PROSPECTUS SUPPLEMENT
(To Prospectus dated May 13, 1999)
STRUCTURED PRODUCTS CORP., THE DEPOSITOR
2,000,000 CORPORATE-BACKED TRUST SECURITIES (CORTSsm) CERTIFICATES
(PRINCIPAL AMOUNT $25 PER CERTIFICATE)
ISSUED BY
CORTSsm TRUST FOR BELLSOUTH DEBENTURES, THE TRUST
RELATING TO
BELLSOUTH TELECOMMUNICATIONS, INC. ONE HUNDRED YEAR 7% DEBENTURES DUE
DECEMBER 1, 2095
---------------------
The Trust will issue a single class of Certificates, which will represent
interests in the Trust and will be paid only from the assets of the Trust. The
Trust will own $50,000,000 One Hundred Year 7% Debentures due December 1, 2095
issued by BellSouth Telecommunications, Inc. and all future payments of interest
and a single payment of principal due on the Debentures, as described in this
Prospectus Supplement.
The Certificates will evidence the right to receive semi-annual interest
payments on the principal amount of your Certificates at an interest rate of 7%
per annum and the right to receive your pro rata amount of a single payment of
principal of $50,000,000 due on December 1, 2095 or on such earlier date as
described in this Prospectus Supplement. The Certificates will represent
interests in the Trust only and will not represent an interest in or obligations
of any other party. No governmental agency or instrumentality has insured or
guaranteed the Certificates or the underlying Debentures.
YOU SHOULD FULLY CONSIDER THE RISK FACTORS ON PAGE S-6 IN THIS PROSPECTUS
SUPPLEMENT PRIOR TO INVESTING IN THE CERTIFICATES.
The Certificates are expected to be approved for listing, subject to
official notice of issuance, on the New York Stock Exchange. Trading of the
Certificates on the New York Stock Exchange is expected to commence within a
30-day period after the initial delivery thereof. See "Underwriting."
---------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED THESE SECURITIES OR DETERMINED THAT THIS PROSPECTUS
SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS IS ACCURATE OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
Per
Certificate Total
<S> <C> <C>
Public offering price...................... $25 $50,000,000
- ----------------------------------------------
Underwriting discount...................... $0.7875 $1,575,000
- ----------------------------------------------
Proceeds to Trust (before expenses)........ $24.2125 $48,425,000
</TABLE>
The Underwriter expects to deliver your Certificates in book-entry form
only through the Depository Trust Company on or about June 10, 1999.
SM "CorTS" is a service mark of Salomon Smith Barney Inc.
---------------------
SALOMON SMITH BARNEY
---------------------
June 8, 1999
<PAGE>
INFORMATION ABOUT CERTIFICATES
We provide information to you about the Certificates in two separate
documents that progressively provide more detail: (a) the accompanying
Prospectus, which provides general information, some of which may not apply to
the Certificates; and (b) this Prospectus Supplement, which describes the
specific terms of your Certificates.
You are urged to read both the Prospectus and this Prospectus Supplement
in full to obtain material information concerning the Certificates. If the
descriptions of the 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 for 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-17 in this document and beginning
on page 41 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 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 Securities and Exchange Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
following Regional Offices of the Commission: New York Regional Office, Seven
World Trade Center, 13th Floor, New York, New York 10048, and Chicago Regional
Office, John C. Kluczynski Federal Building, Northwest Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials
can also be obtained electronically through the Securities and Exchange
Commission'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.
S-2
<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 Certificates, you should read carefully this Prospectus Supplement and
the accompanying Prospectus in full.
ESTABLISHMENT OF THE TRUST. Structured Products Corp., the Depositor, is
establishing a Trust to be designated as CorTSsm Trust for BellSouth Debentures.
The assets of the Trust will consist of the Underlying Debentures, which are
$50,000,000 One Hundred Year 7% Debentures due December 1, 2095 issued by
BellSouth Telecommunications, Inc., the Underlying Issuer, and payments of
principal and interest made on the Underlying Debentures as discussed in more
detail under "Description of the Certificates" herein.
OFFERED SECURITIES. The Trust will issue the Certificates in a single class.
As holder of Certificates, you will have the right to receive from the Trust:
- periodic payments of interest on the principal amount of your
Certificates accruing from the closing date at a rate of 7% per annum, on each
June 1 and December 1, commencing on December 1, 1999, until the principal
amount of your Certificates is paid in full as described below; and
- the pro rata share for your Certificates of a single payment of principal
of $50,000,000. You will be expected to receive your pro rata share of the
principal payment on December 1, 2095, the maturity date of the Underlying
Debentures.
The Certificates are expected to trade flat. This means that any accrued
and unpaid interest on the 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 Certificates not included in the trading price.
UNDERLYING DEBENTURES. BellSouth Telecommunications, Inc. One Hundred Year 7%
Debentures due December 1, 2095.
S-3
<PAGE>
TRUSTEE AND TRUST AGREEMENT. U.S. Bank Trust National Association will act as
Trustee pursuant to a trust agreement dated May 21, 1999, as supplemented by a
supplement dated as of the closing date. You may inspect the trust agreement and
the supplement at the office of the Trustee at 100 Wall Street, Suite 1600, New
York, NY 10005.
