<PAGE>
As filed with the Securities and Exchange Commission on May 9, 2000
Registration No. 333-
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________
REGISTRATION STATEMENT
ON FORM S-3
UNDER
THE SECURITIES ACT OF 1933
____________________________
NATIONAL FINANCIAL SECURITIES CORPORATION
(Registrant)
(Exact name of registrant as specified in its charter)
Delaware Applied For
(State of Incorporation) (I.R.S. Employer I.D. No.)
909 East Main Street
Richmond, Virginia 23219
(804) 649-3952
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
____________________________
WILLIAM E. HARDY Copy to:
909 East Main Street EDWARD L. DOUMA, ESQ.
Richmond, Virginia 23219 DAVID B. RICH, III, ESQ.
(804) 649-3952 Hunton & Williams
(804) 649-0990 (telecopy) Riverfront Plaza, East Tower
(Name, address, including zip code and 951 East Byrd Street
telephone number, including area Richmond, Virginia 23219-4074
code, of agent for service) (804) 788-8200
(804) 788-8218 (telecopy)
_______________________
Approximate date of commencement of proposed sale to the public:
From time to time after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
_______________________
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
======================================================================================================================
Proposed Proposed
Maximum Maximum
Title of Securities Amount to be Offering Price Aggregate Amount of
Being Registered Registered* Per Unit* Offering Price* Registration Fee
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Trust Certificates $50,000,000 100% $50,000,000 $13,200
======================================================================================================================
</TABLE>
* Estimated solely for calculating the registration fee pursuant to Rule
457(a).
__________________________________
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 the Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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 this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
<PAGE>
Explanatory Note
This Registration Statement includes a base prospectus and a form of prospectus
supplement. The form of prospectus supplement is meant to be illustrative of
the type of disclosure that might be presented for a series of trust
certificates, but is not meant to be, and necessarily cannot be, exhaustive of
all possible features that might exist in a particular series. Each base
prospectus used (in either preliminary or final form) will be accompanied by an
appropriate prospectus supplement.
<PAGE>
Prospectus supplement to prospectus dated May 5, 2000
National Financial Securities Corporation, Depositor
NFSC Trust 2000-_, Issuer
__,000,000 Trust Certificates, principal amount $25 per Trust Certificate
relating to
[name of underlying securities]
The Trust will issue a single class of Trust Certificates, which will represent
interests in the Trust and will be paid only from the trust assets. The Trust
will own [name of underlying securities] issued by [underlying issuer] and all
future payments of interest and a single payment of principal due on the
[underlying securities], as described in this prospectus supplement. The Trust
Certificates will evidence the right to receive [semi-annual] interest payments
on the principal amount of your Trust Certificates at an interest rate of _____
% per annum, and the right to receive your pro rata amount of a single payment
of principal of $____________ due on _______________ or on such earlier date,
and together with any applicable redemption premium, as described in this
prospectus supplement.
Neither the Trust Certificates nor the underlying securities are deposits or
other obligations of a bank, nor are they insured by the FDIC or any other
government agency. The Trust Certificates will represent interests in the Trust
only and will not represent an interest in or obligations of any other party.
You should fully consider the risk factors on page S-_ in this prospectus
supplement prior to investing in the Trust Certificates.
Neither the SEC nor any state securities commission has approved or disapproved
of these securities or determined if this prospectus supplement or the
prospectus to which it relates is truthful or complete. Any representation to
the contrary is a criminal offense.
<TABLE>
<CAPTION>
Per Trust
Certificate Total
----------- -----
<S> <C> <C>
Public offering price........................................... $__ $_______
Underwriting discount........................................... $_____ $_______
Proceeds to Trust (before expenses)............................. $_______ $_______
</TABLE>
The public offering price includes accrued interest from ______ __, 20__, if
settlement occurs after that date. The underwriter expects to deliver your Trust
Certificates in book-entry form only through The Depository Trust Company on or
about _______ __, 20__.
Scott & Stringfellow
The date of this prospectus supplement is _________ __, 20__.
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Supplement
Information About Trust Certificates..................................... iii
Summary.................................................................. S-1
Risk Factors............................................................. S-3
The Trust Certificates................................................... S-3
General......................................................... S-3
Redemption of Trust Certificates................................ S-4
Default on Underlying Securities................................ S-5
DTC Book Entry Only System...................................... S-5
The Trustee And The Trust Agreement...................................... S-6
Underwriting............................................................. S-7
Legal Matters............................................................ S-8
Ratings.................................................................. S-9
Federal Income Tax Considerations........................................ S-9
ERISA Considerations..................................................... S-9
General......................................................... S-9
Availability Of Publicly-Offered Security Exception............. S-10
Ineligible Purchasers........................................... S-10
Review By Plan Fiduciaries...................................... S-11
Index Of Terms........................................................... S-12
Description Of Underlying Securities..................................... A-1
Available Information........................................... A-1
Terms Of Underlying Securities.................................. A-1
Prospectus
Available Information.................................................... ii
Incorporation Of Certain Documents By Reference.......................... ii
Reports To Certificateholders............................................ iii
Prospectus Summary....................................................... 1
The Trusts............................................................... 3
General......................................................... 3
The Trustee..................................................... 3
Office For Registration Of Transfer And Exchange................ 3
The Underlying Securities................................................ 3
General......................................................... 3
Available Information Regarding The Obligors............................. 4
Securityholder Communications................................... 4
Use Of Proceeds.......................................................... 4
The Depositor............................................................ 4
The Certificates......................................................... 5
General......................................................... 5
Distributions Of Interest And Principal Amount.................. 5
Certain Information Regarding The Certificates........................... 5
Book-Entry Registration......................................... 5
Definitive Certificates......................................... 7
Defaults And Remedies........................................... 7
Issuance And Delivery........................................... 8
Termination Of Trust Agreement.................................. 9
Reports To Certificateholders................................... 9
Accounts........................................................ 9
Distributions................................................... 9
Federal Income Tax Considerations........................................ 10
Classification Of The Trust..................................... 10
Taxation Of Certificateholders.................................. 10
Additional Tax Considerations................................... 13
State And Other Tax Considerations.............................. 14
ERISA Considerations..................................................... 15
General......................................................... 15
Exempt Plans.................................................... 15
Plan Assets..................................................... 15
Prohibited Transactions......................................... 17
Ineligible Purchasers........................................... 18
Plan Of Distribution..................................................... 18
Legal Opinions........................................................... 19
Index Of Terms........................................................... 20
</TABLE>
ii
<PAGE>
Information About Trust Certificates
We provide information to you about the Trust Certificates in two
separate documents that progressively provide more detail: first, the
accompanying prospectus, which provides general information, some of which may
not apply to the Trust Certificates, and second this prospectus supplement,
which describes the specific terms of your series of Trust Certificates.
You are urged to read both the prospectus and this prospectus
supplement in full to obtain material information concerning the Trust
Certificates. If the descriptions of the Trust Certificates vary between this
prospectus supplement and the prospectus, you should rely on the information
contained in this prospectus supplement.
We include cross-references in this prospectus supplement and the
prospectus to captions in these materials where you can find further related
discussions. The Table of Contents in this prospectus supplement and the
prospectus identify the pages where these sections are located.
You can find a listing of the pages where capitalized terms used in
this prospectus supplement and the accompanying prospectus are defined under the
caption "Index of Terms" beginning on page S-__ in this document and beginning
on page __ in the accompanying prospectus.
The Depositor has filed with the Securities and Exchange Commission a
registration statement of which this prospectus supplement and the accompanying
prospectus form a part under the Securities Act of 1933, as amended, with
respect to the Trust Certificates. This prospectus supplement and the
accompanying prospectus do not contain all of the information contained in the
registration statement. For further information regarding the documents referred
to in this prospectus supplement and the prospectus, you should refer to the
registration statement and the exhibits thereto. The registration statement and
such exhibits can be inspected and copied at prescribed rates at the public
reference facilities maintained by the SEC at its Public Reference Section, 450
Fifth Street, N.W., Washington, D.C. 20549 (information on the operation of the
Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330), and
at its Regional Offices located at: Chicago Regional Office, Citicorp Center,
500 West Madison Street, Chicago, Illinois 60661; and New York Regional Office,
Seven World Trade Center, New York, New York 10048. Copies of such materials can
also be obtained electronically through the SEC's Internet Web Site
(http://www.sec.gov).
You should rely only on the information contained in this prospectus
supplement or the prospectus. Neither the Depositor nor the Underwriter has
authorized any other person to provide you with different information. If anyone
provides you with different or inconsistent information, you should not rely on
it. Neither the Depositor nor the Underwriter is making an offer to sell these
securities in any jurisdiction where the offer or sale is not permitted. You
should assume that the information appearing in this prospectus supplement or
the prospectus is accurate as of the date on their respective front covers only.
iii
<PAGE>
Summary
This summary highlights selected information from this prospectus
supplement. It does not contain all of the information you need to consider in
making your investment decision. To understand all of the terms of the offering
of the Trust Certificates, you should read carefully this prospectus supplement
and the accompanying prospectus in full.
Establishment Of The Trust
National Financial Securities Corporation, the Depositor, is establishing the
Trust, which is named NFSC Trust 2000-_ . [address and telephone number of
Depositor.] The assets of the Trust will consist of $________ _.__% due _____
Underlying Securities issued by _____________________, the Underlying Issuer,
and payments of principal and interest made by the Underlying Issuer on the
Underlying Securities as discussed in more detail under "The Trust
Certificates--General."
Offered Securities
The Trust will issue the Trust Certificates in a single class. As holder of
Trust Certificates, you will have the right to receive from the Trust periodic
payments of interest on the principal amount of your Trust Certificates accruing
from _____ __, 2000 at a rate of _.__% per annum on each ______ __ and ______
__, commencing on _______ __, 2000, until the principal amount of your Trust
Certificates is paid in full as described below, and the pro rata share for your
Trust Certificates of a single payment of principal of $___,000,000. You will be
expected to receive your pro rata share of the principal payment on ________ __,
20__, which is the Stated Maturity Date, or on an earlier date on which the
Trust redeems your Trust Certificates as described in "Redemption of the Trust
Certificates."
Redemption Of The Trust Certificates
The Underlying Issuer may redeem the Underlying Securities on or after ________
__, 20__, in whole or in part from time to time at the percentage redemption
prices stated on page A-2 of Appendix A. The proceeds of a redemption will be
allocated pro rata among the Certificateholders. The redemption prices per Trust
Certificate are set forth under "The Trust Certificates--Redemption of Trust
Certificates."
The amount, if any, by which the redemption price paid on the Underlying
Securities exceeds their principal amount is called "Redemption Premium." If the
Underlying Issuer pays a Redemption Premium on the Underlying Securities, you
will receive the pro rata amount of the Redemption Premium corresponding to the
principal amount of your Trust Certificates.
See "The Trust Certificates--Redemption of Trust Certificates."
The Underlying Issuer, however, is not required to redeem the Underlying
Securities. Therefore, there can be no assurance that the Trust will repurchase
your Trust Certificates prior to the Stated Maturity Date. Should the Trust
redeem your Trust Certificates prior to the Stated Maturity Date, the Trustee
will notify you by mail at least 15 days before the redemption date.
Underlying Securities
[name of Underlying Issuer] _.__% Underlying Securities due 20__.
Trustee And Trust Agreement
[name of Trustee] will act as Trustee pursuant to a series Trust Agreement. You
may inspect the Trust Agreement at the office of the Trustee at [address and
telephone number].
Denominations
Each Trust Certificate will have a principal amount of $__.
Registration, Clearance And Settlement
Your Trust Certificates will be registered in the name of Cede & Co., as the
nominee of The Depository Trust Company. You will not receive a definitive
certificate representing your interest, except in limited circumstances
described in the accompanying prospectus when Trust Certificates in fully
registered, certificated form are issued.
S-1
<PAGE>
See "Certain Information Regarding the Certificates--Definitive Certificates" in
the prospectus.
Tax Considerations
Hunton & Williams, counsel to the Depositor, is of the opinion that under
existing law the Trust will be a grantor trust and not a partnership or an
association taxable as a corporation, and your Trust Certificates will represent
beneficial interests in the Underlying Securities.
See "Federal Income Tax Considerations" in this prospectus supplement and in the
prospectus for additional information concerning the application of federal
income tax laws.
ERISA Considerations
An "employee benefit plan" subject to the Employee Retirement Income Security
Act of 1974, as amended, or a "plan" subject to Section 4975 of the Internal
Revenue Code of 1986, contemplating the purchase of Trust Certificates should
consult with its counsel before making such a purchase. The fiduciary of such an
employee benefit plan or plan and such legal advisors should consider whether
the Trust Certificates will satisfy all of the requirements of the "Publicly-
Offered Securities Exception" and the possible application of other "prohibited
transaction exemptions."
See "ERISA Considerations" in this prospectus supplement and in the prospectus.
Ratings
It is a condition to issuance that the Trust Certificates have ratings assigned
by ______________ [and _______________] equivalent to the ratings of the
Underlying Securities. As of the date of this prospectus supplement, the
Underlying Securities were rated "__" by ______ and "__" by _____.
S-2
<PAGE>
Risk Factors
You should consider the following factors in deciding whether to
purchase the Trust Certificates:
1. No Detailed Information About Underlying Securities Or Underlying
Issuer. This prospectus supplement does not provide you with detailed
information with respect to the Underlying Securities or the Underlying
Issuer, any risk factors relating thereto, or any legal, financial or other
rights or obligations arising under or related to the Underlying
Securities. See "Available Information Regarding The Obligors" in the
prospectus and "Appendix A--Description of Underlying Securities--Available
Information" in this prospectus supplement.
2. Underlying Issuer Is The Only Payment Source. The payments made by
the Underlying Issuer on the Underlying Securities are the only source of
payment on your Trust Certificates. The Underlying Issuer is subject to
laws permitting bankruptcy, moratorium, reorganization or other actions.
Should the Underlying Issuer experience financial difficulties, this could
result in delays in payment, partial payment or non-payment of your Trust
Certificates. See "The Trust Certificates--Default on Underlying
Securities" in this prospectus supplement.
The Trust Certificates
General
The Trust Certificates (the "Trust Certificates") relate to $__,000,000
aggregate principal amount - of $___,000,000 aggregate principal amount issued
in ____________) of _.__% [description of Underlying Securities] due 20__ (the
"Underlying Securities") of [name of Underlying Issuer] (the "Underlying
Issuer"). The Underlying Securities provide for [semiannual] interest payments
("Interest Payments") due on ________ __ and __________ __ of each year (each,
an "Interest Payment Date") and for a single payment of principal of $__,000,000
(the "Principal Payment") payable on _________ __, 20__ (the "Stated Maturity
Date") or upon earlier redemption.
The Trust Certificates are issued in a single class with a principal
amount of $__,000,000. Each Trust Certificate evidences the right to receive
periodic interest payments on its principal amount accruing from _______ __,
2000 at a rate of _.__% per annum on each _______ __ and _______ __, commencing
_______ __, 2000, until the principal amount of such Trust Certificate is paid
on the Stated Maturity Date, or upon the earlier redemption of such Trust
Certificate. [Interest shall be computed on the basis of a 360-day year
consisting of twelve 30-day months.] The Trust Certificates evidence ownership
in the aggregate of all of the Interest Payments, and of the Principal Payment,
due on the Underlying Securities. In addition, the Trust Certificates are
entitled to the Redemption Premium, if any, payable by the Underlying Issuer
upon a redemption of the Underlying Securities by the Underlying Issuer. See "--
Redemption of Trust Certificates" in this prospectus supplement.
[The Underlying Securities were transferred to the Trust exclusive of
the right to receive interest on the Underlying Securities accrued from _______
__, 2000 until, but excluding, _______ [15], 2000 (the "Retained Amount").
Therefore, the interest payment that purchasers of Trust Certificates (each, a
"Certificateholder") are scheduled to receive on the interest payment date on
______ __, 2000 will not include the Retained Amount and the Retained Amount
will be distributed to the Depositor or its designee.]
The scheduled interest and principal payments on the Trust Certificates
are payable solely from payments of principal and interest on the Underlying
Securities made by the Underlying Issuer. If payments are not made on the
Underlying Securities, the Certificateholders will not be paid and will suffer
losses. You should avail yourself of the same information concerning the
Underlying Issuer as you would if you were purchasing the Underlying Securities.
See "Available Information Regarding The Obligors" in the prospectus and
"Appendix A--Description of Underlying Securities--Available Information" in
this prospectus supplement. [Information with respect to the Underlying Issuer
is also available at the Underlying Issuer's corporate website
(http://www._______.com ).]
S-3
<PAGE>
Pursuant to the Trust Agreement, the Underlying Securities underlying
the Trust Certificates will be held by the Trustee for the benefit of the
Certificateholders as book-entry credits to an account of the Trustee at DTC.
The Underlying Issuer is not a party to the Trust Agreement. Each
Certificateholder, by its acceptance of a Trust Certificate, agrees to be bound
by the terms and conditions of the Trust Agreement. Copies of the Trust
Agreement are available upon written request from the Depositor at [address].
The Trust Certificates will be delivered in registered form. Each Trust
Certificate will have a principal amount of $__. The Trust Certificates are
being offered initially in book entry form only through DTC, and purchasers will
not receive physical certificates representing their ownership of Trust
Certificates.
The Trust Certificates offered hereby are different from, and not
exchangeable for, any other series of Trust Certificates or any other receipt or
certificate evidencing ownership of future interest or principal payments due on
Underlying Issuer obligations, and are subject to the terms and conditions of
the Trust Agreement.
Neither the Trustee nor the Depositor will be responsible for the
payments due on the Trust Certificates, except that the Trustee will be required
to apply all payments received in respect of the Underlying Securities,
exclusive of the Retained Amount, to the Trust Certificates to which they relate
without making any deduction, other than any applicable tax or other
governmental charge.
Redemption of Trust Certificates
The Underlying Securities as originally issued are redeemable at any
time on or after ______ __, 20__, in whole or in part from time to time, [on not
less than 30 nor more than 90 days' notice,] at redemption prices expressed in
percentages of the principal amount stated on page A-2 of Appendix A.
The proceeds of such redemption will be distributed to the
Certificateholders pro rata. The redemption prices per Trust Certificate
(expressed in U.S. dollars) during the 12-month period beginning ________ __ of
each year are as follows:
Year Price ($)
- ---- ---------
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
and $__ on or after __________ __, 20__, together, in each case, with accrued
interest to the redemption date.
The amount, if any, by which the redemption price per Trust Certificate
exceeds $__ is referred to herein as the "Redemption Premium."
The holder of a Trust Certificate which is redeemed will receive a
payment equal to its pro rata share of the par value of the Underlying
Securities to be redeemed, plus the Redemption Premium, if any.
On or after the redemption date, interest will cease to accrue on the
Trust Certificates or on any portion thereof called for redemption.
Subject to receipt by the Trustee of actual notice of such redemption
from the Underlying Issuer, the principal amount of Trust Certificates
corresponding to the principal amount of Underlying Securities to be redeemed
will be called for redemption. Notice of such call shall be given by the Trustee
to the registered Certificateholders not less than ___ days prior to the
redemption date by mail to each registered Certificateholder at
S-4
<PAGE>
such registered Certificateholder's last address on the register maintained by
the Trustee; provided, however, that the Trustee shall not be required to give
any notice of redemption prior to the third business day after the date it
receives notice of such redemption.
Default on Underlying Securities
If the Underlying Issuer defaults on the payment of interest or
principal of any Underlying Security, the Trustee shall promptly give notice to
DTC or, for any Trust Certificates which are not then held by DTC or any other
depository, directly to the registered holders thereof. Such notice shall set
forth (a) the identity of the issue of Underlying Securities, (b) the date and
nature of such default, (c) the principal amount of the interest or principal in
default, (d) the Trust Certificates affected by the default, and (e) any other
information which the Trustee may deem appropriate.
In the event of a payment default on the Underlying Securities the
Trustee is required to proceed against the Underlying Issuer on behalf of the
Certificateholders to enforce the Underlying Securities or otherwise to protect
the interests of the Certificateholders, subject to the receipt of indemnity in
form and substance satisfactory to the Trustee; provided, that holders of Trust
Certificates representing a majority of the voting rights on the Trust
Certificates will be entitled to direct the Trustee in any such proceeding,
subject to the Trustee's receipt of satisfactory indemnity.
In the event that the Trustee receives money or other property in
respect of the Underlying Securities, other than a scheduled Interest Payment on
or with respect to an Interest Payment Date, as a result of a payment default on
the Underlying Securities, or actual notice that such moneys or other property
will be received, the Trustee will promptly give notice as provided in the Trust
Agreement to DTC, or for any Trust Certificates which are not then held by DTC
or any other depository, directly to the registered holders of the Trust
Certificates then outstanding and unpaid. Such notice will state that, not later
than __ days after the receipt of such moneys or other property, the Trustee
will allocate and distribute such moneys or other property to the holders of
Trust Certificates then outstanding and unpaid, pro rata by principal amount.
Property other than cash will be liquidated by the Trustee, and the proceeds
thereof distributed in cash, only to the extent necessary to avoid distribution
of fractional securities to Certificateholders. Any such amounts received by the
Trustee in excess of principal and accrued unpaid interest on the Trust
Certificates will be distributed to the Depositor. In-kind distribution of
Underlying Securities to Certificateholders will be deemed to reduce the
principal amount of Trust Certificates on a dollar for dollar basis. No amounts
will be distributed to the Depositor in respect of the Underlying Securities
unless and until principal and accrued interest on the Trust Certificates has
been paid - or reduced by distributions in kind - in full.
Interest and principal payments on the Underlying Securities are
payable solely by the Underlying Issuer. The Underlying Issuer is subject to
laws permitting bankruptcy, liquidation, moratorium, reorganization or other
actions which, in the event of financial difficulties of the Underlying Issuer,
could result in delays in payment, partial payment or non-payment of the Trust
Certificates relating to a Underlying Security.
DTC Book Entry Only System
The Depositor will deliver Trust Certificates to investors in
book-entry form only through the facilities of DTC (the "DTC Book Entry Only
System"), against payment in same day funds. Delivery will be made to investors
at the offices of the Underwriter or to an office specified by the investor of
an entity that is a Participant or Indirect Participant - as defined in the
prospectus. See "Certain Information Regarding the Certificates--Book-Entry
Registration" in the prospectus.
S-5
<PAGE>
The Trustee And The Trust Agreement
The following summary as well as other pertinent information included
elsewhere in this prospectus supplement and the prospectus describes the
material terms generally applicable to the Trust Certificates, but does not
purport to be complete and is expressly made subject to the actual provisions of
the documents. For details of all terms and conditions, reference is made to the
Trust Agreement, a copy of which is available for inspection at the offices of
the Trustee or, during the offering period, at the offices of the Depositor.
Pursuant to the Trust Agreement, the Underlying Securities underlying
the Trust Certificates will be held for the Certificateholders by
_________________ (the "Trustee") initially as book-entry credits to an account
of the Trustee at DTC. The Trustee will establish a separate trust account for
the Underlying Securities relating to Trust Certificates offered hereby. It is
the intent of the Depositor that all of the Underlying Securities will be held
by the Trustee by book-entry credit to its account at DTC. If, for any reason,
the Underlying Securities may no longer be held by book-entry credit at DTC, the
Underlying Securities will thereafter be held by the Trustee in a separate trust
account.
Prior to a payment default by the Underlying Issuer, the only
responsibility of the Trustee with respect to payments on Trust Certificates
will be to apply all payments received in respect of the Underlying Securities
to the registered Certificateholders without making any deductions other than
for any taxes and governmental charges. After a payment default by the
Underlying Issuer, the Trustee is required to proceed against the Underlying
Issuer on behalf of the Certificateholders to enforce the Underlying Securities
or otherwise to protect the interests of the Certificateholders, subject to the
receipt of indemnity in form and substance satisfactory to the Trustee. See "The
Trust Certificates--Default on Underlying Securities" in this prospectus
supplement.
Trust accounts established for Trust Certificates will be accounts
identified and held separate and apart from the general assets of the Trustee
and will not contain any property of the Trustee in its individual capacity.
Pursuant to the Trust Agreement, the Trustee has agreed that it does not have
the authority to assign, transfer, encumber, pledge, sell, set-off or otherwise
dispose of any of the Underlying Securities or any interests therein except as
provided thereunder or as required by law.
The Trust Agreement provides that the Trustee shall keep at its
designated office in [New York, New York] a register (the "Certificate
Register") in which, subject to such reasonable regulations as it may prescribe,
the Trustee shall provide for the registration of, and for the registration of
transfers or exchanges of, Trust Certificates. Notwithstanding the foregoing,
under the DTC Book Entry Only System, transfers and exchange of Trust
Certificates will be accomplished as described under "Certain Information
Regarding the Certificates" in the prospectus. Under the DTC Book Entry Only
System, DTC will be the sole registered holder of the Trust Certificates.
The voting rights on the Trust Certificates will be apportioned among
the Certificateholders pro rata by principal amount. The Trust Agreement
provides that, in the event of any action requiring a vote of the registered
holders of any Underlying Securities, the Trustee - as the owner of record of
the Underlying Securities - , upon receipt of the Underlying Security proxy,
will notify DTC - in its capacity as the owner of record of the Trust
Certificates - of such action. Pursuant to currently existing procedures, it is
expected that DTC, in turn, will notify its Participants, including the
Depositor, who, in turn, will notify the Certificateholders of such event. The
Certificateholders will give their proxies to their Participants. The
Participants will give such proxies to DTC, and DTC will give such proxies to
the Trustee. Thereafter, the Trustee will vote solely in accordance with such
proxies and will apportion its voting power on the basis of the votes cast by
the Certificateholders. In the event that the Trust Certificates have been
removed from the DTC Book Entry Only System and are held as physical
certificates, the Trustee, upon receipt of the Underlying Security proxy, will
notify the registered Certificateholders directly of such action and shall vote
in the same manner as noted above. In casting any votes on the Underlying
Securities in connection with the foregoing, the Trustee will be required to
cast its vote on the Underlying Securities in proportion to the voting rights on
the Trust Certificates held by Certificateholders so directing it,
notwithstanding that such Certificateholders may give contrary instructions. In
no event shall the Depositor be allowed or entitled -
S-6
<PAGE>
other than in its capacity as a safekeeper for a Certificateholder - to vote,
directly or indirectly through the Trustee, any Trust Certificates or the
Underlying Securities.
The Trustee shall at no time vote for or consent to any action to the
extent that such vote or consent could reasonably be expected to alter the
status of the Trust as a grantor trust for federal income tax purposes, prior to
the filing of a bankruptcy petition by or against the Underlying Issuer, or the
commencement of any other similar proceeding, if such action would alter the
timing or amount of any payment on the Underlying Securities or prior to the
filing of a bankruptcy petition by or against the Underlying Issuer, or the
commencement of any other similar proceeding, if such action would result in the
exchange or substitution of any of the outstanding Underlying Securities
pursuant to a plan for the refunding or refinancing of the Underlying
Securities.
The Trustee will maintain a fidelity bond in reasonable form and
amount to protect against loss resulting from the dishonest or fraudulent
action by its employees in connection with the Trustee's obligations under the
Trust Agreement.
The Trust Agreement provides that neither the Trustee nor the Depositor
shall be subject to any liabilities to Certificateholders other than by reason
of willful misconduct, bad faith or negligence in the performance of duties set
forth in the Trust Agreement and that neither of them shall be liable to such
Certificateholders if any law, government regulation or other circumstance
prevents or delays the performance of duties set forth in the Trust Agreement.
DTC will not be deemed an agent of the Trustee. The Trustee may own and
deal in securities of the same issue and maturity as the Underlying Securities
and in Trust Certificates.
The Trustee and the Depositor may amend the Trust Agreement, provided
that no amendment may be made which defers or alters the maturity of a Trust
Certificate or which in any manner adversely affects the rights of a
Certificateholder to the payment of interest, principal or premium, if any,
evidenced thereby or otherwise materially prejudices any substantial existing
right of such a Certificateholder.
The Trustee may at any time resign as Trustee by written notice to the
Depositor, such resignation to take effect upon the appointment of a successor
Trustee, subject to the terms and conditions of the Trust Agreement.
The Depositor may at any time remove the Trustee as Trustee under the
Trust Agreement by written notice of its election to do so, delivered to the
Trustee, and such removal shall take effect upon the appointment of a successor
Trustee and its acceptance of such appointment, subject to the terms and
conditions of the Trust Agreement.
In the event that the Trustee becomes incapable of acting, is adjudged
to be bankrupt or insolvent, or a receiver of the Trustee or of its property is
appointed, or any public officer takes charge or control of the Trustee or of
its property or affairs for the purpose of rehabilitation, conservation or
liquidation, then the Trustee may be removed by court action instituted by any
Certificateholder who has been a Certificateholder for six months or by
Certificateholders of 10% of the principal amount of Trust Certificates
outstanding at such time.
Underwriting
Subject to the terms and conditions set forth in the Underwriting
Agreement (the "Underwriting Agreement") between Scott & Stringfellow, Inc. (the
"Underwriter") and the Trust, the Trust will sell the Trust Certificates to the
Underwriter, and the Underwriter has agreed to purchase from the Trust all of
the Trust Certificates if any Trust Certificates are purchased.
The Trust has been advised by the Underwriter that it proposes
initially to offer the Trust Certificates to the public at the public offering
price set forth on the cover page of this prospectus supplement, and to certain
dealers at such price less a concession not in excess of $.__ per Trust
Certificate. The Underwriter may allow and such dealers
S-7
<PAGE>
may reallow a concession not in excess of $.__. After the initial public
offering, the public offering price and the concessions may be changed.
The Trust Certificates are a new issue of securities with no
established trading market. The Depositor has not made any application to list
the Trust Certificates on any trading exchange. The Underwriter has told the
Depositor that it presently intends to make a market in the Trust Certificates,
but it is not obligated to do so. Any market making by the Underwriter may be
discontinued at any time at the sole discretion of the Underwriter. No assurance
can be given as to whether a trading market for the Trust Certificates will
develop or as to the liquidity of any trading market.
The Trust Certificates are expected to trade flat. This means that any
accrued and unpaid interest on the Trust Certificates will be reflected in the
trading price and purchasers will not pay and sellers will not receive any
accrued and unpaid interest on the Trust Certificates not included in the
trading price.
Until the distribution of the Trust Certificates is completed, rules of
the SEC may limit the ability of the Underwriter to bid for and purchase the
Trust Certificates. As an exception to these rules, the Underwriter is permitted
to engage in certain transactions that stabilize the price of the Trust
Certificates. Possible transactions consist of bids or purchases for the purpose
of pegging, fixing or maintaining the price of the Trust Certificates.
If the Underwriter creates a short position in the Trust Certificates
in connection with this offering, that is, if it sells a greater aggregate
principal amount of Trust Certificates than is set forth on the cover page of
this prospectus supplement, the Underwriter may reduce that short position by
purchasing Trust Certificates in the open market. The Underwriter may also
impose a penalty bid on certain selling group members. This means that if the
Underwriter purchases Trust Certificates in the open market to reduce its short
position or to stabilize the price of the Trust Certificates, it may reclaim the
amount of the selling concession from the selling group members who sold those
Trust Certificates as part of the offering.
In general, purchases of a security for the purposes of stabilization
or to reduce a short position could cause the price of the security to be higher
than it might be in the absence of such purchases. The imposition of a penalty
bid might also have an effect on the price of a Trust Certificate to the extent
that it were to discourage resales of the Trust Certificates.
Neither the Depositor nor the Underwriter makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above might have on the price of the Trust Certificates. In addition,
neither the Depositor nor the Underwriter makes any representation that the
Underwriter will engage in such transactions. Such transactions, once commenced,
may be discontinued without notice.
The Depositor has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act of 1933, as amended
(the "Securities Act"), or to contribute to payments that the Underwriter may be
required to make in respect thereof.
The entire net proceeds received by the Trust from the sale of the
Trust Certificates will be used to acquire the Underlying Securities from the
Depositor, which will use such proceeds to acquire the Underlying Securities
from the Underwriter. Thus, neither the Trust nor the Depositor is expected to
receive any net cash proceeds from the sale of the Trust Certificates.
The expenses of the Depositor in connection with the issuance of the
Trust Certificates are estimated to be approximately $____________. The
Depositor and the Underwriter are each subsidiaries of BB&T Corp.
Legal Matters
Certain legal matters relating to the offering and sale of the Trust
Certificates and the federal income tax aspects thereof will be passed upon by
Hunton & Williams, Richmond, Virginia.
S-8
<PAGE>
Ratings
It is a condition to issuance that the Trust Certificates have ratings
assigned by ______ [and _____] equivalent to the ratings of the Underlying
Securities. As of the date of this prospectus supplement, the Underlying
Securities were rated "__" by _______ and "__" by ____. The ratings given to the
Trust Certificates will be based primarily upon the credit rating of the related
Underlying Securities and the legal structure of the transaction, including the
limitation that payments in respect of the Trust Certificates are subject to
receipt by the Trustee of payments on the Underlying Securities.
There is no assurance that any rating will remain in effect for any
given period of time or that it will not be revised downward or withdrawn
entirely by the rating agency, if in the judgment of the rating agency,
circumstances so warrant. Securities ratings address the likelihood that the
purchasers of Trust Certificates will receive all payments required under the
Trust Agreement.
A security rating is not a recommendation to buy, sell or hold
securities and may be subject to revision or withdrawal at any time by the
assigning entity. The Depositor has not requested a rating of the Trust
Certificates from any rating agency other than _____ [and ____]. However, there
can be no assurance as to whether any other rating agency will rate the Trust
Certificates, or if one does, what rating would be assigned by such rating
agency.
Federal Income Tax Considerations
In the opinion of Hunton & Williams, for federal income tax purposes,
the Trust will be treated as a grantor trust under subpart E of Part I of
subchapter J of the Code and not as a partnership or an association taxable as a
corporation, and the Trust Certificates will represent undivided beneficial
ownership interests in the interest and principal payments on the Underlying
Securities. As a result, each Certificateholder will be treated as owning
indirectly an undivided interest in the Underlying Securities. Accordingly, each
Certificateholder will be required to include in its gross income its pro rata
share of the interest, including any original issue discount ("OID"), and any
other income received or accrued on the Underlying Securities, whether or not
cash is actually distributed to the Certificateholder. [The Trust Certificates
will be treated as Unstripped Certificates for federal income tax purposes. See
"Federal Income Tax Considerations -- Taxation of Certificateholders --
Unstripped Certificates" in the prospectus.] To the extent that the allocable
purchase price paid by a Certificateholder for its interest in the Underlying
Securities differs from the Certificateholder's interest in the Underlying
Securities principal balance, the Trust Certificates will be treated as acquired
with amortizable premium or market discount, as appropriate. A purchaser of a
Trust Certificate with market discount generally will be required to treat any
gain on the sale, redemption or other disposition of all or part of such Trust
Certificate as ordinary income to the extent of accrued (but not previously
taxable) market discount. A Certificateholder who acquires a Trust Certificate
with market discount may be required to defer some interest deductions
attributable to any indebtedness incurred or continued to purchase or carry the
Trust Certificates. A purchaser of Trust Certificates at a premium over the
stated principal amount of the pro rata share of the Underlying Securities
(plus accrued interest) generally may elect to amortize such premium under a
constant yield method as an offset to interest income on the Underlying
Securities.
