiver or other
public officer, or (iv) the Trustee otherwise becomes incapable of acting,
then (A) the Issuer may remove the Trustee or (B) any Senior Noteholder or,
if no Senior Notes are outstanding, any Subordinated Noteholder, may
petition a court of competent jurisdiction for the removal of the Trustee.
Upon the resignation or removal of the Trustee, or the failure of the
Senior Noteholders or the Subordinated Noteholders, as applicable, to
appoint a successor Trustee following the removal without cause of the
Trustee, the Issuer will be required promptly to appoint a successor
Trustee. No removal or resignation of the Trustee will be effective until a
successor Trustee has been appointed and has qualified.
Annual Compliance Statement
The Issuer will be required to file annually with the Trustee a
written statement as to the fulfillment of its obligations under the
Indenture.
Statements to Noteholders
On each Determination Date, the Issuer will prepare the Quarterly
Report and provide copies thereof to the Trustee and each Rating Agency.
The Quarterly Report will also be delivered by the Issuer to the Paying
Agent in Luxembourg and will be made available at the offices of the Paying
Agent in Luxembourg. The Trustee will provide such report to the
Noteholders of record. See "Administration Agreement--Quarterly Reports."
Satisfaction and Discharge of the Indenture
The Indenture will be discharged with respect to the Collateral
securing the Notes of a Series upon the delivery to the Trustee for
cancellation of all of the Notes of such Series or, with certain
limitations, including receipt of certain opinions with respect to tax
matters, upon deposit with the Trustee of funds sufficient for the payment
in full of all of the Notes (including interest and any fees due and
payable).
Modification of the Indenture
Without the consent of the Noteholders, the Issuer and the Trustee may
execute a supplemental indenture for the purposes of (i) adding to the
covenants of the Indenture, (ii) curing any ambiguity, (iii) evidencing a
successor entity to the Issuer or a successor entity to the Trustee, (iv)
correcting or supplementing any provision which may be inconsistent with
any other provision, (v) making any other provision with respect to matters
or questions arising under the Indenture which will not be inconsistent
with other provisions of the Indenture, (vi) adding provisions regarding
the issuance of additional series or (vii) making any change that does not
adversely affect the rights of the Noteholders.
Except as set forth below, with the consent of the holders of more
than fifty percent of the Note Balance of each Series of Senior Notes
affected thereby, the Trustee and the Issuer may execute a supplemental
indenture to add provisions to, or change in any manner or eliminate any
provisions of, the Indenture or modify in any manner the rights of the
Holders of the Senior Notes of any Series.
Without the consent of each Noteholder affected thereby, however, no
supplemental indenture may (i) change the Scheduled Maturity Date, Legal
Final Maturity Date, or the Payment Date of any Note, or reduce the Note
Balance thereof or the Interest Rate thereon or change the coin or currency
in which any Note or interest thereon is payable; (ii) impair the right to
institute suit for the enforcement of any such payment on or after the date
any such payment becomes due and payable; (iii) reduce the percentage in
Note Balance, the consent of the Noteholders of which is required for the
execution of any such amendment or supplement to the Indenture, or the
consent of the Noteholders of which is required for any waiver of
compliance with provisions of the Indenture or for any waiver of Defaults
or Events of Defaults under the Indenture and their consequences provided
for in the Indenture; (iv) change any obligation to purchase or redeem
Notes or change any purchase or redemption price or dates; (v) modify or
alter the provisions of the Indenture regarding the voting of Notes held by
CSFB or any affiliate; (vi) permit the creation of any lien ranking prior
to or on a parity with the lien of a Trustee under the Indenture with
respect to any part of the Collateral (other than, with respect to the Swap
Collateral, the lien under the Credit Swap), or except as otherwise
permitted hereunder, terminate the lien under the Indenture on any property
at any time subject thereto or deprive a Noteholder of the security
afforded by such liens; or (vii) modify certain provisions of the Indenture
relating to amendments, control or limitation on suits by Noteholders.
Evidence as to Compliance
On or before ______ 31 of each calendar year in which there has been a
Reference Obligor Default Event, the Issuer will cause a firm of nationally
recognized independent public accountants to furnish a report to the effect
that such firm has applied certain procedures agreed-upon with the Issuer
and examined certain documents and records relating to CSFB's performance
of its obligations with respect to Reference Obligor Default Events in
accordance with the Credit Swaps and that, on the basis of such agreed-upon
procedures, nothing has come to the attention of such firm that caused them
to believe that such administration was not conducted in compliance with
such Credit Swaps except for such exceptions or errors as such firm will
believe to be immaterial and such other exceptions as will be set forth in
such statement. Such report will set forth the agreed-upon procedures
performed and will be available at the office of the Trustee and in
Luxembourg at the main office of the Listing Agent for the Issuer in
Luxembourg City, ______ Luxembourg S.A., ___________, Luxembourg City,
Luxembourg.
On or before ______ 31 of each calendar year, beginning ______ 31,
1999, the Issuer will cause a firm of nationally recognized independent
public accountants to prepare financial statements of the Issuer. Such
financial statements will be made available at the office of the Trustee
and in Luxembourg, upon request, to the Noteholders.
Quarterly Reports
On each Determination Date, the Issuer will prepare a report (the
"Quarterly Report") setting forth the following information with respect to
each outstanding Series: (a) the amount due to each Class of Notes,
separately identifying the portions thereof which constitute principal and
interest, (b) the amount paid to each Class of Notes, separately
identifying the portions thereof which constitute principal and interest,
(c) the Note Balance of each Class of Notes, after giving effect to all
payments to each Class of Notes on such Payment Date, (d) the LIBOR rate
with respect to the related Interest Accrual Period, (e) the Series Note
Balance, after giving effect to all payments to Noteholders on such Payment
Date, (h) the aggregate Reference Credit Default Amount, Reference Credit
Expected Recovery and Reference Credit Excess Recovery during the related
Coverage Period, (i) the amount of any payments by the Issuer under the
related Credit Swap, the related Contra Amount and the allocation of the
Contra Amount among the Classes of Notes, and (j) the Series Expense Amount
with respect to each Series for the related Coverage Period. The Quarterly
Report will also include information as to whether a Principal Payment
Event has occurred with respect to any Series. The Administrator will
provide such report to each Rating Agency and to the Trustee for
distribution to the Noteholders of record. All such reports will be
available in Luxembourg.
THE ADMINISTRATION AGREEMENT
_____will agree under the terms of the Administration Agreement to
provide certain administrative services to the Issuer. The Administrator
will serve until its resignation or dissolution or its removal by the
Issuer or by the Issuer's member, as described herein. Certain of the
Administrator's duties may be delegated to other parties as contemplated in
the Administration Agreement.
The Administrator will be responsible for the day-to-day operations of
the Issuer and will provide accounting, clerical and administrative
services to the Issuer.
The Administration Agreement will have a term of eight years unless
sooner terminated by a party thereto upon 90 days' written notice of such
party's intention to terminate. No resignation or removal of the
Administrator will become effective until the appointment, acceptance and
assumption of duties by a successor Administrator. The Administration
Agreement may be amended by the parties thereto with the written approval
of the Trustee, who will not agree to any amendment that will have a
material adverse effect on the Noteholders without the consent of a
majority of the Noteholders.
The Issuer will agree to indemnify the Administrator from and against
any liability, actions, proceedings, claims, demands, costs or expenses
whatsoever (other than those resulting from the negligence, willful
misconduct, dishonesty, fraud, bad faith or reckless disregard on the part
of the Administrator of its duties under the Administration Agreement)
which may be imposed on, incurred by or asserted against the Administrator
in performing its obligations or duties pursuant to the Administration
Agreement. The Administrator will not be liable for any damage, loss, costs
or expenses whatsoever to or by the Issuer at any time for any action
taken, or for refraining from the taking of any action, in good faith
pursuant to the Administration Agreement, unless caused by the
Administrator's own negligence, willful misconduct, dishonesty, fraud, bad
faith or reckless disregard of its duties thereunder. However, in no event
(except in the case of gross negligence, willful misconduct, dishonesty,
fraud, bad faith or reckless disregard on the part of the Administrator)
will the Administrator be liable for special, indirect, incidental or
consequential losses or damages of any kind whatsoever, including lost
profits.
THE CREDIT SWAPS
The following description of the Credit Swaps consists of a summary of
certain portions of the Credit Swaps and is qualified by reference to the
detailed provisions of the Credit Swaps. The following summary does not
purport to be complete, and prospective investors must refer to the Credit
Swaps for detailed information regarding the Credit Swaps.
On the Closing Date, the Issuer will enter into three separate credit
swap agreements relating to each Series of Notes (each, a "Credit Swap")
with the [ ] Branch of Credit Suisse First Boston (in such capacity, the
"Swap Counterparty") pursuant to a ISDA Master Agreement and Confirmation
dated the Closing Date between the Issuer and the Swap Counterparty. Each
Credit Swap will be scheduled to terminate on the Scheduled Maturity Date
of the related Series of Notes.
Reference Credits
Pursuant to each Credit Swap, the Swap Counterparty will designate a
pool of (i) reference obligations or portions thereof (each, a "Reference
Obligation") of a Reference Obligor under a term loan, revolving credit
facility, letter of credit or other credit facility extended to such
Reference Obligor by Credit Suisse First Boston through one or more of its
branches or subsidiaries or (ii) corporate debt securities or portions
thereof of Reference Obligors (each, a "Reference Security," and together
with the Reference Obligations, the "Reference Credits") meeting certain
criteria specified in each Credit Swap (the "Series Reference Pool
Guidelines"). The Swap Counterparty will have the right, in accordance with
the terms and conditions of each Credit Swap, to substitute for existing
Reference Credits, other Reference Credits meeting the Series Reference
Pool Guidelines. A "Reference Obligor" means the person or entity obligated
in respect of a Reference Credit. Reference Credits may also consist of
other assets which satisfy the Rating Agency Condition. "Rating Agency
Condition" means, with respect to any action subject to such condition,
that each Rating Agency shall have notified the Issuer and the Trustee in
writing that such action will not result in a reduction or withdrawal of
the rating of any outstanding Class of Notes rated by such Rating Agency.
The Reference Credits from time to time in the pool designated for a Credit
Swap are referred to as the "Reference Pool" with respect to such Credit
Swap.
Reference Credit Default Amount
If a Reference Obligor fails to pay [any amount] when it is required
to be paid under the Reference Credit, the occurrence of such event will be
deemed to be a "Reference Obligor Default Event," and the related Reference
Credit will be deemed to be a "Defaulted Reference Credit." A "Reference
Credit Default Amount" is, with respect to each Defaulted Reference Credit,
the total amount of principal due and payable, but unpaid, on the related
Defaulted Reference Credit as of the end of the related Coverage Period.
Default Coverage
Under each Credit Swap, the Issuer will be obligated to pay to the
Swap Counterparty the Reference Credit Default Amount with respect to any
Defaulted Reference Credit in the related Reference Pool, less the amount
of any payment of principal on such Defaulted Reference Credit expected by
the Swap Counterparty (a "Reference Credit Expected Recovery").