DENOMINATIONS. Each Certificate will have a principal amount of $25.
REGISTRATION, CLEARANCE AND SETTLEMENT. Your Certificates will be registered in
the name of Cede & Co., as the nominee of The Depository Trust Company.
TAX CONSIDERATIONS. Orrick, Herrington & Sutcliffe LLP, counsel to the
Depositor, is of the opinion that under existing law (1) the Trust will be a
grantor trust and not a partnership or an association taxable as a corporation;
and (2) your Certificates will represent beneficial interests in the Underlying
Debentures. For information reporting purposes, interest payments on the
Underlying Debentures will be reported to you (and the Internal Revenue Service)
as interest and not original issue discount and will be included in your income
as it is paid (or, if you are an accrual method taxpayer, as it is accrued) as
interest (and not as original issue discount). See "Certain Federal Income Tax
Considerations" in the Prospectus.
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
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 Certificates will satisfy all of the requirements of
the "publicly-offered securities exception" described herein or the possible
application of other "prohibited transaction exemptions" described herein. See
"Certain ERISA Considerations" herein.
S-4
<PAGE>
LISTING. The Certificates are expected to be approved for listing, subject to
official notice of issuance, on the New York Stock Exchange. Trading of the
Certificates on the New York Stock Exchange is expected to commence within a
30-day period after the initial delivery thereof. See "Underwriting" herein.
RATINGS. It is a condition to issuance of the Certificates that they be rated
identically to the Underlying Debentures by each of Moody's Investors Service,
Inc. and Standard & Poor's Ratings Services. As of the date of this prospectus
supplement, the Underlying Debentures are rated "Aaa" and "AAA" by Moody's
Investors Service, Inc. and Standard & Poor's Ratings Services, respectively.
S-5
<PAGE>
RISK FACTORS
You should consider the following factors in deciding whether to purchase the
Certificates:
1. NO INVESTIGATION OF THE UNDERLYING DEBENTURES OR THE UNDERLYING ISSUER HAS
BEEN MADE BY THE DEPOSITOR, UNDERWRITER OR TRUSTEE. None of the Depositor, the
Underwriter or the Trustee has made, or will make, any investigation of the
business condition, financial or otherwise, of the Underlying Issuer, or verify
any reports or information filed by the Underlying Issuer with the Securities
and Exchange Commission or otherwise made available to the public. It is
strongly recommended that prospective investors in the Certificates consider
publicly available financial and other information regarding the Underlying
Issuer. See "The Underlying Issuer," "Description of the Underlying Debentures,"
and "Appendix A-Description of Underlying Debentures" herein.
2. UNDERLYING ISSUER IS THE ONLY PAYMENT SOURCE. The payments made by the
Underlying Issuer on the Underlying Debentures are the only source of payment
for your 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 Certificates. In the event of
nonpayment on the Underlying Debentures by the Underlying Issuer, you will bear
the risk of such nonpayment. See "Description of the Certificates--Recovery on
Underlying Debentures Following Payment Default or Acceleration" herein.
3. CERTAIN PAYMENTS TO THE DEPOSITOR. On December 1, 1999 as payment of the
balance of the purchase price for the Underlying Debentures, the Trustee will
pay to the Depositor the amount of the interest accrued on the Underlying
Debentures from June 1, 1999 to but not including the closing date. In the event
a payment default or acceleration on the Underlying Debentures occurs on or
prior to December 1, 1999 and the Depositor is not paid such accrued interest on
such date, the Depositor will have a claim for such accrued interest, and will
share pro rata with holders of the Certificates to the extent of such claim in
the proceeds from the recovery on the Underlying Debentures. See "Description of
the Certificates--Recovery on Underlying Debentures Following Payment Default or
Acceleration" herein.
FORMATION OF THE TRUST
Structured Products Corp. (the "Depositor" or the "Company") will establish
a Trust, to be designated as CorTSsm Trust For BellSouth Debentures (the
"Trust") under New York law pursuant to the Trust Agreement dated May 21, 1999
(the "Trust Agreement"), as supplemented by the CorTSsm Supplement 1999-2 dated
as of the Closing Date. The "Closing Date" means the date of initial delivery of
the Certificates. The assets of the Trust will consist of $50,000,000 One
Hundred Year 7% Debentures due December 1, 2095 (the "Underlying Debentures" or,
as referred to in the Prospectus, the "Term Assets") issued by BellSouth
Telecommunications, Inc. (the "Underlying Issuer" or, as referred to in the
Prospectus, the "Term Assets Issuer") and payments of principal and interest
made by the Underlying Issuer on the Underlying Debentures as discussed in more
detail under "Description of the Certificates" herein. The Trust Agreement will
be qualified as an indenture under the Trust Indenture Act of 1939, as amended
(the "Trust Indenture Act"). Concurrently with the execution and delivery of the
Trust Agreement, the Company will deposit with the Trustee the Underlying
Debentures and the Trustee, on behalf of the Trust, will accept such Underlying
Debentures and deliver the Certificates to or upon the order of the Company.