ERISA Considerations
General
As more fully described in the accompanying prospectus, Section 406 of
ERISA and Section 4975 of the Code prohibit certain "employee benefit plans," as
defined in and subject to ERISA, and "plans," as defined in and subject to
Section 4975 of the Code (such employee benefit plans and plans referred to
herein as "Plans"), from engaging in certain transactions involving "plan
assets" with persons that are "parties in interest" under ERISA or "disqualified
persons" under the Code with respect to the Plan. A violation of these
"prohibited transaction" rules may generate excise tax and other liabilities
under ERISA and the Code for such persons. For example, a prohibited transaction
would arise, unless an exemption were applicable, if the Underwriter were a
party in interest or disqualified person with respect to a Plan that acquired
Trust Certificates from such Underwriter. Accordingly, Trust Certificates may
not be purchased from an Underwriter with plan assets of a Plan if such
Underwriter is a party in interest or a disqualified person with respect to such
Plan, unless one of the prohibited transaction class exemptions described below
or another exemption is available.
Moreover, additional prohibited transactions could arise if the assets
of the Trust were deemed to constitute plan assets of any Plan that owned Trust
Certificates. The Department of Labor ("DOL") has issued a final regulation (the
"DOL Regulation") concerning the definition of what constitutes the "plan
assets" of a Plan. Under the DOL Regulation the assets and properties of certain
corporations, partnerships and certain other entities in which a Plan acquires
an "equity interest" could be deemed to be plan assets of each Plan unless one
of the exceptions under the DOL Regulation is applicable to the Trust.
S-9
<PAGE>
Availability Of Publicly-Offered Security Exception
The DOL Regulation contains an exception (the "Publicly-Offered
Securities Exception") that provides generally that if a Plan acquires an equity
interest in another entity and that equity interest constitutes a "publicly-
offered security," then the assets of the entity are not deemed to be plan
assets of such Plan as a result of such acquisition. A publicly-offered security
is a security that is freely transferable, part of a class of securities that is
owned by 100 or more investors independent of the issuer and of one another and
either is part of a class of securities registered under Section 12(b) or
Section 12(g) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") or sold to the Plans as part of an offering of securities to the public
pursuant to an effective registration statement under the Securities Act, and
the class of securities of which such security is a part is registered under the
Exchange Act within 120 days (or such later time as may be allowed by the SEC)
after the end of the fiscal year of the issuer during which the offering of such
securities to the public occurred.
It is anticipated that the Trust Certificates will meet the criteria of
the Publicly-Offered Securities Exception. First, the Trust Certificates are
being sold as part of a public offering pursuant to an effective registration
statement under the Securities Act, and will be timely registered under the
Exchange Act. Second, it appears that the Trust Certificates are freely
transferable because the minimum investment is not more than $25, and the Trust
Certificates generally may be transferred or exchanged upon payment of a service
charge of the Trustee and a sum sufficient for reimbursement of certain tax or
governmental charges and the making of certain representations and warranties.
As described in the accompanying prospectus, the DOL Regulation provides that if
a security is part of an offering in which the minimum investment is $10,000 or
less, then a requirement that reasonable transfer or administrative fees be
paid, or that advance written notice (including representations as to compliance
with the requirements of the DOL Regulation or the entity's governing
instruments) be provided to the entity that issued the security, will not
prevent a finding that the security is freely transferable. Third, the
Underwriter expects (although no assurance can be given) that at the conclusion
of the offering, the Trust Certificates will be owned by at least 100 investors
who are independent of the Trust and each other. Therefore, it is anticipated
that the underlying assets of the Trust should not be deemed to constitute plan
assets of any Plan which purchases Trust Certificates.
If the Trust Certificates fail to meet the criteria of the
Publicly-Offered Securities Exception so that the Trust's assets are deemed to
be plan assets of Plans that are owners of Trust Certificates, transactions
involving the Trust and parties in interest or disqualified persons with respect
to such Plans might be prohibited under Section 406 of ERISA and Section 4975 of
the Code unless a prohibited transaction exemption is applicable. There are
several class exemptions issued by the DOL that might apply in such event,
including: DOL Prohibited Transaction Class Exemption 84-14 (Class Exemption for
Certain Transactions Determined by a Qualified Professional Asset Manager), 90-1
(Class Exemption for Transactions Involving Insurance Company Pooled Separate
Accounts), 91-38 (Class Exemption for Certain Transactions Involving Bank
Collective Investment Funds), 95-60 (Class Exemption for Transactions Involving
Insurance Company General Accounts) and 96-23 (Class Exemption for Certain
Transactions Determined by an In-house Asset Manager). There is no assurance
that these exemptions, even if all of the conditions specified therein are
satisfied, will apply to all transactions involving the Trust's assets.
Ineligible Purchasers
Regardless of whether the Publicly-Offered Security Exception or the
class exemptions described above apply, Trust Certificates generally may not be
purchased with plan assets of a Plan if the Underwriter, the Depositor, the
Underlying Issuer, the Trustee or any of their respective affiliates either: (a)
has investment discretion with respect to the investment of such Plan's assets;
(b) has authority or responsibility to give or regularly gives investment advice
with respect to such Plan assets for a fee and pursuant to an agreement or
understanding that such advice will serve as a primary basis for investment
decisions with respect to such Plan assets and that such advice will be based on
the particular need of the Plan; or (c) is an employer maintaining or
contributing to such Plan.
S-10
<PAGE>
[Review By Plan Fiduciaries
Due to the complexity of these rules and the penalties imposed upon
persons involved in prohibited transactions, it is especially important that any
Plan fiduciary who proposes to cause a Plan to purchase Trust Certificates
should consult with its own counsel with respect to the potential consequences
under ERISA and the Code of the Plan's acquisition and ownership of Trust
Certificates. Assets of a Plan should not be invested in the Trust Certificates
unless it is clear that the assets of the Trust will not be plan assets of such
Plan or unless it is clear that a prohibited transaction class exemption will
apply and exempt all potential prohibited transactions.]
S-11
<PAGE>
Index Of Terms
Certificate Register......................................... S-6
Certificateholder............................................ S-3
DOL.......................................................... S-9
DOL Regulation............................................... S-9
DTC Book Entry Only System................................... S-5
Exchange Act................................................. S-10
Interest Payment Date........................................ S-3
Interest Payments............................................ S-3
Plans........................................................ S-9
Principal Payment............................................ S-3
Publicly-Offered Securities Exception........................ S-2, S-10
Redemption Premium........................................... S-1, S-4
Retained Amount.............................................. S-3
Securities Act............................................... S-8
Stated Maturity Date......................................... S-3
Trust Certificates........................................... S-3
Trustee...................................................... S-6
Underlying Issuer............................................ S-3
Underwriter.................................................. S-7
Underlying Securities........................................ S-3
Underwriting Agreement....................................... S-7
S-12
<PAGE>
APPENDIX A
Description Of Underlying Securities
Available Information
The Underlying Issuer is subject to the information requirements of the
Exchange Act and in accordance therewith files reports and other information
with the SEC. Such reports, proxy and information statements and other
information filed by the Underlying Issuer with the SEC can be inspected and
copied at prescribed rates at the public reference facilities maintained by the
SEC at its Public Reference Section, 450 Fifth Street, N.W., Washington, D.C.
20549, and at its Regional Offices located at: Chicago Regional Office, Citicorp
Center, 500 West Madison Street, Chicago, Illinois 6066; and New York Regional
Office, Seven World Trade Center, New York, New York 10048. Copies of such
materials can also be obtained electronically through the SEC's Internet Web
Site (http://www.sec.gov). [Information about the Underlying Issuer is also
available at the Underlying Issuer's website (http://www._______.com).]
Terms Of Underlying Securities
Underlying Issuer:
Underlying Securities:
Dated:
Stated Maturity Date:
Original Par Value Amount Issued:
CUSIP Number:
Stated Interest Rate: ___%
Interest Payment Dates:
Redemption of Underlying Securities:
A-1
YEAR PRICE (%)
---- ---------
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
and 100% on or after __________________,
together, in each case, with accrued
interest to the redemption date.
A-1
<PAGE>
<TABLE>
<S> <C>
Mode of Payment of Underlying By credit to the account of the holder at DTC
Securities:
Par Value Amount of Underlying Securities $______________
Deposited Under Trust Agreement:
</TABLE>
The Underlying Securities will be held by the Trustee for the benefit
of the Certificateholders, as book-entry credits to an account of the Trustee at
DTC.
A-2
<PAGE>
Prospectus
National Financial Securities Corporation
Depositor
Trust Certificates
Issuable in Series
- --------------------------------------------------------------------------------
Consider carefully the risk factors in the prospectus supplement
Your trust certificates will represent obligations of your trust only and will
not represent interests in or obligations of National Financial or any of its
affiliates. Unless expressly provided in the accompanying prospectus supplement,
your securities are not insured or guaranteed by any person.
These securities are not deposits or other obligations of a bank and are not
insured by the FDIC or any other government agency.
This prospectus may be used to offer and sell any series of securities only if
accompanied by the prospectus supplement for that series.
- --------------------------------------------------------------------------------
Your trust certificates
. will evidence an ownership interest in or be secured by the property of
your trust and will be paid only from your trust's assets,
. will be rated in one of the four highest rating categories by at least one
nationally recognized rating organization, and
. will be issued as part of a designated series.
Your trust will include
. bonds, notes, debentures, trust preferred securities, capital securities,
preferred stock, or other similar securities identified in the prospectus
supplement,
. which were originally issued under an effective registration statement
under the Securities Act, and
. whose issuer is a reporting company under the Exchange Act.
Investors
. will receive interest and principal payments from collections on their
trust's assets but have no entitlement to payments from other assets of
National Financial.
Neither the SEC nor any state securities commission has approved these
securities or determined that this prospectus is accurate or complete. Any
representation to the contrary is a criminal offense.
May 9, 2000
<PAGE>
Important Notice About Information Presented in This
Prospectus And The Accompanying Prospectus Supplement
We provide information to you about your investment in two separate
documents that progressively provide more detail: this prospectus, which
provides general information, some of which may not apply to your series of
securities and the accompanying prospectus supplement, which will describe the
specific terms of your series of securities, including:
. the timing of interest and principal payments,
. information about the specific assets of your trust,
. the ratings for each class, and
. the method for selling your securities.
You should rely only on the information provided in this prospectus and the
accompanying prospectus supplement, including the information incorporated by
reference. We have not authorized anyone to provide you with different
information. Your securities are not offered in any state where the offer is
not permitted.
We have included cross-references in this prospectus and in the
accompanying prospectus supplement to captions in these materials where you can
find further related discussions. The table of contents included in the
accompanying prospectus supplement provides the pages on which these captions
are located.
<PAGE>
Table Of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus
Prospectus Summary.......................................................... 1
The Trusts.................................................................. 3
General............................................................ 3
The Trustee........................................................ 3
Office For Registration Of Transfer And Exchange................... 3
The Underlying Securities................................................... 3
General............................................................ 3
Available Information Regarding The Obligors................................ 4
Securityholder Communications...................................... 4
Use Of Proceeds............................................................. 4
The Depositor............................................................... 4
The Certificates............................................................ 5
General............................................................ 5
Distributions Of Interest And Principal Amount..................... 5
Certain Information Regarding The Certificates.............................. 5
Book-Entry Registration............................................ 5
Definitive Certificates............................................ 7
Defaults And Remedies.............................................. 7
Issuance And Delivery.............................................. 8
Termination Of Trust Agreement..................................... 9
Reports To Certificateholders...................................... 9
Accounts........................................................... 9
Distributions...................................................... 9
Federal Income Tax Considerations........................................... 10
Classification Of The Trust........................................ 10
Taxation Of Certificateholders..................................... 10
Additional Tax Considerations...................................... 13
State And Other Tax Considerations................................. 14
ERISA Considerations........................................................ 15
General............................................................ 15
Exempt Plans....................................................... 15
Plan Assets........................................................ 15
Prohibited Transactions............................................ 17
Ineligible Purchasers.............................................. 18
Plan Of Distribution........................................................ 18
Legal Opinions.............................................................. 19
Available Information....................................................... 19
Incorporation Of Certain Documents By Reference............................. 19
Reports To Certificateholders............................................... 19
Index Of Terms.............................................................. 20
</TABLE>
iv
<PAGE>
Prospectus Summary
This Prospectus Summary is qualified in its entirety by reference to
the detailed information appearing elsewhere in this prospectus and by reference
to the information with respect to the trust certificates (the "Trust
Certificates") contained in the related prospectus supplement to be prepared and
delivered in connection with the offering of Trust Certificates. Capitalized
terms used in this Prospectus Summary are defined elsewhere in this prospectus
and in the related prospectus supplement. A listing of the pages on which some
of such terms are defined is found in the "Index of Terms."
Issuer
With respect to each series of Trust Certificates, the Trust formed by National
Financial Securities Corporation (the "Depositor") and the trustee named in the
prospectus supplement (the "Trustee") pursuant to a trust agreement (the "Trust
Agreement"). Each trust ("Trust) will be established for the primary purpose of
issuing Trust Certificates and using the proceeds to acquire the securities
described in the prospectus supplement for that series.
Depositor
National Financial Securities Corporation, a Delaware corporation.
Trustee
The Trustee specified in the prospectus supplement.
The Certificates
Each series of Trust Certificates will include one or more classes of Trust
Certificates issued under a Trust Agreement between the Depositor and the
Trustee.
The Trust Certificates will be available for purchase in minimum denominations
of $25 and integral multiples of $25 in excess thereof, and will be available in
book-entry form or in the form of Definitive Certificates, as specified in the
prospectus supplement. Certificateholders of a series initially issued in book-
entry form will be able to receive Definitive Certificates only in the limited
circumstances described in this prospectus.
See "Certain Information Regarding the Certificates --Definitive Certificates."
Each class of Trust Certificates will have a stated principal amount and will
accrue interest on its principal amount as described in the prospectus
supplement.
The Trust Property or another party
The property of each Trust will include securities ("Underlying Securities")
acquired by the Depositor from one of its affiliates or another party, which
acquired the Underlying Securities in the secondary market. The Trust, in turn,
will acquire the Underlying Securities from the Depositor. The Underlying
Securities will be identified in the prospectus supplement and will be
securities registered on a registration statement under the Securities Act of
1933, as amended, which issuer also will be a reporting company under Section 12
or Section 15(d) of the Exchange Act at the time the Underlying Securities are
deposited in the Trust. Each of the Underlying Securities will have originally
been issued in a transaction registered pursuant to the Securities Act. An
affiliate of the Depositor will have previously purchased the Underlying
Securities in the secondary market, and this purchase will not have been from
the issuer of the Underlying Securities or any of its affiliates, or as part of
the initial distribution. After the date of issuance by each Trust of its Trust
Certificates (the "Issuance Date"), the Trust will not purchase or otherwise
acquire any additional securities and will not dispose of or create any lien on
its assets, other than upon termination of the Trust.
Payments
Subject to timely receipt of payments on the Underlying Securities, payments in
respect of the Trust Certificates will be paid or distributed at such times and
in such manner as described in the prospectus supplement.
Federal Income Tax Considerations
Upon the issuance of each series of Trust Certificates, Hunton & Williams, as
counsel to the Depositor, will deliver an opinion to the effect that, for
federal income tax purposes the Trust will be a grantor trust and not a
partnership or an association taxable as a corporation, and the Trust
Certificates will be interests in a grantor trust.
See "Federal Income Tax Considerations."
ERISA Considerations
1
<PAGE>
As more fully described under "ERISA Considerations," a particular Trust
Certificate may or may not be eligible for purchase by an "employee benefit
plan" as described in and subject to the Employee Retirement Income Security Act
of 1974, as amended, or a "plan" as defined in and subject to Section 4975 of
the Internal Revenue Code. Section 406 of ERISA and Section 4975 of the Code
prohibit certain transactions involving assets of a Plan with persons who are
"parties-in-interest" - within the meaning of Section 3(14) of ERISA - or
"disqualified persons" with respect to such Plan. Violations of these prohibited
transaction rules can result in excise taxes and other liabilities. An
investment in a Trust Certificate by or on behalf of a Plan will cause the Trust
Certificate to be treated as an asset of the Plan for purposes of Title I of
ERISA and Section 4975 of the Code. Therefore, a Trust Certificate may not be
purchased by a Plan if the Underwriter, the Depositor, the Trustee, the Obligor
of the related Underlying Securities, or any of their respective affiliates is a
party-in-interest or a disqualified person with respect to the Plan, unless a
prohibited transaction exemption applies and the conditions thereof are
satisfied. In addition, unless the Trust Certificate is a "publicly-offered
security" within the meaning of a final regulation issued by the Department of
Labor or another exception set forth in the DOL Regulation applies to the Trust
Certificates, an investment in a Trust Certificate by a Plan may cause the
Underlying Securities also to be treated as assets of the Plan for purposes of
Title I of ERISA and Section 4975 of the Code. If the underlying assets of the
Trust are so treated as Plan assets, the Plan's investment in the Trust
Certificate and certain transactions relating to the underlying assets of the
Trust could violate the prohibited transaction rules under ERISA and the Code.
It is anticipated that certain classes of Trust Certificates within a series of
Trust Certificates may qualify as publicly-offered securities under the DOL
Regulation. Whether a particular Trust Certificate is expected to qualify as a
publicly-offered security under the DOL Regulation will be specified in the
prospectus supplement concerning such Trust Certificate, if applicable.
Accordingly, fiduciaries of Plans considering the purchase or holding of Trust
Certificates by or on behalf of a Plan should consult their counsel prior to
making such a purchase.
See "ERISA Considerations" in this prospectus and in the prospectus supplement.
Rating of the Certificates
It is a condition to the issuance of each series of Trust Certificates that they
be rated investment grade, that is, in one of the four highest rating categories
- - without taking into account any subcategories - by at least one nationally
recognized statistical rating organization. The ratings applicable to the Trust
Certificates of each series will be as set forth in the prospectus supplement.
A security rating should be evaluated independently of similar ratings of
different types of securities. A rating is not a recommendation to buy, sell or
hold securities and may be subject to revision or withdrawal at any time by the
assigning rating organization. There can be no assurance that a rating will not
be lowered or withdrawn by a rating organization if circumstances so warrant.
2
<PAGE>
The Trusts
General
With respect to each series of Trust Certificates, the Depositor will
establish a Trust by depositing the Trust Property in the Trust, without
recourse. After the Issuance Date with respect to each Trust, the Trust will not
purchase or otherwise acquire any additional securities and will not dispose of
or create any lien on its assets, other than upon termination of the Trust.
The trust property will consist of the Underlying Securities, all
monies due or received in respect thereof, certain accounts and the proceeds
thereof, in each case as described in the related prospectus supplement (the
"Trust Property"). The Trust Certificates will evidence ownership interests in
the related Trust Property.
The Trustee
The Trustee for each Trust will be specified in the prospectus
supplement. The Trustee's liability in connection with the issuance and sale of
the Trust Certificates is limited solely to the express obligations of such
Trustee set forth in the Trust Agreement. A Trustee may resign at any time, in
which event the Depositor will be obligated to appoint a successor trustee. Any
resignation or removal of a Trustee and appointment of a successor trustee will
not become effective until acceptance of the appointment by the successor
trustee.
The Trust Agreement will provide that the Trustee must comply with
Section 310(b) of the Trust Indenture Act of 1939, as amended (the "TIA"),
provided that there will be excluded from the operation of TIA Section 310(b)(1)
any series trust deposit agreements under which other securities are outstanding
evidencing ownership interests in securities of the Obligor of the Underlying
Securities if the requirements for exclusion set forth in TIA Section 310(b)(1)
are met.
The Trust Agreement will provide that, except during the continuance of
an event of default on the Underlying Securities, the Trustee will perform only
such duties as are specifically set forth in the Trust Agreement. During the
existence of an event of default on the Underlying Securities, the Trustee will
be required to exercise the rights and powers vested in it by the Trust
Agreement and use the same degree of care and skill in their exercise as a
prudent person would exercise or use under the circumstances in the conduct of
such person's own affairs.
Office For Registration Of Transfer And Exchange
The designated office of the Trustee for the registration of transfer
or exchange of Trust Certificates is identified in the prospectus supplement.
Notwithstanding the foregoing, under the Depository Trust Company ("DTC") Book
Entry Only System, transfers and exchange of Certificates will be accomplished
as described under "The Trust Certificates--DTC Book Entry Only System" in the
prospectus supplement.
Any holder presenting Trust Certificates for surrender or registration
of transfer or exchange may be required to pay any applicable service charge of
the Trustee and a sum sufficient for reimbursement of any tax or governmental
charge, to file such proof of residence, or other matters or information, to
execute such certificates and to make such representations and warranties and
such assurances, including a signature guaranty, as the Trustee may reasonably
deem necessary or proper. The Trustee may withhold the delivery or delay the
surrender of a registration of transfer or exchange of any Trust Certificates
until such payment is made and proof or other information is filed, such
certificates are executed or such representations and warranties are made.
The Underlying Securities
General
The Underlying Securities to be purchased by each Trust will be debt
securities (or undivided interests in such debt securities) issued by a trust,
corporation or other organization (an "Obligor") eligible to offer and sell
securities registered on a registration statement on Form S-3 promulgated under
the Securities Act of 1933, as amended (the "Act"), which Obligor will
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also be a reporting company under Section 12 or Section 15(d) of the Exchange
Act at the time the Underlying Securities are deposited in the Trust. Each of
the Underlying Securities will have originally been issued in a transaction
registered pursuant to the Act. The Underlying Securities will be purchased by
the Trust from the Depositor. The Underlying Securities will have been acquired
by the Depositor from an affiliate. This affiliate of the Depositor will have
previously purchased the Underlying Securities in the secondary market, and will
not have purchased the Underlying Securities from the issuer thereof or any of
its affiliates, and the Underlying Securities will not have been purchased by
this affiliate as part of its initial distribution. The specific terms and
conditions of the Underlying Securities to be purchased by each Trust will be
detailed in the prospectus supplement.
Available Information Regarding The Obligors
The Obligors will be trusts, corporations or other organizations that
at the time of deposit of Underlying Securities into a Trust are subject to the
information requirements of the Exchange Act and file reports and other
information with the SEC. Such reports, proxy and information statements and
other information filed by the Obligors with the SEC can be inspected and copied
at the public reference facilities maintained by the SEC at its Public Reference
Section, 450 Fifth Street, N.W., Washington, D.C. 20549, and at its Regional
Offices located at: Chicago Regional Office, Citicorp Center, 500 West Madison
Street, Chicago, Illinois 6066; and New York Regional Office, Seven World Trade
Center, New York, New York 10048. Copies of such materials can also be obtained
electronically through the SEC's Internet Web Site (http://www.sec.gov). If the
Underlying Securities are listed on the New York Stock Exchange, the material
described above and other information with respect to the Obligor will also be
available for inspection at the offices of the New York Stock Exchange at 20
Broad Street, New York, New York.
Securityholder Communications
Upon the receipt by the Trustee of any securityholder communications
from an Obligor, the Trustee will transmit such communications to the beneficial
owners of the Trust Certificates (each, a "Certificateholder") upon receipt from
the Obligor of assurances that the Trust's reasonable expenses will be
reimbursed by the Obligor. In addition, upon receipt by the Trustee of
securityholder communications from a third party other than the Obligor, the
Trustee will transmit such securityholder communications only to the
Certificateholders upon receipt from such third party of assurances that the
Trustee's reasonable expenses will be reimbursed by such third party. In either
case, if the Trustee does not receive such assurances, then the Trustee, at the
sole discretion of the Depositor and at the expense of the Trust, will transmit
or cause to be transmitted any such bondholder communications to such
Certificateholders.
Use Of Proceeds
The entire net proceeds received by the Trust from the sale of the
Trust Certificates will be used to acquire the Underlying Securities from the
Depositor, which will use such proceeds to acquire the Underlying Securities
from one or more of its affiliates. Thus, neither the Trust nor the Depositor is
expected to receive any net cash proceeds from the sale of the Trust
Certificates.
The Depositor
The Depositor, a wholly owned subsidiary of Scott & String Fellow,
Inc., was incorporated in the state of Delaware on May 3, 2000. The Depositor is
organized for the limited purpose of acquiring securities, forming trusts,
transferring securities to the trusts, and engaging in related activities. The
assets of the Depositor and its affiliates are not available to satisfy
obligations of any trust. The principal executive offices of the Depositor are
located at 909 East Main Street, Richmond, Virginia 23219, telephone (804) 649-
3952.
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The Certificates
General
With respect to each Trust, the Trust Certificates will be issued
pursuant to the terms of a Trust Agreement, a form of which has been filed as an
exhibit to the Registration Statement of which this prospectus forms a part. The
terms and conditions of the Trust Certificates include those stated in the Trust
Agreement and those made part of the Trust Agreement by reference to the TIA.
The Trust Certificates are subject to all such terms and conditions, and
reference is made to the Trust Agreement and the TIA for a statement thereof.
The following summary does not purport to be complete and is subject to, and
qualified in its entirety by reference to, all of the provisions of the Trust
Certificates and the Trust Agreement. Where particular provisions or terms used
in the Trust Agreement are referred to, the actual provisions - including
definitions of terms - are incorporated by reference as part of this summary.
Each class of Trust Certificates of a series of Trust Certificates
issued in book-entry form will initially be represented by a single Trust
Certificate registered in the name of DTC. The Trust Certificates will be
available for purchase in minimum denominations described in the prospectus
supplement. The Depositor has been informed by DTC that DTC's nominee will be
Cede. Accordingly, Cede is expected to be the holder of record of the Trust
Certificates issued in book-entry form. For Trust Certificates initially issued
in book-entry form, unless and until Definitive Certificates are issued under
the limited circumstances described herein, no Certificateholder will be
entitled to receive a physical certificate representing a Trust Certificate. All
references herein to actions by Certificateholders refer to actions taken by DTC
upon instructions from the Participants and all references herein to
distributions, notices, reports and statements to Certificateholders refer to
distributions, notices, reports and statements to DTC or Cede, as the registered
holder of the Trust Certificates, as the case may be, for distribution to
Certificateholders in accordance with DTC's procedures with respect thereto. See
"Certain Information Regarding the Certificates -- Book-Entry Registration" and
"-- Definitive Certificates."
Distributions Of Interest And Principal Amount
The timing, priority, amount, allocation and/or rate of distributions
on the Trust Certificates of each class of any series will be described in the
prospectus supplement. Distributions of interest and principal on the Trust
Certificates will be made on the dates specified in the related prospectus
supplement. Interest on the Certificates will be calculated as specified in the
prospectus supplement.
Certain Information Regarding The Certificates
Book-Entry Registration
DTC is a limited purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York UCC and a "clearing agency"
registered pursuant to Section 17A of the Exchange Act. DTC was created to hold
securities for its Participants and to facilitate the clearance and settlement
of securities transactions between Participants through electronic book-entries,
thereby eliminating the need for physical movement of certificates (such
electronic book-entry system, the "DTC Book Entry Only System"). Participants
include securities brokers and dealers, banks, trust companies and clearing
corporations. Indirect access to the DTC Book Entry Only System also is
available to others such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a Participant, either
directly or indirectly ("Indirect Participants").
Certificateholders of book-entry Trust Certificates that are not
Participants or Indirect Participants but desire to purchase, sell or otherwise
transfer ownership of, or other interests in, such Trust Certificates may do so
only through Participants and Indirect Participants. In addition, such
Certificateholders will receive all distributions of principal and interest
through DTC Participants. DTC will forward such payments to its Participants,
which thereafter will forward them to Indirect Participants or such
Certificateholders. Except for the Depositor, it is anticipated that the only
"Certificateholder" will be Cede, as nominee of DTC. Certificateholders will not
be
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recognized by the Trustee as Certificateholders as such term is used in the
Trust Agreement, and Certificateholders will be permitted to exercise the rights
of Certificateholders only indirectly through DTC and its Participants.
Under the rules, regulations and procedures creating and affecting DTC
and its operations (the "Rules"), DTC is required to make book-entry transfers
of Trust Certificates among Participants on whose behalf it acts with respect to
the Trust Certificates and to receive and transmit distributions of principal of
and interest on Trust Certificates. Participants and Indirect Participants with
which Certificateholders have accounts with respect to the Trust Certificates
similarly are required to make book-entry transfers and receive and transmit
such payments on behalf of their respective Certificateholders. Accordingly,
although Certificateholders will not possess Trust Certificates, the Rules
provide a mechanism by which beneficial owners will receive payments and will be
able to transfer their Trust Certificate interests.
The Physical Certificates delivered to the Trustee will be registered
in the name of Cede, as nominee for DTC. The Owners, as purchasers of Trust
Certificates under the DTC Book Entry Only System, will not receive physical
certificates representing their Trust Certificates. Instead, the ownership
interests of the Owners will be recorded, directly or indirectly, through the
records of the respective Participants and Indirect Participants. Transfers
among Owners will be accomplished through and reflected on the records of DTC
and the Participants or Indirect Participants of which those Owners are
customers. DTC will maintain records for the payment, transfer and exchange of
Trust Certificates held by DTC Participants on behalf of Owners, but will not
make payments directly to Owners or record specific transfers of Trust
Certificates from one Owner to another.
Payments on the Underlying Securities that are received by the Trustee
from the Issuer, including payments upon redemption of the Underlying
Securities, will be paid to DTC as the registered holder of the related Trust
Certificates. DTC, under its current practices, would credit those payments to
the accounts of the Participants in accordance with their respective holdings of
Trust Certificates as shown on DTC's records. Payments by Participants and
Indirect Participants to Owners will be governed by standing instructions and
customary practices, and will be the responsibility of each such Participant or
Indirect Participant and not of DTC or the Trustee, subject to any statutory and
regulatory requirements as may be in effect from time to time.
With respect to any Trust Certificate, on or after each interest
payment date, if the Obligor will have paid in full and the Trustee will have
received the interest payment due on such interest payment date on the
Underlying Securities, the Trustee will pay to DTC as the registered holder of
the Trust Certificate as of the applicable record date, in lawful money of the
United States of America, by credit of same day funds to the account of DTC, the
entire amount of such interest payment, less any taxes or governmental charges
required to be withheld from such payment by the Trustee.
With respect to any Trust Certificate, if the Obligor will have paid in
full and the Trustee will have received the principal due upon maturity of the
Underlying Security, or if the Obligor will have paid in full and the Trustee
will have received the principal and redemption premium, if any, payable upon
the earlier redemption of such Trust Certificate, the Trustee will pay to DTC as
the registered holder of the Trust Certificates as of the applicable record
date, in lawful money of the United States of America, by credit of same day
funds to the account of DTC, the entire amount of such principal and premium, if
any, less any taxes or governmental charges required to be withheld from such
payment by the Trustee.
Amounts received by the Trustee before 2:00 p.m. on any day will be
credited to DTC that same day. Amounts received by the Trustee after 2:00 p.m.
will be credited to DTC on the next business day.
DTC may determine to discontinue the DTC Book Entry Only System with
respect to the Trust Certificates at any time by giving notice to the Trustee
and the Depositor and discharging its responsibilities with respect thereto. In
addition, the Depositor may cause the removal of DTC - or a successor or
substitute depository - if the Depositor determines such removal is in the best
interests of the Owners or is in the best interests of the Depositor as long as
the removal will not adversely affect the Owners. If DTC - or a successor or
substitute depository - is removed and the Depositor, after a good faith effort,
is unable to procure the services of a successor depository, the Trustee will
serve as depository of the Underlying Securities.
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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
Certificateholder to pledge Trust Certificates to persons or entities that do
not participate in the DTC system, or to otherwise act with respect to such
Trust Certificates, may be limited due to the lack of a physical certificate for
such Trust Certificates.
DTC has advised the Depositor that it will take any action permitted to
be taken by a Certificateholder under the related Trust Agreement only at the
direction of one or more Participants to whose accounts with DTC the Trust
Certificates are credited. DTC may take conflicting actions with respect to
other undivided interests to the extent that such actions are taken on behalf of
Participants whose holdings include such undivided interest.
Except as required by law, the Trustee will not have any liability for
any aspect of the records relating to or payments made on account of beneficial
ownership interest of the Trust Certificates of any series held by Cede, as
nominee for DTC, or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
Definitive Certificates
Trust Certificates may be issued in book-entry or in Definitive
Certificate form. Certificates initially issued in book-entry form will be
issued in fully registered, certificated form ("Definitive Certificates") to
Certificateholders or respective nominees, rather than to DTC or its nominee,
only if the Depositor advises the appropriate trustee in writing that DTC is no
longer willing or able to discharge properly its responsibilities as depository
with respect to such Trust Certificates and the Depositor is unable to locate a
qualified successor, the Depositor, at its option, elects to terminate the
book-entry system through DTC, after the occurrence of an Event of Default,
holders representing at least a majority of the voting rights relating to the
outstanding Certificates advise the appropriate trustee through DTC in writing
that the continuation of a book-entry system through DTC - or a successor - is
no longer in the best interest of the holders of such securities, or under the
circumstances described under "--Termination of Book-Entry Registration in
Connection with Suspension of Exchange Act Reporting by Obligor."
Upon the occurrence of any event described in the immediately preceding
paragraph, the Trustee will be required to notify DTC of its intent to make
Definitive Certificates available. Upon surrender by DTC of the Physical
Certificates representing the securities and receipt of instructions for
re-registration, the Trustee will reissue such securities as Definitive
Certificates to the holders thereof.
Distributions of principal of, and interest on, the Definitive
Certificates will thereafter be made in accordance with the procedures set forth
in the related Trust Agreement directly to holders of Definitive Certificates in
whose names the Definitive Certificates were registered at the close of business
on the day before the related Payment Date. Such distributions will be made by
check mailed to the address of such holder as it appears on the register
maintained by the Trustee. The final payment on any Definitive Certificate,
however, will be made only upon presentation and surrender of such Definitive
Certificate at the office or agency specified in the notice of final
distribution to the holders of such class.
Definitive Certificates will be transferable and exchangeable at the
offices of the Trustee or of a registrar named in a notice delivered to holders
of Definitive Certificates. No service charge will be imposed for any
registration of transfer or exchange, but the Trustee may require payment of a
sum sufficient to cover any tax or other governmental charge imposed in
connection therewith.
Defaults And Remedies
With respect to each Trust, the Trust Agreement will provide that if
there is an event of default - as defined in the indenture for the Underlying
Securities - with respect to the Underlying Securities and such event of default
is known to the Trustee, the Trustee will promptly give notice to DTC or, if the
Trust Certificates are not then held by DTC or any other depository, directly to
the registered holders of the Trust Certificates then outstanding and unpaid as
provided in the Trust Agreement - and in the manner and to the extent provided
in TIA Section 313(c) - within ninety days after such event of default occurs.