Reference Credit Excess Recoveries
Upon the earlier of (i) 90 days after the occurrence of a Reference
Obligor Default Event and (ii) the Legal Final Maturity Date of the related
Series, the Issuer will direct the Swap Counterparty, to the extent the
Swap Counterparty is legally authorized to do so, to offer for competitive
bid the right to receive any recovery with respect to a Defaulted Reference
Credit which exceeds the Reference Credit Expected Recovery (such excess,
the "Reference Credit Excess Recovery"). If the Swap Counterparty is able
to sell the right to the Reference Credit Excess Recovery, the amount of
the winning bid will be paid by the Swap Counterparty to the Issuer. If the
Swap Counterparty is unable to sell the right to the Reference Credit
Excess Recovery, any Reference Credit Excess Recovery received by the Swap
Counterparty will be required to be paid by the Swap Counterparty to the
Issuer under the related Credit Swap. Prior to the Scheduled Maturity Date
of a Class of Notes whose Note Balance was reduced as a result of a related
Reference Obligor Default Event (any such Class, an "Affected Class"),
Reference Credit Excess Recoveries with respect to such Series paid to the
Issuer, and the amount of any winning bids paid to the Issuer with respect
to such Series, will be utilized by the Issuer in the related Repurchase
Agreement and the Note Balance of all such Affected Classes of such Series
will be increased by the amount of such Reference Credit Excess Recoveries
and winning bids up to the Initial Note Balance of each such Affected Class
in order of increasing numeric designation and the Contra Amounts with
respect to such Classes will be reduced by a corresponding amount. Such
amounts received by the Issuer on or after the Scheduled Maturity Date of
an Affected Class will be distributed to each such Affected Class as an
Available Principal Distribution Amount in the same order. If, however, the
Legal Final Maturity Date with respect to an Affected Class has occurred,
the amount of any Reference Credit Excess Recoveries and any winning bids
will (i) first be used to cover losses allocated in the same order to any
other Class of Notes of the relevant Series and (ii) then be available to
be distributed to the member of the Issuer. The Swap Counterparty will
agree with the Issuer to use its ordinary business practices in seeking
recovery from a Reference Obligor as if it had not entered into the related
Credit Swap.
Swap Amount
The initial maximum amount payable by the Issuer under any Credit Swap
will be the aggregate Reference Credit Face Amount of the Reference Credits
related to such Credit Swap on the Closing Date, which will equal, in the
aggregate, $[ ] for all Series. Such initial maximum amount will be (i)
reduced by any payments made by the Issuer under such Credit Swap and (ii)
increased by any Reference Credit Excess Recoveries (such amount as so
adjusted from time to time, the "Swap Amount").
The "Reference Credit Face Amount" will equal, with respect to a
Reference Credit denominated in any currency, other than U.S. Dollars, the
U.S. Dollar equivalent of the outstanding principal amount of such
Reference Credit converted to a U.S. Dollar equivalent at the spot exchange
rate in effect at the time such Reference Credit is referenced to the
related Credit Swap (the "Reference Credit Exchange Rate"). Prior to a
Reference Obligor Default Event of the related Reference Credit, the Swap
Counterparty may, from time to time, at its option change the Reference
Credit Exchange Rate, provided that the Series Reference Pool Guidelines
are satisfied. After a Reference Obligor Default Event with respect to the
related Reference Credit, the Reference Credit Exchange Rate will be fixed
at the rate last determined prior to such Reference Credit Default Event.
Swap Counterparty Payment
Under each Credit Swap, the Swap Counterparty will be obligated to pay
to the Issuer on each Deposit Date an amount (the "Swap Counterparty
Payment") equal to the aggregate interest payable on the related Series of
Notes with respect to the related Payment Date, plus the Series Expense
Amount for such Series with respect to such Payment Date, less the interest
payable by the Repo Counterparty under the related Repurchase Agreement on
such Deposit Date.
Swap Collateral
The obligations of the Issuer to the Swap Counterparty under each
Credit Swap will be secured by a security interest granted by the Issuer to
the Swap Counterparty in the Government Securities and cash held by the
Custodian under the Custodial Agreement in the Issuer's Account for the
Repurchase Agreement with respect to the related Series of Notes (the "Swap
Collateral"). Such Government Securities and cash will be required to be
held by the Custodian on behalf of the Swap Counterparty as pledgee and
will not be subject to further transfer or pledge by the Swap Counterparty.
Any Governmental Securities or cash added to an Issuer's Account in
accordance with the Custodial Agreement will be added to its Swap
Collateral for the corresponding Credit Swap and any Governmental
Securities or cash removed from an Issuer's Account in accordance with the
Custodial Agreement will be removed from the Swap Collateral for the
corresponding Credit Swap. Such security interest in government Securities
and cash will generally be senior to the security interest granted therein
by the Issuer to the Trustee pursuant to the Indenture for the related
Series of Notes.
Payment of Reference Credit Default Amounts
The Swap Counterparty will provide the Issuer with notice of any
Reference Credit Default Amount occurring during any Coverage Period. Such
notice will be given by the Swap Counterparty to the Issuer not later than
two Business Days prior to the related Payment Date (with respect to each
Payment Date, the "Determination Date"). The Issuer will be obligated to
pay the Reference Credit Default Amount to the Swap Counterparty on such
Payment Date. The Issuer will liquidate the related Repurchase Agreement to
the extent necessary to make such payment.
Contra Amounts
In the event the Issuer pays any Reference Credit Default Amount to
the Swap Counterparty under a Credit Swap, the Note Balance of the Notes of
the related Series will be reduced by an amount (a "Contra Amount") equal
to the amount paid by the Issuer under such Credit Swap. The Contra Amount
will be allocated among the Notes of the then outstanding Class of the
related Series with the highest numeric designation until the Note Balance
of such Class is reduced to zero and then among the Notes of the
outstanding Class of such Series with the next highest numeric designation
in descending order of numeric designation beginning with the Class with
the highest numeric designation through Class II until the Note Balance of
each such Class is reduced to zero. The Note Balance for any Class of Notes
will not be reduced to less than zero.
Early Credit Swap Termination
In the event of a default by the Repo Counterparty under any
Repurchase Agreement, the Issuer will have the right to sell the related
Government Securities and apply the proceeds of such sale, together with
any cash in the related Issuer's Account with the Custodian and any
recoveries from the Repo Counterparty, first, to pay any Reference Credit
Default Amounts then payable by the Issuer under the related Credit Swap,
and thereafter, to redeem the Notes of the related Series. Upon such
payment and redemption, the related Credit Swap will terminate without
payment of termination or breakage fees by either the Issuer or the Swap
Counterparty.
REPURCHASE AGREEMENTS
The following description of the Repurchase Agreements consists of a
summary of certain portions of the Repurchase Agreements and is qualified
by reference to the detailed provisions of the Repurchase Agreements. The
following summary does not purport to be complete, and prospective
investors must refer to the Repurchase Agreements for detailed information
regarding the Repurchase Agreements.
On the Closing Date, the Issuer will enter into three contracts (the
"Repurchase Agreements") to purchase Government Securities with the [ ]
Branch of Credit Suisse First Boston or with such other financial
institution or institutions as may be selected by the Issuer (collectively,
the "Repo Counterparty") under a Master Repurchase Agreement dated the
Closing Date between the Issuer and the Repo Counterparty, as follows: a
one-year repurchase agreement pledged as collateral for the Series 1998-1
Notes, with a repurchase date occurring on the Deposit Date relating to the
Scheduled Maturity Date for such Series (the "One-Year Repo"); a three-year
repurchase agreement pledged as collateral for the Series 1998-2 Notes,
with a repurchase date occurring on the Deposit Date relating to the
Scheduled Maturity Date for such Series (the "Three-Year Repo"); and a
five-year repurchase agreement pledged as collateral for the Series 1998-3
Notes, with a repurchase date occurring on the Deposit Date relating to the
Scheduled Maturity Date for such Series (the "Five-Year Repo") (each such
repurchase date, a "Repurchase Date").
On the Closing Date (i) the Government Securities purchased under the
One-Year Repo will be required to have a market value (the "Market Value")
at least equal to the Initial Note Balance of the Series 1998-1 Notes; (ii)
the Government Securities purchased under the Three-Year Repo will be
required to have a Market Value at least equal to the Initial Note Balance
of the Series 1998-2 Notes; and (iii) the Government Securities purchased
under the Five-Year Repo will be required to have a Market Value at least
equal to the Initial Note Balance of the Series 1998-3 Notes.
In consideration for the Repo Counterparty's sale to the Issuer of the
Government Securities pursuant to each Repurchase Agreement, the Issuer
will pay to the Repo Counterparty on the Closing Date an amount (the
"Purchase Price") in the case of the One-Year Repo, the Initial Note
Balance of the Series 1998-1 Notes, in the case of the Three-Year Repo, the
Initial Note Balance of the Series 1998-2 Notes, and in the case of the
Five-Year Repo, the Initial Note Balance of the Series 1998-3 Notes.
Repurchase Commitment
Under each Repurchase Agreement, the Repo Counterparty will agree to
repurchase the related Government Securities from the Issuer on the related
Repurchase Date at a price equal to the Purchase Price of such Government
Securities increased by the amount of any cash transferred by the Issuer to
the Repo Counterparty in the case of Margin Surpluses and decreased by the
amount of any cash transferred by the Repo Counterparty to the Issuer in
the case of Margin Deficits, in each case in accordance with such
Repurchase Agreement (as described below).
Custodial Agreement
In connection with the Repurchase Agreements, the Issuer and the Repo
Counterparty will enter into a Custodial Undertaking dated the Closing Date
with [ ], as custodian (the "Custodian"). The Custodian will establish for
each Repurchase Agreement a separate buyer's account to be held by the
Custodian on behalf of the Issuer (the "Issuer's Account"), and a seller's
account to be held by the Custodian on behalf of the Repo Counterparty. The
Custodian will deposit the Government Securities purchased by the Issuer
pursuant to each Repurchase Agreement, together with any cash paid by the
Repo Counterparty to the Issuer in lieu of additional Government Securities
pursuant to such Repurchase Agreement, in the related Issuer's Account. The
Custodian will invest any cash held in the Issuer's Account in Permitted
Investments.
Interest
The Repo Counterparty will pay the Issuer interest under each
Repurchase Agreement. Such interest will accrue during each Interest
Accrual Period on an amount equal to the initial Purchase Price in respect
of such Repurchase Agreement, less the amount by which such Purchase Price
has been reduced by partial Terminations of such Repurchase Agreement prior
to such Interest Accrual Period to permit the Issuer to make payments to
the Swap Counterparty under the related Credit Swap. Such interest will be
payable, and will be deposited into the Collection Account for the related
Series of Notes, one Business Day prior to the next succeeding Payment Date
(each such date, a "Deposit Date").