S-6
<PAGE>
The Trustee will hold the Underlying Debentures for the benefit of the holders
of the Certificates (the "Certificateholders").
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the
Certificates will be used to purchase the Underlying Debentures, which, after
the purchase thereof, will be deposited by the Company with the Trust and will
be the sole Deposited Assets (as defined in the Prospectus) of the Trust.
THE UNDERLYING ISSUER
This Prospectus Supplement does not provide information with respect to
the Underlying Issuer. No investigation has been made of the financial condition
or creditworthiness of the Underlying Issuer or any of its subsidiaries in
connection with the issuance of the Certificates. The Company is not an
affiliate of the Underlying Issuer.
The Underlying Issuer is subject to the informational requirements of the
Securities Exchange Act of 1934 and in accordance therewith files reports, proxy
statements and other information with the Securities and Exchange Commission
(the "Commission"). Reports, proxy statements and other information filed by the
Underlying Issuer with the Commission pursuant to the informational requirements
of the Exchange Act can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the following Regional Offices of
the Commission: New York Regional Office, Seven World Trade Center, 13th Floor,
New York, New York 10048, and Chicago Regional Office, John C. Kluczynski
Federal Building, Northwest Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such material can also be maintained upon
written request addressed to the Securities and Exchange Commission, Public
Reference Section, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. The Commission maintains a web site at http://www.sec.gov
containing reports, proxy statements and other information regarding registrants
that file electronically with the Commission. Such reports, proxy statements and
other information can also be inspected at the offices of the New York Stock
Exchange, on which one or more of the Underlying Issuer's securities are listed.
THIS PROSPECTUS SUPPLEMENT, THE PROSPECTUS, THE UNDERLYING DEBENTURES
PROSPECTUS AND THE UNDERLYING DEBENTURES REGISTRATION STATEMENT DESCRIBES THE
MATERIAL TERMS OF THE UNDERLYING DEBENTURES. THIS PROSPECTUS SUPPLEMENT IS
QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN CONJUNCTION WITH, (I) THE
PROSPECTUS, (II) THE UNDERLYING DEBENTURES PROSPECTUS, AND (III) THE UNDERLYING
DEBENTURES REGISTRATION STATEMENT OF WHICH SUCH UNDERLYING DEBENTURES PROSPECTUS
IS A PART. NO REPRESENTATION IS MADE BY THE TRUST, THE TRUSTEE, THE UNDERWRITER
OR THE COMPANY AS TO THE ACCURACY OR COMPLETENESS OF THE INFORMATION CONTAINED
IN THE UNDERLYING DEBENTURES PROSPECTUS OR THE UNDERLYING DEBENTURES
REGISTRATION STATEMENT.
DESCRIPTION OF THE UNDERLYING DEBENTURES
The Underlying Debentures of the Trust will consist solely of $50,000,000
aggregate principal amount of BellSouth Telecommunications, Inc. One Hundred
Year 7% Debentures due December 1, 2095 issued by the Underlying Issuer, having
the characteristics described in a Prospectus dated November 1, 1995 and a
Prospectus Supplement dated November 28, 1995 (the
S-7
<PAGE>
"Underlying Debentures Prospectus"). The Underlying Debentures were originally
issued by the Underlying Issuer as part of an underwritten public offering of
$500,000,000 aggregate principal amount of such securities, pursuant to a
registration statement no. 33-60351 (together with all amendments and exhibits
thereto, the "Underlying Debentures Registration Statement"), filed by the
Underlying Issuer with the Commission under the Securities Act of 1933, as
amended (the "Securities Act"). Distributions are required to be made on the
Underlying Debentures (i) semiannually on the 1st of each June and December,
commencing on December 1, 1999, or if such day is not a Business Day, on the
next succeeding Business Day and (ii) a single payment of principal of
$50,000,000 payable on December 1, 2095 (the "Maturity Date").
This Prospectus Supplement sets forth material terms with respect to the
Underlying Debentures, but does not provide detailed information with respect
thereto. This Prospectus Supplement relates only to the Certificates offered
hereby and is not an offering document for the Underlying Debentures. All
disclosure contained herein with respect to the Underlying Debentures is derived
from publicly available documents described above. The Underlying Issuer is
subject to the information reporting requirements of the Securities Exchange Act
of 1934 (the "Exchange Act"). Accordingly, the Underlying Issuer is obligated to
file reports and other information with the Commission. Although the Company has
no reason to believe the information concerning the Underlying Debentures or the
Underlying Issuer set forth in the Underlying Debentures Prospectus or any
report filed under the Exchange Act is not reliable, neither the Company nor the
Underwriter has participated in the preparation of such documents, or made any
due diligence inquiry with respect to the information provided therein. Neither
the Company nor the Underwriter has verified the accuracy or completeness of
such documents or reports. Information contained in such documents and reports
is as of the date(s) stated therein, and comparable information, if given as of
the date hereof, may be different. There can be no assurance that events
affecting the Underlying Debentures or the Underlying Issuer have not occurred,
which have not yet been publicly disclosed, which would affect the accuracy or
completeness of the publicly available documents described above.