Such notice will set forth the identity of the issue of Underlying
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Securities, the date and nature of such default, the face amount of the interest
or principal in default, the identifying numbers of the class of Trust
Certificates, or any combination, as the case may be, evidencing the interest or
principal described in the preceding clause, if applicable, and any other
information that the Trustee may deem appropriate. Except in the case of a
default in the payment of principal or interest, the Trustee may withhold the
notice to holders of Trust Certificates if and so long as a committee of its
responsible officers in good faith determines that withholding the notice is in
the interests of the holders of the Trust Certificates.
With respect to each Trust, the Trust Agreement will provide that if
default is made in the payment of any interest on any Underlying Security when
due and payable continue for the period specified in the indenture for the
Underlying Securities - or, if no such period is specified, five days -, or
default is made in the payment of the principal of or any installment of the
principal of any Underlying Security when due and payable continue for the
period specified in the indenture for the Underlying Securities - or, if no such
Period is specified, thirty days -, in each case after receipt by the Obligor of
notice thereof from the Trustee or receipt by the Obligor and the Trustee of
notice thereof from holders of outstanding Trust Certificates representing at
least twenty five percent of the voting rights with respect to the Trust
Certificates, and the Obligor shall, after demand of the Trustee, fail to pay
the Trustee the whole amount due and payable on the Underlying Securities for
principal and interest, then the Trustee, in its own name and as trustee of an
express trust, subject to provision being made for indemnification against
costs, expenses and liabilities in a form satisfactory to the Trustee, will
institute a proceeding for the collection of the sums so due and unpaid, and
will prosecute such proceeding to judgment or final decree or settlement, and
will enforce the same against the Obligor or other obligor upon the Underlying
Securities and collect in the manner provided by law out of the property of the
Obligor or other obligor upon the Underlying Securities, whenever situated, the
moneys adjudged or decreed to be payable, unless otherwise directed by holders
of outstanding Trust Certificates representing not less than a majority of the
voting rights.
In the event the Trustee receives money or other property in respect of
the Underlying Securities - other than scheduled payments - as a result of a
payment default on the Underlying Securities, the Trustee will promptly give
notice as provided in the Trust Agreement to DTC, or for any Trust Certificates
that are not then held by DTC or any other depository, directly to the
registered holders of the Trust Certificates then outstanding and unpaid. Such
notice will state that, not later than thirty days after the receipt of such
moneys or other property, the Trustee will distribute such moneys or other
property to the holders of the outstanding Trust Certificates pro rata by face
amount or, if there is more than one class of Trust Certificates under the Trust
Agreement, in proportion to the accreted value of each class of outstanding
Trust Certificates, and within each class pro rata by face amount.
Interest and principal payments and premium, if any, on the Underlying
Securities, are payable solely by the related Obligor.
The Underlying Securities may be or become subject to laws permitting
bankruptcy, moratorium, reorganization or other actions that, in the event of
financial difficulties of the Obligor, could result in delays in payment or in
nonpayment of the Trust Certificates related to a Underlying Security. In such
cases, the treatment accorded certain classes of Trust Certificates may be less
favorable than the treatment accorded other classes of Trust Certificates.
Holders of Trust Certificates will have no recourse against the
Depositor or the Trustee for payment defaults on the Underlying Securities.
The Depositor will be required to furnish to the Trustee not less than
annually a statement as to the performance by the Depositor of its obligations
under the Trust Agreement and as to any default in such performance.
Issuance And Delivery
With respect to each Trust, the Trust Agreement will provide that the
Depositor will, by book-entry credit or otherwise, irrevocably deliver or cause
to be delivered the Underlying Securities to the Trustee and, concurrently
therewith, the Trustee will execute and deliver to the Depositor, or such person
or persons as the Depositor may
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designate by written instruction, the classes of Trust Certificates identified
in the Trust Agreement, evidencing the aggregate amount, in authorized
denominations, of the Underlying Securities so delivered to the Trustee. No
Trust Certificate will be entitled to the benefits of the Trust Agreement or be
valid or obligatory for any purpose unless it shall have been executed manually
by the Trustee by the signature of a duly authorized signatory.
Termination Of Trust Agreement
With respect to each Trust, the Trust Agreement will terminate one year
following the payment upon maturity - or any earlier redemption - by the
respective Obligors of the entire principal amount, and any redemption premium,
of the Underlying Securities or, in the event of a default on the Underlying
Securities, one year following receipt by the holders of the Trust Certificates
of all amounts that they are entitled to receive in such a case pursuant to the
Trust Agreement. Upon termination of the Trust Agreement, the Depositor will be
discharged from all obligations under the Trust Agreement, other than with
respect to expenses of the Trustee.
Reports To Certificateholders
Within the prescribed period of time for tax reporting purposes after
the end of each calendar year during the term of each Trust, the Trustee will
mail to each person who at any time during such calendar year has been a
Certificateholder with respect to such Trust and received any payment thereon a
statement containing certain information for the purposes of the
Certificateholder's preparation of federal income tax returns. See "Federal
Income Tax Considerations."
Accounts
With respect to each Trust, there will be established and maintained
with the Trustee one or more trust accounts, in the name of the Trustee on
behalf of the Certificateholders, into which all payments made on or with
respect to the related Underlying Securities will be deposited.
Distributions
With respect to each Trust, beginning on the Payment Date specified in
the prospectus supplement, distributions of principal and interest on each
series of Trust Certificates will be made by the Trustee to the
Certificateholders. The timing, calculation, allocation, order, source,
priorities of and requirements for all payments to each class of
Certificateholders will be described in the prospectus supplement.
Termination of book-entry registration in connection with suspension of
Exchange Act reporting by Obligor
Subsequent to the deposit of its Underlying Securities into a Trust, an
Obligor which has no class of securities listed on a national securities
exchange or held of record by 300 or more holders could elect to suspend its
Exchange Act reporting requirements. In such event, such Obligor would no longer
be required to make available under the Exchange Act the public information
referred to under the caption "Available Information Regarding the Obligors."
The Depositor will cause each Trust to undertake to provide, in the Trust's own
Exchange Act reports for as long as such reports are required to be filed,
quarterly and annual financial statements and other information of the type
required to be filed on Form 8-K under the Exchange Act with respect to any
Obligor which suspends its Exchange Act reporting requirements, to the extent
such reports and information are then available to the Trust.
If such financial statements are not available to the Trust, then,
unless the Trust has earlier suspended its own Exchange Act reporting
requirements for the Trust Certificates of such series, the Trust Certificates
of such series will, by their terms, generally be required to be removed from
the DTC book entry system, and definitive physical certificates representing the
Trust Certificates of such series will be issued to the beneficial owners of the
Trust Certificates of the series. Furthermore, the Obligor for the Underlying
Securities will be notified that the Underlying Securities are held pursuant to
the Trust Agreement and that the holders of the Trust Certificates constitute
record holders of the Underlying Securities. The issuance of such definitive
physical certificates representing the Trust Certificates is intended to
increase the likelihood that there will then be more than 300
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holders of record of the Underlying Securities, requiring the Obligor to resume
filing Exchange Act reports, in light of Rule 12g5-1(b)(1) under the Exchange
Act, which appears to require a Obligor with actual knowledge that its
Underlying Securities are held pursuant to a Trust Agreement to treat holders of
record of certificates or other evidences of interest issued by the Trust as
holders of record of the underlying Underlying Securities.
Federal Income Tax Considerations
The following is a general summary of the material federal income tax
consequences of the purchase, ownership and disposition of Trust Certificates.
This summary is based on the Internal Revenue Code of 1986, as amended (the
"Code"), as well as final, temporary and proposed Treasury regulations and
administrative and judicial decisions. Legislative, judicial and administrative
changes may occur, possibly with retroactive effect, affecting the accuracy of
the statements set forth herein and possibly adversely affecting a beneficial
owner of Trust Certificates.
This summary does not purport to address all federal income tax matters
that may be relevant to every investment in Trust Certificates. For example, it
deals only with Trust Certificates held as capital assets within the meaning of
Section 1221 of the Code. It does not address tax consequences that may be
relevant to particular holders subject to special treatment under federal income
tax law (e.g., banks and other financial institutions, life insurance companies,
dealers in securities or currencies, tax-exempt entities, taxpayers holding
Certificates as part of a position in a "straddle," or a part of a "hedging,"
"conversion" or other integrated investment transactions, or whose "functional
currency" is not the United States dollar). Except as indicated, this summary is
directed to prospective purchasers in the initial offering described herein, and
not to subsequent purchasers of Trust Certificates. Consequently, purchasers of
Trust Certificates should consult their own tax advisors concerning the tax
consequences to them under federal income tax law, as well as the tax law of any
state, local or foreign jurisdiction, of the purchase, ownership and disposition
of Trust Certificates.
Classification Of The Trust
Upon the issuance of each series of Trust Certificates, Hunton &
Williams will deliver an opinion to the effect that the Trust will be classified
as a grantor trust under subpart E, Part I of subchapter J of the Code and not
as a partnership or an association taxable as a corporation. As a result of such
classification, each Certificateholder will be treated for federal income tax
purposes as an owner of an undivided beneficial ownership interest in all or a
portion of the Trust assets, consisting primarily of the Underlying Securities.
As a grantor trust, the Trust will not be subject to federal income tax,
although holders of Trust Certificates will be subject to the tax treatment
discussed below.
Taxation Of Certificateholders
Trust Assets, Income And Expense
Each Certificateholder will be treated as owning an undivided interest
in all or specified assets of the Trust. As such, each Certificateholder will be
required to report on its federal income tax return its pro rata share of the
entire gross income from such assets for the period during which it owns a Trust
Certificate, generally in accordance with such holder's applicable method of tax
accounting. Because of stripped interests, market discount or original issue
discount ("OID"), or premium, however, the amounts includible in income on
account of an investment in a Trust Certificate may differ significantly from
the amounts distributable thereon.
Consistent with its applicable method of tax accounting, a
Certificateholder generally will be entitled to deduct its pro rata share of
fees paid or incurred by the Trust. Certificateholders who are individuals,
estates or trusts will be allowed to deduct such fees, subject to various
limitations on itemized deductions. Non-corporate holders of Trust Certificates
should be aware that miscellaneous itemized deductions are not deductible for
purposes of the alternative minimum tax.
Interest, Discount And Premium
For purposes of the following discussion, a Trust Certificate
representing an interest in the principal of Underlying Securities comprising a
Trust together with all interest payable thereon is referred to as an
"Unstripped Certificate." A Trust Certificate representing an undivided interest
in the principal of Underlying Securities comprising a Trust but less than all
interest payable thereon is a "Stripped Bond Certificate"
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(including Trust Certificates so denominated in the prospectus supplement as
well as those denominated "Principal Certificates" therein), a Trust Certificate
representing solely an interest in interest payable on Underlying Securities is
a "Stripped Coupon Certificate" (including Trust Certificates so denominated in
the prospectus supplement as well as those denominated "Coupon Certificates"
therein) and such Trust Certificates collectively are "Stripped Certificates."
Unstripped Certificates. A purchaser of an Unstripped Certificate
generally will be required to report its share of the interest income on
Underlying Securities in accordance with such purchaser's applicable method of
tax accounting. Such purchaser also generally will be required to report its
share of OID to the extent the Trust Certificate evidences an interest in
Underlying Securities issued with OID. A Certificateholder required to report
OID in income must do so although no cash attributable to such discount will be
received until a later date.
The amount treated as OID attributable to a Underlying Security
generally is equal to the excess of its "stated redemption price" over its
"issue price." The stated redemption price of a Underlying Security generally is
the aggregate amount payable thereunder excluding any "qualified stated
interest," i.e., interest payable unconditionally at least annually at a single
fixed or qualifying variable rate. Interest payable on Underlying Securities may
be qualified stated interest. The amounts payable (including interest and
redemption premium, as applicable) with respect to a callable Underlying
Security are determined with reference to the call or maturity date and call
price that produces the lowest yield. The issue price of a Underlying Security
generally is the initial offering price at which a substantial amount of that
particular class of Underlying Securities was sold.
OID is includible in income on a daily basis, based on a constant yield
to maturity over the term of the related Underlying Security. The yield to
maturity of a callable Underlying Security is determined with reference to the
call or maturity date and call price that produces the lowest yield. The
constant yield compounds at the end of each "accrual period," within which OID
is allocated ratably to each day. The accrual periods utilized by a purchaser
must each be no longer than one year, and must be such that each payment will
occur at the beginning or end of an accrual period. OID attributable to
Underlying Securities bearing a variable rate of interest will be determined by
assuming that such rate will remain constant from the date of issuance, while
changes in the actual rate will be accounted for in the period to which they
relate.
OID may be reduced to the extent that an interest in a Underlying
Security issued with OID is acquired by a purchaser of an Unstripped Certificate
with "acquisition premium." Acquisition premium is the excess of such Underlying
Security's allocable purchase price over its "adjusted issue price," which in
turn is the sum of the Underlying Security's issue price and previous accruals
of OID. OID otherwise includible in income may be reduced in the proportion that
the acquisition premium bears to OID remaining to be accrued on the Underlying
Security.
To the extent that the allocable purchase price paid by a purchaser of
an Unstripped Certificate for its interest in a particular Underlying Security
exceeds the holder's interest in such Underlying Security's remaining principal
balance, that interest will be acquired with amortizable bond premium. The
Certificateholder may elect to amortize such premium as an offset to interest
income, generally using a constant yield method of compounding over the term of
the Underlying Security. A callable Underlying Security will be treated for this
purpose as maturing with reference to the call or maturity date and amount, as
applicable, that produces the smallest premium. Any such election will apply to
debt instruments held by the Certificateholder during the year in which the
election is made, and to all debt instruments acquired thereafter.
A purchaser of an Unstripped Certificate alternatively may acquire an
interest in a Underlying Security at a "market discount," i.e., the excess of
such Underlying Security's adjusted issue price, or its issue price in the case
of a Underlying Security issued without OID, over its allocable purchase price.
Market discount generally will accrue ratably during the period from the date of
purchase to the maturity date, unless a Certificateholder elects to accrue such
market discount on the basis of a constant interest rate. If a Certificateholder
acquires an interest in a Underlying Security having market discount, the
Certificateholder generally will be required to take market discount into income
as principal payments are received, in an amount equal to the lesser of the
amount of the principal payment received or the amount of market discount that
has accrued but has not yet been included in income. In addition, a
Certificateholder will be required to treat any gain on the sale of a Trust
Certificate as ordinary income to the extent of the holder's share of any
previously unrecognized
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accrued market discount on such Underlying Security. Moreover, such a
Certificateholder may be required to defer a portion of its otherwise deductible
interest expense allocable to borrowings related to the Trust Certificate until
disposing of the Trust Certificate in a taxable transaction. A holder may elect
to include market discount in income currently in lieu of treating gain as
ordinary income and deferring interest deductions; any such election is
irrevocable, and applies to all market discount bonds acquired during and after
the year of election.
Stripped Certificates. A purchaser of a Stripped Principal Certificate
or Stripped Interest Certificate will be treated as having purchased an interest
in the underlying "stripped bonds" or "stripped coupons," respectively. Under
the "coupon stripping" rules of the Code, such purchasers generally will be
subject to the OID rules discussed above, and will be required to report their
share of OID with respect to each such underlying stripped bond or stripped
coupon although again no cash attributable to such discount will be received
until a later date.
The amount treated as OID attributable to a stripped bond or stripped
coupon generally is equal to the excess of the "stated redemption price" over
its allocable purchase price. In the case of a stripped bond, the stated
redemption price generally is the aggregate amount payable thereunder; the
stated redemption price of a stripped coupon is the amount payable when due.
The purchase price allocable to a stripped bond or stripped coupon will be
determined on the basis of their respective fair market values on the date of
the Trust Certificate purchase.
OID is includible in income on a daily basis, based on a constant yield
to maturity over the term of the related stripped bond or stripped coupon, as
applicable. The constant yield compounds at the end of each "accrual period,"
within which OID is allocated ratably to each day. The accrual periods utilized
by a purchaser must each be no longer than one year, and must be such that each
payment will occur at the beginning or end of an accrual period. OID
attributable to stripped Trust assets bearing a variable rate of interest will
be determined by assuming that such rate will remain constant from the date of
stripping, while changes in the actual rate will be accounted for in the period
to which they relate. In certain circumstances the OID Regulations permit a
Certificateholder to recognize OID under a method that differs from that used by
the Trustee.
In the case of callable stripped bonds, the amounts payable - including
interest, as applicable - and the yield to maturity are determined with
reference to the call or maturity date, as applicable, that produces the lowest
yield. It is unclear, however, whether such call or maturity date producing the
lowest yield should be determined with or without regard to interest stripped
from the stripped bond. Interest payable on a stripped bond after such date
until the final maturity or actual call date should be includible in income
under the purchaser's applicable method of tax accounting.
The Internal Revenue Service ("IRS") could contend that certain
Stripped Principal Certificates should be treated as having amortizable
bond premium, in which case failure to make a premium amortization election
could cause a holder to recognize income from such a Trust Certificate more
rapidly. Such a failure also could cause a holder to recognize more taxable
income over the holding period, if the holder's basis in the Trust Certificate
attributable to such premium ultimately proved non-deductible because it
resulted in capital loss. A Stripped Principal Certificate purchased at a price
in excess of its face amount and treated as having a stated redemption price
that excluded associated interest payments as "qualified stated interest" could
be so treated, producing the foregoing possible consequences. Prospective
purchasers of such Trust Certificates should consult their own tax advisors with
regard to the advisability of a premium amortization election.
Constant Yield Election. The OID Regulations permit a Certificateholder
to elect to accrue all stated interest, OID, and market discount in income as
interest, based on a constant yield method. If a Certificateholder made this
election for a Trust Certificate representing an interest in Underlying
Securities having market discount, such Certificateholder would be deemed to
have made an election to currently include market discount in income with
respect to all debt instruments having market discount acquired by such
Certificateholder during the taxable year of
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the election or thereafter. Similarly, a Certificateholder making this election
for a Trust Certificate representing an interest in Underlying Securities having
amortizable bond premium would be deemed to have made an election to amortize
bond premium with respect to all debt instruments having premium that such
Certificateholder owns or acquires. Each of these elections would be
irrevocable; holders considering any such election should consult their own tax
advisors.
Disposition And Retirement
Upon the sale, exchange or retirement of a Trust Certificate, a holder
will recognize taxable gain or loss in respect of its interest in each Trust
asset underlying such Trust Certificate. Such gains and losses generally will be
long-term capital gains and losses if the Trust Certificate has been held for
more than one year. However, some or all gain may be treated as ordinary income
to the extent of any accrued and unrecognized market discount, if a Trust
Certificate is held as part of a "conversion transaction" as defined in Code
section 1258, or if a Certificateholder has made an election under Code section
163(d)(4) to have net capital gains taxed as investment income at ordinary
income rates. Net long-term capital gains of individuals are subject to taxation
at reduced capital gains tax rates, whereas capital losses of all taxpayers are
subject to limited deductibility.
Gain or loss with respect to each underlying Trust asset is equal to
the difference between the allocable amount realized and the holder's allocable
adjusted basis therein. The amount realized in respect of a disposition or
retirement of a Trust Certificate is allocable among the underlying Trust assets
in accordance with their relative fair market values; a Certificateholder
determines its basis in each such asset by allocating its purchase price among
those assets on the basis of their relative fair market values as of the date of
purchase. A Certificateholder's basis in its Trust Certificate and each
underlying Trust asset generally would be increased by any OID or market
discount and decreased by any premium amortization previously taken into account
in determining the holder's taxable income, and further decreased by amounts
paid other than qualified stated interest.
If Trust Certificates identified as Callable Principal Certificates or
Callable Stripped Bond Certificates in any applicable prospectus supplement
(each, the "Callable Certificates") are retired in exchange for Underlying
Securities, the holders of such Trust Certificates should not recognize gain or
loss with respect to their receipt of Underlying Securities in exchange for
their interest in the Trust.
Additional Tax Considerations
Backup Withholding
Payments of interest, including OID, and principal, as well as proceeds
from disposition or retirement of Trust Certificates, may be subject to a
"backup" withholding tax of 31 percent if a recipient fails to furnish to the
payor certain identifying information. Certain penalties also may be imposed by
the IRS on a recipient of payments who is required to supply information, but
fails to do so in the proper manner.
Backup withholding will not apply with respect to payments made to
certain exempt recipients, such as corporations and financial institutions.
Holders should consult their own tax advisors with respect to qualification for
exemption from backup withholding and the procedure for obtaining such an
exemption. Any amounts deducted and withheld would be allowed as a credit
against such recipient's federal income tax.
The Treasury Department has issued new regulations that make certain
modifications to the withholding, backup withholding and information reporting
rules. Those regulations generally attempt to unify certification requirements
and modify reliance standards. The regulations generally will be effective for
payments made after December 31, 2000, subject to certain transition rules.
Prospective investors are urged to consult their own tax advisors regarding the
new regulations.
Tax Information Reporting
Within a reasonable time after the end of each calendar year, the
Trustee will furnish each Certificateholder - either DTC or other holders of
definitive Trust Certificates - such customary information as the Trustee deems
necessary or desirable to enable Certificateholders to prepare their federal
income tax returns. The Trustee will furnish comparable information to the IRS
as and when required by law to do so. Because the rules for accruing discount
and amortizing premium with respect to Trust Certificates are uncertain in
various respects, there is no assurance that the IRS will agree with information
reports of such items of income and expense. Moreover, even if otherwise
accepted as accurate by the IRS, such information reports will be based on the
original issue price of the Trust Certificates, and
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in the case of Certificateholders who purchased their Trust Certificates after
their initial issuance or at a price different from the original issue price,
those reports will require adjustment to account for such Certificateholders'
holding periods and purchase prices. Certificateholders who hold their Trust
Certificates through DTC participants should consult the party from whom they
receive tax reports concerning the Trust Certificates to determine whether such
reports reflect such adjustments. Certificateholders who hold definitive Trust
Certificates should consult their tax advisors concerning the method for making
any such required adjustments.
Non-United States Holders
A Non-United States Holder is a beneficial owner of a Trust Certificate
other than a United States citizen or resident, a domestic partnership or
corporation, an estate subject to U.S. income tax on income regardless of its
source or a trust if a court within the United States is able to exercise
primary supervision over the administration of the trust and one or more United
States persons have the authority to control all substantial decisions of the
trust. Interest, including OID, paid on a Trust Certificate to a Non-United
States Holder generally will be treated as "portfolio interest" and, therefore,
will not be subject to United States federal income tax, provided that such
holder does not actually or constructively own 10 percent or more of any issuer
of Underlying Securities, is not a controlled foreign corporation related to any
such issuer, and in accordance with specified procedures, supplies the person
otherwise required to withhold with a certification to the effect that the
beneficial owner is not a United States person, citizen or resident. In certain
circumstances, the requisite certification may be provided by or through a bank
or other financial institution. In addition, no withholding of federal income
tax will be required with respect to any gain realized by a Non-United States
Holder upon the sale, exchange or retirement of a Trust Certificate, except
gains realized by certain nonresident alien individuals present in the United
States for 183 days or more during the taxable year.
Notwithstanding the foregoing, Non-United States Holders may be subject
to income tax withholding and estate taxation with respect to any Underlying
Securities that were issued before July 19, 1984. Further, a Non-United States
Holder engaged in a trade or business within the United States whose income from
a Trust Certificate is effectively connected with that trade or business
generally will be subject to regular United States federal income tax on such
income and gain in the same manner as if it were a United States holder. In
addition, if such a Non-United States Holder is a foreign corporation, it may be
subject to a branch profits tax equal to 30 percent of its effectively connected
earnings and profits for the taxable year, subject to adjustments.
Backup withholding will not apply to payments on a Trust Certificate to
a Non-United States Holder if the holder has certified as to its foreign status
under penalty of perjury - or has otherwise established an exemption - and
certain other requirements are met. Payments on the sale, exchange or other
disposition of a Certificate to or through a foreign office of a broker will not
be subject to back-up withholding; payments to or through the United States
office of a broker will be subject to backup withholding unless the Non-United
States Holder makes the certification or otherwise establishes an exemption
under the conditions previously described.
Non-United States Holders should consult their own tax advisors
regarding the application of United States federal income tax law to their
particular situations.
State And Other Tax Considerations
In addition to the federal income tax consequences described above,
potential investors should consider the state, local and foreign tax
consequences of the acquisition, ownership and disposition of Trust
Certificates. State,
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local and foreign tax law may differ substantially from federal income tax law,
and this discussion does not purport to describe any aspect of the tax law of a
state or other jurisdiction. Therefore, prospective purchasers should consult
their own tax advisors with respect to such matters.
ERISA Considerations
General
Summarized below are the material consequences under the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and Section 4975
of the Internal Revenue Code of 1986 (the "Code"), that a fiduciary of an
"employee benefit plan" - as defined in and subject to ERISA - or of a "plan" -
as defined in and subject to Section 4975 of the Code - who has investment
discretion should consider before deciding to invest the plan's assets in Trust
Certificates ("employee benefit plans" and "plans" are "Plans," and fiduciaries
with investment discretion are "Plan Fiduciaries"). Furthermore, all potential
investors in Trust Certificates should read the following summary because it
describes certain issues that could affect the Trust as a consequence of Plans
investing in Trust Certificates. The following summary is intended only to be a
summary of certain issues under ERISA and Section 4975 of the Code which are
likely to be raised by an investor's own counsel.
In general, the terms "employee benefit plan" as defined in ERISA and
"plan" as defined in Section 4975 of the Code refer to any plan or account of
various types which provide retirement benefits or welfare benefits to an
individual or to an employer's employees and their beneficiaries. Plans include
corporate pension and profit-sharing plans, "simplified employee pension plans,"
Keogh plans for self-employed individuals (including partners in a partnership),
individual retirement accounts described in Section 408 of the Code and medical
benefit plans. For the purposes of the following discussion, the term "Plan"
also includes any entity whose assets constitute assets of any Plan for purposes
of Title I of ERISA or Section 4975 of the Code as discussed in the "Plan
Assets" section of this summary below, and the term "Plan Fiduciary" includes
any person who is a fiduciary with respect to any such entity that is a Plan.
Each Plan Fiduciary must give appropriate consideration to the facts
and circumstances that are relevant to an investment in Trust Certificates,
including the role that an investment in Trust Certificates plays in the Plan's
investment portfolio. Each Plan Fiduciary, before deciding to invest in Trust
Certificates, must be satisfied that an investment in Trust Certificates is a
prudent investment for the Plan, that the investments of the Plan, including the
investment in Trust Certificates, are diversified so as to minimize the risks of
large losses and that an investment in Trust Certificates complies with the Plan
and related trust documents.
Each Plan considering acquiring Trust Certificates should consult its
own legal and tax advisors before doing so.
Plan Assets
When a Plan invests in a Trust Certificate, not only does the Trust
Certificate become an asset of the Plan, but, unless an exception applies, the
investment in a Trust Certificate by a Plan will cause, for purposes of Title I
of ERISA and Section 4975 of the Code, the Underlying Securities owned by the
related Trust to be treated as assets of that Plan. A regulation (the "DOL
Regulation") issued under ERISA by the United States Department of Labor (the
"DOL") contains rules for determining when an investment by a Plan in an entity
(such as the Trust) will cause the underlying assets of the entity to be treated
as assets of that Plan for purposes of Title I of ERISA and Section 4975 of the
Code ("plan assets"). The DOL Regulation provides, with respect to a Plan's
purchase of an equity interest, such as a Trust Certificate, of an entity, that
the assets of the entity will be plan assets of the Plan unless the equity
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interest purchased is a "publicly-offered security" (the "Publicly-Offered
Security Exception"), the investment by all "benefit plan investors" is not
"significant" (the "Participation Exception") or certain other exceptions, not
relevant here, apply.
The Publicly-Offered Security Exception applies if the equity interest
purchased by the Plan is a security that is "freely transferable," part of a
class of securities that is "widely held" and either part of a class of
securities registered under Section 12(b) or 12(g) of the Exchange Act, or sold
to the Plan as part of a public offering pursuant to an effective registration
statement under the Act and the class of which such security is a part is
registered under the Exchange Act within 120 days - or such later time as may be
allowed by the SEC - after the end of the fiscal year of the issuer in which the
offering of such security occurred. The DOL Regulation states that the
determination of whether a security is "freely transferable" is to be made based
on all relevant facts and circumstances. The DOL Regulation specifies that, in
the case of a security that is part of an offering in which the minimum
investment is $10,000 or less, the following requirements, alone or in
combination, ordinarily will not affect a finding that the security is freely
transferable: any requirement that not less than a minimum number of shares or
units of such security be transferred or assigned by any investor, provided that
such requirement does not prevent transfer of all of the then remaining shares
or units held by an investor; a requirement that no transfer or assignment of
the security or rights in respect thereof be made to an ineligible or unsuitable
investor; any restriction on, or prohibition against, any transfer or assignment
which would violate any state or federal statute, regulation, court order,
judicial decree or rule of law; a requirement that no transfer or assignment be
made without advance written notice being given to the entity that issued that
security; or any requirement that reasonable transfer or administrative fees be
paid in connection with a transfer or assignment. Under the DOL Regulation, a
class of securities is "widely held" only if it is of a class of securities
owned by 100 or more investors independent of the issuer and of each other, but
a class of securities will not fail to be widely-held solely because subsequent
to the initial offering the number of independent investors falls below 100 as a
result of events beyond the control of the issuer. It is anticipated that for
certain series of Trust Certificates, one or more classes of Trust Certificates
in those series will satisfy the Publicly-Offered Security Exception. The
prospectus supplement for each series of Trust Certificates will specify whether
any or all classes of Trust Certificates in such series are expected to satisfy
the Publicly-Offered Security Exception.
The Participation Exception applies with respect to the assets of an
entity in which a Plan purchases an equity interest if, immediately after the
most recent acquisition of any interest in the entity, less than 25% of the
value of each class of equity interests in the entity is held by "benefit plan
investors" on such date, determined by not including the investments of persons
with discretionary authority or control over the assets of such entity, of any
person who provides investment advice for a fee - direct or indirect - with
respect to such assets and of "affiliates" - within the meaning of the DOL
Regulation - of such persons. For this purpose, the term "benefit plan
investors" includes all plans and accounts of the types described above under
"--General" as employee benefit plans or plans, whether or not subject to ERISA
or Section 4975 of the Code, as well as entities whose assets constitute plan
assets due to investments made in such entities by any such plans or accounts.
Generally, for any class or series of Trust Certificates there is no restriction
on the percentage of the value of that class or series of Trust Certificates
that may be owned by benefit plan investors and, thus, usually there is no
assurance that investment by benefit plan investors will not be significant.
Accordingly, it is not expected that the Participation Exception will apply with
respect to any series of Trust Certificates.
Therefore, unless the prospectus supplement for any particular series
of Trust Certificates specifies that the Participation Exception or the
Publicly-Offered Security Exception is expected to apply to such Trust
Certificates, it should be assumed that the Underlying Securities owned by the
Trust to which the Trust Certificates relate will be treated as plan assets of
Plans that invest in such Trust Certificates.
In addition, it should be noted that ERISA and the Code may place
restrictions on the purchase of Trust Certificates by insurance companies. In
particular, insurance companies considering the purchase of Trust Certificates
should consult their own counsel with respect to the United States Supreme Court
decision in John Hancock Mutual Life Insurance Co. v. Harris Trust and Savings
Bank and any subsequent legislation or other guidance that has or may become
available relating to that decision, including the retroactive and prospective
exemptive relief granted by the DOL for transactions involving insurance company
general accounts in prohibited transaction class exemption 95-60, Section 401(c)
of ERISA and regulations issued under Section 401(c) of ERISA.
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Prohibited Transactions
Section 406 of ERISA prohibits "parties in interest" with respect to a
Plan from engaging in certain transactions involving the Plan and its assets
unless a statutory or administrative exemption applies to the transaction. For
instance, Section 406 of ERISA prohibits a "party in interest" with respect to a
Plan from selling a Trust Certificate to such Plan unless a statutory or
administrative exemption applies. In addition, if the Underlying Securities are
plan assets, Section 406 of ERISA will prohibit the Trustee, among others, from
causing the assets of the Trust to be involved, directly or indirectly, in
certain types of transactions with "parties in interest" with respect to
investing Plans unless a statutory or administrative exemption applies. If the
prohibited transaction restrictions of Section 406 of ERISA are violated, ERISA
generally provides for civil penalties upon the Plan Fiduciary and possibly
other persons. Section 4975 of the Code generally imposes an excise tax on
"disqualified persons" who engage, directly or indirectly, in similar types of
transactions with the assets of Plans subject to such Section and also requires
rescission of such transactions.
The Underwriter, the Depositor, the Trustee, the Obligor of the
Underlying Securities owned by the Trust to which a Trust Certificate relates,
and certain other persons and certain affiliates thereof might be considered or
might become a party in interest or disqualified person with respect to a Plan.
If so, the acquisition, holding or disposition of an investment in Trust
Certificates by or on behalf of such Plan could give rise to one or more
"prohibited transactions" within the meaning of Section 406 of ERISA or Section
4975 of the Code unless an exemption described below or some other exemption is
available. In particular, the sale by the Underwriter to such a Plan of a Trust
Certificate regardless of whether the related Underlying Securities are plan
assets, and the services provided by the Trustee to the Trust or the loans from
the Trust to the issuer of the related Underlying Securities if the related
Underlying Securities are plan assets, would appear in certain circumstances to
be prohibited transactions unless an exemption applies.
There are numerous exemptions to the prohibited transaction
restrictions of Section 406 of ERISA and Section 4975 of the Code, and the
applicability of any particular exemption depends upon the circumstances. An
investment in a Trust Certificate may not be purchased by or on behalf of a Plan
unless the prospectus supplement governing the Trust Certificate provides that
the Participation Exception or Publicly-Offered Security Exception applies to
such Trust Certificate or a prohibited transaction exemption, such as one of the
following Prohibited Transaction Class Exemptions ("PTCEs") applies and the
conditions thereof are satisfied:
i. PTCE 84-14, which provides an exemption if the purchase is
made on behalf of the Plan by a "qualified professional asset
manager." In general, a qualified professional asset manager
is an investment adviser registered under the Investment
Advisers Act of 1940, a bank, as defined in such Act or an
insurance company, each of which meets a certain financial
requirements.
ii. PTCE 90-1, which provides an exemption if the purchase is made
on behalf of an insurance company pooled separate account in
which the assets of no Plan (when aggregated with the assets
of any other Plan maintained by the same employer or employee
organization) in the pooled separate account exceed 10% of the
total assets in the pooled separate account.
iii. PTCE 91-38, which provides an exemption if the purchase is
made on behalf of a bank collective investment fund in which
the interest of no Plan (when aggregated with the interests of
any other Plan maintained by the same employer or employee
organization) in the collective investment fund exceeds 10% of
the total assets in the collective investment fund.
iv. PTCE 95-60, which provides an exemption if the purchase is
made on behalf of an insurance company general account in
which the reserves and liabilities held by no Plan (when
aggregated with the reserves and liabilities of any other Plan
maintained by the same employer, an affiliate thereof or the
same employee organization) in the insurance company general
account exceed 10% of the total reserves and liabilities of
the general account plus surplus.