Interest on the Repurchase Agreements will accrue at the following
rates:
One-Year Repo: LIBOR less %
Three-Year Repo: LIBOR less %
Five-Year Repo: LIBOR less %
Mark to Market
The Market Value of the Government Securities subject to each
Repurchase Agreement will be determined each Business Day. The Custodian
will determine the Market Value of the Government Securities each Business
Day not later than [9:30 a.m.] in accordance with the Market Value
calculation procedures set forth in each Repurchase Agreement. Each
Repurchase Agreement will require that on each Business Day the related
Government Securities have a Market Value, together with any cash and
Permitted Investments on deposit in the related Issuer's Account (the "Repo
Available Amount"), at least equal to the sum of (i) the initial Purchase
Price in respect of such Repurchase Agreement, less the amount by which
such Purchase Price has been reduced by partial Terminations of such
Repurchase Agreement, and (ii) the amount of interest under such Repurchase
Agreement accrued through such Business Day (the "Repo Required Amount").
The Custodian will advise the Repo Counterparty and the Issuer of the
Market Value of the Government Securities subject to each Repurchase
Agreement not later than [10:30 a.m.] on each Business Day.
Collateral Deficiencies
If on any Business Day the Repo Available Amount with respect to any
Repurchase Agreement is less than the related Repo Required Amount (such
deficiency, a "Margin Deficit"), the Repo Counterparty will be required, by
[4:30 p.m.] on such Business Day, to deliver to the Custodian on behalf of
The Issuer either (x) cash in an amount equal to the Margin Deficit or (y)
Government Securities having a Market Value at least equal to the Margin
Deficit.
Collateral Surpluses
In the event that the Repo Available Amount with respect to any
Repurchase Agreement is greater on any Business Day than the related Repo
Required Amount (such surplus, a "Margin Excess"), the Custodian will be
required, by [4:30 p.m.] on such Business Day, to deliver to the Repo
Counterparty from the related Issuer's Account either (x) cash in an amount
equal to the Margin Excess or (y) Government Securities having a Market
Value equal to the Margin Excess.
Failure to Cure
In the event the Repo Counterparty fails to deliver to the Custodian
on behalf of the Issuer cash or Government Securities in an amount
sufficient to cure any Margin Deficit on any Repurchase Agreement by [4:30
p.m.] on any Business Day on which a Margin Deficit exists, the Custodian
will be required to use its best efforts to sell the Government Securities
subject to such Repurchase Agreement and any Permitted Investments in the
related Issuer's Account on the immediately succeeding Business Day. To the
extent that the proceeds received by the Custodian in respect of the sale
of such Government Securities and Permitted Investments (plus any cash held
in such Issuer's Account) are less than the Repo Required Amount, the Repo
Counterparty will be required to pay the deficiency to the Custodian on
behalf of the Issuer. To the extent that the proceeds received by the
Custodian in respect of such sale (plus any such cash) are greater than the
Repo Required Amount, the Custodian will be required to pay the surplus to
the Repo Counterparty.
Termination Right
The Issuer will have the right to terminate, in whole or in part (a
"Termination"), a Repurchase Agreements on any related Deposit Date to the
extent that the Issuer requires funds to perform its obligations on the
related Credit Swap. The Issuer will notify the Repo Counterparty of its
election to effect a Termination of a Repurchase Agreement not later than
[2:00 p.m.] prior to the applicable Determination Date. Upon any
Termination of a Repurchase Agreement, the Repo Counterparty will be
obligated to pay to the Issuer an amount (the "Termination Payment") equal
to the amount payable by the Issuer to the Swap Counterparty under the
related Credit Swap. The Repo Counterparty will be required to make payment
of each Termination Payment not later than [2:00 p.m.] on the applicable
Deposit Date. Upon any payment by the Repo Counterparty to the Issuer of a
Termination Payment, the Custodian will, not later than [4:30 p.m.] on the
applicable Deposit Date, deliver to the Repo Counterparty Government
Securities having a Market Value at least equal to the Termination Payment
to the extent that such delivery will not result in a Margin Deficit. In
the event the Repo Counterparty fails to pay to the Issuer any Termination
Payment payable under a Repurchase Agreement, the Custodian will be
required to use its best efforts on the Deposit Date to sell Government
Securities having a Market Value equal to such Termination Payment. Any
payment by the Repo Counterparty of a Termination Payment will reduce by
the amount of such payment, and any sale by the Custodian of Government
Securities will reduce by the amount of the proceeds of such sale the
obligation of the Repo Counterparty under the applicable Repurchase
Agreement to pay the Purchase Price under such Repurchase Agreement on the
Repurchase Date.
Early Repurchase Agreement Termination
In the event of a default by the Swap Counterparty under any Credit
Swap, the Issuer will have the right to terminate such Credit Swap without
payment of any termination or brokerage fees by the Issuer or the Swap
Counterparty. Upon such termination, the related Repurchase Agreement will
terminate. The proceeds received by the Issuer upon termination of such
Repurchase Agreement will be applied, first, to pay any net Reference
Credit Default Amounts payable under the related Credit Swap immediately
prior to its termination and thereafter to redeem the Notes of the related
Series.
Transfer or Pledge
Each Repurchase Agreement will expressly permit the Issuer to transfer
or pledge the Government Securities and cash held by the Custodian in the
related Issuer's Account to the Swap Counterparty under the related Credit
Swap.
Substitution
Each Repurchase Agreement will expressly permit the Repo Counterparty
to deliver to the Custodian on behalf of the Issuer at any time Government
Securities for substitution or exchange for Government Securities then
subject to such Repurchase Agreement. Any such substitution or exchange
will be permitted so long as, after giving effect to any such substitution
or exchange, no Margin Deficit would exist.
Assignability
Each Repurchase Agreement will provide that the Issuer may assign to
the Trustee as security for the Notes of the related Series and to the Swap
Counterparty as security for the obligations of the Issuer under the Credit
Swaps all of its right, title and interest in and to such Repurchase
Agreement and the related Government Securities, Permitted Investments and
cash as security for the Issuer's obligations in respect of the Notes.
Income
Subject to the terms of each Repurchase Agreement, the Repo
Counterparty will be entitled to all income paid on account of the related
Government Securities and Permitted Investments so long as no Margin
Deficit would exist.
USE OF PROCEEDS
The net proceeds of the Offering will equal $_________ and will be
used by the Issuer to pay the Purchase Prices under the Repurchase
Agreements.
RATING OF THE NOTES
It is a condition to issuance of the Notes that each Class of Notes of
each Series have the ratings set forth above under "Summary of
Terms-Ratings."
A security rating is not a recommendation to buy, sell or hold
securities and may be subject to revision or withdrawal at any time. The
ratings assigned to the Notes by Fitch, Moody's and S&P are based upon each
such Rating Agency's assessment of the probability that the Collateral will
provide sufficient funds to pay such Notes, based largely upon the
statistical analysis of each of Fitch, Moody's and S&P of historical
default rates on corporate debt obligations with various ratings, and the
diversification requirements that the Reference Pool is required to
satisfy. There can be no assurance that actual defaults on the Reference
Pool will not exceed those assumed by each of Fitch, Moody's and S&P in its
analysis and that recovery rates with respect thereto will not differ from
those assumed by each such Rating Agency. The Issuer makes no
representation as to the expected rate of defaults on the Reference
Obligations or as to the expected timing of any defaults that may occur.
SERIES REFERENCE POOL GUIDELINES
The Credit Swap will set forth the guidelines for the Reference
Credits (the "Reference Pool Guidelines"). The "Reference Pool" refers to
all the Reference Credits from time to time in the pool. The initial
aggregate Reference Credit Face Amount for the Reference Credits for all
Series is $[ ].
The Series Reference Pool Guidelines will generally include the
following parameters (each, a "Parameter" and collectively, the
"Parameters"):
1. CSFB Internal Rating constraints for the Reference Obligors;
2. Specified limits on Reference Obligor Concentrations;
3. A maximum Industry Group Concentration for the Reference Pool;
4. A minimum Diversity Score for the Reference Pool;
5. A maximum Country Rating Risk Component for the Reference Pool; and
"Diversity Score" is a single number that indicates the concentration
of Reference Credits. A higher Diversity Score reflects a more diverse
Reference Pool in terms of concentration by Reference Obligor and by
industry. The Diversity Score of the Reference Pool is determined by
summing the Industry Diversity Scores, which are calculated as follows:
A "Reference Obligor Face Amount" is calculated for each Reference
Obligor represented in the Reference Pool by summing the Reference Credit
Face Amount of all Reference Credits in the Reference Pool. For purposes of
calculating the Diversity Score and certain related amounts, any Reference
Obligors affiliated with one another will be considered one Reference
Obligor. A specified Reference Obligor is "affiliated" with another
Reference Obligor if such specified Reference Obligor directly controls, is
controlled by or is under common control with such other Reference Obligor;
An "Average Face Amount" is calculated for the Reference Pool by
summing the Reference Obligor Face Amounts and dividing such sum by the
number of Reference Obligors;
An "Equivalent Unit Score" is calculated for each Reference Obligor by
taking the lesser of (a) one and (b) the Reference Obligor Face Amount for
each Reference Obligor divided by the Average Face Amount;
An "Aggregate Industry Equivalent Unit Score" is calculated for each
Industry Group by summing the Equivalent Unit Scores for each Reference
Obligor in the same Industry Group; and
An "Industry Diversity Score" is established by reference to the
Industry Diversity Score Table shown below for the related Aggregate
Industry Equivalent Unit Score. If the Aggregate Industry Equivalent Unit
Score falls between any two such scores shown in the table below, the
Industry Diversity Score is the lower of the two such scores.