RATINGS
The Underlying Debentures have been rated "Aaa" by Moody's Investors
Service, Inc. ("Moody's") and "AAA" by Standard & Poor's Ratings Services, a
division of the McGraw-Hill Companies ("S&P"). Any rating of the Underlying
Debentures is not a recommendation to purchase, hold or sell such Underlying
Debentures or the Certificates, and there can be no assurance that a rating will
remain for any given period of time or that a rating will not be revised or
withdrawn entirely by a rating agency if in its judgment circumstances in the
future so warrant.
YEAR 2000
Certain information technology ("IT") and non-IT systems (i.e. embedded
technology such as microcontrollers) may utilize older computer programs that
were written using two digits rather than four to define the applicable year.
Consequently, such computer programs may recognize a date using "00" as the year
1900 rather than the year 2000. These computer programs may fail to operate
properly in the year 2000 and after if they are not modified or replaced to
comply with year 2000 requirements.
The Underlying Issuer may not timely conduct or complete a year 2000
assessment and there can be no assurance that the Underlying Issuer will make
any necessary modifications or replacements of its IT or non-IT systems in time,
if at all. Failure to do so could result in a disruption
S-8
<PAGE>
of operations of the Underlying Issuer, including, among other things, a
temporary inability to process funds or engage in similar normal business
practices. As a result, payments to Certificateholders may be interrupted or
impaired.
THE UNDERWRITER AND THE UNDERLYING ISSUER
From time to time, Salomon Smith Barney Inc. (the "Underwriter") may be
engaged by the Underlying Issuer as an underwriter or a placement agent, in an
advisory capacity or in other business arrangements. In addition, the
Underwriter or an affiliate of the Depositor may make a market in other
outstanding securities of the Underlying Issuer.
DESCRIPTION OF THE CERTIFICATES
GENERAL
The Certificates will be issued pursuant to the terms of the Trust
Agreement. The following summary as well as other pertinent information included
elsewhere in this Prospectus Supplement and in the Prospectus describes material
terms of the Certificates and the Trust Agreement, but does not purport to be
complete and is subject to, and qualified in its entirety by reference to, all
the provisions of the Certificates and the Trust Agreement. The following
summary supplements the description of the general terms and provisions of the
Certificates of any given series and the related Trust Agreement set forth in
the Prospectus, to which description reference is hereby made.
The Certificates will be denominated and distributions with respect
thereto will be payable in United States Dollars, which will be the "Specified
Currency" as such term is defined in the Prospectus. The Certificates represent
in the aggregate the entire beneficial ownership interest in the Trust. The
property of the Trust will consist of (i) the Underlying Debentures and (ii) all
payments on or collections in respect of the Underlying Debentures accrued on or
after the Closing Date, together with any proceeds thereof. The property of the
Trust will be held for the benefit of the holders of the Certificates by the
Trustee. The Certificates represent a pro rata portion of the then-current
aggregate principal balance of all outstanding Certificates and will equal the
portion of the proceeds received from the Underlying Debentures that the holder
of such Certificate is entitled to receive on December 1, 2095.
All distributions to Certificateholders will be made only from the
property of the Trust as described herein. The Certificates do not represent an
interest in or obligation of the Depositor, the Underlying Issuer, the Trustee,
the Underwriter, or any affiliate if any thereof.
DISTRIBUTIONS
Each Certificate evidences the right to receive, to the extent received on
the Underlying Debentures, a semiannual distribution of interest on June 1 and
December 1 of each year, commencing December 1, 1999, and a distribution of
principal on December 1, 2095 or if any such day is not a Business day, the next
succeeding Business Day. For purposes of the foregoing, "Business Day" means any
day other than a Saturday, a Sunday or a day on which banking institutions in
New York, New York are authorized or obligated by law or executive order to be
closed.
S-9
<PAGE>
ADDITIONAL UNDERLYING DEBENTURES AND CERTIFICATES
From time to time hereafter, additional Underlying Debentures may be sold
to the Trust, in which case additional Certificates will be issued in a
principal amount equal to the principal amount of Underlying Debentures so sold
to the Trustee. Any such additional Certificates issued will rank pari passu
with the Certificates issued on the date hereof.
RECOVERY ON UNDERLYING DEBENTURES FOLLOWING PAYMENT DEFAULT OR
ACCELERATION
If a Payment Default or an Acceleration occurs, the Trustee will promptly
give notice to The Depository Trust Company ("DTC") or, for any Certificates
which are not then held by DTC or any other depository, directly to the
registered holders of the Certificates thereof. Such notice shall set forth (i)
the identity of the issue of Underlying Debentures, (ii) the date and nature of
such Payment Default or Acceleration, (iii) the amount of the interest or
principal in default, (iv) the Certificates affected by the Payment Default or
Acceleration, and (v) any other information which the Trustee may deem
appropriate.