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v. PTCE 96-23, which provides an exemption if the purchase is
made on behalf of the Plan by an "in-house asset manager." In
general, an in-house asset manager is a subsidiary of a Plan
sponsor or of such Plan sponsor's parent corporation or a
membership nonprofit corporation the majority of whose members
are officers of a Plan sponsor or of such Plan sponsor's
parent corporation, each of which meets certain financial
requirements.
The PTCEs described above contain numerous technical requirements that
must be satisfied as a condition of reliance thereon and may not provide relief
for all transactions involving the Underlying Securities, even if they would
otherwise apply to a purchase of a Trust Certificate by a Plan. Before
purchasing a Trust Certificate, a Plan Fiduciary should consult with its legal
counsel and determine whether there exists any prohibition to the acquisition
and continued ownership of such Trust Certificate. In particular, a Plan
Fiduciary should determine whether the Underwriter, the Obligor of the
Underlying Securities owned by the Trust to which the Trust Certificate relates,
the Trustee or the Depositor are parties in interest with respect to the Plan
and whether any prohibited transaction exemptions, such as PTCE 84-14, PTCE
90-1, PTCE 91-38, PTCE 95-60 or PTCE 96-23, apply.
Ineligible Purchasers
Regardless of whether the Participation Exception, the Publicly-Offered
Security Exception or the PTCEs described above apply, a Plan generally may not
purchase a Trust Certificate if the Underwriter, the Depositor, the Trustee, the
Obligor of the related Underlying Securities, or any of their respective
affiliates either: has investment discretion with respect to the investment of
such Plan assets; has authority or responsibility to give or regularly gives
investment advice with respect to such Plan assets for a fee and pursuant to an
agreement or understanding that such advice will serve as a primary basis for
investment decisions with respect to such Plan assets and that such advice will
be based on the particular investment needs of the Plan; or is an employer
maintaining or contributing to such Plan.
By its purchase of a Trust Certificate, each purchaser will be deemed
to have represented and warranted that its acquisition and ownership of such
Trust Certificate does not and will not constitute a Non-Exempt Prohibited
Transaction under ERISA or the Code and, to the extent that the Underlying
Securities constitute "plan assets," the transactions involving the Underlying
Securities will not constitute or result in a Non-Exempt Prohibited Transaction
as a result of such purchaser's acquisition or ownership of such Trust
Certificates.
Each Plan Fiduciary should consult with attorneys and financial
advisors as to the propriety of such an investment in light of the circumstances
of the particular plan and current tax law.
Plan Of Distribution
The Trust Certificates offered by this prospectus and the prospectus
supplement will be offered in series through one or more of the methods
described below. The prospectus supplement prepared for each series will
describe the method of offering being utilized for that series and will state
the net proceeds, if any, to the Trust or the Depositor from such sale.
Any Trust Certificates acquired by the Underwriter may be acquired by
the Underwriter for its own account, and may be resold from time to time in one
or more transactions, including negotiated transactions, at fixed public
offering prices or at varying prices to be determined at the time of sale or at
the time of commitment therefor.
In connection with any sale of the Trust Certificates, the Underwriter
may pay compensation to broker-dealers in the form of discounts, concessions or
commissions. Other underwriters and dealers participating in the distribution of
the Trust Certificates may be deemed to be underwriters in connection with such
Trust Certificates, and any discounts or commissions received by them from the
Underwriter and any profit on the resale of Trust Certificates by them may be
deemed to be underwriting discounts and commissions under the Act.
It is anticipated that the underwriting agreement pertaining to the
sale of any series of Trust Certificates will provide that the obligations of
the underwriters will be subject to certain conditions precedent, that the
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underwriters will be obligated to purchase all Trust Certificates if any are
purchased - other than in connection with an underwriting on a best efforts
basis -, and that the Depositor will indemnify the several underwriters and the
underwriters will indemnify the Depositor against certain civil liabilities,
including liabilities under the Act, or will contribute to payments required to
be made in respect thereof.
Legal Opinions
Certain legal matters relating to the Trust Certificates and the
material federal income tax matters will be passed upon for the Depositor and
the Underwriter by Hunton & Williams, counsel to the Depositor and the
Underwriter.
Available Information
National Financial Securities Corporation, as depositor of each Trust,
has filed with the Securities and Exchange Commission a Registration Statement
(together with all amendments and exhibits thereto, referred to herein as the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the Certificates offered pursuant to this
prospectus. This prospectus, which forms a part of the Registration Statement,
omits certain information contained in such Registration Statement pursuant to
the rules and regulations of the SEC. For further information, reference is made
to the Registration Statement which may be inspected and copied at the public
reference facilities maintained by the SEC at its Public Reference Section, 450
Fifth Street, N.W., Washington, D.C. 20549 (information on the operation of the
Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330), and
at its Regional Offices located at: Chicago Regional Office, Citicorp Center,
500 West Madison Street, Chicago, Illinois 60661; and New York Regional Office,
Seven World Trade Center, New York, New York 10048. Copies of such materials can
also be obtained electronically through the SEC's Internet Web Site
(http://www.sec.gov).
Incorporation Of Certain Documents By Reference
All documents filed by a Trust pursuant to Section 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
subsequent to the date of this prospectus and prior to any termination of the
offering of the Trust Certificates shall be deemed to be incorporated by
reference into this prospectus. Any statement contained herein or incorporated
by reference herein shall be deemed to be modified or superseded to the extent
that any subsequently filed document which is incorporated by reference herein
modifies or supersedes such statement.
Reports To Certificateholders
Unless and until Definitive Certificates are issued, annual unaudited
reports containing information concerning the related Underlying Securities will
be prepared by the related Trustee and sent on behalf of each Trust only to Cede
& Co. ("Cede"), as nominee of DTC and registered holder of the Trust
Certificates. See "Certain Information Regarding the Certificates -- Book-Entry
Registration" and "-- Reports to Certificateholders." Such reports will not
constitute financial statements prepared in accordance with generally accepted
accounting principles. Each Trust will file with the SEC such periodic reports
as are required under the Exchange Act, and the rules and regulations of the SEC
thereunder.
19
<PAGE>
Index Of Terms
<TABLE>
<S> <C>
Act.................................................................................. 3
Callable Certificates................................................................ 13
Cede................................................................................. 19
Certificateholder.................................................................... 4, 5
Code................................................................................. 10, 15
Obligor.............................................................................. 3
Coupon Certificates.................................................................. 11
Definitive Certificates.............................................................. 7
Depositor............................................................................ 1
DOL.................................................................................. 15
DOL Regulation....................................................................... 15
DTC.................................................................................. 3
DTC Book Entry Only System........................................................... 5
ERISA................................................................................ 15
Exchange Act......................................................................... 19
Index of Terms....................................................................... 1
Indirect Participants................................................................ 5
IRS.................................................................................. 12
Issuance Date........................................................................ 1
OID.................................................................................. 10
Participation Exception.............................................................. 15
Plan................................................................................. 15
plan assets.......................................................................... 15
Plan Fiduciaries..................................................................... 15
Plans................................................................................ 15
Principal Certificates............................................................... 10
PTCEs................................................................................ 17
Publicly-Offered Security Exception.................................................. 15
Registration Statement............................................................... 19
Rules................................................................................ 6
Securities Act....................................................................... 19
Stripped Bond Certificate............................................................ 10
Stripped Certificates................................................................ 11
Stripped Coupon Certificate.......................................................... 10
TIA.................................................................................. 3
Trust................................................................................ 1
Trust Agreement...................................................................... 1
Trust Certificates................................................................... 1
Trust Property....................................................................... 3
Trustee.............................................................................. 1
Underlying Securities................................................................ 1
Unstripped Certificate............................................................... 10
</TABLE>
<PAGE>
================================================================================
National Financial Securities Corporation
NFSC Trust 2000-_
__,000,000 Trust Certificates
Principal Amount $25 per Trust Certificate
relating to [name of underlying security]
-----------------------------------
Prospectus Supplement
-----------------------------------
Scott & Stringfellow
_______ __, 2000
Until _______ __, 2000, all dealers that effect transactions in these
Trust Certificates, whether or not participating in this offering, may be
required to deliver a prospectus and prospectus supplement. This is in
addition to the dealers' obligation to deliver a prospectus when acting as
underwriters and with respect to their unsold allotments or subscriptions.
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the estimated expenses in connection
with the offering of $50,000,000 of the Trust Certificates being registered
under this Registration Statement, other than underwriting discounts and
commission:
<TABLE>
<CAPTION>
<S> <C>
SEC Registration................................... $ 13,200
Printing and Engraving............................. 20,000
Legal Fees and Expenses............................ 75,000
Accounting Fees and Expenses....................... 40,000
Trustee Fees and Expenses.......................... 15,000
Rating Agency Fees................................. 25,000
Blue Sky Fees and Expenses......................... 20,000
Miscellaneous...................................... 11,800
TOTAL......................................... $220,000
========
</TABLE>
Item 15. Indemnification of Directors and Officers.
The Registrant is incorporated under the laws of Delaware. Section
145 of the Delaware General Corporation Law provides that a Delaware corporation
may indemnify any persons, including officers and directors, who are, or are
threatened to be made, parties to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of such corporation, by reason of the
fact that such person was an officer, director, employee or agent of such
corporation, or is or was serving at the request of such corporation as a
director, employee or agent of such corporation, or is or was serving at the
request of such corporation as a director, employee or agent of another
corporation or enterprise). The indemnity may include expenses (including
attorneys' fees) , judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding, provided such person acted in good faith and in a manner he
reasonably believed to be in or not opposed to the corporation's best interests
and, for criminal proceedings, had no reasonable cause to believe that his
conduct was illegal. A Delaware corporation may indemnify officers and
directors in an action by or in the right of the corporation under the same
conditions, except that no indemnification is permitted without judicial
approval if the officer or director is adjudged to be liable to the corporation.
Where an officer or director is successful on the merits or otherwise in the
defense of any action referred to above, the corporation must indemnify him
against the expense which such officer or director actually and reasonably
incurred.
The Certificate of Incorporation and Bylaws of the Registrant provide,
in effect, that, subject to certain limited exceptions, the Registrant will
indemnify its officers and directors to the extent permitted by the Delaware
General Corporation Law.
The Registrant, either directly or through its direct or indirect
parents, maintains an insurance policy providing directors' and officers'
liability insurance for any liability its directors or officers may incur in
their capacities as such.
Under certain sales agreements entered into by the Registrant (as
purchaser) with sellers of collateral, such sellers are obligated to indemnify
the Registrant against certain expenses and liabilities.
II-1
<PAGE>
Reference is made to the form of Underwriting Agreement filed as an
exhibit hereto for provisions relating to the indemnification of directors,
officers and controlling persons of the Registrant against certain liabilities,
including liabilities under the Securities Act of 1933, as amended.
Item 16. Exhibits.
1.1 Underwriting Agreement Standard Provisions, together with Form of
Underwriting Agreement
4.1 Form of Trust Agreement
5.1 Legality Opinion of Hunton & Williams
8.1 Tax Opinion of Hunton & Williams
23.1 Consent of Hunton & Williams is contained in their opinions filed as
Exhibits 5.1 and 8.1
24.1 Power of Attorney (included on signature page)
Item 17. Undertakings.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the Prospectus any facts or events arising
after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in the Registration Statement. Notwithstanding the foregoing,
any increase or decrease in the volume of securities offered (if the
total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high and of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more
than a 20 change in the maximum aggregate offering price set forth
in the "Calculation of the Registration Fee" table in this
Registration Statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the Registration
Statement or any material change of such information in the
Registration Statement;
II-2
<PAGE>
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the information required to be included in the post-effective
amendment by those paragraphs is contained in periodic reports filed
by the Registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are included by reference in the
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof;
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(c) The undersigned Registrant hereby undertakes to file an application
for the purpose of determining the eligibility of the indenture trustee to act
under subsection (a) of Section 310 of the Trust Indenture Act of 1939, as
amended, in accordance with the rules and regulations prescribed by the
Commission under Section 305(b)(2) of the Trust Indenture Act.
(d) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 (including the security rating
requirement) and has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Richmond,
Commonwealth of Virginia, on May 5, 2000.
NATIONAL FINANCIAL SECURITIES
CORPORATION (Registrant)
/s/ William E. Hardy
---------------------------------------
William E. Hardy
President and Chairman of the Board of
Directors
Each person whose signature appears below constitutes and appoints
William E. Hardy, Randall B. Saufley and Edward L. Douma, Esq. his true and
lawful attorneys-in-fact and agents, each acting alone, with full powers of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, each acting alone, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, each acting alone, or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
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.
<TABLE>
<CAPTION>
Signature Capacity Date
--------- -------- ----
<S> <C> <C>
/s/ William E. Hardy Chairman of the Board of Directors May 5, 2000
- --------------------------------
William E. Hardy and President (Principal Executive Officer)
/s/ Steven C. DeLaney Director and Vice President May 5, 2000
- --------------------------------
Steven C. DeLaney
/s/ Michael D. Johnston Director and Vice President May 5, 2000
- --------------------------------
Michael D. Johnston
/s/ Randall B. Saufley Secretary and Treasurer May 5, 2000
- --------------------------------
Randall B. Saufley (Principal Financial Officer
and Principal Accounting Officer)
</TABLE>
II-4
<PAGE>
Exhibit 1.1
NATIONAL FINANCIAL SECURITIES CORPORATION
____________________
Trust Certificates
(Issuable in Series)
UNDERWRITING AGREEMENT
STANDARD PROVISIONS
____________________
May 2000
<PAGE>
National Financial Securities Corporation, a Delaware corporation (the
"Company"), proposes to sell Trust Certificates in various series (each, a
"Series"), in one or more offerings on terms determined at the time of sale,
each to be issued by a separate trust (the "Trust") under a trust agreement,
which incorporates by reference therein standard terms (the "Trust Agreement"),
for such Series between the Company and the trustee named therein (the
"Trustee"). The securities of each Series related to a Trust (the "Securities")
will represent in the aggregate the entire beneficial ownership interest in one
or more underlying securities deposited into the Trust by the Company (the
"Collateral").
The Securities for a Series will be issued by a separate Trust. Under
the Trust Agreement for any Series, the Trustee will collect payment on the
Collateral, and will remit payments to the holders of the Securities. For
federal income tax purposes, each Trust will be treated as a grantor trust under
subpart E of Part I of subchapter J of the Internal Revenue Code of 1986, as
amended (the "Code") and not as a partnership or an association taxable as a
corporation, and the Securities will represent undivided beneficial ownership
interests in the interest and principal payments on the Collateral.
The Company will sell, assign and transfer Collateral acquired by it
to the related Trust (the "Issuer") for each Series, all in exchange for the
related Securities. The Collateral is expected to be acquired by the Company
from one or more of its affiliates (each, in such capacity, a "Seller"), in each
case pursuant to a mutually acceptable sales or other agreement (each, a "Sales
Agreement"), between the Company and the Seller of such Collateral, containing
customary provisions and negotiated in good faith. The net proceeds to the
Company from the sale of each Series of Securities principally will be used to
pay the purchase price of the Collateral acquired for the related Trust.
The Securities are more fully described in the Registration Statement
(as hereinafter defined). Each Series of Securities, and any classes of
Securities within each Series, may vary, among other things, as to number and
types of classes, aggregate principal amount, final stated distribution dates
and the rate or rates, allocation, priority and timing of distributions thereof.
From time to time, the Company may enter into one or more underwriting
agreements (each, an "Underwriting Agreement") that provide for the sale of all
or a portion of certain classes of a Series of Securities (such securities to be
so purchased being herein collectively referred to as the "Underwritten
Securities") to the underwriters named in the related underwriting agreement
(the "Underwriters"). The standard provisions set forth herein are to be
incorporated by reference in any such Underwriting Agreement. An Underwriting
Agreement, including the provisions hereof incorporated therein by reference, is
herein referred to as the "Agreement." Unless otherwise defined herein, all
capitalized terms shall have the meanings assigned to them in the Underwriting
Agreement and if not defined therein shall have the meanings assigned to them in
the Trust Agreement.
-2-
<PAGE>
The Underwriting Agreement relating to each offering of Securities
shall specify the principal amount of Securities to be issued and their
respective interest rates or methods of determining same, the price or prices at
which the Underwritten Securities are to be purchased by the Underwriters from
the Company, the initial public offering prices or the method by which the
prices at which such Underwritten Securities are to be sold will be determined,
the names of the firms, if any, designated as representatives of the
Underwriters (the "Representatives"), the principal amount of Underwritten
Securities to be purchased by each Underwriter, and the date, time and manner of
delivery of the Underwritten Securities and payment therefor. Each such
offering of Underwritten Securities will be governed by the Agreement, which
shall inure to the benefit of and be binding upon the Underwriters participating
in the offering of such Underwritten Securities.
The Company is a limited-purpose finance corporation and wholly-owned
subsidiary of [BB&T PARENT], a [Delaware] corporation ("BB&T"). BB&T, in turn,
is an indirect subsidiary of [BB&T Holding Company].
1. Representations and Warranties. (a) The Company represents and
------------------------------
warrants to, and agrees with, each Underwriter that:
(i) The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-3 for
the registration of securities under the Securities Act of 1933, as
amended (the "Act"), which registration statement has become
effective, and has filed such amendments thereto and such additional
registration statements as may have been required to the date of the
Agreement. Such registration statement, as amended at the date of the
Agreement, meets the requirements set forth in Rule 415 under the Act
and complies in all other material respects with the Act and the rules
and regulations thereunder. The Company proposes to file with the
Commission pursuant to Rule 424 under the Act a supplement to the form
of prospectus included in such registration statement relating to the
Securities and the plan of distribution thereof. Such registration
statement, including the exhibits thereto, as amended at the date of
the Agreement, and including all information, if any, filed with the
Commission pursuant to the Securities Exchange Act of 1934, as amended
(the "Exchange Act") and incorporated by reference therein, is
hereinafter called the "Registration Statement"; the latter of such
prospectus in the form in which it appears in the Registration
Statement or in the form most recently revised and filed with the
Commission pursuant to Rule 424 is hereinafter called the "Base
Prospectus"; such form of prospectus supplemented by the supplement to
the form of prospectus specifically relating to the Securities, in the
form in which it shall be first filed with the Commission pursuant to
Rule 424 (including the Base Prospectus as so supplemented) is
hereinafter called the "Final Prospectus." Any preliminary form of
the Final Prospectus which has heretofore been filed pursuant to Rule
424 or, prior
-3-
<PAGE>
to the effective date of the Registration Statement, pursuant to Rule
402(a), 424(a) or 430A, is hereinafter called a "Preliminary Final
Prospectus."
(ii) As of the date of the Agreement, when the Final
Prospectus is first filed pursuant to Rule 424 under the Act, when,
prior to the Closing Date (as hereinafter defined), any amendment to
the Registration Statement becomes effective, when any supplement to
the Final Prospectus is filed with the Commission, and at the Closing
Date, (A) the Registration Statement, as amended as of any such time,
and the Final Prospectus, as amended or supplemented as of any such
time, complies and will comply in all material respects with the
applicable requirements of the Act and the rules and regulations
thereunder and (B) the Registration Statement, as amended as of any
such time, does not contain and will not contain any untrue statement
of a material fact and does not omit and will not omit to state any
material fact required to be stated therein or necessary in order to
make the statements therein not misleading and the Final Prospectus,
as amended or supplemented as of any such time, does not and will not
include an untrue statement of a material fact and does not omit and
will not omit to state a material fact necessary in order to make the
statements, in light of the circumstances under which they were made,
not misleading; provided, however, that the Company makes no
representations or warranties as to the information contained in or
omitted from the Registration Statement or the Final Prospectus or any
amendment thereof or supplement thereto in reliance upon and in
conformity with Underwriting Information (as defined herein) furnished
in writing to the Company by or on behalf of any Underwriter
specifically for use in connection with the preparation of the
Registration Statement and the Final Prospectus.
(iii) As of the date of the Agreement, when the Final
Prospectus is first filed pursuant to Rule 424 under the Act, when,
prior to the Closing Date, any amendment to the Registration Statement
becomes effective, when any supplement to the Final Prospectus is
filed with the Commission, and at the Closing Date, there has not and
will not have been (A) any request by the Commission for any further
amendment of the Registration Statement or the Final Prospectus or for
any additional information, (B) any issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement
or the initiation or threat of any proceeding for that purpose, or (C)
any notification with respect to the suspension of the qualification
of the Underwritten Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose.
(iv) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware with full corporate power and authority to own its
properties and conduct its business as now conducted by it and to
enter into and perform its obligations under the Agreement and Trust
Agreement, and has qualified to do business as a foreign corporation
and is in good standing under the laws of each jurisdiction that
requires such
-4-
<PAGE>
qualification wherein it owns or leases material properties, except
where the failure to so qualify would not have a material adverse
effect on the Company or its ability to perform its obligations under
the Agreement and the Trust Agreement.
(v) The execution, delivery and performance of the
Agreement and Trust Agreement are within the corporate power of the
Company. The Agreement has been and, as of the Closing Date the Trust
Agreement will have been, duly authorized by all necessary action on
the part of the Company, and neither the issuance and sale of the
Underwritten Securities, nor the execution and delivery by the Company
of the Agreement or the Trust Agreement, nor the consummation by the
Company of any of the transactions herein or therein contemplated, nor
compliance by the Company with the provisions hereof or thereof, will
(A) violate the articles of incorporation or by-laws of the Company,
(B) result in a breach or violation of, or constitute a default under,
any law, governmental rule or regulation or any judgment, decree or
order binding on the Company or its properties, or any of the
provisions of any indenture, mortgage, deed of trust, contract or
other instrument to which the Company is a party or by which it is
bound, or (C) result in the creation of any lien, charge, or
encumbrance upon any of its properties pursuant to the terms of any
such indenture, mortgage, deed of trust, contract or other instrument
(other than the related Trust Agreement).
(vi) The Agreement has been duly executed and delivered by
the Company and, as of the Closing Date, the related Trust Agreement
will have been duly executed by the Company and, assuming the due
authorization, execution and delivery by the other parties thereto,
each constitutes, or will constitute, a legal, valid and binding
agreement of the Company, enforceable against the Company in
accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors'
rights generally and to general principles of equity regardless of
whether enforcement is sought in a proceeding in equity or at law, and
except that the provisions relating to indemnification and
contribution may be unenforceable as against public policy.
(vii) The Underwritten Securities and the Trust Agreement
will conform in all material respects to the descriptions thereof
contained in the Final Prospectus, and, when duly and validly executed
by the Trustee and the Underwritten Securities are delivered to and
paid for by the Underwriters as provided herein, such Underwritten
Securities will be validly issued and entitled to the benefits of the
Trust Agreement.
-5-
<PAGE>
(viii) Since the respective dates as of which information
is given in the Registration Statement and the Final Prospectus, there
has not been any material adverse change or development involving a
prospective material adverse change in the business, operations,
financial condition, properties or assets of the Company.
(ix) There are no actions, suits or proceedings against,
or investigations of, the Company pending, or, to the knowledge of the
Company, threatened, before any court, administrative agency or other
tribunal (A) asserting the invalidity of the Agreement, the Trust
Agreement, or the Underwritten Securities, (B) seeking to prevent the
issuance of the Underwritten Securities or the consummation of any of
the transactions contemplated by the Agreement or any related Trust
Agreement, (C) that might materially and adversely affect the
performance by the Company of its obligations under the Agreement or
the related Trust Agreement, or (D) seeking to affect adversely the
federal or state income tax attributes of the Securities as described
in the Final Prospectus.
(x) No filing or registration with, notice to,
qualification of or with, or consent, approval, authorization or order
or other action of any person, corporation or other organization or of
any court, supervisory or governmental authority or agency is required
for the consummation by the Company of the transactions contemplated
by the Agreement or the Trust Agreement except such as have been, or
will have been prior to the Closing Date, obtained under the Act, or
state securities laws or Blue Sky laws, or from the National
Association of Securities Dealers, Inc. in connection with the
purchase and distribution of the Underwritten Securities by the
Underwriters, or the assignment of the Collateral to the Trustee
pursuant to the Trust Agreement that have not yet been completed.
(xi) At the time of execution of the related Trust
Agreement, the Company will have good and marketable title to the
Collateral being assigned to the Trustee, free and clear of any lien,
adverse claim, mortgage, charge, pledge or other encumbrance or
security interest, and will not have assigned to any other person any
of its right, title or interest in such Collateral; and will have the
power and authority to transfer such Collateral to the Trustee; and
upon the execution and delivery of the Trust Agreement, the Trustee
will have acquired ownership of all of the Company's right, title and
interest in and to the related Collateral; and, upon the execution of
the Trust Agreement, the Company will transfer all its right, title
and interest in such Collateral to the Trustee.
(xii) [Under generally accepted accounting principles, the
Company will report its transfer of the Collateral to the Trust
pursuant to the Trust Agreement and the sale of the Underwritten
Securities as a sale of its interest in the Collateral. The Company
has been advised by its independent certified public accountants that
it concurs with such treatment under generally accepted accounting
principles. For
-6-
<PAGE>
federal income tax purposes, the Company will treat the transfer of
the Collateral to the Trust and the sale of the Securities as a sale
of its interest in the Collateral.]
(xiii) As of the Closing Date, any accounts or funds
constituting part of the Trust with respect to the Securities will
name the Trustee as the beneficiary thereof and will be delivered to
and held by the Trustee and any cash will be delivered to the Trustee,
and the Trustee either will own such assets, or have a first priority
perfected security interest therein, in either case subject to no
prior lien, security interest, pledge, charge or other encumbrance.
(xiv) Any taxes, fees and other governmental charges in
connection with the execution, delivery and issuance of the Agreement
and the Trust Agreement and the execution, delivery and sale of the
Securities have been or will be paid at or prior to the Closing Date.
(xv) Neither the Company nor the Trust is, and the
issuance and sale of the Securities in the manner contemplated by the
Final Prospectus will not cause the Company or the Trust to become,
subject to registration or regulation as an Investment Company or an
affiliate of an Investment Company under the Investment Company Act of
1940, as amended.
(xvi) The Trust Agreement has been qualified under the
Trust Indenture Act of 1939, as amended.
(xvii) Immediately prior to the delivery of the
Underwritten Securities to the Underwriters, the Company will own the
Securities free and clear of any lien, adverse claim, pledge,
encumbrance or other security interest, and will not have assigned to
any person any of its right, title or interest in the Securities, and,
upon consummation of the transactions contemplated in the Agreement,
the Company will transfer all its right, title and interest in the
Securities to the Underwriters free and clear of any lien, adverse
claim, pledge, encumbrance or other security interest.
(xviii) At the Closing Date, the representations and
warranties made by the Company in the Trust Agreement will be true and
correct in all material respects.
-7-
<PAGE>
Any certificate signed by an officer of the Company and delivered
to the Trustee, the Underwriters or to their counsel in connection
with an offering of the Securities shall state that it is a
representation and warranty as to the matters covered thereby by the
Company as to the matters covered thereby.
2. Purchase and Sale. Subject to the terms and conditions and in
-----------------
reliance upon the representations and warranties set forth herein, the Company
agrees to sell to each Underwriter, and each Underwriter agrees, severally and
not jointly, to purchase from the Company, at the applicable purchase prices set
forth in the Underwriting Agreement (plus accrued interest as therein set
forth), Underwritten Securities representing the respective aggregate
approximate principal amounts, notional amounts or percentage interests, as the
case may be, of the various classes of Securities set forth in the Underwriting
Agreement or opposite such Underwriter's name in an attachment to the
Underwriting Agreement.
3. Delivery and Payment. Delivery of and payment for the
--------------------
Underwritten Securities shall be made at the office, on the date and at the time
specified in the Underwriting Agreement, which date and time may be postponed by
agreement between the Underwriters and the Company or as provided in Section 10
hereof (such date and time of delivery and payment for the Underwritten
Securities being herein called the "Closing Date"). Delivery of the
Underwritten Securities shall be made to the Underwriters against payment by the
Underwriters of the purchase price thereof to or upon the order of the Company
in the type of funds specified in the Underwriting Agreement. The Underwritten
Securities shall be registered in such names and in such authorized
denominations as the Underwriters may request not less than two full business
days in advance of the Closing Date.
The Company agrees to have the Underwritten Securities available for
inspection, checking and packaging by the Underwriters in New York, New York (or
such other location within the continental United States requested by the
Underwriters), not later than 1:00 p.m. on the business day prior to the Closing
Date.
4. Offering by Underwriters. It is understood that the several
------------------------
Underwriters propose to offer the Underwritten Securities for sale to the public
as set forth in the Final Prospectus.
5. Agreements. (a) The Company covenants and agrees with the several
----------
Underwriters that:
(i) Substantially contemporaneously with the execution of
the Agreement, the Company will prepare the supplement to the Base
Prospectus setting forth the principal amount of Securities
covered thereby and the material terms thereof, the initial public
offering price of the Underwritten Securities or the manner of
offering such Underwritten Securities, the price at which the
Underwritten Securities are to be purchased by the Underwriters
from the Company, the selling concessions and reallowance, if any,
and such other information as the Underwriters and the Company
deem appropriate in connection with the offering of
-8-
<PAGE>
the Securities. Until the Closing Date, the Company will not file
any amendment to the Registration Statement or supplement to the
Base Prospectus, and thereafter, will not file any supplement to
the Final Prospectus relating to the Securities unless the Company
has furnished the Underwriters a copy for their review prior to
filing and will not file any such proposed amendment or supplement
to which the Underwriters reasonably object. Subject to the
foregoing sentence, the Company will cause the Final Prospectus to
be filed with the Commission pursuant to Rule 424 under the Act
and a report on Form 8-K will be filed with the Commission within
15 days following the Closing setting forth specific information
concerning the Securities and the Collateral and including, as an
exhibit, a copy of the Trust Agreement. The Company will promptly
advise the Underwriters (A) when the Final Prospectus shall have
been filed with the Commission pursuant to Rule 424 has been filed
with the Commission, (B) when any amendment to the Registration
Statement shall have become effective, (C) of any request by the
Commission for any amendment of the Registration Statement or the
Final Prospectus or for any additional information, (D) of the
issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or the initiation or
threatening of any proceeding for that purpose, and (E) of the
receipt by the Company of any notification with respect to the
suspension of the qualification of the Underwritten Securities for
sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose. The Company will use its best efforts
to prevent the issuance of any such stop order or suspension and,
if issued, to obtain as soon as possible the withdrawal thereof.
(ii) If, at any time when a prospectus relating to the
Securities is required to be delivered under the Act, any event
occurs as a result of which in the opinion of counsel to the
Company or the Underwriters, the Final Prospectus, as then amended
or supplemented, would include any untrue statement of a material
fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which
they were made, not misleading, or if it shall be necessary to
amend or supplement the Final Prospectus to comply with the Act or
the rules and regulations thereunder, the Company will promptly
prepare and file with the Commission, subject to paragraph (i) of
this Section 5(a), an amendment or supplement that will correct
such statement or omission or an amendment that will effect such
compliance and, if such amendment or supplement is required to be
contained in a post-effective amendment of the Registration
Statement, will use its best efforts to cause such amendment of
the Registration Statement to be made effective as soon as
possible and will promptly file all reports and any definitive
proxy or information statements required to be filed by the
Company pursuant to Sections 13, 14, and 15 of the Exchange Act
subsequent to the date of the Prospectus for so long as the
delivery of a Prospectus is required in connection with the
offering or sale of the Securities; provided however, that any
such amendment or update prepared more than nine months after the
Closing Date shall be at the expense of the Underwriters.
-9-
<PAGE>
(iii) The Company will furnish to counsel for the
Underwriters and to each Underwriter, without charge, conformed copies
of the Registration Statement (including exhibits thereto) and each
amendment thereto which shall become effective on or prior to the
Closing Date, and, so long as delivery of a prospectus by an
Underwriter or dealer may be required by the Act, as many copies of
any Preliminary Final Prospectus and the Final Prospectus and any
amendments thereof and supplements thereto as the Underwriters may
reasonably request.
(iv) The Company will apply the net proceeds from the sale
of the Securities in the manner set forth in the Prospectus.
(v) The Company will pay all the fees and disbursements
of its counsel and of independent accountants for the Company relating
to legal review, opinions of counsel for the Company, audits, review
of unaudited financials, cold comfort review or otherwise; the costs
and expenses of printing (or otherwise reproducing) and delivering the
Agreement, the Trust Agreement and the Securities; the initial fees,
costs and expenses of the Trustee under the Trust Agreement and its
counsel; the costs and expenses incident to the preparation, printing,
distribution and filing of the Registration Statement (including
exhibits thereto), the Base Prospectus, the Preliminary Final
Prospectus and the Final Prospectus, and all amendments of and
supplements to the foregoing, and of the Securities; and the fees of
rating agencies. Except as provided in Section 7 hereof, the
Underwriters shall be responsible for paying all costs and expenses
incurred by them in connection with their purchase and sale of the
Underwritten Securities.
(vi) The Company will use its best efforts to arrange for
the qualification of the Securities for sale under the laws of such
jurisdictions as the Underwriters may designate in the Underwriting
Agreement, to maintain such qualifications in effect so long as
required for the distribution of the Securities and to arrange for the
determination of the legality of the Securities for purchase by
investors; provided, however, that the Company shall not be required
to qualify to do business in any jurisdiction where it is not now so
qualified or to take any action which would subject it to general or
unlimited service of process in any jurisdiction where it is not now
so subject; and provided further, that the Underwriters will pay all
costs and expenses associated therewith.
(vii) So long as any Securities are outstanding, the
Company will cause the Trustee to furnish to the Underwriter, as soon
as available, a copy of (A) the annual statement of compliance
delivered under the Trust Agreement, [(B) the annual independent
public accountants' servicing report furnished pursuant to the Trust
Agreement,] (C) each report, statement or other document regarding the
Securities filed with the Commission under the Exchange Act or mailed
to the holders of the Securities, pursuant to the Trust Agreement or
otherwise, (D) any
-10-
<PAGE>
reports provided by certified public accountants pursuant to the
Trust Agreement regarding the reports, statements or other
documents included in (C) above, and (E) from time to time, such
other information concerning the Securities as the Underwriter
may reasonably request and which may be furnished by the Company
without undue expense.
6. Conditions to the Obligations of the Underwriters. The
-------------------------------------------------
obligations of the Underwriters under the Agreement to purchase the Securities
shall be subject to the performance by the Company of its obligations hereunder
and in the Trust Agreement, and the following additional conditions:
(a) To the accuracy on the date of the Agreement and on the
Closing Date (if made on such Closing Date) and as of the date of the
effectiveness of any amendment to the Registration Statement filed
prior to the Closing Date of the representations and warranties on the
part of the Company contained herein.
(b) The Registration Statement shall have become effective and
no stop order suspending the effectiveness of the Registration
Statement, as amended from time to time, shall have been issued and
not withdrawn and no proceedings for that purpose shall have been
instituted or threatened; and the Final Prospectus shall have been
filed or mailed for filing with the Commission in accordance with Rule
424 under the Act, and all actions required to be taken and all
filings required to be made by the Company under the Act prior to the
sale of the Securities shall have been duly taken or made.