<TABLE>
<CAPTION>
Industry Diversity Score Table
Aggregate Aggregate Aggregate Aggregate
Industry Industry Industry Industry Industry Industry Industry Industry
Equivalent Diversity Equivalent Diversity Equivalent Diversity Equivalent Diversity
Unit Score Score Unit Score Score Unit Score Score Unit Score Score
- -------------- ------------- ------------- ------------- ------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
0 0 5.05 2.7 10.15 4.02 15.25 4.5300
0.05 0.1 5.15 2.7333 10.25 4.03 15.35 4.5400
0.15 0.2 5.25 2.7667 10.35 4.04 15.45 4.5500
0.25 0.3 5.35 2.8 10.45 4.05 15.55 4.5600
0.35 0.4 5.45 2.8333 10.55 4.06 15.65 4.5700
0.45 0.5 5.55 2.8667 10.65 4.07 15.75 4.5800
0.55 0.6 5.65 2.9 10.75 4.08 15.85 4.5900
0.65 0.7 5.75 2.9333 10.85 4.09 15.95 4.6000
0.75 0.8 5.85 2.9667 10.95 4.1 16.05 4.6100
0.85 0.9 5.95 3 11.05 4.11 16.15 4.6200
0.95 1 6.05 3.025 11.15 4.12 16.25 4.6300
1.05 1.05 6.15 3.05 11.25 4.13 16.35 4.6400
1.15 1.1 6.25 3.075 11.35 4.14 16.45 4.6500
1.25 1.15 6.35 3.1 11.45 4.15 16.55 4.6600
1.35 1.2 6.45 3.125 11.55 4.16 16.65 4.6700
1.45 1.25 6.55 3.15 11.65 4.17 16.75 4.6800
1.55 1.3 6.65 3.175 11.75 4.18 16.85 4.6900
1.65 1.35 6.75 3.2 11.85 4.19 16.95 4.7000
1.75 1.4 6.85 3.225 11.95 4.2 17.05 4.7100
1.85 1.45 6.95 3.25 12.05 4.21 17.15 4.7200
1.95 1.5 7.05 3.275 12.15 4.22 17.25 4.7300
2.05 1.55 7.15 3.3 12.25 4.23 17.35 4.7400
2.15 1.6 7.25 3.325 12.35 4.24 17.45 4.7500
2.25 1.65 7.35 3.35 12.45 4.25 17.55 4.7600
2.35 1.7 7.45 3.375 12.55 4.26 17.65 4.7700
2.45 1.75 7.55 3.4 12.65 4.27 17.75 4.7800
2.55 1.8 7.65 3.425 12.75 4.28 17.85 4.7900
2.65 1.85 7.75 3.45 12.85 4.29 17.95 4.8000
2.75 1.9 7.85 3.475 12.95 4.3 18.05 4.8100
2.85 1.95 7.95 3.5 13.05 4.31 18.15 4.8200
2.95 2 8.05 3.525 13.15 4.32 18.25 4.8300
3.05 2.0333 8.15 3.55 13.25 4.33 18.35 4.8400
3.15 2.0667 8.25 3.575 13.35 4.34 18.45 4.8500
3.25 2.1 8.35 3.6 13.45 4.35 18.55 4.8600
3.35 2.1333 8.45 3.625 13.55 4.36 18.65 4.8700
3.45 2.1667 8.55 3.65 13.65 4.37 18.75 4.8800
3.55 2.2 8.65 3.675 13.75 4.38 18.85 4.8900
3.65 2.2333 8.75 3.7 13.85 4.39 18.95 4.9000
3.75 2.2667 8.85 3.725 13.95 4.4 19.05 4.9100
3.85 2.3 8.95 3.75 14.05 4.41 19.15 4.9200
3.95 2.3333 9.05 3.775 14.15 4.42 19.25 4.9300
4.05 2.3667 9.15 3.8 14.25 4.43 19.35 4.9400
4.15 2.4 9.25 3.825 14.35 4.44 19.45 4.9500
4.25 2.4333 9.35 3.85 14.45 4.45 19.55 4.9600
4.35 2.4667 9.45 3.875 14.55 4.46 19.65 4.9700
4.45 2.5 9.55 3.9 14.65 4.47 19.75 4.9800
4.55 2.5333 9.65 3.925 14.75 4.48 19.85 4.9900
4.65 2.5667 9.75 3.95 14.85 4.49 19.95 5.0000
4.75 2.6 9.85 3.975 14.95 4.5
4.85 2.6333 9.95 4 15.05 4.51
4.95 2.6667 10.05 4.01 15.15 4.52
</TABLE>
"Industry Group" means, with respect to any Reference Obligor, the
industry group classification assigned to such Reference Obligor as of such
date.
"Industry Group Concentration" means the percentage of Reference
Credits in the Reference Pool, by aggregate Reference Credit Face Amount,
having Reference Obligors in the same Industry Group.
"Country Rating Risk Component" means the percentage of Reference
Credits in the Reference Pool, by aggregate Reference Credit Face Amount,
located in countries with a country credit rating from either S&P or
Moody's lower than the level specified in the relevant Series Reference
Pool Guidelines (the "Country Rating Level"). For purposes of calculating
the Country Rating Risk Component, a Reference Obligor located in a country
which is not rated by both S&P and Moody's will be treated as falling below
the Country Rating Level specified in the relevant Series Reference Pool
Guidelines.
"Reference Obligor Concentration" means, with respect to any Reference
Obligor, the percentage of Reference Credits in the Reference Pool, by
aggregate Reference Credit Face Amount. For purposes of calculating the
Reference Obligor Concentration, any Reference Obligors affiliated with one
another will be considered one Reference Obligor. A specified Reference
Obligor is "affiliated" with another Reference Obligor if such specified
Reference Obligor directly controls, is controlled by or is under common
control with such other Reference Obligor.
"CSFB Internal Rating" means, with respect to any Reference Obligor,
the internal rating assigned by CSFB to such Reference Obligor at such time
as the related Reference Credit is included in the Reference Pool.
SERIES REFERENCE POOL GUIDELINES FOR THE NOTES
The Series Reference Pool Guidelines for each of the Series 1998-1
Notes, the Series 1998-2 Notes and the Series 1998-3 Notes will consist of
the following Parameters, each of which must be met on the first Business
Day of each calendar month; provided, however, that pursuant to the Credit
Swap, in the event the Reference Pool does not meet the Parameters, CSFB
will have a period equal to the greater of (i) 30 days and (ii) the number
of days from the initial failure to meet the Parameters to, and including,
the next Determination Date to bring the Reference Pool into compliance
therewith.
1. The portion of the Reference Pool comprised of each CSFB
Internal Rating is subject to the following restrictions:
(A) In the case of Reference Obligors with CSFB Internal
Ratings of R5 or better: 100%;
(B) In the case of Reference Obligors with CSFB Internal
Ratings of R4 or better: [ ]%;
(C) In the case of Reference Obligors with CSFB Internal
Ratings of R3 or better: [ ]%;
2. The maximum Reference Obligor Concentration is subject to the
following restrictions:
(A) In the case of Reference Obligors with CSFB Internal
Ratings of R5: 1.0%;
(B) In the case of Reference Obligors with CSFB Internal
Ratings of R4: 1.5%;
(C) In the case of Reference Obligors with CSFB Internal
Ratings of R3 or better: 2.0%;
3. The maximum Industry Group Concentration is 8%;
4. The Reference Pool must at all times have a Diversity Score of
at least [ ];
5. The portion of the Reference Pool representing Reference
Obligations to Reference Obligors in countries with sovereign debt
rated by Moody's or S&P below Aa2 and AA-, respectively, will not
exceed 5%; and
Notwithstanding the foregoing, to the extent that recovery proceeds
are applied to reference additional Reference Credits, to the related
Credit Swap the CSFB Internal Rating of any related Reference Obligor of
any Reference Credit so referenced must be R3 or better.
Ownership of the Reference Credits and Administration of the Reference Pool
CSFB will not sell, transfer, assign, novate or otherwise dispose of
any of its legal or beneficial rights to the Reference Credits as a result
of entering into the Credit Swaps, and CSFB will continue to be lender or
holder of record for such Reference Credits. Consequently, legal and
equitable title to the Reference Credits will remain with CSFB
notwithstanding its entering into the Credit Swaps, and the Issuer will not
at any time obtain a legal or beneficial interest in the Reference Credits.
CSFB will agree with the Issuer and the Trustee that CSFB will administer
each Reference Credit in accordance with its ordinary business practices as
if it had not entered into the Credit Swaps. CSFB may, at its option, sell,
assign, participate or transfer all or any portion of its rights and
obligations under a Reference Credit. See "Risk Factors--No Legal or
Beneficial Interest in the Reference Credits."
Credit Rating System
CSFB assigns a credit rating to all Reference Obligors for the purpose
of internal credit evaluation and monitoring processes. For each Reference
Obligor, a CSFB analyst utilizes quantitative analysis in combination with
a qualitative and judgmental assessment of the creditworthiness of the
Reference Obligor. The CSFB analyst typically applies a credit model to the
Reference Obligor, taking into consideration the industry and geographical
location of the Reference Obligor. Explicit guarantees and other forms of
support are, where appropriate, considered in CSFB's estimate of the risk
inherent in a transaction and may influence the rating of a Reference
Obligor. In cases where ratings from Nationally Recognized Statistical
Rating Agencies (NRSRA) are available, they are normally used to determine
the appropriate rating. After a CSFB analyst has rated a Reference Obligor,
a Credit Officer of CSFB's Credit Risk Management gives final approval to
the rating of the Reference Obligor.
Upon completion of these steps, a rating of R1 (highest) through R8
(lowest) is assigned to the Reference Obligor. Ratings from R1 through R6
generally correspond to Nationally Recognized Statistical Rating Agency
risk levels triple-A through single-B or from substantially risk free to
high risk. The CSFB rating of R1 is assigned to customers judged to have
superior management ability and integrity, superior financial strength, a
high degree of liquidity and the ability to repay all obligations from
funds generated in the normal course of business. Counterparties rated R7
by CSFB are judged to have a marginal ability to service debt, a heavy
dependance on debt to finance obligations and volatility in both earnings
and sales. An R8 rating indicates a distressed asset which is either in
default or a special restructuring situation.
THE ISSUER
The Issuer was organized as a Delaware limited liability company on
March ___, 1998 for the express purpose of issuing the Notes, acquiring the
Government Securities described herein and engaging in the transactions
contemplated by the Credit Swaps hereby. The business activities in which
the Issuer may engage are limited by its Limited Liability Company
Agreement to issuing the Notes [and certain additional Series] and entering
into the agreements in connection with the transactions described herein.
The Issuer's address is ______________.
Because the Issuer is a limited purpose entity and the Collateral is
held by the Trustee subject to the requirements of the Indenture, the
[officers] of the Issuer will not be required to devote more than a nominal
amount of their time to the Issuer. The individuals serving as officers of
the Issuer are serving pursuant to an agreement between the Issuer and
Global Securitization Services, LLC which provides, among other things,
that such individuals will not at any time serve as trustee in bankruptcy
for the Issuer or affiliates.
Membership interests
The Issuer's membership interest consists of $1,000 of contributed
capital. The Issuer has a single member, GSS Holdings, Inc., a Delaware
corporation.
All obligations of the Issuer with respect to or arising out of the
issuance of the Notes are solely the obligations of the Issuer. No recourse
shall be had for payment of any obligation or claim arising out of or
relating to the Notes or any agreement, instrument, document or certificate
relating thereto, against any member, officer, agent, employee or affiliate
of the Company.
Management of the Issuer
The sole manager of the Issuer is GSS Holdings, Inc. ____________ acts
as Administrator for the Issuer under the Administration Agreement,
providing certain management, administrative and accounting and related
services.
Capitalization of the Issuer
The following table sets forth the capitalization of the Issuer as of
the date of its organization, adjusted to give effect to the issuance of
the Notes and the use of proceeds thereof for the purpose described under
"Use of Proceeds."
Series 1998-1 Notes........................... U.S.$[ ]
Series 1998-2 Notes........................... [ ]
Series 1998-3 Notes........................... [ ]
Membership Interest........................... 1000
---------------
Total Capitalization................. U.S.$[ ]
Financial Statements of the Issuer
[Audited Financial Statements of the Issuer as of _______, 1998: To
Come]
THE BANK
General
Credit Suisse First Boston, a Swiss bank ("the Bank"), is one of the
largest banking institutions in the world, with total consolidated assets
of approximately Sfr___ billion (US$___ billion) and total consolidated
shareholders' equity of approximately Sfr___ billion (US$___ billion), in
each case at December 31, 1997. As a leading global investment bank, the
Bank provides a wide range of financial services from locations around the
globe to corporate, institutional and public sector clients worldwide. The
Bank was established and registered in the Commercial Register of the
Canton of Zurich on July 5, 1856 for an unlimited duration under the name
of Schweizerische Kreditanstalt. The Bank's name was changed to Credit
Suisse First Boston on December 11, 1996 (by entry in the commercial
register), effective as of January 1, 1997, in connection with a
reorganization. The Bank is a joint stock corporation (public limited
company) established under Swiss law. The Bank's registered head office is
in Zurich, and it has additional executive offices and principal branches
located in London and New York. The Bank and its consolidated subsidiaries
employed approximately 13,250 people at December 31, 1997.