In the event of a Payment Default or Acceleration, the Trustee is required
to proceed against the Underlying Issuer on behalf of the Certificateholders to
enforce the Underlying Debentures 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 Certificates representing
a majority of the Voting Rights on the Certificates will be entitled to direct
the Trustee in any such proceeding or direct the Trustee to sell the Underlying
Debentures, in each case, subject to the Trustee's receipt of satisfactory
indemnity.
A "Payment Default" means a default in the payment of any amount due on
the Underlying Debentures after the same becomes due and payable (and the
expiration of any applicable grace period on the Underlying Debentures). An
"Acceleration" means the acceleration of the maturity of the Underlying
Debentures after the occurrence of any default on the Underlying Debentures
other than a Payment Default.
In the event that the Trustee receives money or other property in respect
of the Underlying Debentures (other than a scheduled payment on or with respect
to an interest payment date) as a result of a Payment Default or Acceleration on
the Underlying Debentures (including from the sale thereof), the Trustee will
promptly give notice as provided in the Trust Agreement to DTC, or for any
Certificates which are not then held by DTC or any other depository, directly to
the registered holders of the Certificates then outstanding and unpaid. Such
notice will state that, not later than 30 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 Certificates then outstanding and unpaid, pro rata by
principal amount (after deducting the costs incurred in connection therewith and
subject to the provisions set forth under "Description of the Trust Agreement -
Certain Payments to the Depositor" herein). 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 Certificates will be distributed to
the Depositor. In-kind distribution of Underlying Debentures to
Certificateholders will be deemed to reduce the principal amount of Certificates
on a dollar-for-dollar basis. Following such in kind distribution, all
Certificates will be cancelled. Other than as set forth under "Description of
the Trust Agreement - Certain Payments to the Depositor", no amounts will be
distributed to the Depositor in respect of the Underlying
S-10
<PAGE>
Debentures unless and until principal and accrued interest on the Certificates
has been paid (or reduced by distributions in kind) in full.
Interest and principal payments on the Underlying Debentures 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 Certificates
relating to the Underlying Debentures.
LISTING ON THE NEW YORK STOCK EXCHANGE
The Certificates are expected to be authorized for listing, upon official
notice of issuance, with the New York Stock Exchange ("NYSE"). There can be no
assurance that the Certificates, once listed, will continue to be eligible for
trading on the NYSE.
FORM OF THE CERTIFICATES
The Certificates will be delivered in registered form. The Certificates
will be issued, maintained and transferred on the book-entry records of DTC and
its Participants in minimum denominations of $25 and integral multiples thereof.
Certificateholders will not receive physical certificates.
DESCRIPTION OF THE TRUST AGREEMENT
GENERAL
The Certificates will be issued pursuant to the Trust Agreement, a form of
which is filed as an exhibit to the Registration Statement of which this
Prospectus Supplement and the Prospectus form a part. A Current Report on Form
8-K relating to the Certificates containing a copy of the CorTSsm Supplement
1999-2 to the Trust Agreement as executed will be filed by the Company with the
Commission following the issuance and sale of the Certificates. The assets of
the Trust created under the Trust Agreement will consist of (i) the Underlying
Debentures and (ii) all payments on or collections in respect of the Underlying
Debentures due after the Closing Date. Reference is made to the Prospectus for
important information in addition to that set forth herein regarding the Trust,
the terms and conditions of the Trust Agreement and the Certificates. The
following summaries of certain provisions of the Trust Agreement do not purport
to be complete and are subject to the detailed provisions contained in the form
of Trust Agreement, to which reference is hereby made for a full description of
such provisions, including the definition of certain terms used herein.
AFFILIATE EXCHANGE RIGHT
Any affiliate of the Depositor, but not the Depositor itself, will have
the right, subject to the limitations contained in the Trust Agreement, on any
date to tender to the Trustee Certificates of a specified principal amount and
to receive in exchange Underlying Debentures equal to such principal amount.
CERTAIN PAYMENTS TO THE DEPOSITOR
On December 1, 1999, as payment of the balance of the purchase price for
the Underlying Debentures, the Trustee shall pay to the Depositor the amount of
the interest accrued on the
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Underlying Debentures from June 1, 1999 to but not including the Closing Date.
In the event the Depositor is not paid such accrued interest on such date, the
Depositor shall have a claim for such accrued interest, and shall share pari
passu with Certificateholders to the extent of such claim in the proceeds from
the recovery on the Underlying Debentures.
THE TRUSTEE
U.S. Bank Trust National Association, a national banking association, will
act as Trustee for the Certificates and the Trust pursuant to the Trust
Agreement. The Trustee's offices are located at 100 Wall Street, Suite 1600, New
York, New York 10005 and its telephone number is (212) 361-2500.
The Trust Agreement will provide that the Trustee and any director,
officer, employee or agent thereof will be indemnified by the Trust and held
harmless against any loss, liability or expense incurred in connection with any
legal action relating to the Trust Agreement or the Certificates or the
performance of the Trustee's duties under the Trust Agreement, other than any
loss, liability or expense that (i) constitutes a specific liability of the
Trustee under the Trust Agreement or (ii) was incurred by reason of willful
misfeasance, bad faith or negligence in the performance of the Trustee's duties
under the Trust Agreement or as a result of a breach, or by reason of reckless
disregard, of the Trustee's obligations and duties under the Trust Agreement.