(c) The Company shall have delivered to the Underwriters a
certificate of the Company, signed by the President or any Vice
President or Assistant Vice President of the Company and dated the
Closing Date, to the effect that the signer of such certificate has
carefully examined the Registration Statement, the Final Prospectus,
and the Agreement and that: (A) the representations and warranties of
the Company in the Agreement are true and correct in all material
respects at and as of the Closing Date with the same effect as if made
on the Closing Date; (B) the Company has complied with all the
agreements and satisfied all the conditions on its part to be
performed or satisfied at or prior to the Closing Date; (C) no stop
order suspending the effectiveness of the Registration Statement has
been issued and no proceedings for that purpose have been instituted
or, to the Company's knowledge, threatened; (D) nothing has come to
such Officer's attention that would lead him or her to believe that
the Final Prospectus contains any untrue statement of a material fact
or omits to state any material fact necessary in order to make the
statements, in the light of the circumstances under which they were
made, not misleading; and (E) there has been no material adverse
change or development involving a prospective material adverse change
in the business, operations, financial condition, properties or assets
of the Company.
-11-
<PAGE>
[(d) The Underwriters shall have received from a nationally
recognized independent accounting firm, two letters, (i) one dated the
date of the Agreement and satisfactory in form and substance to the
Underwriters and counsel for the Underwriters covering such matters
relating to the Trust as the Underwriters may reasonably request; and
(ii) the other dated the Closing Date and satisfactory in form and
substance to the Underwriters and counsel for the Underwriters (A)
confirming the information contained in the letter dated the date of
the Agreement and (B) covering such other matters relating to the
Trust as the Underwriters may reasonably request.]
(e) Opinions
--------
(i) The Underwriters shall have received from the counsel
for the Company, a favorable opinion, dated the Closing Date and
satisfactory in form and substance to counsel for the
Underwriters, as to such matters reasonably requested by the
Underwriters.
(ii) The Company shall have furnished to the Underwriters
the opinions of counsel to the Trustee, dated the Closing Date
and satisfactory in form and substance to counsel for the
Underwriters, as to the due authorization, execution and delivery
of the Trust Agreement by the Trustee and such other matters
reasonably requested by the Underwriters.
(f) The Underwritten Securities have been assigned the ratings
set forth in the Underwriting Agreement, which shall be in one of the
four highest rating categories by one or more "nationally recognized
statistical rating organizations" (as that term is defined by the
Commission) designated in the Underwriting Agreement. On the Closing
Date, (i) such rating or ratings shall not have been rescinded and
there shall not have been any downgrading, or public notification of a
possible downgrading or public notice of a possible change, without
indication of direction; and (ii) no downgrading, or public
notification of a possible downgrading or public notification of a
possible change, without indication of direction, shall have occurred
in the rating accorded any of the debt securities of any person,
providing any form of credit enhancement for the Securities by any
"nationally recognized statistical rating organization."
(g) [Reserved.]
(h) On the Closing Date, there shall not have occurred any
change, or any development involving a prospective change, in or
affecting the business or properties of the Company since the date of
the Underwriting Agreement that the Underwriter concludes in the
reasonable judgment of the Underwriter materially impairs the
investment quality of the Underwritten Securities so as to make it
impractical or inadvisable to proceed with the public offering or the
delivery of the Underwritten Securities as contemplated by the Final
Prospectus.
-12-
<PAGE>
(i) All proceedings in connection with the transactions
contemplated by the Agreement and all documents incident hereto shall
be satisfactory in form and substance to the Underwriters and counsel
for the Underwriters, and the Underwriters and counsel for the
Underwriters shall have received such information, certificates and
documents as they may reasonably request.
If any of the conditions specified in this Section 6 shall not
have been fulfilled in all material respects when and as provided in
the Agreement, if the Company is in breach of any covenants or
agreements contained herein or if any of the opinions and certificates
mentioned above or elsewhere in the Agreement shall not be in all
material respects reasonably satisfactory in form and substance to the
Underwriters and counsel for the Underwriters, the Agreement and all
obligations of the Underwriters under the Agreement may be canceled
at, or at any time prior to, the Closing Date by the Underwriters.
Notice of such cancellation shall be given to the Company in writing,
or by telephone or telegraph and confirmed in writing.
7. Reimbursement of Expenses. If for any reason other than a
-------------------------
default by the Underwriters in their obligations under the Agreement the sale of
the Underwritten Securities provided for herein is not consummated, the Company
will reimburse the Underwriters severally upon demand for all out-of-pocket
expenses (including reasonable fees and disbursements of counsel) that shall
have been reasonably incurred by them in connection with their investigation,
the preparation to market and the marketing of the Securities, or in
contemplation of the performance by them of their obligations under the
Agreement.
8. Indemnification and Contribution. (a) The Company indemnifies
--------------------------------
and holds harmless each Underwriter and each person, if any, who controls any
Underwriter within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act as follows:
(i) against any and all losses, claims, expenses, damages or
liabilities, joint or several, to which such Underwriter or such
controlling person may become subject under the Act, the Exchange Act
or otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement, the Final Prospectus, or any
amendment or supplement thereto, or any related Preliminary Final
Prospectus (but only to the extent the underlying information related
to such untrue statement or alleged untrue statement arises out of or
is based upon Company Information (as defined below) that was not
superseded or corrected by delivery to the Underwriters of corrected
written or electronic information, or for which the Company provided
written notice of an error or material omission prior to the
confirmation of the sale of the applicable Underwritten Securities) or
arise out of, or are based upon, the omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; and will
reimburse each Underwriter
-13-
<PAGE>
and each such controlling person for any legal or other expenses
reasonably incurred by such Underwriter or such controlling person in
connection with investigating or defending any such loss, claim,
damage, liability or action as such expenses are incurred; provided,
however, that (A) the Company will not be liable in any such case to
the extent that any such loss, claim, damage or liability arises out
of or is based upon an untrue statement or omission, or alleged untrue
statement or omission, made in any of such documents in reliance upon
and in conformity with written information furnished to the Company by
an Underwriter, specifically for use therein and constituting
Underwriting Information (as defined below), and (B) such indemnity
solely with respect to any Preliminary Final Prospectus shall not
inure to the benefit of any Underwriter (or any person controlling
such Underwriter) from whom the person asserting any such loss, claim,
damage or liability purchased the Securities which are the subject
thereof if such person did not receive a copy of the Final Prospectus
(or the Final Prospectus as amended or supplemented, excluding any
documents incorporated therein by reference) at or prior to the
confirmation of the sale of such Securities to such person in any case
where such delivery is required by the Act and the untrue statement or
omission of a material fact contained in such Preliminary Final
Prospectus was corrected in the Final Prospectus (or the Final
Prospectus as amended or supplemented, excluding any documents
incorporated therein by reference);
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, to the extent of the aggregate amount paid in
settlement of any litigation, or investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission, if such settlement is
effected with the written consent of the Company; and
(iii) against any and all expense whatsoever (including the
fees and disbursements of counsel chosen by you), reasonably incurred
in investigating, preparing or defending against any litigation, or
investigation or proceeding by any governmental agency or body,
commenced or threatened, or any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or
omission, to the extent that any such expense is not paid under (i) or
(ii) above.
As used herein, (i) the term "Company Information" means the information
furnished to the Underwriters by or on behalf of the Company regarding the
Company or the Collateral and (ii) the term "Underwriting Information" means the
information in the portion of the Final Prospectus constituting the prospectus
supplement set forth under the heading "Underwriting."
This indemnity will be in addition to any liability that the Company
may otherwise have, and shall be limited to the extent provided in the Company's
certificate of incorporation.
-14-
<PAGE>
(b) Each Underwriter agrees to indemnify and hold harmless the
Company, each of its directors, each of the Company's officers who have
signed the Registration Statement and each person, if any, who controls the
Company within the meaning of the Act or the Exchange Act, against any and
all losses, claims, expenses, damages or liabilities to which the Company
or any such director, officer or controlling person may become subject,
under the Act, the Exchange Act or otherwise, insofar as such losses,
claims, damages or liabilities, (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of
any material fact contained in the Registration Statement, the Final
Prospectus or any amendment or supplement thereto, or any related
Preliminary Final Prospectus (except to the extent the underlying
information relating to such untrue statement or alleged untrue statement
constitutes, arises out of, or is based upon Company Information), or arise
out of, or are based upon, the omission or the alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only
to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in conformity
with written information constituting Underwriting Information furnished to
the Company by such Underwriter specifically for use therein; and will
reimburse any legal or other expenses reasonably incurred by the Company or
any such director, officer or controlling person in connection with
investigating or defending any such loss, claim, damage, liability or
action. This indemnity agreement will be in addition to any liability that
such Underwriter may otherwise have.
-15-
<PAGE>
(c) Promptly after receipt by an indemnified party under this Section
8 of notice of the commencement of any action, such indemnified party will,
if a claim in respect thereof is to be made against the indemnifying party
under this Section 8, notify the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will not
relieve it from any liability that it may have to any indemnified party
otherwise than under this Section 8. In case any such action is brought
against any indemnified party, and it notifies the indemnifying party of
the commencement thereof, the indemnifying party will be entitled to
participate therein, and, to the extent that it may elect by written notice
delivered promptly to the indemnified party after receiving the aforesaid
notice from such indemnified party, jointly with any other indemnifying
party similarly notified, to assume (at its own expense) the defense
thereof, with counsel satisfactory to such indemnified party (who shall
not, except with the consent of the indemnified party, be counsel to the
indemnifying party) to represent the indemnified party in such action;
provided that, if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party or
parties shall have concluded that there may be legal defenses available to
it or them and/or other indemnified parties which are different from or
additional to those available to the indemnified party, the indemnified
party or parties shall have the right to select separate counsel in the
defense of such action on behalf of such indemnified party or parties.
Upon receipt of notice from the indemnifying party to such indemnified
party of its election so to assume the defense of such action and approval
by the indemnified party of the selected counsel, and, after notice from
the indemnifying party to such indemnified party under this Section 8, such
indemnifying party shall not be liable for any legal or other expenses
subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation unless (i) the
indemnified party shall have employed separate legal counsel in connection
with the assertion of legal defenses in accordance with the proviso to the
next preceding sentence (it being understood, however, that the
indemnifying party shall not be liable for the expenses of more than one
separate counsel, approved by any indemnified party in the case of
subsection (a) above, representing the indemnified parties under such
subparagraph (a) who are parties to such action), (ii) the indemnifying
party shall not have employed counsel satisfactory to the indemnified party
to represent the indemnified party within a reasonable time after notice of
commencement of the action or (iii) the indemnifying party has authorized
the employment of counsel for the indemnified party at the expense of the
indemnifying party (it being understood that if clause (i) or (iii) is
applicable, such liability shall be only in respect of the counsel referred
to in such clause (i) or (iii)).
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<PAGE>
(d) If the indemnification provided for in this Section 8 is
unavailable to hold harmless an indemnified party under subsection (a) or
(b) above in respect of any losses, claims, damages or liabilities (or
actions in respect thereof) referred to herein, then each indemnifying
party shall contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect
the relative benefits received by the Company on the one hand and the
Underwriters on the other from the offering of the Underwritten Securities
to which such loss, claim, damage or liability (or action in respect
thereof) relates. If, however, the allocation provided by the immediately
preceding sentence is not permitted by applicable law or if the indemnified
party failed to give the notice required under subsection (c) above, then
each indemnifying party shall contribute to such amount paid or payable by
such indemnified party in such proportion as is appropriate to reflect not
only such relative benefits but also the relative fault of the Company on
the one hand the Underwriters on the other in connection with the
statements or omissions which resulted in such losses, claims, damages or
liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative benefits received by the Company on
the one hand and Underwriters on the other shall be deemed to be in the
same proportion as the total net proceeds from such offering (before
deducting expenses) received by the Company bear to the total underwriting
discounts and commissions received by the Underwriters. The relative fault
shall be determined by reference to, among other things, whether the untrue
or alleged untrue statement of a material facts or the omission or alleged
omission to state a material fact relates to information supplied by the
Company on the one hand or the Underwriters on the other and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company and the
Underwriters agree that it would not be just and equitable if contribution
pursuant to this subsection (d) were determined by pro rata allocation or
by any other method of allocation which does not take account of the
equitable considerations referred to above in this subsection (d). The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to
above in this subsection (d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim subject to the
limitations set forth in subsection (c) above. Notwithstanding the
provisions of this subsection (d), the Underwriters shall not be required
to contribute any amount in excess of the amount by which the total price
at which the Underwritten Securities underwritten and distributed to the
public exceeds the amount of any damages which the Underwriters have
otherwise paid or been required or become liable to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The obligation of
any Underwriter pursuant to this subsection (d) shall be several in
proportion to its respective underwriting obligations and not joint.
-17-
<PAGE>
9. Default by an Underwriter. If any one or more Underwriters shall
-------------------------
fail to purchase and pay for any of the Securities of any Class agreed to be
purchased by such Underwriter or Underwriters under the Agreement and such
failure to purchase shall constitute a default in the performance of its or
their obligations under the Agreement, the remaining Underwriters shall be
obligated severally to take up and pay for (in the respective proportions which
the portion of the Securities of such Class set forth opposite their names in an
attachment to the Underwriting Agreement bears to the aggregate amount of
Securities of such Class set forth opposite the names of the remaining
Underwriters) the Securities of such Class which the defaulting Underwriter or
Underwriters agreed but failed to purchase; provided, however, that in the event
that the amount of Securities of such Class which the defaulting Underwriter or
Underwriters agreed but failed to purchase shall exceed 10% of the aggregate
amount of Securities of such Class as set forth in the Final Prospectus, the
remaining Underwriters shall have the right to purchase all, but shall not be
under any obligation to purchase any, of the Securities of such Class, and if
such non-defaulting Underwriters do not purchase all the Securities of such
Class, the Agreement will terminate without liability to any non-defaulting
Underwriter or the Company. In the event of a default by any Underwriter as set
forth in this Section 9, the Closing Date for such Class of Securities shall be
postponed for such period, not exceeding seven days, as the Underwriters shall
determine in order that the required changes in the Registration Statement and
the Final Prospectus or in any other documents or arrangements may be effected.
Nothing contained in the Agreement shall relieve any defaulting Underwriter of
its liability, if any, to the Company and any non-defaulting Underwriter for
damages occasioned by its default under the Agreement.
10. Termination. This Agreement shall be subject to termination in the
-----------
absolute discretion of the Underwriters, by notice given to the Company prior to
or at delivery of and payment for all Securities if prior to such time (i)
trading in securities generally on the New York Stock Exchange shall have been
suspended or limited, or minimum prices shall have been established on such
Exchange, (ii) a banking moratorium shall have been declared by either federal
or New York State authorities or (iii) the outbreak or escalation of hostilities
involving the United States or the declaration by the United States of a
national emergency or war, if the effect of any such event specified in this
clause (iii) in the judgment of the Underwriters make it impracticable or
inadvisable to proceed with the public offering or the delivery of the
Underwritten Securities on the terms and in the manner contemplated by the
Prospectus Supplement.
11. Representations and Indemnities to Survive. The respective
------------------------------------------
agreements, representations, warranties, indemnities and other statements of the
Company and the Underwriters set forth in or made pursuant to the Agreement will
remain in full force and effect, regardless of any investigation made by or on
behalf of any Underwriter or the Company or any of the officers, directors or
controlling persons referred to in Section 8 hereof, and will survive delivery
of and payment for the Securities. The provisions of this Section 11 and
Sections 5(a)(v), 7 and 8 hereof shall survive the termination or cancellation
of the Agreement.
12. Notices. All communications under the Agreement will be in writing
-------
and effective only on receipt and, if sent to the Underwriters, will be mailed,
delivered or telegraphed and confirmed to it at the office or offices set forth
in the Underwriting Agreement; or, if sent to the
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<PAGE>
Company, will be mailed, delivered or telegraphed and confirmed to it at 909
East Main Street, Richmond, Virginia 23218, Attention: President.
13. Successors. The Agreement will inure to the benefit of and be
----------
binding upon the parties hereto and their respective successors and the officers
and directors and controlling persons referred to in Section 8 hereof, and their
successors and assigns, and no other person will have any right or obligation
under the Agreement.
14. Applicable Law. The Agreement will be governed by and construed
--------------
in accordance with the laws of the jurisdiction as may be specified in the
Underwriting Agreement. The Agreement may be executed in any number of
counterparts, each of which shall for all purposes be deemed to be an original
and all of which shall together constitute but one and the same instrument.
15. Miscellaneous. Time shall be of the essence of the Agreement. The
-------------
Agreement supersedes all prior or contemporaneous agreements and understandings
relating to the subject matter of the Agreement. Neither the Agreement nor any
term of the Agreement may be changed, waived, discharged or terminated except by
a writing signed by the party against whom enforcement of such change, waiver,
discharge or termination is sought.
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<PAGE>
NATIONAL FINANCIAL SECURITIES CORPORATION
TRUST CERTIFICATES
2000-__ TERMS AGREEMENT
Dated: ________ __, 2000
To: National Financial Securities Corporation (the "Company")
Re: Underwriting Agreement Standard Provisions dated
May 2000 (the "Standard Provisions")
Series Designation: Trust Certificates, Series 2000-__ (the "Underwritten
Certificates")
Underwriting Agreement: Subject to the terms and conditions set forth
herein and to the terms of the Standard Provisions, which are incorporated by
reference herein, the Company hereby agrees to issue and sell to
_____________________ (the "Underwriters"), and the Underwriters hereby agree to
purchase from the Company, on ________ __, 2000, the aggregate outstanding
principal amount of the Underwritten Certificates set forth in Schedule A hereto
at the purchase price and on the terms set forth below; provided, however, that
-------- -------
the obligations of the Underwriters are subject to receipt by the Underwriters
of the Trust Agreement (as defined below), being in form and substance
satisfactory to the Underwriters.
The Underwritten Certificates will be issued by a trust (the "Trust") to be
established by the Company pursuant to a Trust Agreement, to be dated as of
_________ __, 2000 among the Company and _________________________, as trustee
(the "Trustee"), which incorporates by reference the Company's Standard Terms to
Trust Agreement (May 2000 Edition) (collectively, the "Trust Agreement"). The
Underwritten Certificates will represent in the aggregate the entire beneficial
ownership interest in the assets of the Trust which will consist of [UNDERLYING
SECURITIES] having the characteristics described in the Prospectus Supplement,
dated ________ ___, 2000, relating to the Underwritten Certificates (the
"Prospectus Supplement"). The Company specifically covenant to make available on
the Closing Date for sale, transfer and assignment to the Trust, [UNDERLYING
SECURITIES].
Registration Statement: References in the Standard Provisions to the
Registration Statement shall be deemed to include registration statement No.
333-_____.
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<PAGE>
Terms of the Underwritten Certificates: The Trust will issue $__,___,___
Trust Certificates, principal amount $__ per Trust Certificate. The [sole] asset
of the Trust will be [UNDERLYING SECURITIES], exclusive of interest accrued
thereon from and including ________ __, 2000 to but excluding the Closing Date.
[Coupon]
Distribution Dates: Each Distribution Date shall be the 15th day of
___________ and ____________, or if such day is not a business day, on the next
succeeding business day, commencing in ____________, 2000.
Purchase Price: The Underwriters have severally agreed to purchase the
Underwritten Certificates from the Company for the purchase price of ______% of
the principal balance of the Trust Certificates. Payment of the purchase price
for the Underwritten Certificates shall be made to the Company in federal or
similar immediately available funds payable to the order of the Company.
Denominations: The Underwritten Certificates will be issued in book-entry
form in denominations of $__ per Trust Certificate.
Closing Date and Location: 10:00 a.m. Eastern Time on ________ __, 2000, at
the offices of Hunton & Williams, Riverfront Plaza, East Tower, 951 East Byrd
Street, Richmond, Virginia 23219-4074. The Company will deliver the Underwritten
Certificates to the Underwriters in book-entry form only, through the same-day
funds settlement system of The Depository Trust Company on the Closing Date.
Due Diligence: At any time prior to the Closing Date, the Underwriters have
the right to inspect the [UNDERLYING SECURITIES] to ensure conformity with the
Prospectus and the Prospectus Supplement.
Controlling Agreement: This Terms Agreement sets forth the complete
agreement among the Company and the Underwriters and fully supersedes all prior
agreements, both written and oral, relating to the issuance of the Underwritten
Certificates and all matters set forth herein. Capitalized terms used herein and
not otherwise defined herein shall have the meanings assigned to such terms in
the Trust Agreement or the Prospectus Supplement.
Information Provided by the Underwriters: It is understood and agreed that
the information set forth under the heading "Underwriting" in the Prospectus
Supplement is the only information furnished by the Underwriters for inclusion
in the Registration Statement and the Prospectus.
Trustee: ________________________________________, will act as Trustee of
the Trust.
-21-
<PAGE>
Blue Sky Qualifications: The Underwriters specify _____________. The
Company has agreed to pay all costs and expenses incurred in connection with the
preparation of a blue sky survey to be delivered on or prior to the Closing
Date.
State Tax Opinions: The Company shall deliver to the Underwriters an
opinion of counsel pursuant to Section 6(e)(i) of the Standard Provisions with
respect to the State of _________.
Blackout Period: None.
Applicable Law: THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
Notices: All communications hereunder will be in writing and effective only
upon receipt and will be mailed, delivered or telegraphed and confirmed to the
parties at:
National Financial Securities Corporation
909 East Main Street
Richmond, Virginia 23219
Attention: President
[UNDERWRITERS]
Request for Opinions: (a) The Company hereby requests and authorizes
____________________, as their counsel in this transaction, to issue on behalf
of the Company such legal opinions to the Underwriters, their counsel, the
Trustee and the Rating Agencies as may be required by any and all documents,
certificates or agreements executed in connection with this Agreement.
(b) Each Underwriter hereby requests and authorizes _______________, as
their special counsel in this transaction, to issue to the Underwriters such
legal opinions as they may require, and the Company shall have furnished to
__________________ such documents as they may request for the purpose of
enabling them to pass upon such matters.
-22-
<PAGE>
Each Underwriter agrees, subject to the terms and provisions of the Trust
Agreement, a copy of which is attached hereto, and which is incorporated by
reference herein in its entirety and made a part hereof to the same extent as if
such provisions had been set forth in full herein, to purchase the Underwritten
Certificates.
[UNDERWRITER]
By:
Name:
Title:
Accepted and acknowledged
As of the Date First
Above Written:
NATIONAL FINANCIAL SECURITIES CORPORATION
By:
Name:
Title:
-23-
<PAGE>
Exhibit 4.1
TRUST AGREEMENT
between
NATIONAL FINANCIAL SECURITIES CORPORATION,
as Depositor,
and
_______________________________________________,
as Trustee
for Trust Certificates issued by
NFSC Trust 2000-_ for [UNERLYING SECURITIES]
<PAGE>
NFSC TRUST 2000-_ FOR
[UNDERLYING SECURITIES]
TRUST AGREEMENT
This Trust Agreement (this "Series Trust Agreement"), dated as
of_______ __, 2000, between National Financial Securities Corporation, as
Depositor, and ___________________, as Trustee, for $__,000,000 Trust
Certificates for [UNDERLYING SECURITIES] (the "Certificates"), incorporates by
reference the Standard Terms and Provisions of Series Trust Agreement (the
"Standard Terms") attached as Exhibit B hereto, and is governed by the Standard
Terms as fully as if set forth herein at length. All capitalized terms not
defined herein shall have the same meaning as set forth in the Standard Terms.
W I T N E S S E T H:
SECTION 1. A Trust is hereby created under the laws of the State of
[New York] and in the manner specified in Article II of the Standard Terms for
the benefit of Holders of the Certificates. The assets of the Trust shall
consist of the securities (referred to herein and in the Standard Terms as the
"Underlying Securities") described in Exhibit A hereto, all distributions
thereon after the date hereof, all right, title and interest in and to such
distributions and all other rights and privileges of the Holders of the
Certificates under this Series Trust Agreement.
SECTION 2. The name of the Trust is NFSC Trust 2000-_ for [Underlying
Securities].
SECTION 3. The Certificates shall be issued as a single class in the
amount set forth in Exhibit A hereto; shall have the standard terms set forth in
the Standard Terms; and shall have the nonstandard terms set forth in Exhibit A
hereto. Certificates shall be issued in substantially the form of the Form of
Certificate set forth in Exhibit C to this Series Trust Agreement. The
Certificates shall evidence fractional interests in the assets of the Trust,
payable solely from payments received by the Trustee attributable to the
Underlying Securities.
[SECTION 4. The Depositor hereby authorizes and directs the Trustee to
execute and deliver a letter of representations, in the form customarily
provided to DTC, from the Trustee and the Depositor dated the date of delivery
of the Certificates (the "Letter of Representations"). ]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Series Trust
Agreement to be executed by their respective duly authorized officers as of the
date first above written.
NATIONAL FINANCIAL SECURITIES CORPORATION,
as Depositor
By__________________________
Name:
Title:
[_________________________],
as Trustee
By__________________________
Name:
Title:
4.1-3
<PAGE>
Exhibit A - Description of the Underlying Securities and the Certificates;
Description of Certain Terms Used in the Agreement
Exhibit B - Standard Terms and Provisions of Series Trust Agreement
Exhibit C - Form of Certificate
Exhibit D - Officer's Certificate of the Trustee
4.1-4
<PAGE>
EXHIBIT A
TO SERIES TRUST AGREEMENT
DESCRIPTION OF THE UNDERLYING SECURITIES AND THE CERTIFICATES;
DESCRIPTION OF CERTAIN TERMS USED IN THE AGREEMENT
Part I - Description of the Underlying Securities
Issuer: [___________________]
Underlying Securities: [_______________________________]
Dated: [_________]
Original Principal Maturity Date: [_________]
Original Par Value Amount Issued: $[_________]
CUSIP Number: [_________]
Stated Interest Rate: [_________]%
Interest Payment Dates: [_________]
First Call Date: [_________]
Redemption Price: The Underlying Securities are redeemable at any time on or
after [_________], in whole or in part from time to time on
not less than __ nor more than __ days' notice at the
following redemption prices (expressed in percentages of the
principal amount) during the 12-month period ending
[_________]of each year:
Year Price ($)
- ---- ---------
and $__ on or after[_________], together, in each
case, with accrued interest to the redemption date.
<PAGE>
Mode of Payment of Underlying Securities: [By credit to the account of the
Holder at DTC.]
Record date of Underlying Securities: [_________]
Event of Default with respect to payment of interest and principal: [An event
of default under the Indenture exists upon (i) the default in the
payment of interest for 60 days, or (ii) the default in payment of
principal (or premium, if any) at maturity.]
Par Value Amount of Underlying Securities Deposited Under Series Trust
Agreement: $__,000,000
[The Underlying Securities will be held by the Trustee as Book-Entry Credits at
DTC.]
Part II - Description of the Certificates
Classes of Certificates: Pooled Certificates
Aggregate Face Amount of Pooled Certificate: $__,000,000
Item Aggregate
Face Minimum
Offered Number Due Date CUSIP Number Amount Offered Denominations
- -------------- -------- ------------ -------------- -------------
1 [_________] [_________] $__,000,000 $__
Part III - Definitions of Certain Terms Used in the Agreement
Authorized Denominations (Section 1.01) $__
Certificate Principal Amount (Section 1.01) $__
Closing Date (Section 1.01) [_________].
Corporate Trust Office (Section 1.01) [_________]
Depositor Address (Section 9.04) National Financial Securities Corporation
909 East Main Street
Richmond, Virginia 23219
Distribution Dates (Section 1.01) [_________]1 and [_________] 1 of each year,
commencing[_________].
A-2
<PAGE>
Indenture (Section 1.01) [_________]
Indenture Trustee (Section 1.01) [_________]
Trustee Address (Section 9.04) [_________]
Rating Agency (Section 1.01) Each of [Moody's Investors Service, Inc.] and
[Standard & Poor's Ratings Group]
Rating Agency Address (Section 9.04) [Moody's Investors Service, Inc.
99 Church Street
New York, NY 10007]
[Standard & Poor's Ratings Group
26 Broadway, 15th Floor
New York, NY 10004]
Retained Amount (Section 1.01) Interest accrued on the Underlying Securities
from, and including, [_________]to, but excluding, the Closing Date,
equal to $[_________]
A-3
<PAGE>
EXHIBIT B
TO SERIES TRUST AGREEMENT
================================================================================
STANDARD TERMS AND PROVISIONS OF SERIES TRUST AGREEMENT
between
NATIONAL FINANCIAL SECURITIES CORPORATION,
as Depositor,
and
the Trustee
================================================================================
<PAGE>
Relating to Trust Certificates of the Series identified in the Series Trust
Agreement; Reconciliation and Tie between the Trust Indenture Act of 1939 and
Agreement Provisions*
Trust Indenture Act Section Agreement Section
310(a)(1) 5.01
(a)(2) 5.01
(a)(3) Not Applicable
(a)(4) 5.02
(b) 5.11, 5.01
(c) Not Applicable
311(a) 5.10
(b) 5.10
312(a) 6.01, 6.02(a)
(b) 6.02(b)
(c) 6.02(c)
313(a) 6.03
(b) 6.03
(c) 6.03
(d) 6.03
314(a) 5.09(a), 5.09(b)
(b) 5.09(c), 5.09(d)
(c)(1) 5.09(f)
(c)(2) 5.09(f)
(c)(3) 5.09(f)
(d)(1) 5.09(e)
(d)(2) 5.09(e)
(d)(3) 5.09(e)
(e) 5.09(f)
315(a) 5.08
(b) 5.02
(c) 5.02
(d) 5.08
(d)(1) 5.08
(d)(2) 5.08
(d)(3) 5.08
(e) 5.13
316(a)(1)(A) 5.04
(a)(1)(B) 5.05
(a)(2) Not Applicable
(b) 2.08, 4.01
(c) 2.08, 2.09
(a) 5.03
317(b) 4.03
3.18(a) 9.03
________________________
* This reconciliation and tie shall not, for any purpose, be deemed to be part
of the within agreement.
B-ii
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I DEFINITIONS................................................................................................. 1
Section 1.1 Certain Definitions............................................................................. 1
ARTICLE II CREATION OF TRUST; DELIVERY AND CUSTODY OF BONDS; FORM OF CERTIFICATES; EXECUTION AND DELIVERY,
SURRENDER AND REDEMPTION OF CERTIFICATES.................................................................... 7
Section 2.1 Creation of Trust; Delivery and Custody of Underlying Securities; Execution .................... 7
Section 2.2 Form of Certificates............................................................................ 8
Section 2.3 Registration and Registration of Transfer and Exchange of Certificates.......................... 8
Section 2.4 Limitations on Execution and Delivery, Surrender and Registration of Transfer and Exchange of
Certificates........................................................................................... 9
Section 2.5 Mutilated, Destroyed, Lost or Stolen Certificates............................................... 9
Section 2.6 Persons Deemed Owners........................................................................... 10
Section 2.7 Cancellation and Destruction of Surrendered Certificates........................................ 10
Section 2.8 Book-Entry..................................................................................... 10
Section 2.9 Action or Consent of Holders.................................................................... 12
Section 2.10 Transfer of Certificates Held by DTC to Successor Depository.................................... 13
Section 2.11 Temporary Certificates.......................................................................... 14
ARTICLE III CERTAIN OBLIGATIONS OF HOLDERS OF CERTIFICATES; DEPOSITOR'S WARRANTIES.................................... 14
Section 3.1 Filing Proofs, Certificates and Other Information............................................... 14
Section 3.2 Payment of Taxes or Other Governmental Charges.................................................. 14
Section 3.3 Depositor's Warranties.......................................................................... 15
ARTICLE IV PAYMENT OF INTEREST AND PRINCIPAL; CUSTODY OF PROCEEDS OF INTEREST AND PRINCIPAL PAYMENTS.................. 15
Section 4.1 Payment of Interest; Payment of Principal; Mandatory Exchange of Callable Principal
Certificates and Callable Stripped Underlying Security Certificates.................................... 15
Section 4.2 Segregation of Moneys Received from Issuers in Respect of Underlying Securities................. 17
Section 4.3 Paying Agent.................................................................................... 18
ARTICLE V THE TRUSTEE AND THE DEPOSITOR............................................................................... 18
Section 5.1 Eligibility of Trustee; Disqualification........................................................ 18
Section 5.2 Trustee's Duties on Default; No Liability of the Trustee or the Depositor on the Underlying
Securities...................................................................................... 18
Section 5.3 Collection of Indebtedness and Suits for Enforcement by Trustee; Distribution of Amounts
Received in Respect of Defaulted Underlying Securities................................................. 19
Section 5.4 Control by Holders.............................................................................. 21
Section 5.5 Waiver of Past Defaults......................................................................... 21
Section 5.6 Maintenance of Offices and Agencies by the Trustee.............................................. 21
Section 5.7 Prevention of or Delay in Performance by the Trustee or the Depositor........................... 21
Section 5.8 Liability of the Trustee and the Depositor...................................................... 22
Section 5.9 Obligation of the Depositor..................................................................... 24
Section 5.10 Preferential Collection of Claims Against Depositor............................................. 27
Section 5.11 Resignation and Removal of the Trustee; Appointment of Successor Trustee........................ 27
Section 5.12 Indemnification by the Depositor................................................................ 29
Section 5.13 Undertaking for Costs........................................................................... 30
Section 5.14 Charges and Expenses............................................................................ 31
Section 5.15 Trustee Reports................................................................................. 31
ARTICLE VI HOLDERS' LISTS AND REPORTS................................................................................ 32
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Section 6.1 Depositor to Furnish Names and Addresses of Holders to Trustee................................. 32
Section 6.2 Preservation of Information, Communications to Holders......................................... 32
Section 6.3 Reports by Trustee............................................................................. 32
ARTICLE VII AMENDMENT AND TERMINATION............................................................................... 32
Section 7.1 Amendment...................................................................................... 32
Section 7.2 Termination.................................................................................... 33
ARTICLE VIII REDEMPTION OF CERTIFICATES.............................................................................. 33
Section 8.1 Redemption..................................................................................... 33
Section 8.2 Notice of Redemption........................................................................... 33
ARTICLE IX MISCELLANEOUS............................................................................................ 34
Section 9.1 Exclusive Benefit of Parties and Holders of Certificates; Effective Date....................... 34
Section 9.2 Invalidity of Provisions....................................................................... 34
Section 9.3 Conflict with Trust Indenture Act.............................................................. 34
Section 9.4 Notices........................................................................................ 34
Section 9.5 Governing Law; Forum........................................................................... 35
Section 9.6 Headings....................................................................................... 35
Section 9.7 Covenant of Depositor and Trustee Not to Place Trust in Bankruptcy............................. 35
Section 9.8 Trust Not to Merge............................................................................. 35
Section 9.9 Incurrence of Indebtedness..................................................................... 36
</TABLE>
B-iv
<PAGE>
STANDARD TERMS AND PROVISIONS OF SERIES TRUST AGREEMENT
-------------------------------------------------------
This document constitutes Standard Terms and Provisions of Series Trust
Agreement which are to be incorporated by reference in, and attached as Exhibit
B to, one or more series trust deposit agreements (each, a "Series Trust
Agreement") by and among National Financial Securities Corporation, as
Depositor, and the trustee designated therein, as Trustee.