Credit Suisse Group, which owns 99.99% of the voting shares of the
Bank and expects to acquire 100% of such shares in 1998, is now principally
composed of five business units. The Bank principally consists of two of
these business units, Credit Suisse First Boston ("CSFB") and Credit Suisse
Asset Management ("CSAM"). CSFB is engaged, directly and through
affiliates, in the corporate and investment banking, trading (equity, fixed
income and foreign exchange), private equity investment and derivatives
businesses on a worldwide basis. CSAM, directly and through subsidiaries,
offers asset management and investment advisory services to institutional
investors worldwide.
The CSFB business unit has five core businesses: (i) the Corporate and
Investment Banking Division ("CIBD"), (ii) the Fixed Income Division, (iii)
the Equity Division, (iv) Credit Suisse Financial Products ("CSFP") and (v)
the Private Equity Division ("CSFB-PE"). The Corporate and Investment
Banking Division serves a broad range of users and suppliers of capital
around the world and provides financial advisory services. The Fixed Income
Division and the Equity Division are active in equity and fixed income
trading (including foreign exchange and precious metals trading),
respectively, with specialized trading partners worldwide. CSFP is a global
market leader in derivative and risk management products and foreign
exchange and derivatives trading. Through the Private Equity Division. CSFB
and other Credit Suisse Group entities participate in privately-negotiated
equity investments around the world. The CSAM business unit is divided into
its institutional asset management and advisory business and its mutual
fund activities.
The Bank's registered head office is located at Uetlibergstrasse 231,
CH-8045, Zurich, Switzerland, and its telephone number is 41-1-333-1111.
The London Branch is located at 5 Cabot Square, London E14 4QR, England,
and its telephone number is 44-171-888-8888. The New York Branch is located
at Eleven Madison Avenue, New York, NY 10010-3629, and its telephone number
is 212-325-2000.
Recent Developments
On December 31, 1997, the Bank (through its subsidiaries ) acquired
(the "BZW Acquisition") the United Kingdom and Continental European mergers
and acquisitions, advisory and equity capital markets businesses of certain
entities within BZW from Barclays Bank plc. ("Barclays"). Simultaneously,
the Bank assumed management control of BZW's United Kingdom and Continental
European equity sales, trading and research activities under a management
services agreement. Legal completion of the acquisition of the Continental
European equity, trading and research activities took place in stages on
January 30 and February 27, 1998. Legal completion of the acquisition of
the United Kingdom equity sales, trading and research activities, which is
subject to certain conditions, including the split-off of these activities
from BZW and the receipt of regulatory approvals, is scheduled to occur in
the first half of 1998. These businesses employed approximately 1,000
people at December 31, 1997. Upon completion of these acquisitions, all of
these businesses will be part of CSFB.
In addition, the Bank (through its subsidiaries) has agreed to acquire
from Barclays selected equity sales and trading, equity research, equity
capital markets and mergers and acquisitions advisory businesses and
personnel of BZW in Asia. This transaction is also subject to certain
conditions, including the receipt of regulatory approvals. These businesses
employed approximately 200 people at December 31, 1997. The Bank has also
agreed to acquire 75% of the common stock of First Pacific (the "First
Pacific Acquisition") causing First Pacific to become a wholly-owned
subsidiary of the Bank. First Pacific is an investment banking firm with a
leadership position in the equity markets in Australia. This acquisition is
subject to certain conditions, including the receipt of regulatory
approvals. First Pacific employed approximately 175 people at December 31,
1997. Upon completion of these acquisitions in the Pacific region, these
businesses will become a part of CSFB.
Regulation and Supervision
The Bank operates under a license granted by the Swiss Federal Banking
Commission pursuant to the Swiss Federal Law on Banks and Savings Banks of
November 8, 1934, as amended (the "Banking Law"), and its Implementing
Ordinance of May 17, 1972, as amended (the "Implementing Ordinance"). In
addition, CSFB must comply with certain reporting and filing requirements
with regard to the Swiss National Bank (the "National Bank"), in particular
in connection with capital export transactions.
The Swiss Federal Banking Commission, which is the highest bank
supervisory authority and is independent from the National Bank, is
responsible for the supervision of the banking system. Among other things,
the Swiss Federal Banking Commission has the power to grant and withdraw
banking licenses, to enforce the Banking Law, and to prescribe the content
and format of audit reports.
In addition, under the Banking Law, a bank's business is subject to
inspection and supervision by independent auditors licensed by the Swiss
Federal Banking Commission. These auditors, who are appointed by the bank's
Board of Directors, perform a full-scope audit of the bank's financial
statements and verify that the bank complies with the provisions of the
Banking Law and the Implementing Ordinance. The audit report is submitted
to the bank's Board of Directors and copies are submitted to the Swiss
Federal Banking Commission. In the event that the audit reveals either
violations of law or other irregularities, the auditors must inform the
Swiss Federal Banking Commission if the violation or irregularity is not
cured within a time limit designated by the auditors, or immediately in the
case of serious violations or irregularities which may jeopardize the
security of creditors.
RELATIONSHIP BETWEEN THE BANK AND CREDIT SUISSE GROUP
The Bank is part of Credit Suisse Group, which also includes Credit
Suisse, a Swiss bank conducting Swiss domestic banking for individual and
corporate clients and global private banking, and Winterthur, a global
insurance company. Credit Suisse Group is among the world's largest
financial institutions and is active on six continents and in all major
financial centers. Credit Suisse Group is a publicly-held corporation
organized in Switzerland, and its securities are listed on the Swiss
Exchange as well as on the Frankfurt and Tokyo Stock Exchanges. Other than
the group of affiliated entities known as the BZ Group and the group of
affiliated entities known as the Olayan Group, Credit Suisse Group is not
aware of any other shareholders that control 5% or more of Credit Suisse
Group outstanding share capital as of December 31, 1997.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain material United States federal
income tax consequences of acquiring, holding and disposing of Senior
Notes. It is based upon the Internal Revenue Code of 1986, as amended (the
"Code"), rules and Treasury regulations (the "Treasury Regulations")
promulgated thereunder, published rulings and court decisions, all as in
effect on the date of this Prospectus. This summary does not discuss all of
the tax consequences that may be relevant to a particular investor or to
certain investors subject to special treatment under the federal income tax
laws. This summary deals only with Senior Notes held as capital assets and,
in general, only with Notes held by initial purchasers; it does not, in
general, deal with special classes of Noteholders, such as dealers in
securities, life insurance companies, regulated investment companies,
banks, tax-exempt entities, persons holding Notes as a hedge, as part of a
"conversion transaction" or "straddle" for tax purposes, or as a part of a
"synthetic security," non-U.S. persons (except with respect to U.S.
withholding tax), or persons whose functional currency is not the U.S.
Dollar. This summary assumes that all of the Issuer's distributions will be
made in cash only. No advance rulings have been or will be sought from the
Internal Revenue Service (the "Service") regarding any matter discussed in
this Prospectus. Except as expressly indicated in "Issuer Status" below,
counsel to the Issuer has not rendered any legal opinions with respect to
any federal income tax consequences relating to the Issuer or an investment
therein. Accordingly, prospective investors are urged to consult their tax
advisers to determine the federal, state, local and foreign income and
other tax consequences to them of acquiring, holding and disposing the
Senior Notes.
As used in this section, the term "U.S. person" means (i) a citizen or
resident of the U.S., (ii) a corporation, partnership or other entity
created or organized in or under the laws of the U.S. or of any political
subdivision thereof, (iii) an estate whose income from sources without the
U.S. is includible in gross income for United States federal income tax
purposes regardless of its connection with the conduct of a trade or
business within the U.S., or (iv) any trust with respect to which (A) a
U.S. court is able to exercise primary supervision over the administration
of such trust and (B) one or more U.S. fiduciaries have the authority to
control substantial decisions of the trust. "Non-U.S. person" means any
individual or entity not described in the preceding sentence.
Issuer Status
The Issuer will receive an opinion of its special tax counsel,
Skadden, Arps, Slate, Meagher & Flom LLP ("Special Counsel"), that under
current law, the Issuer will be treated as a partnership and not as an
association or a publicly traded partnership (a "PTP") taxable as a
corporation for United States federal income tax purposes if its operations
conform to the assumptions and description set forth in such opinion.
Except as otherwise indicated, this discussion assumes such treatment. This
opinion of counsel will be based upon certain representations of the
Administrator and the facts set forth in this Prospectus. In particular,
the opinion of counsel regarding status of the Issuer as a partnership and
not an association or a PTP taxable as a corporation is based upon the
representation of the Administrator that, subject to the circumstance
described below, the Issuer will in no event have more than 95 Mezzanine
and Subordinated Noteholders (in the aggregate) as determined in accordance
with applicable Regulations. In such a case, the Issuer will be eligible
for a safe harbor from PTP status. The Administrator has further
represented that it will only permit the number of Mezzanine and
Subordinated Noteholders (in the aggregate) to exceed 95 if the Issuer
obtains an opinion from its counsel that the Issuer (i) qualifies for the
exemption from being a PTP taxable as a corporation status that would apply
if more than 90% of the gross income of the Issuer consists of passive
"qualifying income" within the meaning of the Code or (ii) will otherwise
be exempt from classification as a PTP taxable as a corporation.
Unlike an advance ruling from the Service, an opinion of counsel is
not binding on the Service or any court. No assurance can be given that the
Service will not challenge the classification of the Issuer as a
partnership or that a court will not sustain any such challenge. If for any
reason the Issuer were treated as an association or a PTP taxable as a
corporation, the Issuer would be subject to tax on its net income at
corporate tax rates, without deduction for any distributions to the
Noteholders, thereby materially reducing the amount of any cash available
for distribution to such Noteholders. In addition, capital gains and losses
and other income and deductions of the Issuer would not be passed through
to the Noteholders, and the Noteholders would be treated as shareholders
for federal income tax purposes. Thus, all distributions by the Issuer to
the Noteholders would be treated as dividends, return of capital and/or
capital gain.
Treatment of U.S. Holders of Senior Notes
Characterization of the Senior Notes. In general, whether for United
States federal income tax purposes a transaction constitutes a sale of
property or a loan the repayment of which is secured is a question of fact,
the resolution of which is based upon the economic substance of the
transaction rather than its form or the manner in which it is labeled.
While the Service and the courts have set forth several factors to be taken
into account in determining whether the substance of a transaction is a
sale of property or a secured indebtedness for United States federal income
tax purposes, the primary factor in making this determination is whether
the transferee has assumed the risk of loss or other economic burdens
relating to the property and has obtained the benefit of ownership thereof.