Pursuant to the Trust Agreement, as compensation for the performance of
its duties under such agreement, the Trustee shall be entitled to payment of
Trustee fees and reimbursement of expenses by the Company pursuant to a separate
agreement with the Company, but shall not have any claim against the Trust with
respect thereto.
EVENT OF DEFAULT
There are no events of default with respect to the Certificates. If a
Payment Default or Acceleration occurs (or other default with respect to the
Underlying Debentures occurs), the Trustee will act upon the instruction of
Certificateholders to recover amounts due on the Underlying Debentures and
distribute the proceeds from such recovery (after deducting the costs incurred
in connection therewith and subject to the provisions set forth above under
"--Certain Payments to the Depositor") to the Certificateholders. See
"Description of the Certificates--Recovery on Underlying Debentures Following
Payment Default or Acceleration" herein.
NO DERIVATIVE TRANSACTIONS
The Trust is not permitted to engage in derivative transactions.
VOTING RIGHTS
The Certificateholders will have 100% of the total voting rights as
specified in the Trust Agreement (the "Voting Rights"). All Voting Rights with
respect to the Certificates will be allocated in proportion to the respective
principal balances of the then-outstanding Certificates held by such
Certificateholders on any date of determination.
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The required percentage of Voting Rights of those Certificates that are
materially adversely affected by any modification or amendment of the Trust
Agreement necessary to consent to such modification or amendment shall be
greater than 50%.
VOTING OF UNDERLYING DEBENTURES
The Trustee, as holder of the Underlying Debentures, has the right to vote
and give consents and waivers in respect of such Underlying Debentures as
permitted by the depositary with respect thereto and except as otherwise limited
by the Trust Agreement. In the event that the Trustee receives a request from
the Underlying Issuer for its consent to any amendment, modification or waiver
of the Underlying Debentures or any document relating thereto, or receives any
other solicitation for any action with respect to the Underlying Debentures, the
Trustee shall mail a notice of such proposed amendment, modification, waiver or
solicitation to each Certificateholder of record as of such date. The Trustee
shall request instructions from the Certificateholders as to whether or not to
consent to or vote to accept such amendment, modification, waiver or
solicitation. The Trustee shall consent or vote, or refrain from consenting or
voting, in the same proportion (based on the relative principal balances of the
Certificates) as the Certificates of the Trust were actually voted or not voted
by the Certificateholders thereof as of a date determined by the Trustee prior
to the date on which such consent or vote is required; PROVIDED, HOWEVER, that,
notwithstanding anything to the contrary stated herein, the Trustee shall at no
time vote in favor of or consent to any matter (i) which would alter the timing
or amount of any payment on the Underlying Debentures, including, without
limitation, any demand to accelerate the Underlying Debentures or (ii) which
would result in the exchange or substitution of any Underlying Debenture
pursuant to a plan for the refunding or refinancing of such Underlying
Debenture, except in each case with the unanimous consent of the
Certificateholders and subject to the requirement that such vote or consent
would not, based on an opinion of counsel, materially increase the risk that the
Trust would fail to qualify as a grantor trust for federal income tax purposes.
The Trustee shall have no liability for any failure to act resulting from
Certificateholders' late return of, or failure to return, directions requested
by the Trustee from the Certificateholders.
TERMINATION OF THE TRUST
The Trust shall terminate upon (i) the payment in full at maturity, (ii)
the distribution of the proceeds received upon a recovery on the Underlying
Debentures (after deducting the costs incurred in connection therewith) after a
Payment Default or an Acceleration thereof (or other default with respect to the
Underlying Debentures) or (iii) the distribution in kind of the Underlying
Debentures upon the tender by an affiliate of the Depositor of 100% of the
Certificates in exchange for 100% of the Underlying Debentures.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
Orrick, Herrington & Sutcliffe LLP, counsel to the Depositor, is of the
opinion that under existing law (1) the Trust will be a grantor trust and not a
partnership or an association taxable as a corporation; and (2) your
Certificates will represent beneficial interests in the Underlying Debentures.
For information reporting purposes, interest payments on the Underlying
Debentures will be reported to you (and the Internal Revenue Service) as
interest and not original issue discount and will be included in your income as
it is paid (or, if you are an accrual method taxpayer, as it is accrued) as
interest (and not as original issue discount). See "Certain Federal Income Tax
Considerations" in the Prospectus.
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CERTAIN ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and Section 4975 of the Code impose certain requirements on (a) an employee
benefit plan (as defined in Section 3(3) of ERISA), (b) a plan described in
Section 4975(e)(1) of the Code, including an individual retirement account
("IRA") or Keogh plan or (c) any entity whose underlying assets include plan
assets by reason of a plan's investment in the entity (each, a "Plan").
ERISA and Section 4975 of the Code prohibit certain transactions involving
the assets of a Plan and persons who have specified relationships to the Plan,
I.E., "parties in interest" within the meaning of ERISA or "disqualified
persons" within the meaning of the Code (collectively, "Parties in Interest").