Each Series Trust Agreement will create a trust under the laws of the State
of New York to hold securities (the "Underlying Securities") and all
distributions thereon and will provide for the creation, execution and delivery
of trust certificates (the "Certificates").
These Standard Terms shall be of no force and effect unless and until
incorporated by reference into a Series Trust Agreement.
The following terms and provisions shall govern the Certificates subject to
contrary or additional terms and provisions expressly set forth in a Series
Trust Agreement, which contrary or additional terms and provisions of the Series
Trust Agreement shall control.
ARTICLE I DEFINITIONS
Section 1.1 Certain Definitions.
-------------------
All capitalized terms used herein shall have the meaning set forth in this
Section 1.01 unless the context otherwise requires:
The term "Accreted Value" shall mean, for any Coupon Certificate, Principal
--------------
Certificate, Callable Principal Certificate or Stripped Coupon Certificate, (a)
the original issue price for such Certificate as set forth in Exhibit A to the
Series Trust Agreement, plus (b) an amount equal to an investment return thereon
accrued to the date of determination calculated based on a semiannual
compounding rate, on the basis of a 360 day year composed of twelve 30-day
months, equal to the original yield to maturity on the Closing Date on such
Certificate as set forth in Exhibit A to the Series Trust Agreement. With
respect to the allocation of proceeds of the Underlying Securities received in
connection with a payment default on the Underlying Securities, the relevant
determination date shall be the Petition Date. With respect to the determination
of Accreted Value in connection with a vote relating to the Underlying
Securities, the relevant determination date shall be a date determined by the
Trustee, which date shall be within fifteen Business Days of the date the
Trustee casts its votes as provided herein.
The term "Agreement" shall mean the trust deposit agreement consisting of
---------
the Series Trust Agreement into which is incorporated by reference the Standard
Terms, including all exhibits, schedules, appendices, supplements and amendments
to each.
The term "Authorized Denominations" for each class of Certificates shall
------------------------
mean the dollar amount, and greater multiples thereof (or of such other dollar
amount specified in the Series Trust Agreement), set forth in the Series Trust
Agreement.
<PAGE>
The term "Authorized Officer" shall mean any officer of the Depositor who
------------------
is authorized to act for the Depositor in matters relating to the Depositor.
The term "Available Information Event" shall mean that the Issuer has
---------------------------
suspended its Exchange Act reporting requirements at a time when the Exchange
Act reporting requirements with respect to the Certificates have not been
suspended or terminated.
The term "Beneficial Owner" shall mean any purchaser of Certificates which
----------------
are held through a Direct or Indirect DTC Participant, as such terms are used in
the rules and regulations of DTC.
The term "Book-Entry Credit" shall mean the evidence of the deposit by the
-----------------
Trustee of one or more Underlying Securities in a separate account of the
Trustee, as Trustee under this Agreement, identified in the Series Trust
Agreement.
The term "Business Day" shall mean a day which is not a day when banking
------------
institutions or trust companies in New York City are authorized or obligated by
law, regulation or executive order to remain closed.
The term "Callable Principal" shall mean the right to receive (i) the
------------------
payment, whether upon stated maturity or upon earlier redemption, of the
Principal and redemption premium, if any, of Underlying Securities which are
redeemable at the option of the Issuer thereof prior to stated maturity, and
(ii) the Interest relating to such Underlying Securities with respect to
Interest Payment Dates after the First Call Date for such Underlying Securities,
in each case subject to Section 5.03(b) hereof.
The term "Certificate" shall mean a certificate of a class of certificates
-----------
to be issued under this Agreement, which classes are specified in the Series
Trust Agreement for the series. Such classes may consist of:
(i) Coupon Certificates, which entitle the Holders thereof, in the
aggregate, to the Interest payable on a single Interest Payment Date on or
before the First Call Date for the Underlying Securities, or the stated
maturity date in the case of Underlying Securities not redeemable
(otherwise than in connection with a default or acceleration) at the option
of the Issuer thereof prior to stated maturity:
(ii) Principal Certificates, which entitle the Holders thereof, in the
aggregate, to Principal, payable at the stated maturity of the Underlying
Securities, of Underlying Securities which are not redeemable (otherwise
than in connection with a default or acceleration) at the option of the
Issuer thereof prior to stated maturity.
(iii) Callable Principal Certificates, which entitle the Holders thereof,
in the aggregate, to the Callable Principal relating to the Underlying
Securities.
B-2
<PAGE>
(iv) Stripped Coupon Certificates, which entitle the Holders thereof, in
the aggregate, to a specified portion (less than 100%) of the Interest
payable on a single Interest Payment Date on or before the First Call Date
for the Underlying Securities, or the stated maturity date in the case of
Underlying Securities not redeemable (otherwise than in connection with a
default or acceleration) at the option of the Issuer thereof prior to
stated maturity.
(v) Stripped Underlying Security Certificates, which entitle the Holders
thereof, in the aggregate, to Principal, payable at the stated maturity of
the Underlying Securities, of Underlying Securities which are not
redeemable (otherwise than in connection with a default or acceleration) at
the option of the Issuer thereof prior to stated maturity, and to a
specified portion (less than 100%) of Interest due on the Underlying
Securities on each Interest Payment Date on or prior to the First Call
Date.
(vi) Callable Stripped Underlying Security Certificates, which entitle
the Holders thereof, in the aggregate, to the Callable Principal relating
to the Underlying Securities, and to a specified portion (less than 100%)
of Interest due on the Underlying Securities on each Interest Payment Date
on or prior to the First Call Date.
(vii) Pooled Certificates, which entitle the Holders thereof to all the
interest payments on the Underlying Securities, all the principal payments
on the Underlying Securities and any related premium payable upon early
redemption of the Underlying Securities less any Retained Amount; provided,
that any designation of classes of Certificates made in the Series Trust
Agreement shall consist of only one of the following options, designated by
letters (a) - (e): (a) Coupon Certificates and Principal Certificates, (b)
Coupon Certificates and Callable Principal Certificates, (c) Stripped
Coupon Certificates and Stripped Underlying Security Certificates, (d)
Stripped Coupon Certificates and Callable Stripped Underlying Security
Certificates, or (e) Pooled Certificates.
The term "Certificate Register" shall have the meaning specified in Section
--------------------
2.03 hereof.
The term "Closing Date" shall mean the date set forth and designated as
------------
such in the Series Trust Agreement.
The term "Commission" shall mean the Securities and Exchange Commission.
----------
The term "Corporate Trust Office" shall mean the principal office of the
----------------------
Trustee as identified in the Series Trust Agreement.
The term "Depositor" shall mean National Financial Securities Corporation,
---------
a Delaware corporation, and any successor as Depositor hereunder.
The term "Designated Office in New York City," when used with respect to
----------------------------------
the Trustee, shall mean an office maintained in accordance with Section 5.06
hereof and designated by the Trustee.
B-3
<PAGE>
The term "DTC" shall mean The Depository Trust Company, a clearing agency
---
registered with the Commission, its successor or successors, and its nominee or
nominees.
The term "Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended.
The term "First Call Date" shall mean, for any Underlying Security, the
---------------
first date such Underlying Security can be redeemed at the option of the Issuer
thereof, which date shall be specified in the Series Trust Agreement.
The term "Holder" shall mean a Person in whose name a Certificate is
------
registered in the Certificate Register.
The term "Independent Certificate" shall mean a certificate of a non-
-----------------------
affiliated accountant, engineer, appraiser or other expert, as required by the
TIA.
The term "Indenture Trustee" shall mean the trustee or other fiduciary for
-----------------
the Underlying Securities.
The term "Interest" shall mean the right to receive the interest payable on
--------
the Underlying Securities on each Interest Payment Date, subject to Section
5.03(b) hereof.
The term "Interest Payment Dates" shall mean the dates on which interest
----------------------
payments are due on the Underlying Securities as specified in the Series Trust
Agreement.
The term "Issuer" shall mean the issuer of the Underlying Securities
------
described in Exhibit A to the Series Trust Agreement.
The term "Issuer Payment Default" shall have the meaning specified in
----------------------
Section 5.03 hereof.
The term "Letter of Representations" shall mean the letter of
-------------------------
representations from the Depositor and the Trustee to DTC with respect to the
Certificates held at DTC.
The term "Officer's Certificate of the Depositor" shall mean a certificate
--------------------------------------
signed by any Authorized Officer of the Depositor and delivered to the Trustee.
Unless otherwise specified, any reference in this Agreement to an Officer's
Certificate of the Depositor shall be to an Officer's Certificate of any
Authorized Officer of the Depositor.
The term "Officer's Certificate of the Trustee" shall mean the certificate
------------------------------------
of the Trustee in the form attached as Exhibit D to the Series Trust Agreement.
The term "Opinion of Counsel" shall mean one or more written opinions of
------------------
counsel who may, except as otherwise expressly provided in this Agreement, be
employees of or counsel to the Depositor and who shall be satisfactory to the
Trustee, and which opinion or opinions shall be
B-4
<PAGE>
addressed to the Trustee as Trustee, shall comply with any applicable
requirements of this Agreement, and shall be in form and substance satisfactory
to the Trustee.
The term "Outstanding Certificates" shall mean, as of the date of
------------------------
determination, all Certificates theretofore authenticated and delivered under
this Agreement except:
(i) Certificates theretofore canceled by the Certificate registrar or
delivered to the Certificate registrar for cancellation;
(ii) Certificates or portions thereof for which money in the necessary
amount for payment thereof has been theretofore deposited with the Trustee
or any Paying Agent in trust for the Holders of such Certificates
(provided, however, that if such Certificates are to be redeemed, notice of
such redemption has been duly given pursuant to this Agreement or provision
therefor, satisfactory to the Trustee, has been made); and
(iii) Certificates in exchange for which or in lieu of which other
Certificates have been authenticated and delivered pursuant to this
Agreement, unless proof satisfactory to the Trustee is presented that any
such Certificates are held by a bona fide purchaser;
provided that in determining whether the Holders have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Certificates
owned by the Depositor, the Trustee or any Affiliate of any of the foregoing
Persons shall be disregarded and for purposes of determining the requisite
amount of Outstanding Certificates shall be deemed not to be Outstanding
Certificates, except that, in determining whether the Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only Certificates that the Trustee knows to be so owned shall
be so disregarded.
The term "Participant" means an entity maintaining a custodial account in
-----------
its own name with DTC.
The term "Paying Agent" shall mean the Trustee or any other Person that
------------
meets the eligibility standards for the Trustee specified in Section 5.01 and is
authorized to make payments of Principal or Interest on behalf of the Trustee.
The term "Person" means any individual, corporation, limited liability
------
company, partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
The term "Petition Date" shall mean (i) the date on which a bankruptcy
-------------
petition is filed by or against the Issuer of the Underlying Securities or (ii)
the date of commencement of any other similar proceeding, as applicable.
The term "Principal" shall mean the right to receive the principal due on
---------
the Underlying Securities, subject to Section 5.03(b) hereof.
B-5
<PAGE>
The term "Proceeding" shall mean any suit in equity, action at law or other
----------
judicial or administrative proceeding.
The term "Rating Agency" shall mean each rating agency which is identified
-------------
in Exhibit A to the Series Trust Agreement.
The term "Redemption Date" shall mean, with respect to any Underlying
---------------
Securities to be redeemed, the date fixed by the Issuer thereof for such
redemption.
The term "Responsible Officer" shall mean, with respect to the Trustee, any
-------------------
officer within the Corporate Trust Office of the Trustee, including any Senior
Vice President, Vice President, Assistant Vice President, Secretary, Assistant
Secretary, or any other officer of the Trustee customarily performing functions
similar to those performed by any of the above-designated officers and also,
with respect to a particular matter, any other officer to whom such matter is
referred because of such officer's knowledge of and familiarity with the
particular subject.
The term "Retained Amount" shall mean the amount, if any, described in
---------------
Exhibit A to the Series Trust Agreement, which amount shall be held by the
Trustee in trust for the benefit of the Depositor and shall be paid by the
Trustee to the Depositor in accordance with Section 4.01 hereof.
The term "Series" shall mean any series of Certificates identified in a
------
Series Trust Agreement.
The term "Series Trust Agreement" shall mean the particular series trust
----------------------
deposit agreement between the Depositor and the Trustee into which these
Standard Terms have been incorporated. The term "Standard Terms" shall mean this
Standard Terms and Provisions of Series Trust Agreement between National
Financial Securities Corporation, as Depositor, and the Trustee.
The term "TIA" shall mean the Trust Indenture Act of 1939, as amended.
---
The term "Trust" shall mean the trust established by this Agreement for the
-----
benefit of the Holders of the Certificates under the laws of the State of New
York.
The term "Trustee" shall mean the institution acting as trustee with whom
-------
the Depositor has entered into the Series Trust Agreement.
The term "Underlying Security" shall mean, with respect to the issuance of
-------------------
Certificates hereunder, the Underlying Securities specified in the Series Trust
Agreement relating to such Certificates in the aggregate principal amount so
specified.
The term "Voting Rights" shall mean voting rights on the Certificates
-------------
apportioned as required by Section 2.09 hereof.
B-6
<PAGE>
ARTICLE II CREATION OF TRUST; DELIVERY AND CUSTODY OF BONDS; FORM OF
CERTIFICATES; EXECUTION AND DELIVERY, SURRENDER AND REDEMPTION OF CERTIFICATES
Section 2.1 Creation of Trust; Delivery and Custody of Underlying Securities;
-----------------------------------------------------------------
Execution.
- ---------
The Trust shall be established by the Depositor by execution and delivery
of the Series Trust Agreement and the deposit of the Underlying Securities
pursuant thereto. The sole asset of the Trust shall be the Underlying Securities
deposited by the Depositor and any other related property specified in the
Series Trust Agreement. The Certificates shall evidence fractional interests in
designated portions of the assets of the Trust. The income received by, and the
assets of, the Trust shall be distributed solely in accordance with this
Agreement. The Depositor shall, by book-entry credit or otherwise, irrevocably
deliver the Underlying Securities to the Trustee and, concurrently therewith,
the Trustee shall, in accordance with the provisions of this Agreement, execute
and deliver to the Depositor, or such Person or Persons as the Depositor may
designate by written instruction, the classes of Certificates identified in the
Series Trust Agreement, evidencing the aggregate amount, in Authorized
Denominations, of the Underlying Securities so delivered to the Trustee. The
Depositor shall also, in connection with the Series Trust Agreement, enter into
a separate agreement with the Trustee, satisfactory to the Trustee, providing
for the payment of the charges and expenses of the Trustee in respect of such
Certificates.
The Trustee shall accept the Underlying Securities so delivered as trustee
for the Holders of the Certificates, which shall be delivered hereunder to
evidence the interests of the Holders in the Underlying Securities, and shall
hold the Underlying Securities as provided hereunder. The Underlying Securities
shall be deposited by Book-Entry Credit in an account maintained on behalf of
the Trustee at DTC, unless the Series Trust Agreement specifies that the Trustee
shall hold the Underlying Securities (i) in a special trust account created by
separate recordation on its books, separate from all other assets of the
Trustee, or (ii) in some other manner. Separate subaccounts of any such special
trust account shall be established for each series of Certificates.
The Trustee shall hold all the Underlying Securities delivered to it
pursuant to this Agreement in trust for the Holders, identified and held
separate and apart from the general assets of the Trustee. The account of the
Trustee in which the Underlying Securities are held shall not contain any
property of the Trustee in its individual capacity and shall contain only
property held by the Trustee as fiduciary. The Trustee agrees that it does not
have the authority to assign, transfer, encumber, pledge, sell, set-off or
otherwise dispose of any of the Underlying Securities or any interests therein
except as provided hereunder or as required by law.
The Trustee acknowledges that it is not the beneficial owner of the
Underlying Securities and that it holds the Underlying Securities solely as
trustee for the Holders pursuant to this Agreement. Interest and principal
payments on the Underlying Securities held in the trust account will not be
subject to any right, charge, security interest, lien or claim of any kind in
favor of the Trustee, the Depositor or any Person claiming through either of
them.
B-7
<PAGE>
The representations and covenants contained in the Officer's Certificate of
the Trustee delivered in connection with the issuance of the Certificates shall
be deemed to be incorporated by reference herein, as fully as if set forth in
full herein.
A reasonable time prior to the delivery of Underlying Securities to the
Trustee, the Depositor shall furnish the Trustee with written instructions as to
the name in which the Certificates evidencing interests in such Underlying
Securities shall initially be registered, the denominations in which such
Certificates shall initially be delivered, the Persons and addresses to whom
such Certificates are to be delivered and such other information as may be
requested by the Trustee in connection with the execution and delivery of such
Certificates. Each class of Certificates shall evidence the ownership by the
Holders thereof of Interest, Principal, or Callable Principal (or portions
thereof), as the case may be, on the Underlying Securities, less any Retained
Amount, to the extent required by the terms of such class of Certificates.
Underlying Securities underlying Certificates which are not held by book-
entry credit at an account maintained on behalf of the Trustee at DTC shall be
held by the Trustee at its Designated Office in New York City or at such other
place or places as the Trustee shall determine.
Section 2.2 Form of Certificates.
--------------------
Certificates shall be issued in registered form only and shall be
typewritten or printed on safety paper. The classes of Certificates to be issued
hereunder shall be identified in the Series Trust Agreement and shall be
substantially in the forms set forth in Exhibit C thereto, in each case with
appropriate insertions, modifications and omissions, as therein and herein so
provided. Certificates shall be executed by the Trustee by the manual signature
of a duly authorized signatory of the Trustee. No Certificate shall be entitled
to any benefits under this Agreement or be valid or obligatory for any purpose,
unless it shall have been executed manually by the Trustee by the signature of a
duly authorized signatory. The Trustee shall record in the Certificate Register
each Certificate so signed and delivered as herein provided.
The Authorized Denominations for each class of Certificates shall be the
dollar amount, and greater multiples thereof (or of such other dollar amount
specified in the Series Trust Agreement), set forth in the Series Trust
Agreement.
Certificates may be endorsed with or have incorporated in the text thereof
such legends or recitals not inconsistent with the provisions of this Agreement
as may be required by the Trustee or required to comply with any applicable law
or any regulation thereunder.
Section 2.3 Registration and Registration of Transfer and Exchange of
---------------------------------------------------------
Certificates.
- ------------
The Trustee shall keep at its Designated Office in New York City a register
(the register maintained in such office being herein sometimes referred to as
the "Certificate Register") in which, subject to such reasonable regulations as
it may prescribe, the Trustee shall provide for the registration of Certificates
and for the registration of transfers or exchanges of Certificates.
B-8
<PAGE>
Upon surrender for registration of transfer of any Certificate at the
Trustee's Designated Office in New York City, the Trustee shall execute and
deliver, in the name of the designated transferee or transferees, one or more
Certificates of the same class and series, of any Authorized Denominations and
of a like aggregate amount.
At the option of the Holder, Certificates may be exchanged for other
Certificates of the same class and series, of any Authorized Denominations and
of a like aggregate amount, upon surrender of the Certificates to be exchanged
at the Trustee's Designated Office in New York City. Whenever any Certificates
are so surrendered for exchange, the Trustee shall execute and deliver the
Certificates which the Holder making the exchange is entitled to receive.
All Certificates issued upon any registration of transfer or exchange of
Certificates shall evidence, to the extent indicated thereby, Interest,
Principal and/or Callable Principal (or portions thereof), as the case may be,
of Underlying Securities held by the Trustee hereunder and shall be entitled to
the same benefits under this Agreement as the Certificates surrendered upon such
registration of transfer or exchange.
Every Certificate presented for registration of transfer or for exchange
shall (if so required by the Trustee) be duly endorsed by, or be accompanied by
a written instrument of transfer in form satisfactory to the Trustee and duly
executed by, the Holder thereof or such Holder's attorney duly authorized in
writing.
Section 2.4 Limitations on Execution and Delivery, Surrender and Registration
-----------------------------------------------------------------
of Transfer and Exchange of Certificates.
- ----------------------------------------
As a condition precedent to the execution and delivery, surrender or
registration of transfer or exchange of any Certificate, the Trustee may require
payment, by the Holder requesting such action, of the then applicable service
charge of the Trustee and of a sum sufficient for reimbursement of any tax or
other governmental charge with respect thereto, may require the production of
proof reasonably satisfactory to it as to the Holder's residence and identity
and genuineness of any signature, may require the Holder to execute certificates
and to make such representations and assurances as the Trustee may reasonably
deem necessary or proper, and may also require compliance with such regulations,
if any, as the Trustee may reasonably establish consistent with the provisions
of this Agreement.
The surrender or registration of transfer or exchange of Certificates may
be suspended if any such suspension is deemed necessary or advisable by the
Trustee at any time or from time to time because of any requirement of law or of
any government or governmental body or commission, or under any provision of
this Agreement, or for any other reason which makes such surrender or
registration of transfer or exchange impracticable.
Section 2.5 Mutilated, Destroyed, Lost or Stolen Certificates.
-------------------------------------------------
In case any Certificate shall be mutilated, the Trustee in its discretion
may execute and deliver a Certificate of the same series, of like form and
tenor, and in the same denomination and
B-9
<PAGE>
bearing a number not contemporaneously outstanding, in exchange and substitution
for such mutilated Certificate. In case any Certificate shall be destroyed, lost
or stolen, the Trustee may execute and deliver a Certificate of the same series,
of like form and tenor, and in the same denomination and bearing a number not
contemporaneously outstanding, in lieu of and in substitution for such
destroyed, lost or stolen Certificate, only upon (i) the filing by the Holder
thereof with the Trustee of evidence satisfactory to the Trustee of the
destruction, loss or theft of such Certificate and of the authenticity of such
Holder's ownership thereof, and (ii) the furnishing to the Trustee of reasonable
indemnification satisfactory to it. All expenses and charges associated with
such indemnity and with the preparation, execution and delivery of a new
Certificate shall be borne by the Holder of the Certificate mutilated,
destroyed, lost or stolen.
Section 2.6 Persons Deemed Owners.
---------------------
Prior to due presentment of a Certificate for registration of transfer, the
Trustee and any agent of the Trustee may treat the Person in whose name such
Certificate is registered as the owner of such Certificate for the purpose of
receiving payment of such Certificate and for all other purposes whatsoever,
whether or not such Certificate be overdue, and neither the Trustee nor any
agent of the Trustee shall be affected by notice to the contrary.
Section 2.7 Cancellation and Destruction of Surrendered Certificates.
--------------------------------------------------------
All Certificates surrendered to the Trustee shall be canceled by the
Trustee. The Trustee is authorized to destroy such Certificates so canceled.
Section 2.8 Book-Entry.
----------
(i) At the election of the Depositor, the Series Trust Agreement may
provide that (1) all Certificates of a series are to be held in DTC's book-
entry only system, (2) all Certificates of a series are to be issued in
definitive physical form, or (3) the Certificates (or any part thereof) are
to be issued or held in such other form as is specified in the Series Trust
Agreement.
(ii) Notwithstanding Section 4.01 hereof, when the registered Holder of
any or all of the Certificates is DTC, such Certificates shall be
registered in the name of Cede & Co., as nominee for DTC, and payment in
respect of any Interest, Principal or Callable Principal represented by any
Certificate shall be made on or after the corresponding Interest Payment
Dates, in the case of the payment of Interest, and on or after the
corresponding stated maturity date, in the case of the payment of
Principal, in each case after the Trustee shall have received the amounts
due from the Issuer of the Underlying Securities, by credit of same day
funds to the account indicated for Cede & Co. in the Certificate Register.
Payments received by the Trustee on or prior to 2:00 p.m., New York City
time, shall be credited to DTC that same day and payments received after
such time shall be credited the following Business Day. Notwithstanding any
other provisions in this Agreement, the right of the Holder of any
Certificate to receive any of the payments described above in this Section
2.08
B-10
<PAGE>
(ii), and to institute suit for the enforcement of any such payment on or
after the date such payment is payable, shall not be impaired without the
consent of such Holder.
(iii) Certificates of which Cede & Co. shall be the Holder shall be
initially issued in the form of one or more separate single Certificates
for each separate class of Certificates identified in the Series Trust
Agreement to be issued hereunder, aggregating in each case to the amount of
each separate stated maturity of the Certificates, or in such other manner
as is required by DTC. Upon initial issuance, the ownership of each such
Certificate shall be registered in the Certificate Register in the name of
Cede & Co., as nominee for DTC. The Depositor and the Trustee may treat DTC
(or its nominee) as the sole and exclusive owner of each Certificate
registered in its name for the purposes of payment of Interest, Principal
and/or Callable Principal represented thereby, giving any notice permitted
or required to be given to Holders under this Agreement, registering the
transfer of such Certificate, obtaining any consent or other action to be
taken by Holders and for all other purposes whatsoever, and neither the
Depositor nor the Trustee shall be affected by any notice to the contrary.
Neither the Depositor nor the Trustee shall have any responsibility or
obligation to any Participant, any Person claiming a beneficial ownership
interest in such Certificate under or through DTC or any Participant or any
other Person that is not shown on the Certificate Register as being a
Holder of such Certificate, with respect to the accuracy of any records
maintained by DTC or any Participant; the payment by DTC or any Participant
of any amount in respect of Principal, Interest and/or Callable Principal
represented by such Certificate; any notice (or the timeliness thereof)
that is permitted or required to be given to Holders of such Certificate
under this Agreement; or any consent given or other action taken by DTC as
the Holder of such Certificate. Upon delivery by DTC to the Trustee of
written notice to the effect that DTC has determined to substitute a new
nominee in place of Cede & Co., and subject to the provisions of section
2.03 hereof limiting the obligations of the Trustee to register transfers
of or to exchange Certificates, the words "Cede & Co." in this Agreement
shall refer to such new nominee of DTC.
(iv) DTC may determine to discontinue providing its services with respect
to Certificates at any time by giving 90 days prior written notice to the
Depositor and the Trustee and discharging its responsibilities with respect
thereto under applicable law. Following receipt of such notice from DTC,
the Trustee shall promptly notify the Rating Agency. In connection
therewith, the Trustee and the Depositor will cooperate with DTC in taking
appropriate action after reasonable notice (a) to make available one or
more separate physical certificates evidencing the Certificates to any
Participant having Certificates credited to its DTC account or (b) to
arrange for another securities depository to maintain custody of physical
certificates evidencing such Certificates. Upon (1) the resignation of DTC
from its functions as depository in accordance herewith, provided that the
Depositor is unable to arrange for another securities depository to act as
successor to DTC, (2) the election by the Depositor to terminate book-entry
registration of the Certificates (which election shall only be made if the
Depositor determines that such election will not adversely affect the
Holders), (3) the delivery of written notice to the Trustee through DTC,
from Holders of Outstanding Certificates representing at least a majority
of the Voting Rights, that such Holders elect to terminate book-entry
registration of the Certificates, (4) a default in payment of any Interest,
B-11
<PAGE>
Principal or Callable Principal due on the Underlying Securities, which
default remains uncured for 10 days, and the election by the Trustee to
terminate book-entry registration of the Certificates, or (5) the
occurrence of an Available Information Event (provided that the financial
statements and other information about the Issuer of the Underlying
Securities referred to in Section 5.15 hereof are not thereafter available
to the Trust), the Depositor shall notify DTC and, except in the case of
item (4) above, the Trustee of such event, whereupon DTC is required under
the Letter of Representations to notify the Participants of the
availability through DTC of physical certificates evidencing the
Certificates. In such event, DTC is required under the Letter of
Representations to promptly deliver to the Trustee the physical
certificates evidencing such Certificates, whereupon the Trustee at the
expense of the Depositor shall deliver physical certificates evidencing the
Certificates to any Participant having Certificates credited to its account
at DTC and the provisions of this Agreement shall then apply irrespective
of this Section 2.08.
(v) In connection with any notice or other communication to be provided
to Holders pursuant to this Agreement by the Trustee with respect to any
consent or other action to be taken by Holders, the Trustee shall establish
a record date for such consent or other action and give DTC notice of such
record date not less than 15 calendar days in advance of such record date
to the extent possible. Such record date shall be the later of thirty (30)
days prior to the first solicitation of such consent or other action or the
date of the most recent list of Holders furnished to the Trustee pursuant
to Section 6.01 hereof.
(vi) In the event that Underlying Securities are redeemed and
Certificates are correspondingly redeemed and the Certificates are
registered in the name of Cede & Co., as nominee for DTC, the Certificates
shall be redeemed and terminated without action by the Holder thereof, all
as provided in the Letter of Representations.
Section 2.9 Action or Consent of Holders.
----------------------------
The Voting Rights on the Certificates shall be apportioned by the Trustee
among the Holders, as of the applicable record date as determined by the Trustee
pursuant to Section 2.08(v) hereof, of the Outstanding Certificates in
proportion to the Accreted Value or, with respect to Stripped Underlying
Security Certificates, Callable Stripped Underlying Security Certificates and
Pooled Certificates, the principal amount, of each class of Certificates, and
within each class, pro rata by aggregate Accreted Value or principal amount, as
applicable. In the event of any action or consent requiring the vote of the
owners of any Underlying Securities at any time when the Certificates are held
in the DTC book-entry form, the Trustee, upon receipt of the Underlying Security
proxy, shall notify DTC (in its capacity as the Holder of the Certificates) of
such action. Under current procedures the Depositor expects that DTC will notify
the Participants who will notify the Beneficial Owners of the Certificates of
such an event. Thereafter, the Trustee shall vote solely in accordance with such
proxies and shall apportion its voting powers on the basis of the votes cast by
the Holders, based upon the direction the Holders have received from the
Beneficial Owners. If the Certificates are not then held by DTC or any other
depository, the Trustee, upon receipt of the Underlying Security proxy, shall
notify the Holders directly of such action and shall vote in the same manner as
noted above. The Trustee shall cast its vote in connection with the foregoing
vote on the Underlying
B-12
<PAGE>
Securities in proportion to the Voting Rights on the Certificates held by the
Holders or groups of Holders directing it, notwithstanding that such Holder or
groups of Holders may give contrary instructions or that such instructions may
conflict.
The Trustee shall at no time vote for or consent to any action (i) to the
extent that such vote or consent could reasonably be expected to alter the
status of the Trust as a grantor trust for federal income tax purposes, (ii)
prior to the filing of a bankruptcy petition by or against the Issuer of the
Underlying Securities or the commencement of any other similar proceeding, if
such action would alter the timing or amount of any payment on such Underlying
Securities or (iii) prior to the filing of a bankruptcy petition by or against
the Issuer of Underlying Securities, or the commencement of any other similar
proceeding, if such action would result in the exchange or substitution of any
of such outstanding Underlying Securities pursuant to a plan for the refunding
or refinancing of such Underlying Securities. In connection with any vote, the
Trustee may request, as a condition precedent to casting any vote, that it be
provided with an opinion of Counsel that the consent or action will not alter
the status of the Trust as a grantor trust for federal income tax purposes,
which Opinion of Counsel shall be an expense of the Holders voting in favor of
the proposed action. The Trustee in requesting such opinion shall inform the
Holders of the potential expense of the Opinion of Counsel.
In no event shall the Depositor be allowed or entitled (other than in its
capacity as a Participant for a Beneficial Owner) to vote, directly or
indirectly, any Certificates.
The Trustee shall also transmit to DTC or, if the Certificates are not then
held by DTC or any other depository, the Holders as provided in Section 9.04
hereof, any communications from the Issuer or from a third party (other than the
Issuer) to the Trustee as bondholder, upon receipt from such Issuer or third
party, respectively, of assurances that the Trustee's reasonable expenses will
be reimbursed by such Issuer or third party. If the Trustee does not receive
such assurances, then the Trustee, at the sole discretion of the Depositor and
at the expense of the Trust, shall transmit or cause to be transmitted any such
communications to DTC or, if the Certificates are not then held by DTC or any
other depository, the Holders as provided in Section 9.04 hereof.
Section 2.10 Transfer of Certificates Held by DTC to Successor Depository.
------------------------------------------------------------
(a) If the Depositor elects to direct that the Trustee deliver Certificates
with respect to a particular Series Trust Agreement in the name of and to DTC,
as the depository hereunder, or its nominee, said Certificates may not
thereafter be transferred except:
(i) to any successor of DTC or its nominee;
(ii) to any substitute depository not objected to by the Trustee, upon (1)
the resignation of DTC or its successor (or any substitute depository or its
successor) from its functions as depository or (2) a determination by the
Depositor that it is in the best interest of the Depositor (and will not
adversely affect the Holders) or the Holders to remove DTC or its successor
(or any substitute depository or its successor); or
B-13
<PAGE>
(iii) as provided in Section 2.08(iv) hereof;
provided, that any successor of DTC or substitute depository referred to
above shall be a clearing agency registered with the Commission and shall
otherwise be qualified under any applicable laws to provide the services
proposed to be provided by it.
Section 2.11 Temporary Certificates.
----------------------
The Certificates may be initially delivered in temporary form exchangeable
for definitive Certificates when ready for delivery, which temporary
Certificates shall be printed, lithographed or typewritten, shall be of such
denominations as may be determined by the Trustee, shall be in fully registered
form and shall contain such reference to any of the provisions hereof as may be
appropriate. Every temporary Certificate shall be executed and delivered by the
Trustee upon the same conditions and terms and in substantially the same manner
as definitive certificates. If temporary Certificates are issued, the Trustee
shall execute and deliver definitive Certificates without delay, and in that
case upon demand of the Holder of any temporary Certificates such temporary
Certificates shall be exchanged without cost to such Holder for definitive
Certificates at the office of the Trustee upon surrender of such temporary
Certificates, and until so exchanged such temporary Certificates shall be
entitled to the same benefit, protection and security hereunder as the
definitive Certificates executed and delivered hereunder. All temporary
Certificates surrendered pursuant to the provisions of this Section 2.11 shall
be canceled by the Trustee, shall not be redelivered and shall be disposed of
pursuant to Section 2.07.
ARTICLE III CERTAIN OBLIGATIONS OF HOLDERS OF CERTIFICATES; DEPOSITOR'S
WARRANTIES
Section 3.1 Filing Proofs, Certificates and Other Information.
-------------------------------------------------
Any Holder presenting Certificates for surrender or registration of
transfer or exchange may be required to file such proof of residence, or other
matters or information, to execute such certificates and to make such
representations and warranties as the Trustee may reasonably deem necessary or
proper. The Trustee may withhold the delivery or delay the surrender of or
registration of transfer or exchange of any Certificate until such proof or
other information is filed, such certificates are executed or such
representations and warranties are made.
Section 3.2 Payment of Taxes or Other Governmental Charges.
-----------------------------------------------
If any tax or other governmental charge shall become payable by or on
behalf of the Trustee, including any tax or charge required to be withheld from
any payment made to or by the Trustee under the provisions of any applicable
law, with respect to any Certificate or with respect to the Interest, Principal
or Callable Principal (or portions thereof) evidenced by any Certificate, such
tax or governmental charge shall be payable by the Holder of such Certificate
and may be so withheld by the Trustee. The surrender of or registration of
transfer or exchange of any Certificate may be refused until such payment is
made.