Accordingly, although there is no authority that addresses the proper
characterization of the Senior Notes, and therefore the matter is not free
from doubt, based upon its analysis of such factors, Special Counsel is of
the opinion that the Senior Notes will be characterized as indebtedness.
The beneficial owners of the Senior Notes will agree, by their acceptance
of beneficial interests therein, to treat the Senior Notes as indebtedness
for United States federal, state and local income tax purposes, and the
discussion in the following paragraphs, unless otherwise indicated, assumes
such characterization.
If contrary to the opinion of Special Counsel, the Service were to
assert successfully that the Senior Notes are not indebtedness for United
States federal income tax purposes, the Senior Notes could be treated as
equity, potentially subjecting the Issuer to full U.S. income tax as a
corporation, which tax would reduce the Issuer's ability to make payments
to the holders of Senior Notes.
Interest, Discount or Premium on the Senior Notes. In general, U.S.
holders of Senior Notes will include payments of stated interest received
on such Senior Notes, in accordance with their method of accounting, as
ordinary interest income. If, however, the issue price of the Senior Notes
is less than the "stated redemption price at maturity" of such Senior Notes
by more than a de minimis amount, a U.S. holder will be considered to have
purchased such Senior Notes with original issue discount ("OID"). In the
case of Senior Notes, "stated redemption price at maturity" means the sum
of all payments to be received on a Senior Note other than payments of
stated interest. If a U.S. holder acquires Senior Notes with OID, then
regardless of such holder's method of accounting, the holder will be
required to accrue OID on a constant yield basis and include such accruals
in gross income. It is not anticipated that the Senior Notes will be issued
with OID.
In general, if the issue price of a Senior Note exceeds the "stated
redemption price at maturity" of such Senior Note, a U.S. holder will be
considered to have purchased such Senior Note at a premium. In this event,
a U.S. holder may elect to amortize the amount of such premium, based on a
constant interest basis, as an offset to interest income. It is not
anticipated that the Senior Notes will be issued at a premium.
Sale, Exchange and Retirement of the Senior Notes. In general, a U.S.
holder of a Senior Note will have a basis in such Note equal to the cost of
such Senior Note to such holder, increased by any amount includible in
income by such holder as OID and reduced by any amortized premium and any
payments other than payments of stated interest on such Senior Note. Upon a
sale, exchange or retirement of a Senior Note, a U.S. holder will generally
recognize gain or loss equal to the difference between the amount realized
on the sale, exchange or retirement (less any accrued interest, which would
be taxable as such) and the holder's tax basis in such Senior Note. Such
gain or loss will be long-term capital gain or loss if the U.S. holder held
such Senior Note for more than one year at the time of disposition. In
certain circumstances, U.S. holders that are individuals may be entitled to
preferential treatment for net long-term capital gains, particularly, as a
result of recently enacted legislation, in the case of a capital asset that
has been held for more than 18 months at the time of disposition. The
ability, however, of U.S. holders to offset capital losses against ordinary
income is limited.
Tax Treatment of Non-U.S. Holders of Senior Notes
Payments on the Senior Notes to a non-U.S. holder, or gain realized on
the sale, exchange or redemption of the Senior Notes (excluding accrued
OID, if any) by such holder, will not be subject to United States federal
income or withholding tax, as the case may be, unless such income is
effectively connected with a trade or business by such non-U.S. holder in
the United States, provided (A) in the case of payments of interest or
principal, that the non-U.S. holder (i) provides the person who would
otherwise be required to withhold U.S. tax with respect to the Senior Notes
with an appropriate statement (on IRS Form W-8 or a substitute form),
signed under penalties of perjury, certifying that the beneficial owner of
the Senior Note is not a U.S. person and providing the non-U.S. holder's
name and address, (ii) does not actually or constructively own 10% or more
of the total combined voting power or equity (as determined for United
States federal income tax purposes) of the Issuer within the meaning of
Section871(h)(3) of the Code and the Treasury Regulations thereunder, (iii)
the non-U.S. holder is not a controlled foreign corporation (a "CFC") that
is related to the Issuer through equity ownership (as determined for United
States federal income tax purposes) and (iv) the beneficial owner is not a
bank whose receipt of interest on a Senior Note is described in Section
881(c)(3)(A) of the Code; or, (B) in the case of gain, such holder is a
nonresident alien individual who holds the Senior Notes as a capital asset
and who is not present in the United States more than 182 days in the
taxable year of the sale and who does not satisfy certain other criteria. A
Senior Note beneficially owned by an individual who at the time of death is
a non-U.S. holder will not be subject to United States federal estate tax
as result of such individual's death, provided that such individual does
not actually or constructively own 10% or more of the total combined voting
power or equity (as determined for United States federal income tax
purposes) of the Issuer within the meaning of Section 871(h)(3) of the Code
and provided that the interest payments with respect to such Senior Note
would not have been, if received at the time of such individual's death,
effectively connected with the conduct of a U.S. trade or business by such
individual.
Possible United States Federal Tax Law Changes
The foregoing discussion is only a summary and is based upon existing
United States federal income tax law. Prospective investors should
recognize that the federal income tax treatment of an investment in Notes
may be modified at any time by legislative, judicial or administrative
action. Any such changes may have retroactive effect with respect to
existing transactions and investments and may modify the statements made
above.
ERISA CONSIDERATIONS
The U.S. Employee Retirement Income Security Act of 1974, as amended
("ERISA"), imposes certain requirements on "employee benefit plans" (as
defined in Section 3(3) of ERISA) subject to ERISA, including entities such
as collective investment funds, separate accounts and certain insurance
company general accounts whose underlying assets include the assets of such
plans (collectively, "ERISA Plans"), and on those persons who are
fiduciaries with respect to ERISA Plans. Investments by ERISA Plans are
subject to ERISA's general fiduciary requirements, including the
requirement of investment prudence and diversification and the requirement
that an ERISA Plan's investments be made in accordance with the documents
governing the ERISA Plan. The prudence of a particular investment must be
determined by the responsible fiduciary of an ERISA Plan by taking into
account the ERISA Plan's particular circumstances and all of the facts and
circumstances of the investment including, but not limited to, the matters
discussed herein under "Risk Factors" and the fact that in the future there
may be no market in which such fiduciary will be able to sell or otherwise
dispose of the Senior Notes.
Section 406 of ERISA and Section 4975 of the Code prohibit certain
transactions involving the assets of an ERISA Plan (as well as those plans
that are not subject to ERISA but which are subject to Section 4975 of the
Code, such as individual retirement accounts (together with ERISA Plans,
"Plans")) and certain persons (referred to as "parties in interest" or
"disqualified persons" (collectively, "Parties in Interest")) having
certain relationships to such Plans, unless a statutory or administrative
exemption is applicable to the transaction. A party in interest or
disqualified person who engages in a prohibited transaction may be subject
to excise taxes and other penalties and liabilities under ERISA and Section
4975 of the Code.
The U.S. Department of Labor has promulgated a regulation, 29 C.F.R.
Section 2510.3-101 (the "Plan Asset Regulation"), describing what
constitutes the assets of a Plan with respect to the Plan's investment in
an entity for purposes of certain provisions of ERISA and the Code,
including the fiduciary responsibility provisions of Title I of ERISA and
Section 4975 of the Code. Under the Plan Asset Regulation, if a Plan
invests in an "equity interest" of an entity that is neither a "publicly
offered security" nor a security issued by an investment company registered
under the Investment Company Act, the Plan's assets include both the equity
interest and an undivided interest in each of the entity's underlying
assets, unless it is established that the entity is an "operating company"
or that equity participation in the entity by "benefit plan investors" is
not "significant."
Under the terms of the Plan Asset Regulation, if the Issuer were
deemed to hold "plan assets" by reason of a Plan's investment in a Note,
such Plan's assets would include an undivided interest in the assets held
by the Issuer. In such event, the persons providing services with respect
to such assets may be subject to the fiduciary responsibility provisions of
Title I of ERISA and to the prohibited transaction provisions of ERISA and
Section 4975 of the Code with respect to transactions involving such
assets. In addition, if any of the obligors on such assets is a Party in
Interest with respect to an investing Plan, such Plan's investment could be
deemed to constitute a transaction prohibited under Title 1 of ERISA or
Section 4975 of the Code (e.g. the extension of credit between a Plan and a
Party in Interest).
The Senior Notes
Although there can be no assurances in this regard, the Senior Notes
should not be considered to be "equity interests" in the Issuer. Even if
the Senior Notes are treated as equity interests, the Senior Notes will
constitute public offered securities under the Plan Asset Regulation.
Nevertheless, prohibited transactions within the meaning of Section 406 of
ERISA or Section 4975 of the Code may arise if Senior Notes are acquired by
a Plan with respect to which the Issuer, the Underwriters, the Trustee or
CSFB, or any of their respective affiliates, is a Party in Interest.
Similarly, prohibited transactions within the meaning of Section 406 of
ERISA or Section 4975 of the Code may arise if Senior Notes are acquired by
a Plan and a person which is a Party in Interest with respect to such Plan
acquires or holds an equity interest in the Issuer, or if such Senior Notes
are acquired by a person or entity which is a Party in Interest with
respect to a Plan which acquires or holds an equity interest in the Issuer.
Certain exemptions from the prohibited transaction provisions of Section
406 of ERISA and Section 4975 of the Code may be applicable, however,
depending in part on the type of Plan fiduciary making the decision to
acquire a Senior Note and the circumstances under which such decision is
made. Included among these exemptions are Prohibited Transaction Class
Exemption PTCE 84-14 (relating to transactions effected by a "qualified
professional asset manager"), PTCE 90-1 (relating to investments by
insurance company pooled separate accounts), ("PTCE") 91-38 (relating to
investments by bank collective investment funds), PTCE 95-60 (relating to
investments by insurance company general accounts), and PTCE 96-23
(relating to transactions determined by in-house asset managers). There can
be no assurance that any of these class exemptions or any other exemption
will be available with respect to any particular transaction involving the
Senior Notes.
BY ITS PURCHASE OF A SENIOR NOTE, THE PURCHASER THEREOF WILL BE DEEMED
TO HAVE REPRESENTED AND WARRANTED THAT EITHER (A) IT IS NEITHER A PLAN NOR
USING THE ASSETS OF ANY PLAN TO PURCHASE AND HOLD SUCH NOTE OR (B) ITS
PURCHASE AND HOLDING OF SUCH NOTE DOES NOT AND WILL NOT CONSTITUTE OR
RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION
4975 OF THE CODE FOR WHICH AN EXEMPTION IS NOT AVAILABLE.
Any insurance company proposing to invest assets of its general
account in the Notes should consider the extent to which such investment
would be subject to the requirements of ERISA in light of the U.S. Supreme
Court's decision in John Hancock Mutual Life Insurance Co. v. Harris Trust
and Savings Bank, 114 S. Ct. 517 (1993) and under any subsequent guidance
that may become available relating to that decision. In addition, any such
investor should note that the Small Business Job Protection Act of 1996
added new Section 401(c) of ERISA relating to the status of the assets of
insurance company general accounts under ERISA and Section 4975 of the
Code. Pursuant to Section 401(c), the Department of Labor is required to
issue final regulations (the "General Account Regulations") with respect to
insurance policies or annuity contracts issued on or before December 31,
1998 that are supported by an insurer's general account. The General
Account Regulations are to provide guidance on which assets held by the
insurer constitute "plan assets" for purposes of the fiduciary
responsibility provisions of ERISA and Section 4975 of the Code. Section
401(c) also provides that, except in the case of avoidance of the General
Account Regulations and actions brought by the Secretary of Labor relating
to certain breaches of fiduciary duties that also constitute breaches of
state or federal criminal law, until the date that is 18 months after the
General Account Regulations become final, no liability under the fiduciary
responsibility and prohibited transaction provisions of ERISA and Section
4975 may result on the basis of a claim that the assets of the general
account of an insurance company constitute "plan assets" of any Plan.