Thus, a Plan fiduciary considering an investment in Certificates should consider
whether such an investment might constitute or give rise to a prohibited
transaction under ERISA or Section 4975 of the Code. The Underlying Issuer, the
Underwriter, the Trustee and their respective affiliates may be Parties in
Interest with respect to many Plans.
If an investment in Certificates by a Plan were to result in the assets of
the Trust being deemed to constitute "plan assets" of such Plan, certain aspects
of such investment, including the operations of the Trust and the deemed
extension of credit between the Underlying Issuer and the holder of a
Certificate (as a result of the Underlying Debentures being deemed to be plan
assets), as well as subsequent transactions involving the Trust or its assets,
might constitute or result in prohibited transactions under Section 406 of ERISA
and Section 4975 of the Code unless exemptive relief were available under an
applicable exemption issued by the United States Department of Labor (the
"DOL"). Neither ERISA nor the Code defines the term "plan assets." Under Section
2510.3-101 of the DOL regulations (the "Regulation"), a Plan's assets may
include the assets of an entity if the Plan acquires an "equity interest" in
such entity unless an exception applies under the Regulation. Thus, if a Plan
acquires a Certificate, for certain purposes (including the prohibited
transaction provisions of Section 406 of ERISA and Section 4975 of the Code),
the Plan would be considered to own an undivided interest in the underlying
assets of the Trust unless such Certificate is a "publicly-offered security" or
another exception applies under the Regulation.
The Underwriter expects that the Certificates will satisfy the criteria
for treatment as publicly-offered securities under the Regulation. A
publicly-offered security is a security that is (i) freely transferable, (ii)
part of a class of securities that is owned by 100 or more investors independent
of the issuer and of one another at the conclusion of the initial offering, and
(iii) either is (A) part of a class of securities registered under Section 12(b)
or 12(g) of the Exchange Act, or (B) sold to the Plan as part of an offering of
securities to the public pursuant to an effective registration statement under
the Securities Act and the class of securities of which such security is a part
is registered under the Exchange Act within 120 days (or such later time as may
be allowed by the Commission) after the end of the fiscal year of the issuer
during which the offering of such securities to the public occurred.
The Underwriter will verify that there will be at least 100 separate
purchasers (whom the Underwriter has no reason to believe are not independent of
the Company or of one another) at the conclusion of the initial offering. There
is no assurance that the 100 independent investor requirement of the
"publicly-offered security" exception will, in fact, be satisfied.
NOTHING HEREIN SHALL BE CONSTRUED AS A REPRESENTATION THAT AN INVESTMENT
IN THE CERTIFICATES WOULD MEET ANY OR ALL OF THE RELEVANT LEGAL REQUIREMENTS
WITH RESPECT TO
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INVESTMENTS BY, OR IS APPROPRIATE FOR, PLANS GENERALLY OR ANY PARTICULAR PLAN.
ANY PLAN OR ANY OTHER ENTITY THE ASSETS OF WHICH ARE DEEMED TO BE "PLAN ASSETS,"
SUCH AS AN INSURANCE COMPANY INVESTING ASSETS OF ITS GENERAL ACCOUNT, PROPOSING
TO ACQUIRE CERTIFICATES SHOULD CONSULT WITH ITS COUNSEL.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement (the "Underwriting Agreement") between the Underwriter and the
Company, the Company will sell the Certificates to the Underwriter, and the
Underwriter has agreed to purchase from the Company all the Certificates. In the
Underwriting Agreement, the Underwriter has agreed, subject to the terms and
conditions set forth therein, to purchase all of the Certificates if any
Certificates are purchased.
The Company has been advised by the Underwriter that it proposes initially
to offer the 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 $.50 per Certificate. The Underwriter
may allow and such dealers may reallow a concession not in excess of $.25. After
the initial public offering, the public offering price and the concessions may
be changed.
The Certificates are a new issue of securities with no established trading
market. The Certificates will be approved for listing, subject to official
notice of issuance, on the NYSE. Trading of the Certificates on the NYSE is
expected to commence within the 30-day period after the initial delivery
thereof. In order to meet one of the requirements for listing the Certificates
on the NYSE, the Underwriter has undertaken to sell the Certificates to a
minimum of 400 beneficial owners. The Underwriter has told the Company that it
presently intends to make a market in the Certificates prior to commencement of
trading on the NYSE, as permitted by applicable laws and regulations. The
Underwriter is not obligated, however, to make a market in the Certificates. 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 Certificates will develop or as to the liquidity of any trading
market.
The Certificates are expected to trade flat. This means that any accrued
and unpaid interest on the 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 Certificates not included in the trading price.
Until the distribution of the Certificates is completed, rules of the
Commission may limit the ability of the Underwriter to bid for and purchase the
Certificates. As an exception to these rules, the Underwriter is permitted to
engage in certain transactions that stabilize the price of the Certificates.
Possible transactions consist of bids or purchases for the purpose of pegging,
fixing or maintaining the price of the Certificates.