B-14
<PAGE>
Section 3.3 Depositor's Warranties.
----------------------
In the case of each delivery of Underlying Securities to the Trustee, the
Depositor shall be deemed thereby to represent and warrant to the Trustee that
the Depositor is duly authorized to so deliver such Underlying Securities and
that immediately prior to the delivery thereof the Depositor owned such
Underlying Securities free and clear of any lien, pledge, encumbrance or other
security interest, and such delivery is irrevocable and free of any continuing
claim by the Depositor, except for the Retained Amount. The Depositor shall
further be deemed by such delivery to represent and warrant to the Trustee that
the prospectus and prospectus supplement prepared by the Depositor with respect
to the Certificates makes such disclosure with respect to the Underlying
Securities as is required by applicable federal and state securities laws. Such
representations and warranties shall survive the delivery of such Underlying
Securities and the Certificates in respect thereof.
ARTICLE IV PAYMENT OF INTEREST AND PRINCIPAL; CUSTODY OF PROCEEDS OF INTEREST
AND PRINCIPAL PAYMENTS
Section 4.1 Payment of Interest; Payment of Principal; Mandatory Exchange of
----------------------------------------------------------------
Callable Principal Certificates and Callable Stripped Underlying Security
- -------------------------------------------------------------------------
Certificates.
- ------------
In the case of Underlying Securities held by the Trustee in certificate
form, the Trustee shall present the Underlying Securities to the Issuer,
Indenture Trustee or paying agent therefor, as applicable, for payment of
Interest on the Interest Payment Dates related thereto and all Principal at
stated maturity or upon the Redemption Date therefor, to the extent required
under the terms of such Underlying Securities to obtain payment thereon.
With respect to any Coupon Certificate, on or after the Interest Payment
Date of the Interest evidenced thereby, if the Issuer shall have paid in full
and the Trustee shall have received the interest due on such Interest Payment
Date on the Underlying Securities, the Trustee shall pay to the Holder thereof
upon presentation and surrender of its Certificates, in lawful money of the
United States of America, by check no later than one Business Day after receipt
of funds by the Trustee, the entire amount of such Interest evidenced thereby,
less any taxes or governmental charges required to be withheld from such payment
by the Trustee.
With respect to any Principal Certificate, on or after the stated maturity
date of the Principal evidenced thereby, if the Issuer shall have paid in full
and the Trustee shall have received the amount of such Principal upon maturity
of the underlying Underlying Security or Underlying Securities, the Trustee
shall pay to the Holder thereof upon presentation and surrender of its
Certificates, in lawful money of the United States of America, by check no later
than one Business Day after receipt of funds by the Trustee, the entire amount
of such Principal evidenced thereby, less any taxes or governmental charges
required to be withheld from such payment by the Trustee.
With respect to any Callable Principal Certificate, on or after the stated
maturity date, the redemption date or the Interest Payment Date, as applicable,
of the Callable Principal evidenced thereby, if the Issuer shall have paid and
the Trustee shall have received all or any part of the Callable Principal due
upon maturity or earlier redemption of the underlying Underlying Securities
B-15
<PAGE>
or on any Interest Payment Date, the Trustee shall pay to the Holder thereof
upon presentation and surrender of its Certificates, in lawful money of the
United States of America, by check no later than one Business Day after receipt
of funds by the Trustee, the entire amount of such Callable Principal so paid
and received or, in the case of a Callable Principal Certificate redeemed in
part, the amount of such Principal so redeemed; in each case less any taxes or
governmental charges required to be withheld from such payment by the Trustee.
Any Callable Principal Certificate which is not redeemed on the First Call
Date shall be terminated and deemed involuntarily surrendered by the Holder
thereof in exchange for a principal amount of the Underlying Securities
underlying such Callable Principal Certificate equal to the face amount of such
Callable Principal Certificate, whether or not such Holder has requested such
exchange. No action such Holder shall be required to effect such termination,
which shall be carried out by the Trustee pursuant to the terms of this
Agreement.
With respect to any Stripped Coupon Certificate, on or after the Interest
Payment Date of the Interest evidenced thereby, if the Issuer shall have paid in
full and the Trustee shall have received the interest due on such Interest
Payment Date on the underlying Underlying Securities, the Trustee shall pay to
the Holder thereof upon presentation and surrender of its Certificates, in
lawful money of the United States of America, by check no later than one
Business Day after receipt of funds by the Trustee, the entire amount of such
Interest evidenced thereby, less any taxes or governmental charges required to
be withheld from such payment by the Trustee.
With respect to any Stripped Underlying Security Certificate, on or after
the Interest Payment Date or stated maturity date, as applicable, of the
Interest or Principal evidenced thereby, if the Issuer shall have paid and the
Trustee shall have received the Interest evidenced thereby or all or any part of
the principal amount of the Principal evidenced thereby due upon maturity of the
underlying Underlying Securities, the Trustee shall pay to the Holder thereof
(i) with respect to each Interest Payment Date preceding the maturity date, as
of the applicable record date of the underlying Underlying Securities, and (ii)
with respect to the maturity date, upon presentation of its Certificates, in
lawful money of the United States of America, by check no later than one
Business Day after receipt of funds by the Trustee (in the case of clause (i)
above, sent by first-class mail to the address of the Holder set forth in the
Certificate Register), the entire amount of such Interest and/or Principal; in
each case less any taxes or governmental charges required to be withheld from
such payment by the Trustee.
With respect to any Callable Stripped Underlying Security Certificate, on
or after the stated maturity date, the redemption date or the Interest Payment
Date, as applicable, of the Callable Principal evidenced thereby, if the Issuer
shall have paid and the Trustee shall have received the Interest or all or any
part of the Callable Principal evidenced thereby due upon maturity or earlier
redemption of the underlying Underlying Securities or on any Interest Payment
Date, the Trustee shall pay to the Holder thereof (i) with respect to each
Interest Payment Date preceding the maturity date or redemption date, as
applicable, as of the applicable record date of the underlying Underlying
Securities, and (ii) with respect to the maturity date or redemption date, as
applicable, upon presentation of its Certificates, in lawful money of the United
States of America, by check no later than one Business Day after receipt of
funds by the Trustee (in the case of clause (i) above, sent by
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<PAGE>
first-class mail to the address of the Holder set forth in the Certificate
Register), the entire amount of such Holder's allocable portion of the Callable
Principal so received or, in the case of a Callable Stripped Underlying Security
Certificate redeemed in part, the amount so redeemed; in each case less any
taxes or governmental charges required to be withheld from such payment by the
Trustee.
Any Callable Stripped Underlying Security Certificate which is not redeemed
on the First Call Date shall be terminated and deemed involuntarily surrendered
by the Holder thereof in exchange for a principal amount of the Underlying
Securities underlying such Callable Stripped Underlying Security Certificate
equal to the face amount of such Callable Stripped Underlying Security
Certificate, whether or not such Holder has requested such exchange. No action
by such Holder shall be required to effect such termination, which shall be
carried out by the Trustee pursuant to the terms of this Agreement.
With respect to any Pooled Certificate, on or after the stated maturity
date, the redemption date or the Interest Payment Date, as applicable, of the
Interest, Principal or Callable Principal evidenced thereby, if the Issuer shall
have paid and the Trustee shall have received Interest on any of the Underlying
Securities in the Trust evidenced thereby or all or any part of the Principal or
Callable Principal on any of the Underlying Securities in the Trust evidenced
thereby due upon maturity or earlier redemption of such Underlying Securities or
on any Interest Payment Date, the Trustee shall pay to the Holder thereof (i)
with respect to each Interest Payment Date preceding the maturity date or
redemption date, as applicable, as of the applicable record date of the
underlying Underlying Securities, and (ii) with respect to the maturity date or
redemption date, as applicable, upon presentation of its Certificates, in lawful
money of the United States of America, by check no later than one Business Day
after receipt of funds by the Trustee (in the case of clause (i) above, sent by
first-class mail to the address of the Holder set forth in the Certificate
Register), the entire amount of such Interest, Principal or Callable Principal
so paid and received, less any Retained Amount, or, in the case of a Certificate
redeemed in part, the amount of such Callable Principal so redeemed; in each
case less any taxes or governmental charges required to be withheld from such
payment by the Trustee.
With respect to any payment of Interest, Principal or Callable Principal,
as applicable, that constitutes a Retained Amount, the Trustee shall remit such
Retained Amount to the Depositor, in immediately available funds, within one
Business Day of receipt by the Trustee from the Issuer.
When making any payment to a Holder of a Certificate or, with respect to
any Retained Amount, to the Depositor, under this Agreement, the Trustee shall
round down such payment to the nearest whole cent.
Notwithstanding any other provisions in this Agreement, the right of the
Holder of any Certificate to receive any of the payments described above in this
Section 4.01, and to institute suit for the enforcement of any such payment on
or after the date such payment is payable, shall not be impaired without the
consent of such Holder.
Section 4.2 Segregation of Moneys Received from Issuers in Respect of
---------------------------------------------------------
Underlying Securities.
- ---------------------
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<PAGE>
All moneys received from the Issuers of Underlying Securities or otherwise
by the Trustee in respect of Underlying Securities evidenced by Certificates
issued hereunder shall be held by it without interest in a segregated trust
account (which account shall contain two subaccounts, one for interest payments
on the Underlying Securities and the second for principal and redemption premium
payments on the Underlying Securities) for each issue of Underlying Securities
held in trust until required to be disbursed in accordance with the provisions
of this Agreement or as otherwise required by law and such moneys shall be
segregated by separate recordation on the books and records of the Trustee.
Payments whose character as principal, redemption premium or interest on the
Underlying Securities cannot be determined shall be deposited in the subaccount
for principal until distributed pursuant to Section 5.03(b) hereof.
Section 4.3 Paying Agent.
------------
Each Paying Agent other than the Trustee shall execute and deliver to the
Trustee an instrument in which such Paying Agent shall agree with the Trustee
(and if the Trustee acts as Paying Agent, it hereby so agrees), that such Paying
Agent shall:
(i) hold all sums held by it for the payment of amounts due with respect
to the Underlying Securities in trust for the benefit of the Persons
entitled thereto until such sums shall be paid to such Persons or otherwise
disposed of as herein provided and pay such sums to such Persons as herein
provided;
(ii) give the Trustee notice of any default by the Issuer (or any other
obligor upon the Underlying Securities) of which it has actual knowledge in
the making of any payment required to be made with respect to the
Certificates.
ARTICLE V THE TRUSTEE AND THE DEPOSITOR
Section 5.1 Eligibility of Trustee; Disqualification.
----------------------------------------
The Trustee shall at all times satisfy the requirements of TIA Section
310(a). The Trustee shall have a combined capital and surplus of at least
$50,000,000 as set forth in its most recent published annual report of condition
and it shall have a long term unsecured debt or deposit rating of A-2 or better
by Moody's Investors Service, Inc. and A by Standard & Poor's Ratings Group or
the equivalent rating thereof by the Rating Agency (if other than Moody's
Investors Service, Inc., or Standard & Poor's Ratings Group). The Trustee shall
comply with TIA Section 310(b); provided, however, that there shall be excluded
from the operation of TIA Section 310(b)(1) any series trust deposit agreements
under which other securities are outstanding evidencing ownership interests in
bonds of the Issuer of the Underlying Securities if the requirements for such
exclusion set forth in TIA Section 310(b)(1) are met.
Section 5.2 Trustee's Duties on Default; No Liability of the Trustee or the
---------------------------------------------------------------
Depositor on the Underlying Securities.
- --------------------------------------
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<PAGE>
If an event of default on the Underlying Securities has occurred and is
continuing, the Trustee shall exercise the rights and powers vested in it by
this Agreement and use the same degree of care and skill in their exercise as a
prudent Person would exercise or use under the circumstances in the conduct of
such Person's own affairs.
The Trustee shall have the legal power to exercise all of the rights,
powers and privileges of a holder of the Underlying Securities in which the
Certificates evidence an interest. However, neither the Trustee (except as
specifically provided in Section 5.03 or elsewhere herein or in the TIA) nor the
Depositor shall be under any obligation whatsoever to appear in, prosecute or
defend any action, suit or other proceeding in respect of Underlying Securities
or Certificates.
The sole obligor with respect to any Underlying Security is the Issuer
thereof or any other entity obligated to make payments to or on behalf of the
Issuer thereof (or its trustee or other applicable fiduciary) with respect to
such Underlying Security. Neither the Trustee nor the Depositor shall have any
obligation on or with respect to the Underlying Securities except as provided in
this Article V with respect to the Trustee; and their respective obligations
with respect to Certificates shall be solely as set forth in this Agreement.
If there is an event of default (as defined in the indenture or other
document pursuant to which the Underlying Securities were issued) with respect
to any Underlying Security and such default is known to the Trustee, the Trustee
shall promptly give notice to DTC or, if the Certificates are not then held by
DTC or any other depository, directly to Holders thereof as provided in Section
9.04 hereof (and in the manner and to the extent provided in TIA Section 313(c))
within 90 days after such event of default occurs. Such notice shall set forth
(a) the identity of the issue of Underlying Securities, (b) the date and nature
of such default, (c) the face amount of the Interest, Principal or Callable
Principal to which such default relates, (d) the identifying numbers of the
class of Certificates, or any combination, as the case may be, evidencing the
Interest, Principal or Callable Principal (or portions thereof) described above
in clause (c), and (e) any other information which the Trustee may deem
appropriate. Except in the case of a default in payment of Principal or Interest
(including payments pursuant to a redemption of any Certificate), the Trustee
may withhold the notice to Holders if and so long as a committee of its
Responsible Officers in good faith determines that withholding the notice is in
the interests of the Holders.
Holders of Certificates shall have no recourse against the Depositor or the
Trustee for payment defaults on the Underlying Securities.
Section 5.3 Collection of Indebtedness and Suits for Enforcement by Trustee;
----------------------------------------------------------------
Distribution of Amounts Received in Respect of Defaulted
--------------------------------------------------------
Underlying Securities.
---------------------
(a)If: (i) default is made in the payment of any installment of interest on
any Underlying Security when the same becomes due and payable, and such
default continues unremedied for the period specified in the indenture (as
identified in Exhibit A to the Series Trust Agreement), or, if no such
period is specified, five days, after receipt by the Issuer of notice
thereof from the Trustee or receipt by the Issuer and the Trustee of notice
thereof from the Holders of Outstanding Certificates representing at least
25% of the Voting Rights; or (ii)
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<PAGE>
default is made in the payment of the principal of or any installment of
the principal of any Underlying Security when the same becomes due and
payable, and such default continues unremedied for the period specified in
the indenture (as identified in Exhibit A to the Series Trust Agreement),
or, if no such period is specified, thirty (30) days, after receipt by the
Issuer of notice thereof from the Trustee or receipt by the Issuer and the
Trustee of notice thereof from the Holders of Outstanding Certificates
representing at least 25% of the Voting Rights;
and the Issuer shall, upon demand of the Trustee, fail to pay forthwith to
the Trustee, for the benefit of the Holders, the whole amount then due and
payable on such Underlying Securities for principal and interest, with
interest upon the overdue principal, at the rate borne by the Underlying
Securities and in addition thereto such further amount as shall be
sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the
Trustee and its agents and counsel, to the extent permitted by law (such
event, an "Issuer Payment Default"), then the Trustee, in its own name and
as trustee of an express trust, subject to provision being made by the
Holders for indemnification against costs, expenses and liabilities in a
form satisfactory to the Trustee, shall institute a Proceeding for the
collection of the sums so due and unpaid, and shall prosecute such
Proceeding to judgment or final decree or settlement, and shall enforce the
same against the Issuer or other obligor upon the Underlying Securities and
collect in the manner provided by law out of the property of the Issuer or
other obligor upon the Underlying Securities, wherever situated, the moneys
adjudged or decreed to be payable, unless otherwise directed by Holders of
Outstanding Certificates representing not less than a majority of the
voting Rights. In connection therewith, the Trustee shall use its best
reasonable efforts in accordance with such normal and customary procedures
it shall deem necessary or advisable, and shall have the power and
authority, acting alone, to do any and all things in connection therewith
and the administration of the Trust as it may deem necessary or advisable.
(b) In the event that the Trustee receives money or other property in
respect of the Underlying Securities (other than a scheduled interest
payment with respect to an Interest Payment Date, the scheduled payment of
principal on or with respect to the stated maturity date of the Underlying
Securities, or the payment of principal and any redemption premium on or
with respect to the earlier redemption of the Underlying Securities) as a
result of a payment default on the Underlying Securities, or actual notice
that such moneys or other property will be paid to the Trustee, the Trustee
shall promptly give notice (as provided in Section 9.04 hereof) to DTC or,
if the Certificates are not then held by DTC or any other depository,
directly to the Holders of the Certificates then outstanding and unpaid.
Such notice shall state that, not later than thirty (30) days after the
receipt of such moneys or other property, the Trustee shall allocate and
distribute such moneys or other property to the Holders of the Outstanding
Certificates then unpaid, in proportion to the Accreted Value or, with
respect to Stripped Underlying Security Certificates, Callable Stripped
Underlying Security Certificates and Pooled Certificates, the principal
amount, of each class of Outstanding Certificates, and within each class,
pro rata by aggregate Accreted Value or principal amount, as applicable.
Property received, other than cash, shall be liquidated by the
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<PAGE>
Trustee in a commercially reasonable manner and the proceeds thereof, after
deduction of all reasonable costs of such liquidation, distributed in cash,
only to the extent necessary to avoid distribution of fractional
securities. The Trustee shall not be responsible for the failure of any
Person to maximize the price at which such property may be sold. No Person
effecting a sale on behalf of the Trustee shall be liable therefor so long
as such sale is effected in a commercially reasonable manner.
Section 5.4 Control by Holders.
------------------
The Holders of Outstanding Certificates representing a majority of the
Voting Rights shall, subject to provision being made for indemnification against
costs, expenses and liabilities in a form satisfactory to the Trustee, have the
right to direct the time, method and place of conducting any Proceeding for any
remedy available to the Trustee with respect to any Issuer Payment Default;
provided, however, that:
(i) such direction shall not be in conflict with any rule of law or with
this Agreement;
(ii) subject to Sections 2.09 and 5.12, the Trustee need not take any
action that it determines might cause it to incur any liability or might
materially adversely affect the rights of any Holders not consenting to
such action.
Section 5.5 Waiver of Past Defaults.
------------------------
The Holders of Outstanding Certificates representing not less than a
majority of the Voting Rights may waive any past default and its consequences
except (i) an Issuer Payment Default or other default in the payment of
principal of or interest on any of the Certificates or (ii) a default in respect
of a covenant or provision hereof which cannot be modified or amended without
the consent of the Holder of each Certificate. In the case of any such waiver,
the Depositor, the Trustee and the Holders shall be restored to their former
positions and rights hereunder, respectively; but no such waiver shall extend to
any subsequent or other default or impair any right consequent thereto.
Section 5.6 Maintenance of Offices and Agencies by the Trustee.
--------------------------------------------------
Until termination of this Agreement in accordance with its terms, the
Trustee shall maintain (a) facilities in the City of New York for the execution
and delivery, payment, surrender and registration of transfer and exchange of
Certificates, all in accordance with the provisions of this Agreement, and (b)
such other agents, if any, as the Trustee and the Depositor may agree from time
to time.
Section 5.7 Prevention of or Delay in Performance by the Trustee or the
-----------------------------------------------------------
Depositor.
- ---------
Neither the Trustee nor the Depositor shall incur any liability to any
Holder of any Certificate, if by reason of any provision of any present or
future law, or regulation thereunder, of any governmental authority, or by any
reason of any act of God or war or other circumstance beyond the control of the
relevant party, the Trustee or the Depositor shall be prevented or forbidden
from doing or performing any act or thing which the terms of this Agreement
provide shall be done or
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<PAGE>
performed; and neither the Trustee nor the Depositor shall incur any liability
to any Holder of a Certificate by reason of any non-performance or delay, caused
as aforesaid, in the performance of any act or thing which the terms of this
Agreement provide shall or may be done or performed, or by reason of any
exercise of, or failure to exercise, any discretion provided for in this
Agreement.
Section 5.08. Liability of the Trustee and the Depositor.
------------------------------------------
(a) Neither the Trustee nor the Depositor assumes any obligation or shall be
subject to any liability under this Agreement to Holders of Certificates, other
than liability for its own negligent action, its own negligent failure to act or
its own willful misconduct, in the performance of such duties as are
specifically set forth in this Agreement or the TIA; further provided, that:
(i) the Trustee shall not be liable except for the performance of such
duties as are specifically set out in this Agreement and no implied
covenants or obligations shall be read into this Agreement against the
Trustee;
(ii) the Trustee may conclusively rely, as to the truth of the statements
and the correctness of the opinions expressed therein, in the absence of
bad faith on the part of the Trustee, upon certificates or opinions
conforming to the requirements of this Agreement (but the Trustee shall
examine the evidence furnished to it pursuant to TIA Section 314 to
determine whether or not such evidence conforms to the requirements of this
Agreement);
(iii) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer unless it is proved that the Trustee
was negligent in ascertaining the pertinent facts; and
(iv) to the extent that the Holders of Outstanding Certificates
representing not less than a majority of the Voting Rights direct the
Trustee with respect to the time, method and place of conducting any
Proceeding for any remedy available to the Trustee with respect to an
Issuer Payment Default, the Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with such
direction.
Neither DTC nor any registrar with which Underlying Securities are
maintained as book-entry credits shall be deemed agents of the Trustee. The
Trustee may own and deal (i) in bonds of the same issue and maturity as the
Underlying Securities and (ii) in Certificates.
The Trustee shall be under no liability to any party hereto, or to any
Holder, by reason of any failure on the part of the Depositor or any maker,
guarantor, endorser or other signatory of any document or instrument, including
any Underlying Security, or any other Person to perform such Person's
obligations under any such document or instrument.
The Trustee shall not be responsible for the sufficiency or accuracy, the
form or the execution, validity, value or genuineness of any document or
property received or held by it hereunder, including without limitation any
Underlying Securities, or the authority of the Depositor in executing this
Agreement.
<PAGE>
The Trustee assumes no responsibility for the correctness of the recitals
to the Certificates or to any document issued in connection with the sale of the
Certificates, other than its signature under the Certificates.
ANY ACTION OR PROCEEDING ALLEGING ANY BREACH BY THE TRUSTEE OF ITS DUTIES UNDER
THIS AGREEMENT SHALL BE PROSECUTED ONLY IN A STATE OR FEDERAL COURT LOCATED IN
THE STATE OF NEW YORK, COUNTY OF NEW YORK. THE TRUSTEE SHALL HAVE THE RIGHT AT
ANY TIME TO SEEK INSTRUCTIONS FROM ANY COURT OF COMPETENT JURISDICTION.
The Trustee shall be deemed to have exercised reasonable care in the
custody and preservation of the Underlying Securities in its possession if the
Underlying Securities are held in the manner specified in the Officer's
Certificate of the Trustee and are accorded treatment substantially equal to
that which a prudent Person accords its own property.
The Trustee shall at all times maintain a fidelity bond in reasonable form
and amount to protect against loss due to dishonest or fraudulent action by its
employees in connection with its obligations hereunder.
The Trustee may consult with and rely upon the calculations of an advisor
(which may be the Depositor) in connection with any calculation of Accreted
Value to the extent such amount must be determined in order for the Trustee to
carry out its duties hereunder.
The Trustee may consult with counsel of its selection, and the advice of
such counsel or any Opinion of Counsel selected by the Trustee with due care
shall be full and complete authorization and protection in respect of any action
taken, suffered or omitted by it hereunder in reliance thereon.
The Trustee may request and rely upon and shall be protected in acting or
refraining from action upon any resolution, certificate signed by an authorized
officer, certificate of auditors or any other certificate, statement,
instrument, opinion, report, notice, facsimile transmission, request, consent,
order, appraisal, bond or other paper or document reasonably believed by it to
be genuine and to have been signed or presented by the proper party or parties.
The Trustee shall be under no obligation to exercise any of the trusts or
powers vested in it by this Trust Agreement or to institute, conduct or defend
any litigation hereunder or in relation hereto, at the request, order or
direction of any of the Holders, pursuant to the provisions of this Series Trust
Agreement, unless such Holders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities which may be
incurred therein or thereby.
The Trustee may execute any of the trusts or powers hereunder or perform
any duties hereunder either directly or by or through agents or attorneys or a
custodian and shall not be liable for any misconduct or negligence of any such
agents or attorneys selected with due care by it.
Any application by the Trustee for written instructions from the Depositor
may, at the option of the Trustee, set forth in writing any action proposed to
be taken or omitted by the Trustee under
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<PAGE>
this Series Trust Agreement and the date on and/or after which such action shall
be taken or such omission shall be effective, if, but only if, the obligations
of the Trustee with respect to such proposed action or omission, in the view of
the Trustee, are not set forth reasonably clearly in this Series Trust
Agreement. The Trustee shall not be liable for any action taken by, or omission
of, the Trustee in accordance with a proposal included in such application on or
after the date specified in such application (which date shall not be less than
ten (10) Business Days after the date a Responsible Officer of the Depositor
actually receives such application, unless any such Responsible Officer shall
have consented in writing to any earlier date) unless, prior to taking any such
action (or the effective date in the case of an omission), the Trustee shall
have received written instructions in response to such application specifying
the action to be taken or omitted; provided, however, that this provision shall
not protect the Trustee from liability for any action or omission constituting
willful misconduct, bad faith or negligence.
Section 5.9 Obligation of the Depositor.
---------------------------
(a) The Depositor shall:
(i) if so requested by the Trustee, provide to the Trustee at least
10 Business Days prior to the date required for filing information
reasonably necessary to assist the Trustee under Section 5.15(b) of this
Agreement in preparing and filing reports with the Commission pursuant to
Section 13 or 15(d) of the Exchange Act;
(ii) [Reserved.];
(iii) supply to the Trustee (and the Trustee shall transmit by mail to
all Holders described in TIA Section 313(c), in the manner and to the
extent provided therein) such summaries of any information, documents and
reports required to be filed by the Depositor pursuant to clauses (i) and
(ii) of this Section 5.09(a), if any, as may be required by rules and
regulations prescribed from time to time by the Commission; and
(iv) after an Available Information Event, on behalf of the Trust,
prepare and file with the Commission, following the execution thereof by
the Trustee if so requested by the Depositor, and file with the Trustee,
within 15 days after the Depositor on behalf of the Trust is required to
file the same with the Commission, reports of the kind referred to in
clause (i) of this Section 5.09(a) with respect to the Issuer of the
Underlying Securities, to the extent such reports are then available to the
Depositor, for as long as the Depositor on behalf of the Trust is required
to file such reports under the Exchange Act. Such reports shall include
quarterly and annual financial statements and other information of the type
required to be filed on Form 8-K under the Exchange Act with respect to the
Issuer of the Underlying Securities. A copy of each such report shall be
provided to the Trustee at least 10 Business Days prior to the date
required for filing. If such reports and information are not available to
the Depositor at a time when such reports and information are required to
be filed with the Commission by the Depositor on behalf of the Trust, the
Depositor shall cause the removal of the Certificates from the DTC book-
entry system as set forth in Section 2.08(iv)(5) of this Agreement and
<PAGE>
shall notify the Issuer that the Holders of Certificates constitute record
holders of the Underlying Securities for purposes of the Exchange Act.
(b) The Depositor shall deliver to the Trustee, not less often than
annually, an Officer's Certificate signed by an Authorized Officer who is
the principal executive officer, principal financial officer or principal
accounting officer of the Depositor, dated as of the date set forth in the
Series Trust Agreement for such year, stating that:
(i) a review of the activities of the Depositor during such fiscal year
and of performance under this Agreement has been made under such
Authorized Officer's supervision; and
(ii) to the best of such Authorized Officer's knowledge, based on such
review, the Depositor has fulfilled all of its obligations under this
Agreement throughout such year, or, if there has been a default in the
fulfillment of any such obligation, specifying each such default known
to such Authorized Officer and the nature and status thereof. A copy
of such certificate may be obtained by any Holder by a request in
writing to the Depositor addressed to the Corporate Trust Office of
the Trustee.
(c) If and only if the Series Trust Agreement provides for the pledge of
the Underlying Securities to the Trustee (and not merely the transfer,
assignment, conveyance and sale, without recourse, thereof to the Trustee),
on the Closing Date, the Depositor shall furnish to the Trustee an Opinion
of Counsel either stating that, in the opinion of such counsel, such action
has been taken with respect to the recording and filing of this Agreement,
any agreements supplemental hereto and any other requisite documents, and
with respect to the execution and filing of any financing statements and
continuation statements as are necessary to perfect and make effective the
lien and security interest of this Agreement and reciting the details of
such action, or stating that, in the opinion of such counsel, no such
action is necessary to make such lien and security interest effective.
(d) If and only if the Series Trust Agreement provides for the pledge of
the Underlying Securities to the Trustee (and not merely the transfer,
assignment, conveyance and sale, without recourse, thereof to the Trustee),
at least annually after the Closing Date, the Depositor shall furnish to
the Trustee an Opinion of Counsel either stating that, in the opinion of
such counsel, such action has been taken with respect to the recording,
filing, re-recording and refiling of this Agreement, any agreements
supplemental hereto and any other requisite documents and with respect to
the execution and filing of any financing statements and continuation
statements as is necessary to maintain the lien and security interest
created by this Agreement and reciting the details of such action or
stating that in the opinion of such counsel no such action is necessary to
maintain the lien and security interest created by this Agreement. Such
Opinion of Counsel shall also describe the recording, filing, re-recording
and refiling of this Agreement, any agreements supplemental hereto and any
other requisite documents and the execution and filing of any financing
statements and continuation statements that will, in the opinion of such
counsel, be required to maintain the lien and security interest of this
Agreement until such date in the following calendar year.
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<PAGE>
(e) If and only if the Series Trust Agreement provides for the pledge of
the Underlying Securities to the Trustee (and not merely the transfer,
assignment, conveyance and sale, without recourse, thereof to the Trustee),
(i) whenever any property or securities are to be released from the lien
of this Agreement, the Depositor shall furnish to the Trustee an Officer's
Certificate of the Depositor certifying or stating the opinion of each
Person signing such certificate as to the fair value (within 90 days of
such release) of the property or securities proposed to be released and
stating that in the opinion of such Person the proposed release will not
impair the security under this Agreement in contravention of the provisions
hereof.
(ii) whenever the Depositor is required to furnish to the Trustee an
Officer's Certificate of the Depositor certifying or stating the opinion of
any signatory thereof as to the matters described in clause (i) above, the
Depositor shall also furnish to the Trustee an Independent Certificate as
to the same matters if the fair value of the property or securities and of
all other property or securities released from the lien of this Agreement
since the commencement of the then current calendar year, as set forth in
the certificates required by clause (i) above and this clause (ii), equals
10% or more of the principal amount of the Outstanding Certificates, but
such certificate need not be furnished in the case of any release of
property or securities if the fair value thereof as set forth in the
related Officer's Certificate of the Depositor is less than $25,000 or less
than one percent of the then principal amount of the Outstanding
Certificates.
(iii) prior to the deposit with the Trustee of any securities that is to
be made the basis for the authentication and delivery of Certificates, the
withdrawal of cash constituting a part of the trust estate or the release
of any property or securities subject to the lien of this Agreement, the
Depositor shall furnish to the Trustee an Officer's Certificate of the
Depositor certifying or stating the opinion of each Person signing such
certificate as to the fair value (within 90 days of such deposit) to the
Depositor of the securities to be so deposited.
(iv) whenever the Depositor is required to furnish to the Trustee an
Officer's Certificate of the Depositor described in clause (iii) above, the
Depositor shall also deliver to the Trustee an Independent Certificate as
to the same matters, if the fair value to the Depositor of the securities
to be so deposited and of all other such securities made the basis of any
such withdrawal or release since the commencement of the then current
fiscal year of the Depositor, as set forth in the certificates delivered
pursuant to clause (iii) above and this clause (iv), is 10% or more of the
principal amount of the Outstanding Certificates, but such a certificate
need not be furnished with respect to any securities so deposited, if the
fair value thereof to the Depositor as set forth in the related Officer's
Certificate of the Depositor is less than $25,000 or less than one percent
of the principal amount of the Outstanding Certificates.
(v) subject to the payment of its fees and expenses hereunder, the
Trustee may, and when required by the provisions of this Agreement, shall,
execute instruments to release property from the lien of this Agreement, or
convey the Trustee's interest in the same, in a manner and under
circumstances that are consistent with the provisions of this Agreement.
No party
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<PAGE>
relying upon an instrument executed by the Trustee in connection therewith
shall be bound to ascertain the Trustee's authority, inquire into the
satisfaction of any conditions precedent or see to the application of any
moneys.
(vi) the Trustee shall at such time as there are no Outstanding
Certificates and all sums due to the Trustee hereunder have been paid,
release any remaining portion of the trust estate that secured the
Certificates from the lien of this Agreement and release to the Depositor
or any other Person entitled thereto any funds then included in the trust
estate.
(f) Upon any application or request by the Depositor to the Trustee to
take any action under the provisions of this Agreement, which action is
subject to the satisfaction of a condition precedent (including any
covenants compliance with which constitutes a condition precedent), the
Depositor shall furnish to the Trustee: (i) an Officer's Certificate
stating that all conditions precedent, if any, provided for in this
Agreement relating to the proposed action have been complied with, (ii) an
Opinion of Counsel stating that in the opinion of such counsel all such
conditions precedent, if any, have been complied with and (iii) (if
required by the TIA) an Independent Certificate from a firm of certified
public accountants meeting the applicable requirements of the TIA, except
that, in the case of any such application or request as to which the
furnishing of such documents is specifically required by any provision of
this Agreement, no additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a condition or
covenant provided for in this Agreement shall include:
(i) a statement that such signatory of such certificate or opinion has
read or has caused to be read such covenant or condition and the
definitions herein relating thereto;
(ii) a brief statement as to the nature and scope of the examination or
investigation upon which the Statements or opinions contained in such
certificate or opinion are based;
(iii) a statement that, in the judgment of each such signatory, such
signatory has made such examination or investigations as is necessary to
enable such signatory to express an informed opinion as to whether or not
such covenant or condition has been complied with; and
(iv) a statement as to whether, in the opinion of each such signatory,
such condition or covenant has been complied with.
Section 5.10 Preferential Collection of Claims Against Depositor.
---------------------------------------------------
The Trustee shall comply with TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent required by TIA
Section 311(a).
Section 5.11 Resignation and Removal of the Trustee; Appointment of Successor
----------------------------------------------------------------
Trustee.