To date the Department of Labor has issued proposed regulations under
Section 401(c). If adopted substantially in the form in which proposed, the
General Account Regulations may not exempt the assets of an insurance
company general account from treatment as "plan assets" after December 31,
1998. The General Account Regulations should not, however, adversely affect
the applicability of PTCE 95-60.
Any Plan fiduciary or benefit plan investor that proposes to purchase
any Notes should consult with its counsel regarding the applicability of
the fiduciary responsibility and prohibited transaction provisions of ERISA
and Section 4975 of the Code to such an investment, and to confirm that
such investment will not constitute or result in a prohibited transaction
or any other violation of an applicable requirement of ERISA.
Governmental plans and certain church plans, while not subject to the
fiduciary responsibility provisions of ERISA or the provisions of Section
4975 of the Code, may nevertheless be subject to State or other federal
laws that are substantially similar to the foregoing provisions of ERISA
and the Code. Fiduciaries of any such plans should consult with their
counsel before purchasing any Senior Notes.
The sale of any Notes is in no respect a representation by the Issuer,
the Underwriters or CSFB that such an investment meets all relevant legal
requirements with respect to investments by benefit plan investors
(including Plans generally or any particular Plan), or that such an
investment is appropriate for such benefit plan investors generally or any
particular Plan.
The table below lists Common Codes, CINS Numbers, CUSIP Numbers and
International Securities Identification Numbers (ISIN) for the Notes.
<TABLE>
<CAPTION>
Senior
Global Individual International
Notes Notes Securities
Common CUSIP CUSIP Identification
Series Notes Codes Number Number Number
- --------- --------------------------- ------------ -------------- --------------- -----------------
<S> <C> <C> <C> <C> <C>
1998-1 Class I....................
Class II...................
Class III..................
Class IV...................
Class V....................
1998-2 Class I....................
Class II...................
Class III..................
Class IV...................
1998-3 Class I....................
Class II...................
Class III..................
Class IV...................
</TABLE>
NOTICE TO CANADIAN RESIDENTS
Resale Restrictions
The distribution of the Notes in Canada is being made only on a
private placement basis exempt from the requirement that the Issuer prepare
and file a prospectus with the securities regulatory authorities in each
province where trades of the Notes are effected. Accordingly, any resale of
the Notes in Canada must be made in accordance with applicable securities
laws which will vary depending on the relevant jurisdiction, and which may
require resales to be made in accordance with available statutory
exemptions or pursuant to a discretionary exemption granted by the
applicable Canadian Securities regulatory authority. Purchasers are advised
to seek legal advice prior to any resale of the Notes.
Representations of Purchasers
Each purchaser of the Notes in Canada who receives a purchase
confirmation will be deemed to represent to the Issuer and the dealer from
whom such purchase confirmation is received that (i) such purchaser is
entitled under applicable provincial securities laws to purchase such Notes
without the benefit of a prospectus qualified under such securities laws,
(ii) where required by law, such purchaser is purchasing as principal and
not as agent, and (iii) such purchaser has [been provided and has reviewed
information with respect to the limitations described herein].
Rights of Action (Ontario Purchasers)
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
section 32 of the Regulations under the Securities Act (Ontario). As a
result, Ontario purchasers must rely on other remedies that may be
available, including common law rights of action for damages or rescission
or rights of action under the civil liability provisions of the U.S.
federal securities laws. Following a decision of the U.S. Supreme Court, it
is possible that Ontario purchasers will not be able to rely upon the
remedies set out in Section 12(2) of the Securities Act where the
securities are being offered under a U.S. private placement memorandum,
such as this Preliminary Prospectus.
Enforcement of Legal Rights
All of the Issuer's directors and officers as well as the experts
named herein may be located outside of Canada and, as a result, it may not
be possible for Canadian purchasers to effect service of process within
Canada upon the Issuer or such persons. All or a substantial portion of the
assets of the Issuer and such persons may be located outside of Canada and,
as a result, it may not be possible to satisfy a judgment against the
Issuer or such persons in Canada or to enforce a judgment obtained in
Canadian courts against such Issuer or persons outside Canada.
Notice to British Columbia Residents
A purchaser of Notes to whom the Securities Act (British Columbia)
applies is advised that such purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
Notes acquired by such purchaser pursuant to this Offering. Such report
must be in the form attached to British Columbia Securities Commission
Blanket Order BOR #95/17, a copy of which may be obtained from CSFB. Only
one such report must be filed in respect of Notes acquired on the same date
and under the same prospectus exemption.
Taxation and Eligibility for Investment
Canadian purchasers of Notes should consult their own legal and tax
advisors with respect to the tax consequences of an investment in the Notes
in their particular circumstances and with respect to the eligibility of
the Notes for investment by the purchaser under relevant Canadian
legislation.
UNDERWRITING
Subject to the terms and subject to the conditions contained in an
Underwriting Agreement dated , 1998 (the "Underwriting Agreement"), the
Issuer has agreed to sell to the Underwriters named below (the
"Underwriters"), for whom Credit Suisse First Boston is acting as
representative (the "Representative"), and each of the Underwriters have
severally but not jointly agreed to purchase from the Issuer the following
respective principal amounts of the Senior Notes.
Underwriters of
The Series 1998-1 Senior Notes
Underwriters
---------------------- -----------------
Credit Suisse First Boston Corporation......................$
Total..............................................$
================
Underwriters of
The Series 1998-2 Senior Notes
Underwriters
Credit Suisse First Boston Corporation..............................
Total.....................................$
================
Underwriters of
The Series 1998-3 Class I Notes
Underwriters
Credit Suisse First Boston Corporation..............................
Total....................................$
================
In the Underwriting Agreement the Underwriters have agreed, subject to
certain terms and conditions therein, to purchase all the Senior Notes if
any are purchased. The Underwriting Agreement provides that, in the event
of a default by an Underwriter, in certain circumstances the purchase
commitments of the non-defaulting Underwriters may be increased or the
Underwriting Agreement may be terminated.
The Issuer has been advised by the Representative that the
Underwriters propose to offer the Senior Notes to the public initially at
the public offering price set forth on the cover page of this Prospectus
and, through the Representative, to certain dealers at such price less a
concession not in excess of % of the principal amount per Senior Note, and
the Underwriters and such dealers may allow a concession not in excess of %
such principal amount per Senior Note on sales to certain other dealers.
After the initial public offering, such prices and concessions may be
changed.
Until the distribution of the Notes is completed, rules of the
Commission may limit the ability of the Underwriters, and certain selling
group members to bid for and purchase the Notes. As an exemption to these
rules, Credit Suisse First Boston Corporation ("CSFBC"), on behalf of the
Underwriters, is permitted to engage in over-allotment transactions,
stabilizing transactions, syndicate covering transactions and penalty bids
with respect to the Senior Notes in accordance with Regulation M under the
Exchange Act.
Over-allotment transactions involve syndicate sales in excess of the
offering size, which create syndicate short positions. Stabilizing
transactions permit bids to purchase the Senior Notes so long as the
stabilizing bids do not exceed a specified maximum. Syndicate covering
transactions involve purchases of Senior Notes in the open market after the
distribution has been completed in order to cover syndicate short
positions. Penalty bids permit CSFBC to reclaim a selling concession from a
syndicate member when the Senior Notes originally sold by such syndicate
member are purchased in a syndicate covering transaction.
Such over-allotment transactions, stabilizing transactions, syndicate
covering transactions and penalty bids may cause the prices of the Senior
Notes to be higher than they would otherwise be in the absence of such
transactions. Neither the Issuer nor any of the Underwriters makes any
representation or prediction as to the direction or magnitude of any effect
that the transactions described above may have on the price of the Senior
Notes. In addition, neither the Issuer nor any of the Underwriters
represent that the Underwriters will engage in any such transactions or
that such transactions, once commenced, will not be discontinued, without
notice.
The Senior Notes are newly issued securities for which there is
currently no market. The Underwriters have advised the Issuer that they
currently intend to make a market in the Senior Notes as permitted by
applicable law. The Underwriters are not obligated, however, to make a
market in such Senior Notes, and any such market-making may be discontinued
at any time at the sole discretion of the Underwriters. Accordingly, no
assurance can be given as to the development of liquidity or any market for
the Senior Notes.
The Issuer has agreed to indemnify, jointly and severally, the
Underwriters against certain liabilities, including civil liabilities under
the Securities Act, or contribute to payments that the Underwriter may be
required to make in respect thereof.
Upon receipt of a request by an investor who has received an
electronic Prospectus from an Underwriter or a request by such investor's
representative within the period during which there is an obligation to
deliver a Prospectus, the Issuer or the Underwriter will promptly deliver,
or cause to be delivered, without charge, a paper copy of the Prospectus.
LEGAL MATTERS
Certain legal matters with respect to the Notes will be passed upon
for the Issuer by _________________. Certain legal matters with respect to
the Issuer and the Underwriters will be passed upon by Skadden, Arps,
Slate, Meagher & Flom LLP.
LISTING AND GENERAL INFORMATION
Application has been made to list the Senior Notes on the Luxembourg
Stock Exchange. Prior to the listing, a legal notice ("Notice Legale")
relating to the issuance of the Senior Notes, and the Articles of the
Issuer, will be deposited with the Chief Registrar of the District Court in
Luxembourg ("Greffier en Chef du Tribunal d'Arrondissement de et a
Luxembourg"), where copies thereof may be obtained, free of charge, upon
request.
As long as any of the Senior Notes are outstanding, copies of the
Certificate of Formation and the Limited Liability Company Agreement of the
Issuer and the Indenture, will be available for inspection, and the annual
and any semi-annual interim financial statements of the Issuer will be
obtainable at the offices of Banque Generale du Luxembourg (the "Listing
Agent") in the City of Luxembourg, where copies thereof may be obtained
upon request.
Copies of the Certificate of Formation of the Issuer, the Limited
Liability Company Agreement of the Issuer and the Administration Agreement
and the resolutions of the member of the Issuer authorizing the issuance of
the Senior Notes and authorizing the Indenture and the Administration
Agreement will be available for inspection until the maturity of the Senior
Notes at the office of the Paying Agent in Luxembourg.
Copies of the Indenture, the Repurchase Agreements, the Custodial
Agreements, the Credit Swaps, the Monthly Reports as well as all financial
and other reports of the Issuer, will be available at the office of the
Paying Agent in Luxembourg.