If the Underwriter creates a short position in the Certificates in
connection with this offering, that is, if it sells a greater aggregate
principal amount of Certificates than is set forth on the cover page of this
Prospectus Supplement, the Underwriter may reduce that short position by
purchasing 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 Certificates in the open market to reduce its short position or to
stabilize the price of the Certificates, it may reclaim the amount of the
selling concession from the selling group members who sold those Certificates as
part of the offering.
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In general, purchase 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 Certificate to the extent that it
were to discourage resales of the Certificates.
Neither the Company nor the Underwriter makes any representation or
prediction as to the direction or magnitude of any effect that the transaction
described above might have on the price of the Certificates. In addition,
neither the Company nor the Underwriter makes any representation that the
Underwriter will engage in such transactions. Such transactions, once commenced,
may be discontinued without notice.
The Underwriting Agreement provides that the Company will indemnify the
Underwriter against certain civil liabilities, including liabilities under the
Securities Act, or will contribute to payments the Underwriter may be required
to make in respect thereof.
Salomon Smith Barney Inc. is an affiliate of the Company, and the
participation by Salomon Smith Barney Inc. in the offering of the Certificates
complies with Conduct Rule 2720 of the National Association of Securities
Dealers, Inc. regarding underwriting securities of an affiliate.
RATINGS
It is a condition to the establishment of the Trust and the issuance of
the Certificates that the Certificates be rated identically to the Underlying
Debentures by both Moody's and S&P. Moody's and S&P have rated the Underlying
Debentures "Aaa" and "AAA" respectively.
The ratings address the likelihood of the receipt by holders of the
Certificates of payments required under the Trust Agreement, and are based
primarily on the credit quality of the Underlying Debentures.
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 S&P and Moody's.
Each security rating should be evaluated independently of any other security
rating.
The Company has not requested a rating on the Certificates by any rating
agency other than the S&P and Moody's. However, there can be no assurance as to
whether any other rating agency will rate the Certificates, or, if it does, what
rating would be assigned by any such other rating agency. A rating on the
Certificates by another rating agency, if assigned at all, may be lower than the
ratings assigned to the Certificates by the S&P and Moody's.
LEGAL OPINIONS
Certain legal matters relating to the Certificates will be passed upon for
the Company and for the Underwriter by Orrick, Herrington & Sutcliffe LLP, New
York, New York.
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INDEX OF TERMS
Acceleration.....................................................10
Business Day......................................................9
Certificateholders................................................7
Closing Date......................................................6
Commission........................................................7
Company...........................................................6
Depositor.........................................................6
DOL..............................................................14
DTC..............................................................10
ERISA............................................................14
Exchange Act......................................................8
IRA..............................................................14
IT................................................................8
Maturity Date.....................................................8
Moody's...........................................................8
NYSE.............................................................11
Parties in Interest..............................................14
Payment Default..................................................10
Plan.............................................................14
Regulation.......................................................14
S&P...............................................................8
Securities Act....................................................8
Trust.............................................................6
Trust Agreement...................................................6
Trust Indenture Act...............................................6
Underlying Debentures.............................................6
Underlying Debentures Prospectus..................................8
Underlying Debentures Registration Statement......................8
Underlying Issuer.................................................6
Underwriter.......................................................9
Underwriting Agreement...........................................15
Voting Rights....................................................12
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APPENDIX A
DESCRIPTION OF THE UNDERLYING DEBENTURES
Issuer: BellSouth Telecommunications, Inc.
Underlying Debentures: One Hundred Year 7% Debentures due December 1, 2095
Maturity Date: December 1, 2095
Original Principal Amount Issued: $500,000,000
CUSIP No.: 079867AP2
Stated Interest Rate: 7% per annum
Interest Payment Dates: June 1 and December 1
Principal Amount of Underlying
Debentures Deposited
Under Trust Agreement: $50,000,000
The above summary is qualified in its entirety by reference to the
Underlying Debentures Prospectus. Neither the Depositor nor any of its
affiliates make any representation about the completeness, accuracy or
timeliness of information in the Underlying Debentures Prospectus.
AVAILABLE INFORMATION
The Underlying Issuer is subject to the informational requirements of the
Securities Exchange Act of 1934 and in accordance therewith files reports, proxy
statements and other information with the Commission. Reports, proxy statements
and other information filed by the Underlying Issuer with the Commission
pursuant to the informational requirements of the Exchange Act can be inspected
and copied at the public reference facilities maintained by the Commission at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and
at the following Regional Offices of the Commission: New York Regional Office,
Seven World Trade Center, 13th Floor, New York, New York 10048, and Chicago
Regional Office, John C. Kluczynski Federal Building, Northwest Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material can also be maintained upon written request addressed to the Securities
and Exchange Commission, Public Reference Section, Room 1024, 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates. The Commission maintains a
Web site at http://www.sec.gov containing reports, proxy statements and other
information regarding registrants that file electronically with the Commission.
Such reports, proxy statements and other information can also be inspected at
the offices of the New York Stock Exchange, on which one or more of the
Underlying Issuer's securities are listed.
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