- -------
<PAGE>
The Trustee may at any time resign as Trustee hereunder by written notice
of its election so to do, delivered to the Depositor and the Rating Agency as
provided in Section 9.04 hereof, and such resignation shall take effect upon the
appointment of a successor Trustee and its acceptance of such appointment as
hereinafter provided. The Depositor may at any time (including such time as the
Trustee fails to comply with Section 5.01) remove the Trustee as Trustee
hereunder by written notice of its election to do so, delivered to the Trustee
and the Rating Agency as provided in Section 9.04 hereof, and such removal shall
take effect upon the appointment of a successor Trustee and its acceptance of
such appointment as provided in the third succeeding paragraph; provided,
however, that in the event of such removal, the Depositor shall negotiate in
good faith with the Trustee in order to agree regarding payment of the
termination costs of the Trustee resulting from such removal. Upon the
designation of a successor Trustee following either resignation by or removal of
the Trustee, the Trustee shall deliver to the successor Trustee all records
relating to the Certificates in the form and manner then maintained by the
Trustee, which shall include a hard copy thereof upon request of the successor
Trustee.
If at any time the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent, or a receiver of the Trustee or of its
property shall be appointed, or any public officer shall take charge or control
of the Trustee or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation, or the Trustee shall fail to comply with Section
5.01, then any Holder of a Certificate with respect to a particular issue of
Underlying Securities which has been such a Holder for at least six (6) months
or the Holders of Outstanding Certificates representing ten percent (10%) of the
Voting Rights for the Outstanding Certificates of a series which is outstanding
at such time may, on behalf of himself, herself or themselves and all others
similarly situated, petition any court of competent jurisdiction for the removal
of the Trustee with respect to the Underlying Securities evidenced by such
Certificates and the appointment of a successor Trustee.
In the event the Trustee resigns or is removed, the Trustee shall reimburse
the Depositor for any fees or charges previously paid to the Trustee in respect
of duties not yet performed under this Agreement which remain to be performed by
a successor Trustee and the Trustee shall promptly notify the Rating Agency of
its resignation or removal and any successor Trustee shall promptly notify the
Rating Agency of its appointment as provided in Section 9.04 hereof.
In case at any time the Trustee acting hereunder notifies the Depositor
that it elects to resign or the Depositor notifies the Trustee that it elects to
remove the Trustee as Trustee, the Depositor shall, within ninety (90) days
after the delivery of the notice of resignation or removal, appoint a successor
Trustee, which shall be a bank with trust powers or a trust company having its
principal office in the United States of America and having a combined capital
and surplus of at least $50,000,000 and which is rated at least investment grade
by the Rating Agency. If no successor Trustee has been appointed as successor
Trustee within ninety (90) days after the Trustee has given written notice of
its election to resign or the Depositor has given written notice to the Trustee
of its election to remove the Trustee, as the case may be, the Trustee may
petition any court of competent jurisdiction for the appointment of a successor
Trustee. Every successor Trustee shall execute and deliver to its predecessor
and to the Depositor an instrument in writing accepting its appointment
hereunder, and thereupon such successor Trustee, without any further act or
deed, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor and for all purposes shall
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<PAGE>
be the Trustee under this Agreement, and such predecessor, upon payment of all
sums due it and on the written request of the Depositor, shall execute and
deliver an instrument transferring to such successor all rights, obligations and
powers of such predecessor hereunder, and shall duly assign, transfer and
deliver all right, title and interest in the Underlying Securities and parts
thereof to such successor. Any successor Trustee shall promptly give notice of
its appointment to the Holders of Certificates for which it is successor Trustee
as provided in Section 9.04 hereof.
Any corporation into or with which the Trustee may be merged, consolidated
or converted shall be the successor of such Trustee without the execution or
filing of any document or any further act.
Section 5.12 Indemnification by the Depositor.
--------------------------------
The Depositor agrees to indemnify the Trustee and any of its agents,
officers, directors or employees for, and to hold them harmless against, any
loss, liability or expense arising, directly or indirectly, out of, relating to,
or in connection with the acceptance, administration or performance of their
duties, or the duties of the Trustee, as well as the costs and expenses of
defending themselves against any action, suit, or other proceeding involving any
claim or liability arising, directly or indirectly, out of, relating to or in
connection with, this Agreement, the Initial Trust Agreement or the exercise or
performance of any of their powers or duties hereunder or thereunder, other than
any loss, liability or expense arising out of (i) negligence, willful misconduct
or bad faith on the part of the Trustee or any of its agents, officers,
directors or employees, or (ii) any charges, fees or reimbursements that are
expressly required by this Agreement to be paid by the Holders or for which the
Holders are expressly required by this Agreement or have elected pursuant to the
terms of this Agreement to provide security or indemnity to the Trustee. Failure
of the Depositor to fulfill its obligations hereunder shall not relieve the
Trustee from fulfilling its duties under this Agreement.
Any Person that proposes to assert the right to be indemnified under this
Section 5.12 (any such Person, an "Indemnified Party") shall, promptly after
receipt of notice of commencement of any action against such party in respect of
which a claim is to be made against the Depositor under this Section 5.12,
notify the Depositor of the commencement of such action, enclosing a copy of all
papers served, but the omission so to notify the Depositor shall not relieve the
Depositor from any liability that it may have to such Indemnified Party under
the foregoing provisions of this Section 5.12 unless, and only to the extent
that, such omission results in the forfeiture of rights or defenses by the
Depositor. If any such action is brought against an Indemnified Party and it
notifies the Depositor of its commencement, the Depositor shall be entitled to
participate in and, to the extent that it elects by delivering written notice to
the Indemnified Party promptly after receiving notice of the commencement of the
action from the Indemnified Party, to assume the defense of the action, with
counsel satisfactory to the Indemnified Party, and after notice from the
Depositor to the Indemnified Party of its election to assume the defense, the
Depositor shall not be liable to the Indemnified Party for any fees,
disbursements or other charges of counsel except as provided below and except
for the reasonable costs of investigation subsequently incurred by the
Indemnified Party in connection with the defense. The Indemnified Party shall
have the right to employ its own counsel in any such action, but the fees,
expenses and other charges of such counsel shall be at the expense of the
Indemnified Party unless (1) the employment of counsel by the Indemnified Party
has been
<PAGE>
authorized in writing by the Depositor, (2) the Indemnified Party has reasonably
concluded (based on advice of counsel) that there may be legal defenses
available to it or other Indemnified Parties that are different from or in
addition to those available to the Depositor, (3) a conflict or potential
conflict exists (based on advice of counsel to the Indemnified Party) between
the Indemnified Party and the Depositor (in which case the Depositor shall not
have the right to direct the defense of such action on behalf of the Indemnified
Party), or (4) the Depositor has not in fact employed counsel to assume the
defense of such action within 15 Business Days after receiving notice of the
commencement of the action, in each of which cases the reasonable fees,
disbursements and other charges of counsel shall be at the expense of the
Depositor. It is understood that the Depositor shall not, in connection with any
proceeding or related proceedings in the same jurisdiction, be liable for the
reasonable fees, disbursements and other charges of more than one separate firm
admitted to practice in such jurisdiction at any one time for all Persons
entitled to indemnification hereunder. All such fees, disbursements and other
charges shall be reimbursed by the Depositor promptly as they are incurred. The
Depositor shall not be liable for any settlement of any action or claim effected
without its written consent (which consent shall not be unreasonably withheld).
The Depositor shall not, without the prior written consent of each Indemnified
Party, settle or compromise or consent to the entry of any judgment in any
pending or threatened claim, action or proceeding relating to the matters
contemplated by this Section 5.12 (whether or not any Indemnified Party is a
party thereto), unless such settlement, compromise or consent includes an
unconditional release of each Indemnified Party from all liability arising or
that may arise out of such claim, action or proceeding. Notwithstanding any
other provision of this Section 5.12, if at any time an Indemnified Party shall
have requested the Depositor to reimburse the Indemnified Party for fees and
expenses of counsel, the Depositor agrees that it shall be liable for any
settlement effected without its written consent if (i) such settlement is
entered into more than 45 days after receipt by the Depositor of the aforesaid
request, (ii) the Depositor shall have received notice of the terms of such
settlement at least 30 days prior to such settlement being entered into, and
(iii) the Depositor shall not have reimbursed the Indemnified Party in
accordance with such request prior to the date of such settlement.
The term "liability," as used in this Section 5.12, shall include any
losses, claims, damages, expenses (including without limitation the Trustee's
costs and expenses in defending itself against any losses, claims or
investigations of any nature whatsoever to the extent the Trustee is not
reimbursed as contemplated in this Section 5.12) or other liabilities, joint or
several, arising for any reason (including without limitation violation of
applicable laws or trademarks or service marks).
The obligations of the Depositor under this Section 5.12 (i) shall be in
addition to any liability which the Depositor may otherwise have, (ii) shall
extend, upon the same terms and conditions, to each officer and director of the
Trustee and to each Person, if any, who controls the Trustee within the meaning
of the Securities Exchange Act of 1934, as amended (iii) shall survive the
termination of this Agreement and the resignation or removal of the Trustee, and
(iv) shall be limited to the extent set forth in the Depositor's certificate of
incorporation.
Section 5.13 Undertaking for Costs.
---------------------
All parties to this Agreement agree, and each Holder of any Certificate by
such Holder's acceptance thereof shall be deemed to have agreed, that any court
may in its discretion require, in
<PAGE>
any Proceeding for the enforcement of any right or remedy under this Agreement,
or in any Proceeding against the Trustee for any action taken, suffered or
omitted by it as Trustee, the filing by any party litigant in such Proceeding of
an undertaking to pay the costs of such Proceeding and that such court may in
its discretion assess reasonable costs, including reasonable attorneys, fees,
against any party litigant in such Proceeding, having due regard to the merits
and good faith of the claims or defenses made by such party litigant; but the
provisions of this Section 5.13 shall not apply to:
(a) any Proceeding instituted by the Trustee;
(b) any Proceeding instituted by any Holder, or group of Holders, in each
case holding in the aggregate Outstanding Certificates representing more
than 10% of the Voting Rights; or
(c) any Proceeding instituted by any Holder for the enforcement of the
payment of Principal or Interest on or after the respective due dates
expressed in such Certificate and in this Agreement (or, in the case of
redemption, on or after the Redemption Date).
Section 5.14 Charges and Expenses.
--------------------
Except as otherwise provided in this Agreement, (i) no current or future
charges, fees and expenses of the Trustee shall be payable by or withheld from
any Person other than the Depositor, except for any taxes and other governmental
charges, and (ii) in full payment and satisfaction of all other charges and
expenses of the Trustee (including, in each case, fees and expenses of counsel)
incidental to the performance of its obligations hereunder, the Depositor shall
pay the Trustee an amount determined in accordance with a separate agreement
between it and the Trustee. The Trustee shall not be released from any of its
duties hereunder as a result of the failure of the Depositor to pay such amount.
Section 5.15 Trustee Reports.
---------------
(a) So long as the Certificates are held in DTC's book-entry only system,
annual unaudited reports setting forth the amounts of payments on the
Certificates, and whether such amounts are principal or interest shall be
prepared by the Trustee and sent to DTC. To the extent the Depositor fails to
provide the Trustee with a copy of any report referred to in Section 5.09(a) (i)
herein prior to the 10th Business Day preceding the applicable filing date
therefor as required by such provisions, the Trustee shall request the Depositor
to prepare and file such report and, if the Depositor fails to do so, shall
cause such report to be prepared and filed and the Depositor shall reimburse the
Trustee for its reasonable expenses incurred in connection therewith. Any such
expenses not reimbursed by the Depositor shall be borne by the Holders.
(b) The Trustee shall, on behalf of the Trust, prepare and file with the
Commission, copies of the annual reports and of the information, documents and
other reports (or copies of such portions of any of the foregoing as the
Commission may from time to time by rules and regulations prescribe), if any,
which the Trust may be required to file with the Commission pursuant to Section
13 or 15(d) of the Exchange Act (collectively, "reports") with respect to the
Trust.
<PAGE>
ARTICLE VI
HOLDERS' LISTS AND REPORTS
Section 6.1 Depositor to Furnish Names and Addresses of Holders to Trustee.
--------------------------------------------------------------
The Depositor shall furnish or cause to be furnished to the Trustee not
more than five days before each Interest Payment Date or Redemption Date, and at
such other times as the Trustee may request in writing, a list, in such form as
the Trustee may reasonably require, to the extent such information is in the
possession or control of the Depositor or any of its paying agents, of the
Holders of Certificates as of the close of business on the applicable record
date of the underlying Underlying Securities; provided, however, that so long as
the Trustee maintains the Certificate Register, no such list shall be required
to be furnished.
Section 6.2 Preservation of Information, Communications to Holders.
-------------------------------------------------------
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of the Holders of Certificates
contained in the most recent list furnished to the Trustee as provided in
Section 6.01 and the names and addresses of Holders of Certificates
received by the Trustee in its capacity as Certificate registrar. The
Trustee may destroy any list furnished to it as provided in such Section
6.01 upon receipt of a new list so furnished.
(b) Holders shall have the right to communicate pursuant to TIA Section
312(b) with other Holders with respect to their rights under this Agreement
or under the Certificates.
(c) The Depositor, the Trustee and the Certificate registrar shall have
the protection of TIA Section 312(c).
Section 6.3 Reports by Trustee.
------------------
If required by TIA Section 313(a), within 60 days after December 31 of each
year, the Trustee shall mail to (i) each Holder as required by TIA Section
313(c) and (ii) the Depositor, a brief report dated as of such date that
complies with TIA Section 313(a). The Trustee also shall comply with TIA Section
313(b). A copy of any report delivered pursuant to this Section 6.03 shall, at
the time of its mailing to Holders and the Depositor, be filed by the Trustee
with the Commission and each stock exchange, if any, on which the Certificates
are listed. The Depositor shall notify the Trustee if and when the Certificates
are listed on any stock exchange.
ARTICLE VII
AMENDMENT AND TERMINATION
Section 7.1 Amendment.
---------
The form of the Certificates and any provisions of this Agreement may at
any time and from time to time be amended by agreement between the Depositor and
the Trustee in any respect which they may deem necessary or desirable, provided
that in no event shall any amendment defer or alter the maturity of a
Certificate, or in other manner adversely affect the rights to payment of a
Holder of a Certificate or otherwise materially prejudice any substantial
existing right of the Holders of the
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<PAGE>
Certificates; and provided further that at the time of any amendment the Trustee
shall be provided evidence that the rating on the Certificates by the Rating
Agency will not be lowered or withdrawn as a result of the amendment. Every
Holder of a Certificate at the time any such amendment so becomes effective
shall be deemed to be continuing to hold such Certificate, to consent and agree
to such amendment and to be bound by this Agreement as amended thereby. Prior to
entering into any amendment to the form of the Certificates or this Agreement,
the Trustee shall be entitled to receive an Opinion of Counsel to the effect
that such amendments are authorized or permitted by this Agreement and that all
conditions precedent to the execution and delivery of such amendments have been
satisfied. The costs of providing such Opinion of Counsel shall be borne by the
Holders requesting that the Trustee execute and deliver such amendment. The
Trustee shall notify the Holders of the estimated expense of any such Opinion of
Counsel.
Section 7.2 Termination.
-----------
This Agreement shall terminate one year following the payment upon maturity
(or any earlier redemption) by the respective Issuers of the entire principal
amount (and any redemption premium) of the Underlying Securities or, in the
event of a default on the Underlying Securities, one year following receipt by
the Holders of all amounts to which the Holders are entitled pursuant to Section
5.03(b) hereof. If any Certificates shall remain outstanding after the date of
termination of this Agreement, the Trustee shall not perform any further acts
under this Agreement, except that the Trustee shall hold the proceeds of any
payment, without liability for interest, for the pro rata benefit of the Holders
of Certificates which have not theretofore been surrendered for payment unless
otherwise required by applicable law. Upon the termination of this Agreement,
the Depositor shall be discharged from all obligations under this Agreement
except for its obligations to the Trustee under Sections 5.15 and 5.13 hereof.
ARTICLE VIII
REDEMPTION OF CERTIFICATES
Section 8.1 Redemption.
----------
If the Underlying Securities are redeemed in whole or in part on or after
the First Call Date, upon actual receipt by the Trustee of notice of such
redemption, the Trustee shall, in accordance with the provisions of this Article
VIII, redeem a principal amount of Pooled Certificates, Callable Principal
Certificates or Callable Stripped Underlying Security Certificates, as
applicable, equal to the principal amount of the Underlying Securities of such
issue held in trust hereunder so redeemed, and if the Underlying Securities are
redeemed in part, then the Trustee shall select the Certificates to be redeemed
by lot in such manner as the Trustee deems fair and appropriate. In the absence
of the actual notice described in this Section 8.01, the Trustee shall be under
no obligation to effect the redemption required by this Section 8.01. Upon
redemption of any Certificate, the Holder shall have no right to receive
payments on any Interest maturing after the Redemption Date.
Section 8.2 Notice of Redemption.
--------------------
Notice of redemption shall be given by the Trustee to each Holder of any
Certificate to be redeemed as provided in Section 9.04 hereof within thirty (30)
days after notice of redemption of the
<PAGE>
underlying Underlying Securities has been given by the Issuer, trustee or paying
agent of or for the Underlying Securities, as the case may be (but not less than
fifteen days prior to the redemption date); provided, however, that the Trustee
shall not be required to give any notice of redemption less than five (5)
Business Days after the date it receives notice of such redemption. All notices
of redemption shall be mailed to each Holder at such Holder's last address on
the Certificate Register and shall state the Redemption Date, the date the
Certificates are to be redeemed, the amount payable on such date, the place at
which Certificates are to be surrendered for payment and that interest on
amounts redeemed shall cease to accrue on and after the Redemption Date.
ARTICLE IX
MISCELLANEOUS
Section 9.1 Exclusive Benefit of Parties and Holders of Certificates; Effective
-------------------------------------------------------------------
Date.
- ----
This Agreement is for the exclusive benefit of the parties hereto, their
respective successors hereunder, and Holders of Certificates, and shall not be
deemed to give any legal or equitable right, remedy or claim to any other Person
whatsoever. The Holders from time to time shall be beneficiaries of this
Agreement and shall be bound by all the terms and conditions hereof and of the
Certificates by acceptance of delivery thereof. This Agreement shall become
effective as to the Trustee and the Depositor for each series of Certificates
upon the execution of the Series Trust Agreement for such series by the Trustee
and Depositor and the receipt by the Trustee of the Underlying Securities
deposited therewith.
Section 9.2 Invalidity of Provisions.
------------------------
In case any one or more of the provisions contained in this Agreement or
contained in the Certificates should be or become invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein or therein shall in no way be affected,
prejudiced or disturbed thereby.
Section 9.3 Conflict with Trust Indenture Act.
---------------------------------
(a) If any provision hereof limits, qualifies or conflicts with another
provision hereof that is required to be included in this Agreement by any
of the provisions of the TIA, such required provision shall control.
(b) The provisions of TIA Sections 310 through 317 that impose duties on
any Person (including the provisions automatically deemed included herein
unless expressly excluded by this Agreement) are a part of and govern this
Agreement, whether or not physically contained herein.
Section 9.4 Notices.
-------
Any and all notices to be given to the Depositor shall be deemed to have
been duly given if personally delivered or sent by mail, first class, post
prepaid, or telegram or telex or facsimile confirmed by letter addressed to the
Depositor at the Depositor Address set forth in the Series Trust
B-34
<PAGE>
Agreement relating to Certificates evidencing Underlying Securities deposited by
the Depositor, or at any other place as the Depositor shall notify the Trustee
in writing from time to time.
Any and all notices to be given to the Trustee shall be deemed to have been
duly given if personally delivered or sent by mail, first class, post prepaid,
or facsimile confirmed by letter addressed to the Trustee at the Trustee Address
set forth for notice to the Trustee in the Series Trust Agreement, or to such
other place which the Trustee may have designated in writing to the Depositor.
Any and all notices to be given to the Rating Agency shall be deemed to
have been duly given if personally delivered or sent by mail, first class, post
prepaid, or facsimile confirmed by letter addressed to the Rating Agency at the
Rating Agency Address set forth in the Series Trust Agreement, or to such other
place which the Rating Agency may have designated in writing to the Depositor
and the Trustee.
All other notices to be given to any Holder shall be deemed to have been
duly given if given by mail, first-class postage prepaid, to each Holder at such
Holder's address as it appears in the Certificate Register. Neither the failure
to mail such notice, nor any defect in any notice so mailed, to any particular
Holder shall affect the sufficiency of such notice with respect to other
Holders.
All notices specified to be given "promptly" hereunder shall be given no
later than the second Business Day after the event which results in the
requirement that the notice be delivered.
Section 9.5 Governing Law; Forum.
--------------------
This Agreement and the Certificates shall be governed by, and construed in
accordance with, the laws of the State of New York. Any action or proceeding
alleging a breach of an obligation under this Agreement shall be prosecuted only
in a state or federal court located in the State of New York, County of New
York.
Section 9.6 Headings.
--------
The headings of articles and sections in this Agreement have been inserted
for convenience only and are not to be regarded as a part of this Agreement or
to have any bearing upon the meaning or interpretation of any provision
contained herein or in the Certificates.
Section 9.7 Covenant of Depositor and Trustee Not to Place Trust in Bankruptcy.
------------------------------------------------------------------
Each party hereto covenants that it shall not, until at least one year and
one day after the termination of this Agreement, take any action to file an
involuntary bankruptcy petition against the Trust or cause the Trust to file a
voluntary bankruptcy petition.
Section 9.8 Trust Not to Merge.
------------------
B-35
<PAGE>
For so long as any Certificate remains outstanding, the Trust shall not
merge or consolidate with or into any Person, or transfer all or substantially
all of its assets to any Person.
Section 9.9 Incurrence of Indebtedness.
--------------------------
For so long as any Certificate remains outstanding, the Trust shall not create,
assume, incur, suffer to exist or otherwise become or remain liable in respect
of any indebtedness.
B-36
<PAGE>
EXHIBIT C
TO SERIES TRUST AGREEMENT
TRUST CERTIFICATES
issued by
NFSC TRUST 2000-__ FOR [UNDERLYING SECURITIES]
POOLED CERTIFICATE (principal amount $__ per certificate)
For a Pro Rata Share of All Interest Payments on the
[Underlying Securities] and All Principal Payments and
Redemption Premium, If Any, Due on the Stated Maturity
Date Indicated Below or on any Previous Call for Redemption on
[UNDERLYING SECURIITES]
Certificate No. 1 Face Amount: $__,000,000
Number of Certificates: __,000,000
CUSIP No.: __________ Stated Maturity Date: ________ __, 20__
CEDE & CO., or registered assigns, is the owner of the face amount set forth
above of certificates evidencing 100% beneficial ownership of NFSC Trust 2000-__
for [Underlying Securities] (the "Issuer"), whose sole asset consists of
$__,000,000 of [Underlying Securities] (the "Underlying Securities"). The sole
obligor with respect to such Underlying Securities is the issuer of the
Underlying Securities named above (the "Underlying Issuer") or any other
entities obligated to make payments to or on behalf of the Underlying Issuer (or
their trustees or other applicable fiduciaries) with respect to the Underlying
Securities. The Underlying Securities are being held in a trust account by
[_________________], as Trustee, pursuant to the terms of a Trust Agreement
dated as of ________ __, 2000 (the "Agreement"), including the Standard Terms
and Provisions of Series Trust Agreement appended thereto and all other
exhibits, schedules, appendices, supplements and amendments thereto, between
National Financial Securities Corporation, as Depositor, and the Trustee,
pursuant to which this and other certificates (the "Certificates"), evidencing
the right to receive all interest and principal payments, including the
redemption premiums, if any, but excluding the Retained Amount (as defined in
the Agreement), if any, on the Underlying Securities, are executed and delivered
by the Trustee. This Certificate is subject to the provisions of and is entitled
to the benefits of the Agreement, which may be inspected by the holder hereof at
the Designated Office in New York City of the Trustee. The owner of this
Certificate, by its acceptance hereof, agrees to be bound by the terms and
conditions of the Agreement. Capitalized terms used but not defined herein shall
have the meanings set forth in the Agreement.
<PAGE>
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO ISSUER OR ITS AGENT
FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED
IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
The Underlying Securities will be held in an account of the Trustee at DTC in
book-entry credit form. The Trustee will pay to the Holder of this Certificate
its pro rata share of all amounts received as payments on the Underlying
Securities, promptly after receipt, less any amounts required to be withheld
from or by the Trustee pursuant to applicable law, in lawful money of the United
States of America, (i) if the Holder is The Depository Trust Company ("DTC") or
its nominee or any successor depository or nominee thereof, by wire transfer of
immediately available funds, and (ii) if the Holder is any other person, by
check in immediately available funds sent by first-class mail to the address of
the Holder hereof set forth in the Certificate Register.
In the event the Trustee receives money or other property in connection with the
payment of principal (or actual notice that such moneys or other property will
be received), other than in connection with a redemption, prior to the Stated
Maturity Date, the Trustee shall promptly give notice, as provided in the
Agreement, to the Holder. Such notice shall state that, not later than ninety
(90) days after the receipt of such moneys or other property, the Trustee shall
distribute such moneys or other property pro rata to the Holders of
Certificates.
As provided in the Agreement and subject to certain limitations therein set
forth, the transfer of this Certificate is registrable in the Certificate
Register, upon surrender of this Certificate for registration of transfer at the
corporate trust office of the Trustee at [________________], duly endorsed by,
or accompanied by a written instrument of transfer in form satisfactory to the
Trustee duly executed by, the Holder hereof or such Holder's attorney duly
authorized in writing, and thereupon one or more new Certificates of the same
series having the Stated Maturity Date set forth on the face hereof, of
Authorized Denominations of $__ or greater multiples of $__, and having the same
aggregate face amount, will be issued to the designated transferee or
transferees. Under the Agreement, the Trustee is required, when making any
payment to a Holder, to round down such payment to the nearest whole cent.
The Certificates are issuable only in registered form in Authorized
Denominations. As provided in the Agreement and subject to certain limitations
therein set forth, such Certificates are exchangeable for Certificates of the
same series, having the same Stated Maturity Date and of a like aggregate face
amount, as requested by the Holder surrendering the same.
For any such registration of transfer or exchange, the Trustee may require
payment of the then applicable service charge and of a sum sufficient to cover
any tax or other governmental charge
<PAGE>
payable in connection therewith. Prior to due presentment of this Certificate
for registration of transfer, the Trustee and any agent of the Trustee may treat
the person in whose name this Certificate is registered as the owner hereof for
all purposes, whether or not this Certificate be overdue, and neither the
Trustee nor any such agent shall be affected by notice to the contrary.
This Certificate shall not be valid or become obligatory for any purpose unless
and until duly executed by the Trustee by manual signature.
Dated: _______ __, 2000
[__________________], as Trustee
By: _______________________________________
Authorized Signatory
Authentication
This is one of the Certificates referred to in the within-mentioned Trust
Agreement.
[____________________], as Trustee
By: _______________________________________
Authorized Signatory
<PAGE>
TRANSFER FORM
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto__________________________________________________________________________
the within Certificate, and all rights thereunder, and hereby does irrevocably
constitute and appoint_________________________________________________________
________________________________________________________________________________
attorney to transfer the within Certificate on the books kept for the
registration thereof, with full power of substitution in the premises.
Optional:
[Insert wire transfer instructions for transferee.] Neither the transferor nor
the Trustee shall have any responsibility for the accuracy of such wire transfer
instructions, if provided.
Dated:_____________
______________________________________________
(Signature)
NOTE: Signature must conform in every
particular to the name in which this security
is registered, without any alteration or change
whatsoever.
Signature must be guaranteed by an "eligible
guarantor institution" meeting the requirements
of the Trustee, which requirements include
membership or participation in STAMP or such
other "signature guarantee program" as may be
determined by the Trustee in addition to, or in
substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934.
<PAGE>
EXHIBIT D
TO SERIES TRUST AGREEMENT
OFFICER'S CERTIFICATE
OF [TRUSTEE]
The undersigned, being a [Senior Vice President] of [TRUSTEE] (the "Bank"),
does hereby certify and agree on behalf of the Bank, for the benefit of National
Financial Securities Corporation (the "Depositor") and the beneficial owners of
the Certificates (as defined below), that:
1. The Trust Agreement dated as of ________ __, 20__, including the Standard
Terms and Provisions of Series Trust Agreement (the "Trust Agreement"),
between the Depositor and[TRUSTEE], as Trustee (the "Trustee"), has been
duly executed and delivered in the name of and on behalf of the Bank.
2. Pursuant to the provisions of Section 2.01 of the Trust Agreement, the
Trustee has issued $__,000,000 face amount of Trust Certificates (the
"Certificates").
3. The Bank is a [state chartered bank and trust company organized under the
laws of the State of New York] [whose deposits are insured by the FDIC], and
has the power to act as trustee with respect to the Certificates.
4. Immediately prior to the transfer of any of the [UNDERLYING SECURITIES] (the
"Underlying Securities") to the Trustee pursuant to the Trust Agreement, the
Trustee did not have record or beneficial ownership of such Underlying
Securities.
5. By means of separate recordation upon the books of the Trustee, or by
physical segregation, if appropriate, the Underlying Securities will always
be segregated and kept separate from the assets of the Bank and from all
other trust or fiduciary accounts, and will always be specifically
identified as property held subject to a trust. The Trust Agreement will
always be maintained as an official record in the books and records of the
Trustee. The Trustee will always hold the Underlying Securities as required
by the Trust Agreement, will always keep its trust records separate and
distinct from its other records, will always ensure its trust records are
complete, will always comply with all applicable laws, regulations, and
rules relating to the custody of assets held in a trust relationship, and
will always take whatever steps are necessary to ensure that, should the
[superintendent of banks for the State of New York (the "Superintendent")]
take possession of the Trustee, or a receiver or liquidator for the Trustee
be appointed, at such time the Underlying Securities would be identifiable
as property held subject to the trust relationship by the Trust Agreement.
At all times that the Underlying Securities are credited to an account
maintained on behalf of the Trustee at The Depository Trust Company of New
York, the Bank will reflect on its records that the Underlying Securities
are held in a trust account subject to the Trust Agreement, which account
will contain no property of the Trustee in its individual capacity.
6. At no time will the Bank receive a loan or other credit from a third person
because of such third party's reliance upon the Bank's apparent ownership of
the beneficial interests in the Underlying Securities.
<PAGE>
7. Each person who, on behalf of the Bank, executed the Trust Agreement was at
the date thereof and is now duly authorized as a signatory of the Bank and
duly authorized to perform such acts at the respective times of such acts
and the signatures of such persons appearing on such documents are their
genuine signatures.
8. The Trust Agreement has been duly and validly authorized, executed and
delivered by the Bank and is enforceable against the Bank in accordance with
its terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights generally
and by general principles of equity.
[SIGNATURE PAGE FOLLOWS]
8.1-2
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this certificate to be duly
executed.
[____________________], as Trustee
By________________________________
Name:
Title:
Dated: ________ __, 20__
8.1-3
<PAGE>
[LETTERHEAD OF HUNTON & WILLIAMS]
Exhibit 5.1
-----------
May 9, 2000
National Financial Securities Corporation
909 East Main Street
Richmond, Virginia 23219
Dear Sirs:
We have acted as counsel to National Financial Securities Corporation,
a Delaware corporation (the "Company"), in connection with the Company's
Registration Statement on Form S-3 (the "Registration Statement") filed with the
Securities and Exchange Commission under the Securities Act of 1933, as amended,
with respect to the proposed sale by the Company of up to $50,000,000 in
aggregate principal amount of Trust Certificates, issuable in one or more series
(the "Securities"). In this capacity, we have examined the Registration
Statement, the Company's Certificate of Incorporation and Bylaws, the form of
Trust Agreement, including Standard Terms thereto (the "Trust Agreement"), and
such other materials as we have deemed necessary to the issuance of this
opinion.
On the basis of the foregoing, we are of the opinion that:
1. The Company has been organized and is existing as a corporation
under the laws of the State of Delaware.
2. When each Trust Agreement has been duly authorized by all
necessary corporate action and has been duly executed and delivered by the
parties thereto, each will constitute a valid, legal and binding agreement of
the Company, enforceable against the Company in accordance with its terms,
subject to bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforcement of creditors' rights generally and to general
principles of equity, regardless of whether enforcement is sought in a
proceeding in equity or at law.
3. When the Securities have been duly authorized for sale by all
necessary corporate
<PAGE>
Page 2
action, and when the Securities have been duly issued, executed and
authenticated in accordance with the provisions of the related Trust Agreement,
and delivered to and paid for by the purchasers thereof, the Securities will be
legally and validly issued for adequate consideration and (a) the Security
holders will be entitled to the benefits provided by the Trust Agreement
pursuant to which such Securities were issued and (b) no Security holder will be
subject to any further assessment in respect of the purchase price of his
Securities.
The foregoing opinions are limited to matters of the laws of the
United States of America and the State of Delaware. We hereby consent to the
filing of this opinion as an exhibit to the Registration Statement. In giving
this consent, we do not admit that we are within the category of persons whose
consent is required by Section 7 of the Securities Act of 1933, as amended, or
the rules and regulations promulgated thereunder by the Securities and Exchange
Commission.
Very truly yours,
/s/ Hunton & Williams
<PAGE>
Exhibit 8.1
-----------
[LETTERHEAD OF HUNTON & WILLIAMS]
May 9, 2000
National Financial Securities Corporation
909 East Main Street
Richmond, Virginia 23219
Gentlemen:
We have acted as counsel to National Financial Securities
Corporation, a Delaware corporation (the "Company"), in connection with the
Company's Registration Statement on Form S-3 (the "Registration Statement"),
filed with the Securities and Exchange Commission under the Securities Act of
1933, as amended (the "Act"), for the registration under the Act of $50,000,000
aggregate principal amount of Trust Certificates (the "Securities") representing
interests in one or more trusts (each a "Trust") to be established by the
Company. The Securities will be issued pursuant to a form of Trust Agreement,
including Standard Terms thereto, or a form of Indenture (each, an "Agreement").
We have reviewed the originals or copies of (i) the Certificate
of Incorporation, By-laws, and other organizational documents of the Company;
(ii) certain resolutions of the Board of Directors of the Company; (iii) the
Agreements, including the forms of the Securities; (iv) the Registration
Statement and the prospectus included therein; and (v) such other documents as
we have deemed necessary or appropriate as a basis for the opinion set forth
below.
<PAGE>
Page 2
Based on the foregoing, we are of the opinion that the legal
conclusions contained in the Registration Statement under the caption "Federal
Income Tax Consequences" are correct in all material respects, and the
discussion thereunder does not omit any material provision with respect to the
matters covered. You should be aware that this opinion represents our
conclusions as to the application of existing law to a transaction as described
therein. There can be no assurance that contrary positions will not be taken by
the Internal Revenue Service or that the law will not change.
We hereby consent to the filing of this opinion as an exhibit to
the Registration Statement. We also consent to the references to Hunton &
Williams under the caption "Federal Income Tax Consequences" in the Prospectus.
In giving this consent, we do not admit that we are in the category of persons
whose consent is required by Section 7 of the Act or the rules and regulations
promulgated thereunder by the Securities and Exchange Commission.
No opinion has been sought and none has been given concerning the
tax treatment of the issuance and sale of the Securities under the laws of any
state.
Very truly yours,
/s/ Hunton & Williams