Notices to Senior Noteholders will be mailed or faxed to them at their
respective addresses or fax numbers noted in the Note Register and will be
published (so long as any Senior Notes are listed on the Luxembourg Stock
Exchange and the rules of that exchange so require) in a leading newspaper
having general circulation in Luxembourg (which is expected to be the
Luxembourger Wort). Any such notice will be deemed to have been given on
the later of the date of such publication and the day of such mailing or
faxing; provided, however, in no case will any such notice be effective
with respect to a particular Senior Noteholder later than the date of
receipt of such notice by such Senior Noteholder.
The Issuer represents that there has been no material adverse change
in its financial position since its date of creation. The Issuer is not
involved in any litigation or arbitration proceedings relating to claims on
amounts which are material in the context of the issue of the Senior Notes,
nor, so far as the Issuer is aware, is any such litigation or arbitration
involving it pending or threatened. The issuance of the Senior Notes was
authorized by the member of the Issuer by resolution adopted on _____,
1998.
The Luxembourg Stock Exchange will be duly advised of any change in
the criteria used to determine the Interest Rate.
INDEX OF DEFINED TERMS
Following is an index of defined terms used in this Prospectus and the
page number where each definition appears. [To be revised]
$.......................................................................... 1
Administration Agreement................................................... 3
Administrator.............................................................. 3
Affected Class......................................................... 4, 33
Available Distribution Amount.......................................... 10, 20
Banking Law............................................................... 48
Basle Recommendations..................................................... 47
BIS....................................................................... 47
Book-Entry Senior Notes.................................................... 9
Calculation Agent......................................................... 21
Certificated Notes......................................................... 9
CFC....................................................................... 50
Class...................................................................... 2
Code..................................................................15, 48
Collateral................................................................ 19
Collection Account........................................................ 41
Collection Accounts...................................................10, 20
Commission................................................................. 1
Contra Amount......................................................5, 16, 34
Country Rating Level...................................................... 40
Credit Swap........................................................... 3, 32
CSAM...................................................................... 44
CSFB.................................................................. 3, 32
CSFBC..................................................................... 59
CSFP...................................................................... 44
Custodian.......................................................6, 14, 25, 35
Deposit Date.......................................................... 7, 35
Depositary Agreement...................................................... 14
Determination Date.....................................................8, 36
Dollars.................................................................... 1
DTC.................................................................. .1, 28
DWAC...................................................................... 25
ERISA..................................................................... 50
ERISA Plans............................................................... 50
Exchange Act............................................................... 1
Fitch..................................................................... 14
Five-Year Repo........................................................ 6, 34
General Account Regulations............................................... 52
Global Senior Notes................................................. .14, 25
Greffier en Chef du Tribunal d'Arrondissement
de et a Luxembourg..................................................... 60
Implementing Ordinance.................................................... 48
Indenture.............................................................(i), 3
Individual Notes.......................................................... 25
INHAM..................................................................... 15
Interest Rate............................................................. 10
Investment Company Act.................................................... 13
Issuer.....................................................................(i)
Issuer's Account...................................................... 6, 35
Legal Final Maturity Date................................................. 11
LIBOR................................................................ 10, 21
LIBOR Determination Date.................................................. 21
Listing Agent............................................................. 60
Margin Deficit........................................................ 7, 35
Margin Excess......................................................... 7, 35
Market Value.......................................................... 6, 34
Mezzanine Notes............................................................ 2
Moody's................................................................... 14
National Bank............................................................. 48
Note Register............................................................. 24
Notes................................................................(ii), 2
Notice Legale............................................................. 60
OID....................................................................... 49
One-Year Repo......................................................... 6, 34
Optional Tax Redemption.............................................. 14, 23
Parameter................................................................. 37
Parameters................................................................ 37
Participants.............................................................. 25
Parties in Interest....................................................... 51
Payment Date............................................................... 9
Plan Asset Regulation..................................................... 51
Plans..................................................................... 51
Principal Distribution Amount............................................. 11
Principal Payment Event.............................................. 11, 22
PTCE...................................................................... 51
PTP....................................................................... 48
Purchase Price........................................................ 6, 34
QPAM...................................................................... 15
Quarterly Report.......................................................... 32
Rating Agencies........................................................... 14
Rating Agency Condition.................................................... 4
Record Date................................................................ 9
Reference Credit Excess Recovery...................................... 4, 33
Reference Credit Exchange Rate........................................ 5, 33
Reference Credit Expected Recovery.................................... 4, 32
Reference Credits..................................................... 3, 32
Reference Obligation.................................................. 3, 32
Reference Obligor.......................................................... 3
Reference Pool Amortization Event.................................... 12, 23
Reference Pool Guidelines................................................. 37
Reference Security.................................................... 3, 32
Registration Statement..................................................... 1
Reorganization............................................................ 43
Repo Available Amount................................................. 7, 35
Repo Counterparty..................................................... 6, 34
Repo Required Amount.................................................. 7, 35
Representative............................................................ 59
Repurchase Agreements................................................. 6, 34
Repurchase Date....................................................... 6, 34
Risk Factors..............................................................(i)
S&P....................................................................... 14
Scheduled Maturity Date................................................... 11
Securities Act............................................................. 1
Senior Noteholders........................................................ 17
Senior Notes..........................................................(i), 2
Series..................................................................... 2
Series 1998-1 Class I Notes................................................(i)
Series 1998-1 Class II Notes..............................................(ii)
Series 1998-1 Class III Notes.............................................(ii)
Series 1998-1 Class IV Notes..............................................(ii)
Series 1998-1 Class V Notes...............................................(ii)
Series 1998-1 Notes........................................................ 2
Series 1998-2 Class I Notes................................................(i)
Series 1998-2 Class II Notes..............................................(ii)
Series 1998-2 Class III Notes.............................................(ii)
Series 1998-2 Class IV Notes..............................................(ii)
Series 1998-2 Notes........................................................ 2
Series 1998-3 Class I Notes................................................(i)
Series 1998-3 Class II Notes..............................................(ii)
Series 1998-3 Class III Notes.............................................(ii)
Series 1998-3 Class IV Notes..............................................(ii)
Series 1998-3 Notes........................................................ 2
Series Reference Pool Guidelines...................................... 3, 32
Service................................................................... 48
Sfr........................................................................ 1
Special Counsel........................................................... 48
Subordinated Noteholders.................................................. 30
Subordinated Notes......................................................... 2
Swap Amount........................................................... 5, 33
Swap Collateral....................................................... 5, 33
Swap Counterparty..................................................... 3, 32
Swap Counterparty Payment............................................ 5, 33
Termination........................................................... 8, 36
Termination Payment................................................... 8, 36
Three-Year Repo....................................................... 6, 34
Treasury Regulations...................................................... 48
Trustee....................................................................(i)
U.S. Dollars............................................................... 1
U.S.$...................................................................... 1
Underwriters......................................................... 54, 59
Underwriting Agreement.................................................... 59
Winterthur................................................................ 44
No dealer, salesperson or
other person has been authorized
to give any information or to $[ ]
make any representation not
contained in this Prospectus and,
if given or made, such
information or representation
must not be relied upon as having Triangle Funding II LLC
been authorized by the Issuer,
Credit Suisse First Boston or the
Underwriters. This Prospectus
does not constitute an offer to
sell, or a solicitation of an
offer to buy, any of the
securities offered hereby by any
person in any jurisdiction in
which it is unlawful for such
person to make such offer or
solicitation. Neither the
delivery of this Prospectus nor
any sale made hereunder shall,
under any circumstances, create
any implication that the
information herein is correct as
of any time subsequent to the
date hereof or that there has
been no change in the affairs of
the Issuer or Credit Suisse First
Boston since such date.
---------------
TABLE OF CONTENTS $ ------------
Series 1998-1
Senior Notes
Page
Information as to Sale within
the United States.................
Available Information.................
Summary of Term.......................
Risk Factors..........................
Description of the Notes.............. $--------------
The Indenture......................... Series 1998-2
The Administration Agreement.......... Senior Notes
The Credit Swaps
The Repurchase Agreements.............
Use of Proceeds.......................
Rating of the Notes...................
Series Reference Pool Guidelines...... $--------------
Series Reference Pool Guidelines Series 1998-3
for the Notes.................... Senior Notes
The Issuer............................
Credit Suisse Group...................
CSFB..................................
Certain Income Tax Considerations.....
ERISA Considerations.................. Prospectus
Underwriting
Notice to Canadian Residents..........
Legal Matters......................... CREDIT FIRST
Listing and General Information....... SUISSE BOSTON
Index of Defined Terms................
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
Expenses in connection with the offering of the Senior Notes being
registered hereby are estimated as follows:
SEC registration fee.........................................$[ ]
]
Legal fees and expenses.......................................[
]
Accounting fees and expenses..................................[
]
Blue sky fees and expenses....................................[
]
Rating agency fees............................................[
]
Trustee's fees and expenses...................................[
]
Printing......................................................[
]
Miscellaneous.................................................[ ]
----------
Total...................................................$[ ]
==========
Reference is made to Section [ ] of the Underwriting Agreement among
Credit Suisse First Boston Corporation, as representative of the several
Underwriters, and the Registrant (see Exhibit 1.1), which provides for
indemnification of the Registrant under certain circumstances.
Section [ ] of the Limited Liability Company Agreement of the
Registrant (see Exhibit 3.2) provides for the indemnification of the member
and the manager of the Registrant to the fullest extent permissible under
Delaware law.
Section [ ] of the Limited Liability Company Agreement of the
Registrant (see Exhibit 3.2) requires that the Registrant indemnify, and,
in certain instances, advance expenses to, its agents, with respect to
certain costs, expenses, judgments, fines, settlements and other amounts
incurred in connection with any proceeding, to the full extent permitted by
applicable law.
Item 16. Exhibits.
1.1 Form of Underwriting Agreement*
3.1 Certificate of Formation of Triangle Funding II LLC*
3.2 Limited Liability Company Agreement of Triangle Funding II LLC*
4.1 Form of Indenture*
4.2 Form of Repurchase Agreement*
4.3 Form of Credit Swap*
4.4 Form of Administration Agreement*
5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP with respect
to legality*
8.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP
with respect to tax matters*
23.1 Consent of Skadden, Arps, Slate, Meagher & Flom LLP included
as part of Exhibit 5.1*
23.2 Consent of Skadden, Arps, Slate, Meagher & Flom LLP included
as part of Exhibit 8.1*
---------------
* To be filed by amendment.
Item 17. Undertakings.
The undersigned Registrant undertakes as follows:
(a) For purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1)
or (4) or 497(h) under the Act will be deemed to be part of this
registration statement as of the time it was declared effective.
(b) For purposes of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time will
be deemed to be the initial bona fide offering thereof.
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 and has duly caused
this the Registration Statement on Form S-3 to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of New York, New
York, on the 26th day of March, 1998.
TRIANGLE FUNDING II LLC
By: GSS Holdings, Inc., as Manager
By: /s/ Andrew L. Stidd
--------------------------------
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
President, March 26, 1998
GSS Holdings, Inc., as Manager
